<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 [FEE REQUIRED)

                   For the Fiscal Year Ended December 31, 1999

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 [NO FEE REQUIRED]

                  For The Transition Period From _____ to _____

                          Commission File No. 0-684401

                           STRATEGIC DIAGNOSTICS INC.
             (Exact name of Registrant as specified in its charter)
                       -----------------------------------
                Delaware                                         56-1581761
    (State or other jurisdiction of                           (I.R.S. Employer
    incorporation or organization)                           Identification No.)
          111 Pencader Drive
           Newark, Delaware                                        19702
(Address of principal executive offices)                         (Zip Code)

        Registrant's telephone number, including area code: (302) 456-6789

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock,$.01 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 past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  No
                                       ---    ---

     Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regu1ation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $102,849,000 as of March 13, 2000.

     As of March 13, 2000 there were 16,552,596 shares outstanding of the
Registrant's common stock, par value $.01 per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive proxy statement (the "Definitive Proxy
Statement") to be filed with the Securities and Exchange Commission relative to
the Company's 2000 Annual Meeting of Stockholders are incorporated by reference
into Part III of this Report.

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                                  <C>
PART I................................................................................................................1

 ITEM 1.  BUSINESS....................................................................................................1
   Overview...........................................................................................................1
   Immunoassay Technology.............................................................................................1
   Markets and Products...............................................................................................3
   Major Customers....................................................................................................7
   Sales and Marketing Strategy.......................................................................................7
   Regulatory Approvals...............................................................................................8
   Manufacturing......................................................................................................9
   Research and Development..........................................................................................10
   Proprietary Technology and Patents................................................................................11
   Competition.......................................................................................................12
   Employees.........................................................................................................12
 ITEM 2.  PROPERTIES.................................................................................................13
 ITEM 3.  LEGAL PROCEEDINGS..........................................................................................13
 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................................13
 EXECUTIVE OFFICERS OF THE REGISTRANT................................................................................14

PART II..............................................................................................................15

 ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................................15
 ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.......................................................................16
 ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION......................17
   Forward Looking Statements........................................................................................17
   Overview..........................................................................................................17
   Results of Operations.............................................................................................18
   Year ended December 31, 1999 versus year ended December 31, 1998..................................................18
   Year ended December 31, 1998 versus year ended December 31, 1997..................................................19
   Liquidity and Capital Resources...................................................................................20
   Year 2000 Issues..................................................................................................20
   New Accounting Pronouncements.....................................................................................20
 ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................................21
 ITEM 8.   FINANCIAL STATEMENTS AND SUPLEMENTARY DATA................................................................22
 ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......................22

PART III.............................................................................................................22

 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.............................................................22
 ITEM 11. EXECUTIVE COMPENSATION.....................................................................................22
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............................................22
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................................................23

PART IV..............................................................................................................23

 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K............................................23
</TABLE>




<PAGE>

                                    PART I

ITEM 1. BUSINESS

Overview


         Strategic Diagnostics Inc. (the "Company") develops, manufactures, and
markets immunoassay-based test kits and strip tests for rapid, cost-effective
detection of a wide variety of different analytes in three primary market
segments: water quality, industrial testing and agricultural. The Company is the
entity resulting from the combination of EnSys Environmental Products, Inc.
("EnSys"), Ohmicron Corporation ("Ohmicron"), HTI BioProducts Inc. ("HTI"), TSD
BioServices Inc. ("TSD") and Strategic Diagnostics, Inc. ("SDI"). On August 30,
1996, Ohmicron was merged with and into SDI. On December 30, 1996, SDI was
merged with and into EnSys. The surviving entity was then renamed Strategic
Diagnostics Inc. HTI and TSD were merged with and into SDI during 1999.

         The Company is a recognized leader in the field of immunoassay
research, development and manufacturing and develops products in markets where
the attributes of immunoassay technology (i.e. speed, ease-of-use,
cost-effectiveness, quantitation, and flexibility), meet specific customer
needs. The substances detected by the Company's test kits and strip tests
include chemicals used to treat drinking water, proprietary chemicals used in
industrial processes, environmental contaminants, pesticides, genetically
engineered traits in plants, commonly referred to as genetically modified
organisms, or GMOs, and diseases of commercial crops.

         The Company's tests for the detection of GMOs (Trait Check(R), GMO
Check(R)), water-soluble polymers, pesticides and environmental contaminants (D
TECH(R), EnviroGard(TM), EnSys RISC(TM) and RaPID Assay(R)) are well recognized
in the immunoassay field testing market. The Company sells its environmental
products through its direct sales force and through distributors. The Company's
"one-step" strip tests hold a leading position in the emerging markets of
analytical tests for the detection of water-soluble polymers and specific traits
of genetically engineered plants. In addition to products serving the three
primary markets, the Company manufactures and sells select immunoassay test kits
for medical research applications.

         In addition to developing and marketing test kits and strip tests, the
Company provides fully integrated antibody development and large scale
manufacturing services to pharmaceutical and medical diagnostic companies
through its newly formed operating division Strategic BioSolutions. Strategic
BioSolutions was formed from consolidating the operations of TSD, HTI, which was
purchased February 26, 1999, and the operating assets of the OEM business of
Atlantic Antibodies, Inc., which was purchased on May 10, 1999.


