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                       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, 1998     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:

<TABLE>
<S>                                         <C>
          None                                                  None
    (Title of class:)                       (Name of each exchange on which registered:)
</TABLE>

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

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

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

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

        The aggregate market value of Common Stock held by non-affiliates of
registrant is $95,573,135 (based upon a last sale price of $8.75 per share of
the Common Stock as reported on the NASDAQ National Market System on January
15, 1999). The number of shares of Common Stock outstanding as of January 15, 
1999 was 14,909,954.

                      DOCUMENTS INCORPORATED BY REFERENCE

        Certain portions of Registrant's Annual Report to Stockholders for the
fiscal year ended October 31, 1998 are incorporated by reference into Part II
of this Report. Certain portions of the Registrant's Definitive Proxy Statement
for its 1999 Annual Meeting of Stockholders (which will be filed with the
Commission within 120 days after the end of the Registrant's 1998 fiscal year)
are incorporated by reference into Part III of this Report.


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                                     PART I

ITEM I.  BUSINESS.

                                    OVERVIEW

        Martek Biosciences Corporation ("Martek") is a leader in the
development and commercialization of high value products derived from
microalgae. Martek's leading products are nutritional oils used as ingredients
in infant formula and encapsulated for use as dietary supplements. The
Company's nutritional oils are comprised of fatty acid components which many
researchers believe may enhance mental and visual development in infants and
play a pivotal role in brain function throughout life. Martek has licensed
these oils to six infant formula manufacturers, representing over 40% of the
estimated $5 billion worldwide market for infant formula. 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 50 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 3,000 live microalgal species and a
related database, which it believes are among the largest such resources
available worldwide.

        Nutritional Oils for Infant Formula, Dietary Supplementation and Other
Applications. Using its proprietary technology, Martek has developed
nutritional oils, which provide two essential fatty acids that are naturally
present in breast milk but are not available in most infant formulas. The
predominant fatty acid components of these oils, docosahexaenoic acid ("DHA")
and arachidonic acid ("ARA"), are produced from microalgae and fungi,
respectively, using Martek's proprietary technologies. Studies published by
others have indicated that DHA may 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 rates, and various neurological and visual disorders.
ARA is a major structural lipid in human tissues. With respect to DHA and ARA,
Martek's blended oils provide the closest match to human milk when added to
infant formula. In 1994, the Company received a U.S. patent covering certain
blends of a microbial oil enriched with DHA and a microbial oil enriched in
ARA, as well as the use of such blends in infant formulas. In 1995, the Company
received a U.S. patent covering a process for making an edible oil containing
DHA and the edible oil made by such process as well as a U.S. patent covering
an infant formula comprising a specified edible oil containing DHA. In 1996 the
Company received two additional 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 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
countries and pre-term infant formula products containing the Company's oils in
50 countries worldwide. Competing supplemented infant formulas are now being
marketed in Spain, Australia and New Zealand. The infant formula industry
represents over $2 billion in annual wholesale sales in the United States and
approximately $5



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billion worldwide. Martek is actively pursuing additional 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(TM), a DHA dietary supplement, and Neuromins(TM)
PL, a DHA dietary supplement for pregnant and lactating women. In 1997 and
1998, Martek expanded distribution of its Neuromins(TM) 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(TM) DHA
is also sold through mail order distributors.

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

        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 M. U.S. patents were issued to Martek for its Celtone M technology in
1995, 1997 and 1998.

        The Company has also developed novel labelled combinatorial libraries
of small molecules. Martek's technology involves the production and use of
libraries of small, flexible, stable isotopically labeled molecules for use as
probes (Reconnaissance Probes) of the binding site of any receptor. Used in
conjunction with Nuclear Magnetic Resonance (NMR) Spectroscopy, these probes
have the potential to provide precise data about binding site topography of a
receptor-site protein for which little other structural information need be
known. Based on this critical information, focused libraries of new drug leads
can then be quickly made to fit the identified binding pocket of the
receptor-site protein. Martek was issued a patent in 1998 covering the
preparation and use of these labelled Reconnaissance Probe Libraries for new
drug development.

        Diagnostics. Martek has recently developed a series of proprietary
fluorescent markers that are 100 times brighter than existing fluors and could
provide a sensitivity to diagnostics never before achieved with conventional
fluorescent markers. Martek's new markers provide rapid (taking minutes instead
of hours), sensitive Western and Southern blot tests (protein and gene
determination respectively), and open new possibilities for high sensitivity
viral detection, rapid high throughput screening, and detection of substrates
in the parts per trillion range. The Company recently began to supply these
high sensitivity markers for Western blot tests (protein determination). The
Company has exclusive rights to use of this technology for diagnostic
applications based on a U.S. patent issued in 1997 and pending patent
applications. During 1998, Martek began marketing some of its products in this
area through partenerships with Intergen(R) Company, Kirkegaard & Perry
Laboratories, and Amersham Pharmacia Biotech.

                                   TECHNOLOGY

        Martek applies its microalgal expertise and culturing technology to its
expanding library of over 3,000 live microalgal species and related database to
achieve technical and commercial advantages. Certain fundamental and


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

Neuromins(TM) is a trademark of the Company.

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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;

        -      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 3,000 strains of microalgae,
        which includes representatives of virtually all of the significant
        taxonomic microalgal groups. Equally important is the Company's
        proprietary microalgal database, which contains biochemical and
        physiological data on the strains in the collection. The Company
        believes that its microalgal collection and associated database are
        among the largest such resources available in the world. Coupled with
        the Company's extensive microalgal expertise, these resources are used
        to select organisms for initial testing. Further testing ultimately
        results in the selection of production strains.

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

               Culturing Microalgae. Successful exploitation of the unique
        characteristics of microalgae is in large measure dependent upon the
        availability of large-scale culturing technology. Martek has discovered
        and uniquely cultured a microalga capable of producing large amounts of
        DHA heterotrophically (i.e., without light) by using organic nutrients.
        Heterotrophic culturing of this DHA-producing microalga was previously
        not believed to be possible at commercially viable levels.
        Heterotrophic microalgae have the advantage of being


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        able to be cultured in conventional fermenters employed by the food,
        pharmaceutical and biotechnology industries. Microalgal fermentation
        has an advantage over photobioreactor production because larger-scale
        production of products such as the Company's nutritional oils, for
        which the incorporation of high-priced stable isotopes is not required,
        can be conducted in existing fermentation equipment, resulting in lower
        production costs. Aspects of Martek's technology for the heterotrophic
        growth of DHA-producing microalgae are the subject of 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 the
        Company's patents and patent applications filed in the United States.

                                    PRODUCTS
                             AND PRODUCT CANDIDATES

Nutritional Products

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

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



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        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 1998. As of early 1999, four of the Company's infant
formula licensees were marketing term infant formula products containing
Martek's oils in seven countries and pre-term infant formula containing the
Company's oils in 50 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.

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

-       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.

-       Research was published in 1998 linking DHA to glucose metabolism. The
        study, which was published in Metabolism, suggested that providing
        infants with DHA may protect them from noninsulin-dependent diabetes,
        obesity, hypertension and other diseases associated with impaired
        glucose metabolism. The study also suggested that the ability of
        infants to utilize glucose, the body's primary source of energy, may
        depend on whether they are well nourished with DHA.

-       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:


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

-       A study reported in 1997 and sponsored by Wyeth-Ayerst found that
        infant formula supplemented with Martek's oils resulted in a reduction
        of fungal skin infections, milk intolerance, nervousness and
        irritability in pre-term infants.