Immunoassay Technology

         An immunoassay is an analytical test that uses antibodies to detect the
presence of a target compound in a complex sample matrix with high degrees of
precision and accuracy.


         The technology was first developed more than 25 years ago and has
replaced many laboratory diagnostic tests in the medical industry. The Company
has applied immunoassay technology to a variety of industrial and agricultural
applications. As with medical applications, immunoassay technology has
demonstrated its value in these markets by virtue of its ability to yield
specific, accurate, cost-effective and timely data in a manner previously
unavailable.


         The major attributes of immunoassay technology can be summarized as
follows:

         Sensitivity: Immunoassays can measure extremely low concentrations of
                      compounds (routinely as low as parts per billion; i.e.,
                      one millionth of one gram in a liter of liquid).
         Specificity: Immunoassays can measure one specific compound out of a
                      chemical "soup," reducing the need for sample preparation.
         Speed:       Total time to obtain a test result ranges from 1 minute to
                      several hours as compared to several days to several weeks
                      with many competing laboratory testing methods.
         Cost:        Price per test for immunoassays range from $1 to $50;
                      price per test for similar laboratory testing can range
                      from $5 to $1,000.
         Accuracy:    Immunoassays are typically as or more accurate than their
                      laboratory counterparts.
         Flexibility: Immunoassays can be developed in a wide variety of test
                      formats, including multiple sample laboratory-based tests,
                      disposable, single-use units, and large automated
                      instruments. They can be designed for use by non-technical
                      persons on-site under a variety of field conditions for
                      testing of diverse sample types.

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<PAGE>


         Immunoassay technology relies on the specific binding characteristics
of antibodies. Antibodies are proteins made by cells within the bodies of
animals as part of the immune response to invasion by foreign substances like
bacteria and viruses. An antibody physically binds only to the substance that
elicited its production. This characteristic of specific binding makes
antibodies useful tools for detecting substances in complex sample matrices
(e.g., blood, plant tissue, soil and water). Methods exist for isolating and
purifying antibodies from animals, and labeling them in such a way that they can
be used as components, or reagents, within a test to detect the presence of the
substance of interest. Immunoassay technology has advanced to the point that
antibodies can be made to a wide variety of substances including microorganisms,
drugs, hormones, proteins, polymers, environmental pollutants and other
chemicals.


         Once an antibody reagent that has the desired performance
characteristics (sensitivity and specificity) has been identified, it can be
incorporated into a test format that is appropriate for the customer's
application. In the human clinical chemistry market, antibodies are employed as
reagents on large, automated instruments that can analyze hundreds of samples
per hour. In contrast, antibodies can also be packaged into single use,
disposable formats such as home pregnancy tests. Immunoassays can be designed to
be highly quantitative or yield a simple yes/no result. The type of test format
chosen for any given application depends on the needs of the customer and may
include factors such as ease-of-use, cost-per-test, number of samples to be
tested, the location the test will be performed and experience of the user.


         The Company has expertise and proprietary technology relating to the
development and manufacture of primarily five immunoassay formats: latex
filtration, magnetic particle, one-step strip tests, coated-tube and microtiter
plate. Latex filtration assays offer ease-of-use, field portability and
semi-quantitative results and are ideally suited for on-site, field screening
applications where limited numbers of samples are to be analyzed.

         Magnetic particle assays have a greater number of steps and require
more technical expertise to execute than latex filtration assays, but are more
suited to the processing of larger number of samples at a single time, can be
highly quantitative, and are relatively inexpensive on a cost-per-test basis.
These characteristics make magnetic particle immunoassays effective measurement
tools in both laboratory and certain field applications, especially where highly
precise results are required.

         Lateral flow immunoassay strips, often referred to as 'one-step' strip
tests, require only that the user apply a prepared sample to the test strip to
obtain the test result--much like pH or Litmus paper tests. The low cost and
simplicity of these tests make them ideally suited for a wide range of
applications in many different markets. The current state-of-the-art of lateral
flow immunoassays is such that the results obtained using these tests are
qualitative, not quantitative, which imposes some limits on the applicability of
the format.

         Coated-tube immunoassays are well suited for analyzing relatively large
numbers of samples in the field, yield a semi-quantitative result and are
intermediate in their ease-of-use and cost-per-test.

         Microtiter plate assays are well established in the medical diagnostic
industry and offer many of the advantages of magnetic particle assays, including
quantitative results and the capacity to analyze large numbers of samples at a
relatively low cost-per-test. Special laboratory equipment, relatively high
levels of technical training, and a time-to-result measured in hours limits this
test format to laboratory applications.

         All measurement technologies, including immunoassays, have strengths
and limitations. The Company's expertise with multiple immunoassay formats,
coupled with a thorough understanding of the needs of a market and specific
customer applications, has allowed the Company to develop a diverse array of
immunoassay products designed to meet the analytical needs of multiple, sizable
markets.

                                       2
<PAGE>


Markets and Products


         The Company sells products in the water quality, industrial testing,
agricultural and antibody market categories through its direct sales force,
through a network of over 40 distributors in Canada, Mexico, Latin America,
Europe and Asia, and through its corporate partners. This section describes the
Company's current markets and products as well as those in development.

         Agricultural

         The agricultural market segment includes tests to detect targeted
traits in genetically engineered plants, two plant fungi, Rice Blast and
Botrytis (crop testing), and tests to detect Genetically Modified Organisms
(GMOs) in food and food fractions (food testing).

         Seed Testing

         Genetically Engineered Crops. Agricultural companies are developing
varieties of commercially important crops like corn, cotton and soybeans that
have new additional genes which confer some commercial advantage to the plant,
such as insect or pesticide resistance or enhanced growth or nutritional
characteristics. Industry reports show that approximately 50% of the acreage
used to produce soybeans and one quarter of the acreage used to grow corn in the
U.S. was planted with genetically engineered seed in 1999, in comparison to only
0.5% in 1996.

         In 1995, a large agricultural biotechnology company that has developed
proprietary varieties of herbicide and insect-resistant corn and cotton using
genetic engineering technology commissioned the Company's first test in this
market. Not all the seed produced by a genetically engineered plant contains the
gene for the desired trait and therefore testing is required to evaluate the
genetic characteristics of seeds. The Company has developed a simple `one-step'
strip test that is used at the point of testing to determine if an individual
plant contains the new genetic trait. Since 1995, the Company has also developed
similar one-step products for other traits and crops. The Company is actively
developing and/or manufacturing and/or selling field tests for genetically
enhanced products developed by five of the six leading ag-biotech companies.
Commercial seed producers use these products to ensure the quality of their
products. This type of test can also be used for enforcement purposes in crops
to prevent unlicensed application of the genetic technology.

         Sales of this strip test and similar products to detect the presence of
genetically engineered traits in plants have been increasing rapidly since their
introduction in the third quarter of 1995 and the Company believes sales will
continue to grow. The number of acres of crops with genetically enhanced traits
under cultivation grew rapidly in 1998 and further in 1999, and published
reports indicate that the farmers' experience with these products was positive.
Acreage is expected to grow further based on these results combined with the
introduction of new traits currently under development, and with this increased
volume, the Company expects sales of these products to grow. Additional tests
for genetically engineered plants are currently under development. The Company
estimates the market potential for its commercial crop tests could reach $20
million as planting acreage of genetically engineered plants grows and
additional traits are introduced.

         Food Testing

         In 1998, a significant market opportunity for immunodiagnostic analysis
was created. This opportunity arose from regulatory response to public demands
to address a consumer's "right-to-know" whether a food product contains
concentrations of Genetically Modified Organisms (GMOs). In May 1998, the
European Commission enacted food regulations governing the labeling of
foodstuffs that are derived from genetically-modified crops. The legislation
affects food processors in all fifteen member states within the European Union.
Under the European Commission's EC 258/97 and EC 1139/98, beginning March 1,
1999, food processors were required to label food ingredients for the presence
of GMOs.

         During the second half of 1998, the Company entered into licenses to
use proprietary genetic traits with major developers of genetically engineered
plants, and began developing an immunodiagnostic test to detect the presence of
GMOs at specified concentrations. This research and development was completed
and the Company participated in a Joint Research Centre - Institute for Health
and Consumer Protection Food Products Unit sponsored validation study of its
first test kit. Validation studies are common in the food testing industry and
are generally referred to as "Ring Studies." This Ring Study involved 38

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qualified laboratories throughout Europe and was completed in December 1998. The
JRC has informed the Company that its products have been validated to detect the
presence of the tested traits at the thresholds established in the Ring Study
protocol.

         Also during the second half of 1998, the Company began to introduce its
technology and product plans to food processors. The reaction from the
marketplace was and continues to be positive. Prospective customers have shown
interest in the ability of the Company's technology and products to detect the
presence of GMOs above a specified threshold level, its fast time-to-result and
cost advantages.

         The Company estimates the market potential for food test kits could
reach $20 million by the end of the year 2001. This estimate is based on the
volume of food fractions used by the more than 22,000 European food processors.
The Company believes this newly created market opportunity could expand even
further. Legislation similar to the European legislation was passed in Australia
and New Zealand in December 1998.

         Grain Testing

         Building on its extensive experience, in 1999 Strategic Diagnostics
developed the first GMO test kits for the commodity grain and distribution
business. In the same time a grain processor evaluates in-bound shipments for
specific characteristics such as moisture content, the Company's test kits
provide information as to genetic composition and concentration. Demand for this
vital information is growing, as the Company's customers are required to supply
genetic identification and concentration data to their customers. The Company
currently offers test kits for corn, soybeans, and canola, the three largest
agricultural commodities that incorporate genetic enhancements. The Company is
actively developing additional products for these and additional crops such as
wheat and rice so that as new genetic technology is commercialized in
agriculture, the Company will be able to maintain its leadership position and
provide the necessary analytical tools to meet the requirements of this large
and growing market. The Company estimates the market potential for its grain and
seeds tests to reach approximately $60 million as more processors adopt testing
of shipments and identity preservation becomes more widespread.