        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 essential fatty acids be included in pre-term infant formulas at
levels found in human milk. The BNF and the FAO/WHO Committee have gone further
to recommend that DHA and ARA also be included in formulas for term infants as
well. Also, in addition to recommending the inclusion of DHA and ARA in infant
formula, the BNF and FAO/WHO Committees have recognized their importance in
pregnancy and lactation. To address these markets, Martek introduced
Neuromins(TM) PL DHA dietary supplements for pregnant and lactating women.

        Recent research has also linked low levels of DHA to a variety of
health risks, including increased cardiovascular problems, Cystic Fibrosis,
cancer rates, and various neurological and visual disorders. One recent study
at the American Health Foundation in New York reported that Martek's
Neuromins(TM) DHA suppressed human breast cancer metastasis in mice. The study
concluded that a relatively modest dietary manipulation is capable of
significantly slowing breast cancer progression in vivo and suggested a
specific role for DHA as a clinically utilizable adjuvant therapy.

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


                                     - 6 -


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        Martek believes that its nutritional oils and Neuromins(TM) capsules
have the following advantages over other currently available sources of DHA and
ARA for use in infant formula or as an adult supplement:

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

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

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

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

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

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

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

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 nuclear
magnetic resonance ("NMR"). Proteins incorporating stable isotopes such as
carbon-13 and/or nitrogen-15 have been obtained by growing micro-organisms,
such as bacteria and yeast, on Martek's media, and the 3-D structures
subsequently deduced from information provided by NMR. In addition,
incorporating deuterium, an NMR "invisible" isotope of hydrogen, into the
protein allows for the structure of either the ligand or the receptor to be
determined while bound to its NMR invisible partner.

        The Company has developed a series of novel combinatorial libraries.
These libraries are available for screening by pharmaceutical and drug
discovery companies. Martek has also developed a new method for providing
detailed structural information on molecular interactions through the use of an
array of small, flexible molecules which are labelled with stable isotopes such
as Carbon-13 and Nitrogen-15. In conjunction with NMR analysis, these probes
are being developed to elucidate the bound conformation of these small
molecules to their receptor binding sites. The chemoinformatics associated with
the receptor binding site may be useful for accelerating the design of new drug
leads. In 1998, Martek was granted a U.S. patent covering this technology and
the Company signed a research collaboration agreement with SmithKline Beecham
involving this technology.


                                     - 7 -

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        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 include the following:

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

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

               Glucose -- Carbon-13-glucose is the most widely used reagent for
        isotopically labeling bacterial proteins.  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.

Diagnostics

        Fluorescent Marker Technology. In 1997, Martek developed a series of
proprietary fluorescent markers ("PBXLs(TM)") that are 100 times brighter than
existing fluors and could provide a sensitivity to diagnostics never before
achieved with conventional fluorescent markers. Martek's PBXLs(TM) provide
rapid (taking minutes instead of hours), sensitive, Western and Southern blot
tests (protein and gene determination respectively) and the Company recently
began to market these high sensitivity markers for commercially available laser
scanning systems. As a consequence of their high level of sensitivity, Martek's
PBXLs(TM) are being tested as a platform technology for new methods of viral
detection, novel high throughput screening approaches, and new diagnostic tests
which were heretofore not practical because of a lack of sensitivity. The
Company is the exclusive licensor of this technology for diagnostic
applications that are the subject of a U.S. patent issued in 1997 and pending
patent applications. During 1998, Martek began marketing certain of its
PBXL(TM) products in this area through partenerships with Intergen(R) Company,
Kirkegaard & Perry Laboratories, and Amersham Pharmacia Biotech.