         Mycotoxins

         Mycotoxins are toxins formed in grains such as corn, barley, and wheat
by naturally occurring fungi. Many mycotoxins are associated with adverse health
effects in both animals and humans. The FDA, in concert with the USDA, has
developed minimum acceptable levels for the mycotoxins aflatoxin and vomitoxin.
Testing is mandatory on all U.S. exported grains. Some mycotoxins do not break
down upon processing, and therefore testing continues at the food processing
level as well. The existing market for mycotoxin testing is greater than $20
million annually. Though it is a developed market in which we will compete with
other established test providers, we believe we have an enhanced product with
significant competitive advantages, including enhanced ease-of-use and rapid
screening applications, and sales could develop rapidly.


         Water Quality

         The Company believes that all of its products sold in this market are
unique to the Company and provide high value testing solutions to fill largely
unserviced analytical needs in this critical and highly regulated industry. In
this arena, the Company markets established products such as those for the
detection of pesticides, as well as emerging products for the detection of
pathogenic microorganisms and toxic chemicals resulting from chlorine
disinfection of drinking water. Also included in this market category are
products developed and others currently under development for the detection of
water treatment polymers used to clarify water and prevent scale formation.

         Water Treatment Polymers. The water treatment market encompasses both
industrial and municipal water treatment systems. Water treatment chemicals,
typically polymers, are critical to preparing finished drinking water in
municipal settings and to controlling water quality in industrial settings.
Competition between water treatment chemical manufacturers is intense and new
chemicals have evolved to the point that some of the more effective chemicals
are quite expensive. Cost-effective use of these chemicals requires careful
control of polymer concentrations throughout the system in which they are being
employed. Many of these polymers are toxic and have been implicated in fish
kills when industrial effluents have been discharged to natural bodies of water.
As a result, there is increased regulatory pressure to measure the amount of
chemical being discharged into surface waters. Polymer detection is quite
difficult and currently there is no other detection method capable of measuring
these substances at the levels at which they are used or discharged in
effluents.

                                       4
<PAGE>


         The Company, working in collaboration with its corporate partners, has
successfully developed highly sensitive and accurate immunoassays for the
detection of a number of water treatment polymers. These immunoassays have been
demonstrated to be a reliable and cost-effective way to measure water treatment
polymers in samples from municipal water supplies, boilers, cooling towers, and
other processes and raw water sources. Some specific applications are: (i)
measuring concentrations of chemicals to allow more efficacious use of costly
compounds, (ii) detecting the presence of particular compounds in effluent
discharge in order to gauge regulatory compliance, and (iii) monitoring
processes to prevent fouling of highly expensive systems (like reverse osmosis)
by excess polymer.

         Pesticides. The entrance of pesticides into the water supply as a
result of agricultural and residential runoff continues to be a problem
requiring analytical testing. In areas of substantial agricultural activity,
drinking water is tested for several pesticides in order to ensure compliance
with federal regulations. Imported grains, fruits and vegetables are tested for
the presence of pesticide residues prior to use in the U.S. In addition,
pesticide residues in crops call for extensive testing at the time of pesticide
registration or re-registration under the Federal Insecticide, Fungicide, and
Rodenticide Act (FIFRA). In spite of their banned status, pesticides such as DDT
and chlordane still persist in soil at sites where they were stored or
distributed. The clean-up of these sites requires the use of specific analytical
methods of pesticide detection.

         Total Trihalomethanes. Trihalomethanes are regulated, toxic by-products
that result from chlorine disinfection of drinking water. The Company's test is
a non-immunoassay-based test for the detection of `total trihalomethanes'
(TTHMs). The test is fast, easy, inexpensive and detects TTHMs at levels much
lower than the new proposed safe drinking water guideline. The Company's TTHM
kit has received US EPA Method Approval (Method 8530).

         RaPID Assay(R) and EnviroGard(TM). The RaPID Assay(R) and
EnviroGard(TM) pesticide test kits are being used extensively by water quality
researchers, resource managers, regulators and drinking water system operators
for surface and groundwater monitoring, drinking water source and supply
management, and chemical fate and transport studies. Users of the Company's
water quality pesticide products include federal agencies, such as the U.S.
Geological Survey and Department of Agriculture, state environmental and health
departments, drinking water utilities, and environmental engineering companies.

         Industrial Testing

         The industrial testing market category is comprised of immunoassays for
pollutants, proprietary chemicals and industrial markers.

         Pollutants. Analysis of soil, water and waste samples to determine the
presence of hazardous chemicals has become increasingly important in connection
with environmental remediation and environmental monitoring activities. These
activities are largely the result of environmental legislation such as RCRA,
CERCLA, TSCA, the Safe Drinking Water Act (SDWA) and Federal Water Pollution
Control Act (the "Clean Water Act"). The Company believes that approximately
1,200 commercial environmental testing laboratories, as well as "in-house"
laboratories at industrial and disposal facilities provide environmental
testing.

         Environmental remediation activities require a substantial amount of
testing in connection with the clean-up of contaminated sites. After initial
characterization of toxic chemicals at a site, substantial testing typically is
required to complete an assessment of the site to determine the extent and
location of contamination and the appropriate remediation plan. Upon the
commencement of the remediation project, additional testing is necessary to

                                       5
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determine the effectiveness of the remediation measures. In addition, ongoing
testing to monitor soil and groundwater is often required after completion of
the remediation activities. The contaminants of primary concern for remediation
activities include petroleum fuel products, polyaromatic hydrocarbons (PAHs),
polychlorinated biphenyls (PCBs), benzene, certain metals and chlorinated
solvents.

         Environmental monitoring activities under SDWA and National Pollution
Discharge Elimination System (NPDES) legislation require periodic testing for
various hazardous chemicals. The nation's 58,000 drinking water systems test for
contaminants such as metals, benzene, other volatile organic compounds and
microbiological contamination. Approximately 6,400 major industrial and
municipal wastewater treatment facilities monitor and test wastewater for
contaminants such as chlorinated solvents, metals and volatile organic
compounds. Hazardous waste handling and disposal companies carry out large
volumes of analytical work, including pre-acceptance testing to determine the
suitability of waste streams for disposal and routine testing of incoming
shipments. In addition, the ongoing management of chemicals in the petrochemical
and pesticide industries also results in the need to test samples at many points
in the production, use and disposal cycle. Electrical utilities have ongoing
analytical needs pertaining to disposal of PCB-containing materials.

         Proprietary Chemicals. The proprietary chemical market category
includes tests, commissioned by chemical manufacturers, that specifically
measure the particular compound of interest. In the chemical market category the
benefits of immunoassay testing have led to three key applications: (i)
regulatory registration, in which immunoassay data is generated to support the
registration of a product with the EPA; (ii) detection, to determine whether a
target compound is present in a complex matrix; and (iii) monitoring, in which
tests are performed to determine chemical concentrations for control purposes.

         The application of immunoassay technology in conjunction with
regulatory registration is significant because of the requirement that
large-scale chemical manufacturers register their chemicals under FIFRA with the
EPA. As part of this registration process, manufacturers must provide extensive
data for both registration and post-registration analyses regarding toxicity and
environmental impact. For many new compounds, certain aspects of this analysis
require sensitivity which instrument-based testing cannot achieve. For others,
no classical analytical methods are available to measure the compound. In either
case, EPA requires the manufacturer to supply a method to monitor the compound
in the environment. The Company is currently commercializing four tests in this
area for two chemical companies. Agreements are in place for the development of
seven additional tests.

         Industrial Markers. The Company is collaborating with a corporate
partner in this market category, which consists of test kits that detect marked
products. The product marking technology is based on the incorporation of trace
levels of inert chemicals or markers into solid or liquid products or on the
surface of the products. The use of these markers, in conjunction with
immunoassay techniques for marker detection, allows for the covert marking and
testing of nearly any product. This technology can be used to prevent revenue
loss due to counterfeiting and product diversion, limit a manufacturer's
exposure to unwarranted product liability, and enhance process efficiency and
product quality assurance.

         Pollutant Test Products. The Company sells four different format
immunoassays into the environmental market: (i) D TECH(R) latex filtration
tests, (ii) EnSys RISC(TM) and EnviroGard(TM) coated-tube tests, (iii) RaPID
Assay(R) magnetic particle tests and (iv) EnviroGard(TM) microtiter plate tests.
Each of the four different test formats has performance characteristics that
make them more or less suited for a particular customer application. The Company
positions the sale of all of its products so as to provide the customer with the
best product for its specific application.

         The D TECH(R) and EnSys RISC(TM) tests do not require refrigeration
which make them ideally suited for on-site, field applications. All of the
environmental test kits include components for the extraction of target analytes
from the sample and subsequent analysis. Sample preparation time is typically
less than five minutes per sample. All of the Company's environmental test kits
are capable of analyzing at least ten samples per hour and some allow analysis
of as many as forty samples per hour.

         D TECH(R). The D TECH(R) tests are a latex filtration immunoassay
format and provide for rapid, easy to use, on-site, field screening analysis of
soil and water samples containing EPA Priority Pollutants like PCBs, PAHs, TNT,
BTEX (benzene, toluene, ethylbenzene and xylene) and others. D TECH is simple to
use, requires little or no user training, yields a semi-quantitative result and
is ideally suited for true field applications where limited numbers of samples
are analyzed at one time.

                                       6
<PAGE>


         RaPID Assay(R). The RaPID Assay(R) magnetic particle immunoassay
product line currently contains kits and accessories for detection of 21
different pesticides (herbicides, insecticides and fungicides), and 6 toxic
organic compounds. The magnetic particle test format is ideally suited for
applications requiring highly precise determination of contaminant
concentrations. Like the Company's other immunoassay tests, RaPID Assay(R) is
fast and easy to perform, but not as field-portable. RaPID Assay(R) pesticide
test kits are used for quantitation of pesticides in water, soil and food. RaPID
Assay(R) test kits for toxic organic chemicals are used for measuring
contaminant concentrations in both water and soil.