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

                     COLLABORATIVE AND LICENSING AGREEMENTS

        Martek has entered into licensing agreements with six infant formula
manufacturers, including Mead Johnson & Company (a subsidiary of Bristol-Myers
Squibb Company), American Home Products, Numico, Maabarot and Novartis, that
together comprise over 40% of the worldwide infant formula market. Under these
agreements,


                                     - 8 -


<PAGE>   10

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

        In 1993, Martek entered into an agreement with Columbia University
pursuant to which Columbia University will try to determine the structure of
the hCG protein using Celtone M. The hCG molecule affects fertility by
controlling the attachment of the egg to the uterus. Martek and Columbia
University will share any commercial proceeds resulting from their joint
efforts. Martek's share of any such proceeds will be based upon the successful
conclusion of certain events but will not be less than 75%. In May 1994, the
Company initiated commercialization of Celtone M through a license agreement
with Genetics Institute under which Martek will receive royalties on sales of
products resulting from Genetics Institute's work with Celtone M. In October
1994, Martek entered into a collaboration with the University of St. Andrews in
Scotland. This collaboration is dedicated to the development of NMR techniques
for the study of large proteins and determining the 3-D structures of certain
human proteins of pharmaceutical interest. Under this agreement, St. Andrews
will provide NMR facilities and expertise in large protein resolution. Martek
will provide funding and pay royalties for certain proprietary products arising
from this research.

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

        In May 1998, Martek entered into a research collaboration agreement
with SmithKline Beecham Corporation (SB) for the use of the Company's
proprietary Reconnaissance Probe Technology to "map" the binding sites where
drugs interact with receptor-site proteins of key interest to SB's research
program.

        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.



                                     - 9 -


<PAGE>   11



       COMMERCIAL AND U.S. GOVERNMENT RESEARCH AND DEVELOPMENT CONTRACTS

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

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

        Costs under U.S. government contracts are subject to audit by the U.S.
government. The Company believes that cost disallowances, if any, arising from
such audits of costs charged to government contracts through October 31, 1998
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, Gist-brocades, to produce
its ARA oil, and may enter into additional production agreements with third
parties if demand for its oils requires. The commercial success of its
nutritional oils will depend, in part, on Martek's ability to manufacture these
oils or have them manufactured at a commercially acceptable cost. There can be
no assurance that the Company will be able to successfully optimize production
of its nutritional oils, or continue to comply with applicable regulatory
requirements (including Good Manufacturing Practices ("GMP") requirements) or
that these facilities will be sufficient to meet the future demand for the
oils. Under the terms of several of its infant formula licenses, Martek's
licensees may elect to manufacture these oils themselves, although the Company
believes this is unlikely.

                              SALES AND MARKETING

        The Company currently markets its nutritional oils products and its
products for drug discovery both directly to end users and through
distributors. The Company markets its nutritional oils for use in infant
formula directly to infant formula manufacturers. The Company markets its
Neuromins(TM) DHA dietary supplements 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(TM) to mass market retail outlets, and
with Nutraceuticals Corporation, Solgar Vitamin and Herb Company, Source
Naturals, and Nature's Way for the packaging and distribution of its
Neuromins(TM) DHA capsules to the natural foods markets.

                                     - 10 -

<PAGE>   12

Neuromins(TM) DHA is currently being marketed in over 6,000 retail stores
nationwide, including Safeway, Vitamin World and General Nutrition Center (GNC)
stores. Neuromins(TM) DHA is also marketed through several mail order
distributors. In the aggregate, these distributors have access to approximately
58,000 health food and mass retail outlets nationwide. Martek has continued its
own DHA awareness campaign in an effort to support the marketing efforts of its
infant formula licensees and capsule distributors. This campaign will continue
and most likely intensify in 1999. There can be no assurance that the Company
will be able to successfully market these nutritional oils products for use in
infant formula or as dietary supplements.

                                  COMPETITION

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

        The development of a DHA-containing oil low in EPA 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(TM) DHA.
Published reports, however, have cited a number of fish oils as containing
chemical toxins that are not present in Martek's oils. In addition, management
believes that the combination of either low-EPA fish oil or microencapsulated
fish oil with a microbial source of ARA for use in infant formula would likely
infringe claims of Martek's patents. Martek is also aware that Omegatech, 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. 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.

                                     - 11 -

<PAGE>   13


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

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

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

                  PATENTS, LICENSES AND PROPRIETARY TECHNOLOGY

        The Company's success is dependent in part on its ability to obtain
patent protection for its products, maintain trade secret protection and
operate without infringing the proprietary rights of others. The Company's
policy is to protect aggressively its proprietary technology through patents,
where appropriate, and through trade secrets in other cases. Additionally, the
Company, in certain cases, relies on the licences of patents and technology of
third parties. The Company has obtained 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
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

                                     - 12 -

<PAGE>   14

possible that the infant formula manufacturers currently under license by the
Company or which may be under license in the future may choose formula
ingredients from these competitors if they choose to include the ingredients in
their formulas at all.

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

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

                   GOVERNMENT REGULATION AND PRODUCT TESTING

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

        Martek's infant formula licensees are responsible for obtaining the
requisite regulatory clearances to market their products containing Martek's
oils. 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 50 countries for term or pre-term infant formula products. The
Company and its licensees are in the process of preparing to respond 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 approval
should ultimately be obtained, 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 clearances
needed for introductions of Martek's oils in additional 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.


                                     - 13 -

<PAGE>   15


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

        In connection with the Company's decision to manufacture certain of its
products which it markets directly, or licenses to or collaborates with others
to market, it will be required to adhere to applicable current GMP as required
by the FDA. GMP regulations specify component and product testing standards,
control quality assurance requirements, and records and other documentation
controls. In general, drug GMP requirements are more stringent than food GMP
requirements although significant quality control procedures exist for infant
formulas. Depending upon the type of FDA application that is submitted,
compliance with relevant GMP requirements can be onerous and time consuming,
and there can be no assurance that the Company can meet relevant FDA
manufacturing requirements, particularly for scale-up operations involving
product marketing applications. Because the Company is manufacturing its DHA
and ARA oils, it 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(TM) and Neuromins(TM)
PL. In addition, it is researching and developing new applications for its DHA
and ARA oils. There can be no assurance that the Company will be able to comply
with the requirements of the DSHEA or any regulations that the FDA may
promulgate thereunder with regards to ARA as a dietary supplement or that the
Company will be able to continue to meet such requirements with regard to DHA
as a dietary supplement.

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

        For pharmaceutical uses of products derived from microalgae, there can
be no assurance that required clinical testing will be completed successfully
within any specified time period, if at all, with respect to the Company's
products. Additionally, there is no assurance that the Company or its licensees
or collaborators will be able to


                                     - 14 -

<PAGE>   16






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, 1998, the Company had 121 full-time employees, of
whom 13 had Ph.D.'s. Approximately 41 employees are engaged in research and
development and contract related research and development activities, 52 are
engaged in production or production development related activities and 28 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.

               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 2002" 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 1999 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..................               58        Chairman, Chief Executive Officer and Director
  Richard J. Radmer, Ph.D............               56        President, Chief Scientific Officer and Director
  Thomas C. Fisher...................               52        Senior Vice President, Operations
  David J. Kyle, Ph.D................               45        Senior Vice President, Research and Development
  Jerome C. Keller...................               56        Senior Vice President, Sales & Marketing
  Steve Dubin........................               45        Senior Vice President, Business Development, General Counsel,
                                                              and Secretary
  Peter L. Buzy......................               39        Chief Financial Officer and Treasurer
  Paul W. Behrens, Ph.D..............               42        Director of Physiology
  Jonathan Miles Brown, Ph.D.........               43        Director, Stable Isotope Group
  Paul J. Kelley ....................               45        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 NationsBank), from 1983 to 1987.  Prior to 1983, Mr.
Linsert was Vice President of Inverness Capital Corporation, a small business
investment company, and Vice President of First Virginia Bank.  He also served
as a Captain in the U.S. Marine Corps and as an artillery officer in Vietnam.
He received an M.A. in economics from George Washington University and a B.A.
from Duke University.