         EnviroGard(TM) and EnSys RISC(TM). Like D TECH(R) and RaPID Assay(R),
these coated-tube and microtiter plate format testing products detect some of
the most commonly encountered toxic chemicals found in soil, water and on
surfaces at contaminated sites, including PCBs, fuel products, PCP, TNT,
benzene, PAHs, crude oil, and pesticides. Additionally, the EnviroGard(TM)
products detect pesticides in drinking water and foodstuffs. The coated-tube
format tests are used extensively to analyze relatively large numbers of samples
in the field and yield a semi-quantitative result. The EnviroGard(TM) microtiter
plate kits are designed for use in the laboratory and are ideally suited for
analysis of large numbers of samples where determination of exact concentrations
of contaminants are required.

         Antibody Business

         The Company develops, manufactures and markets a comprehensive set of
monoclonal and polyclonal antibody products and services through its Strategic
BioSolutions division. Specific expertise includes hybridoma development and
cell culture expertise, large-scale ascites and antibody production, large-scale
purification, characterization and a complete array of related services.

         This division serves a wide range of customers including
pharmaceutical, biotechnology, diagnostic companies and major research centers
in the United States, the European Union and the Pacific Rim. During 1999, the
Company significantly enhanced its presence in this market through the
acquisition of HTI and the operating assets of the OEM business of Atlantic
Antibodies as more fully described in the notes to the consolidated financial
statements. The Company believes this division is one of the largest independent
custom antibody operations in the United States. Throughout SDI's history, many
significant product development and commercial supply agreements have followed
from initial projects to develop and supply antibodies. The comprehensive
customer base of this division has the potential to provide an even greater
number of these meaningful opportunities.

         The division employs approximately 90 people and supplies critical
reagents used in the Company's test kits in addition to the development and
marketing activities described above.

         Other Products

         RapidChek(R) SRB. Sulfate Reducing Bacteria ("SRBs") are
environmentally significant because they generate hydrogen sulfide gas and cause
corrosion of stainless steel pumps, pipelines, and drilling rigs and result in
the souring of oil reserves. SRBs can be controlled by the addition of treatment
chemicals. Historically, the majority of testing in this market was performed
using a culture method called the American Petroleum Institute Recommended
Procedure No. 38. This method requires that samples be incubated from 14-28 days
before a result is obtained. RapidChek(R) SRB test is a simple-to-use, field
portable test that provides the user with accurate results in 20 minutes and
allows for an immediate, more cost-effective application of treatment chemicals.

Major Customers

          In 1999, no customer accounted for 10% of the Company's revenues. In
1998, Delta and Pine Land Company accounted for 10% of the Company's revenues.
Delta and Pine Land Company and Rohm and Haas Corp. each accounted for 10% of
the Company's 1997 revenues.

                                       7
<PAGE>


Sales and Marketing Strategy

         As a result of the consolidation of SDI, EnSys, Ohmicron,
EnviroGard(TM) and HTI businesses, the Company has formed an experienced sales
and marketing organization of 41 individuals. In addition to its direct sales
force, the Company sells product through an extensive network of distributors,
and through its corporate partners.

         The Company uses a number of strategies for the sale of its products
worldwide. In the U.S., the major route of sale of its industrial testing
products is through a national field sales force in defined sales territories.
The field sales force is augmented by an in-house sales force, which in addition
to selling product directly to customers, provide marketing and logistic support
to the field sales personnel and interface between customers and technical
support.

         In 1993 the Company opened a European headquarters and sales operation
near London, England, and the sale of the EnSys RISC(TM), RaPID Assay(R) and
EnviroGard(TM) products in Europe are principally directed through that office.
Sales and distribution of the D TECH product line outside of the U.S. are made
exclusively by E. Merck KGaA, Darmstadt, Germany.

         Sales of the Company's products for detecting water treatment polymers,
proprietary chemicals, industrial markers, genetically engineered crops and Rice
Blast are through the Company's corporate partners in selected markets and
through the Company's direct organization in others. The RapidChek(R) SRB test
kit is sold directly by the Company and through 5 international distributors.

Regulatory Approvals

         The environmental legislation and regulations that the Company believes
are most applicable to its current business are RCRA, CERCLA, TSCA, FIFRA and
the Pure Food and Drug Act. As the Company expands its product line to meet the
environmental monitoring needs of municipalities and industrial facilities, the
SDWA, the Clean Water Act and the NPDES permitting program under the Clean Water
Act also will be significant to the Company's business. These laws regulate the
management, disposal and clean-up of hazardous substances and protect the
nation's ground and surface water and drinking water supplies. In addition,
regulatory responsibilities in a number of areas have been delegated to state
agencies and state and local laws and regulations impose additional restrictions
and requirements. While environmental regulations overseas vary, many countries,
particularly in Europe, have counterparts to the U.S. legislation.