        Dr. Richard J. Radmer, a founder of Martek, has served since 1985 as a
director, President and Chief Scientific Officer of the Company.  Prior to
1985, he worked for 17 years at Martin Marietta Corp. where he headed the
Biosciences Department which performed research to develop new products from
microalgae, among other

                                     - 15 -

<PAGE>   17

activities.  He has served as an Adjunct Associate Professor and Associate
Member of the Graduate Faculty at the University of Maryland.  Dr. Radmer
received a Ph.D. in biology, an M.S. in botany and a B.S. in biochemistry from
the University of Chicago.  He completed his Ph.D. studies while in residence
at Harvard University.

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

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

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

        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 is a co-founder, specializing in the development and financing
of early stage companies in the Mid-Atlantic area.  Prior to 1986, he served as
Vice President of Suburban Capital Corporation, a venture capital subsidiary of
Sovran Financial Corporation (now NationsBank), where he participated in the
original financing of the Company.  Mr. Dubin also held a variety of financial
management positions with Suburban Bank.  Mr. Dubin is a Certified Public
Accountant and an attorney.  He received his J.D. from the National Law Center,
George Washington University and his B.S. in accounting from the University of
Maryland.

       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 and microalgal-physiology expertise.  Prior to joining Martek, Dr.
Behrens was a research scientist in the Biosciences Department at Martin
Marietta Laboratories from 1983 to 1985.  He received a Ph.D. in physiology and
biochemistry and a M.S. in biology from the University of Maryland.  He also
received a B.A. in biology from The Johns Hopkins University.



                                     - 16 -

<PAGE>   18


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

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


                                     - 17 -


<PAGE>   19




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 1998.



                                     - 18 -


<PAGE>   20


                                    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,
1998, 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, 1998.

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, 1998, is included herein as Exhibit 13.01, and that portion
of the annual report is incorporated by reference into Part II of this Report.

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

        The information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 7
through 9 of the Company's Annual Report to Stockholders for the fiscal year
ended October 31, 1998, is included herein as Exhibit 13.01, and that portion
is incorporated by reference into Part II of this Report.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Not material.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        The Company's 1998 Financial Statements and Report of Independent
Auditors by Ernst & Young LLP set forth on pages 12 through 20 of the Company's
Annual Report to Stockholders for the fiscal year ended October 31, 1998, 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.



                                     - 19 -


<PAGE>   21


                                    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" and is
incorporated by reference herein.

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 1999 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 1999 Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        None.


                                     - 20 -


<PAGE>   22


                                    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, 1998 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, 1998 and 1997                                    12

     Statements of Operations for the Years Ended October 31, 1998,
     1997 and 1996                                                                     13

     Statements of Stockholders' Equity for the
     Years Ended October 31, 1998, 1997 and 1996                                       14

     Statements of Cash Flows for the Years Ended October 31, 1998,
     1997 and 1996                                                                     15

     Notes to Financial Statements                                                   16 - 20

     Report of Independent Auditors                                                    20

</TABLE>

 (a)(2)  Financial Statement Schedules

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

<TABLE>
<CAPTION>
(a)(3)  Exhibits
        --------
<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
</TABLE>

                                     - 21 -


<PAGE>   23

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

                                     - 22 -


<PAGE>   24


<TABLE>
<S>                   <C>
    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. **
    10.27             Employment Agreement, dated January 16, 1998, between the Company and Peter L.
                             Buzy.**
    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).
    13.01             Portions of the Annual Report to Stockholders of the Company for the year ended
                            October 31, 1998.**
    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).

(b)  Reports on Form 8-K

        None


                                     - 23 -

<PAGE>   25


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized on January 29, 1999.