         The Company believes that regulatory acceptance, though not required
for the use of its products in most cases, is a significant factor in gaining
market acceptance. There are two main areas in which the Company is seeking
regulatory acceptance for its products: hazardous waste testing methods by the
federal and state environmental protection agencies and water testing methods by
the federal and state environmental protection agencies. The federal
Environmental Protection Agency and some state agencies have evaluated certain
of the Company's analytical methods and accepted their use for certain
remediation and monitoring activities. Further acceptance by these agencies
would further stimulate demand for the Company's products. The Company expects
that as its products are subjected to wider use under a variety of conditions
and subjected to traditional validation techniques, such acceptance will
generally be granted. Such acceptance would serve to strengthen already
compelling customer motivations such as the ease-of-use and specificity
characteristics of the Company's products and is not a prerequisite to selling
the products in the markets the Company serves.

         Hazardous Waste Testing Methods. EPA SW-846 is the compendium of
analytical and test methods published by the EPA's Office of Solid Waste (OSW).
A number of provisions of the EPA's hazardous waste regulations under RCRA
mandate the use of SW-846 methods. In other contexts, SW-846 is a guidance
document setting forth acceptable, although not required methods to be
implemented by the user in response to sampling and analysis requirements. Some
states also require the use of SW-846 methods under their hazardous waste
programs. While SW-846 methods are technically only applicable to regulatory
programs under RCRA, other federal, state and local environmental programs,
including CERCLA and TSCA, often refer to and rely on SW-846 methods for
purposes of remediation and monitoring.

         The process for a method to be incorporated into EPA SW-846 generally
takes approximately 24 to 36 months. The OSW evaluates the applicant's test
results and obtains additional information or conducts its own tests if
necessary. After a method is deemed acceptable, it is published by the EPA in
draft form ("EPA Draft Method"). Periodically, the EPA updates SW-846 through a
notice in the Federal Register referencing the EPA Draft Methods published since
the last update. Following a comment period, the EPA Draft Methods are

                                       8
<PAGE>

referenced in the Federal Register as a Final Rule and incorporated into SW-846.
The following table summarizes the EPA acceptance status of the Company's
products.

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------
     EPA SW-846
       Method              D TECH(R)     EnSys RISC(TM)   EnviroGard(TM)   RaPID Assay(R)
                                                  -
No.         Analyte
-------------------------------------------------------------------------------------------
<S>           <C>          <C>           <C>             <C>               <C>
4010          PCP                        Soil & Water                          Soil
-------------------------------------------------------------------------------------------
4015          2,4-D                                      Soil & Water      Soil & Water
-------------------------------------------------------------------------------------------
4020          PCB           Soil          Soil & Oil         Soil              Soil
-------------------------------------------------------------------------------------------
4030          TPH                            Soil            Soil
4035          PAH                        Soil (APAH)      Soil (APAH)       Soil (APAH)
                                                                            Soil (CPAH)
-------------------------------------------------------------------------------------------
4040     Toxaphene                                           Soil
4041     Chlordane                                           Soil
4042     DDT                                                 Soil
-------------------------------------------------------------------------------------------
4050     TNT            Soil & Water                                       Soil & Water
4051     RDX            Soil & Water
-------------------------------------------------------------------------------------------
4670    Triazines                                                              Water
-------------------------------------------------------------------------------------------

8510          RDX                            Soil
8515          TNT                            Soil
8530          TTHM                          Water

-------------------------------------------------------------------------------------------
</TABLE>

         Water Testing Methods. Water testing methods approved for use in
compliance with the SDWA are published periodically in the Federal Register.
Newly developed methods are reviewed by the EPA's Environmental Monitoring and
Systems Laboratory in Cincinnati to determine whether they are (i) an acceptable
version of a previously approved method or (ii) a new method in need of a
comparability study and proceed through a comment and approval procedure. The
EPA has a program aimed at expediting the approval of new methods that involves
the cooperation of the Solid Waste, Drinking Water, and Waste Water methods
groups.

         The TTHM (total trihalomethanes) water test has been accepted as Method
8530. In addition, the RaPID Assay(R) Atrazine test was accepted as the first
quantitative immunoassay method. It is anticipated that the EPA Office of
Drinking Water will adopt this method for screening according to the Drinking
Water Regulations for Triazines under the SDWA. More recently, the Company's
RaPID Assay(R) for Spinosad has been adopted by the EPA office of Pesticide
Programs as the official enforcement method for this pesticide. The
Hydrofluor-Combo(TM) test kit is the ASTM standard method for detection of these
pathogenic protozoa and has been designated as the method for use in complying
with the EPA's Information Collection Rule to establish the extent of
contamination in the nation's drinking water.

         Tests for water treatment polymers, genetically engineered traits in
plants, and fungal plant pathogens are currently unregulated. However, agencies
such as the EPA, the FDA and the Food Safety and Inspection Service of the U.S.
Department of Agriculture are engaged in testing environmental samples and,
together with the Association of Official Analytical Chemists ("AOAC"), maintain
compilations of official methods for use in testing for environmental
contaminants in certain market segments. Some of these organizations also issue
procedures and guidelines for validating new methods.