                                        MARTEK BIOSCIENCES CORPORATION


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

                               POWER OF ATTORNEY

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

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


<TABLE>
<CAPTION>
Signatures                                                        Title                       Date
----------                                                        -----                       ----
<S>                                                   <C>                                     <C>
/s/ Henry Linsert, Jr.                                Chief Executive Officer and             January 29, 1999
-----------------------------------------------       Director (Principal Executive
Henry Linsert, Jr.                                    Officer)

/s/Peter L. Buzy                                      Principal Financial and                 January 29, 1999
-----------------------------------------------       Accounting Officer
Peter L. Buzy

/s/ Jules Blake                                       Director                                January 29, 1999
-----------------------------------------------
Jules Blake

/s/ Ann L. Johnson                                    Director                                January 29, 1999
-----------------------------------------------
Ann L. Johnson
</TABLE>

                                     - 24 -



<PAGE>   26

<TABLE>
<S>                                                   <C>                                     <C>
/s/ Douglas J. MacMaster, Jr.                         Director                                January 29, 1999
-----------------------------------------------
Douglas J. MacMaster, Jr.

/s/ John H. Mahar                                     Director                                January 29, 1999
-----------------------------------------------
John H. Mahar

/s/ Sandra Panem                                      Director                                January 29, 1999
-----------------------------------------------
Sandra Panem

/s/ Richard J. Radmer                                 President and Director                  January 29, 1999
-----------------------------------------------
Richard J. Radmer

/s/ Eugene J. Rotberg                                 Director                                January 29, 1999
-----------------------------------------------
Eugene H. Rotberg

/s/ William D. Smart                                  Director                                January 29, 1999
-----------------------------------------------
William D. Smart

/s/ Gordon S. Macklin                                 Director                                January 29, 1999
-----------------------------------------------
Gordon S. Macklin
</TABLE>


                                     - 25 -

<PAGE>   27


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

                                     - 26 -

<PAGE>   28

<TABLE>
<S>                   <C>
    10.18             Lease Modification Agreement, dated October 14, 1993 between the Company and
                             Aetna Life Insurance Company.
    10.19             Letter of Intent, dated January 13, 1995, between the Company and Golden Technologies
                             Corporation (filed as Exhibit 10.19 to the Company's 1994 Form 10-K, File No. 
                             0-22354, and incorporated by reference herein).
    10.20             Second Lease Modification Agreement, dated September 27, 1994, between the Company and 
                             Aetna Life Insurance Company (filed as Exhibit 10.20 to the Company's 1995 Form 10-K,
                             File No. 0-22354, and incorporated by reference herein).
    10.21             Purchase and Sale Agreement, dated February 16, 1995, between the Company and
                             Zeagan, Inc. (filed as Exhibit 4.3 to the Company's Registration Statement on 
                             Form S-3, File No. 33-89760, filed March 15, 1995, and incorporated by reference 
                             herein).
    10.22             Directors' Stock Option Plan (filed as Exhibit 4.1(b) to the Company's Registration
                             Statement on Form S-8, File No. 33-79222, filed May 23, 1994, and incorporated 
                             by reference herein).
    10.23             Manufacturing Agreement, dated December 31, 1996, between the Company and Royal Gist-Brocades 
                             B.V.[*] (filed as exhibit 10.23 to the Company's Annual Report on Form 10-K for
                             the fiscal year ended October 31, 1996).
    10.24             Martek Biosciences Corporation 1997 Stock Option Plan (filed as Exhibit 4.1(e) to the
                             Company's Registration Statement on Form S-8, File No. 333-27671, filed May 22, 
                             1997, and incorporated by reference herein).
    10.25             Third Amendment of Lease, dated August 1, 1997 between the Company and M.O.R
                             Columbia Limited Partnership (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. **
    10.27             Employment Agreement, dated January 16, 1998, between the Company and Peter L.
                             Buzy.**
    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).
    13.01             Portions of the Annual Report to Stockholders of the Company for the year ended
                            October 31, 1998.**
    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).


                                     - 27 -