Manufacturing


         The Company currently manufactures over 270 different test kits for the
detection of a wide array of analytes in five immunoassay formats; one-step
strip tests, coated-tubes, latex particles, magnetic particles and microtiter
plates. In addition to test kits, the Company supplies its customers with
ancillary equipment and supplies including spectrophotometers, pipettes,
balances and timers among others.

                                       9
<PAGE>


         The kit manufacturing process consists mainly of critical reagent
production and in-process testing, filling and dispensing, labeling, kit
assembly, quality control, packaging and shipping. The Company's Technical
Reagents Manufacturing group produces critical reagents from its laboratories in
Newark, Delaware. Sub-assemblies and finished kits are manufactured and shipped
worldwide out of the Company's headquarters facility in Newark, Delaware.

         Biological materials are primarily developed and produced in-house,
however, some reagents are licensed from third parties or purchased from
commercial sources. A crucial step in the Company's manufacturing process is the
stabilization of the immunoreagents utilizing proprietary lyophilization
techniques. In general, raw materials used by the Company in its products are
obtainable from multiple sources. The Company purchases instruments and
ancillary equipment from outside vendors. A number of the instruments sold by
the Company were developed to be used exclusively with the Company products and
are subject to specific supply agreements. The Company believes that the raw
materials, instruments and equipment used in the manufacture of its products are
adequately available for the Company's current and foreseeable manufacturing
needs.

         The Company manufactures its products in accordance with the FDA's Good
Manufacturing Practices guidelines and has put in place systems designed to
control all elements of the manufacturing process including raw materials,
inventory, processes, documents, work-in-process, lot records, equipment and
training. Integrated inventory control, purchasing, manufacturing scheduling,
order processing, shipping and customer invoicing are elements of the Company's
computerized Manufacturing Resource Planning (MRP) systems.

         The Company's manufacturing organization, including the Technical
Reagents Manufacturing group, consists of 39 individuals. The Company believes
the existing facilities and equipment are sufficient to support a significantly
larger manufacturing base. Manufacturing operations are currently running a
single shift.

Research and Development

         The Company engages in substantial research and development activities
involving antibody and immunoassay development. In the three years ended
December 31, 1999, 1998 and 1997, the Company incurred approximately $2,450,000,
$1,922,000 and $1,580,000, respectively, in research and development
expenditures, most of which are pursuant to customer research agreements or
Corporate Partnerships. The Company's laboratory facilities located in Newark,
Delaware were designed and built specifically for conducting research and
development relating to antibody and immunoassay technology. These facilities
include the state-of-the art, GMP, American Association for Accreditation of
Laboratory Animal Care ("AAALAC") approved, Strategic BioSolutions antibody
development and large-scale production facility. The Company has assembled a
scientific staff with extensive experience in the development of monoclonal and
polyclonal antibodies, immunogens and assay reagents.

         The Company's assay development scientists are experienced in
developing tests in a variety of different immunoassay formats including
one-step strips, latex filtration, magnetic particles, coated tubes and
microtiter plates. Research and development personnel have complementary skills
in several advanced research disciplines, including synthetic organic chemistry,
protein chemistry, biochemistry, immunology, immunochemistry, microbiology and
soil science. In addition to the technical expertise resident within research
and development, Strategic Biosolutions provides the Company, as well as its
outside clients, with large-scale GMP production, bioprocessing, purification
and quality control of antibodies and reagents.

         The Company's research and development activities are focused on
developing products to expand its manufacturing base and leverage its Sales and
Marketing organization. The Company is a recognized leader in the field of
contract antibody and immunoassay research and development in the industrial,
water quality and agricultural sectors, and markets its services primarily to
large chemical and pharmaceutical companies. Product development is typically
performed in collaboration with a corporate partner that has identified a
specific market need and provides funds to the Company to develop an assay.
Research and development contracts are typically structured so that technology
developed within the program is co-owned by the Company and its partner and the
Company maintains exclusive manufacturing rights.

         To the extent the Company believes that improvements to existing
products significantly enhance competitiveness, expand a market or improve
market penetration, the Company has periodically funded such efforts. In the
markets where the Company has chosen to compete, rapid field screening tests are
highly valued and the Company is actively engaged in developing proprietary
technology to better meet those needs and enhance the Company's overall
performance. Through its continuing development of tests to detect genetically

                                       10
<PAGE>

engineered plants and water treatment polymers, the Company has gained extensive
expertise in the development and manufacture of one-step strip tests, and is
working aggressively to further develop this technology.

         The Company's technology organization, including research and
development, Strategic BioSolutions, Technical Reagents Manufacturing, and
Technical Marketing Support consists of approximately 59 individuals of which 20
hold advanced academic degrees.

Proprietary Technology and Patents

         The Company's products are based on the use of proprietary reagents,
technology and test systems developed by Company scientists or acquired
externally. Accordingly, the Company has implemented a number of procedures to
safeguard the proprietary nature of its technology. The Company requires its
employees and consultants to execute confidentiality agreements upon the
commencement of an employment or consulting relationship with the Company and
all employees are required to agree to assign to the Company all rights to any
inventions made during their employment or relating to the Company's activities.

         Additionally, the Company seeks to protect its technology and processes
through the patent process. The Company currently holds 19 issued U.S. patents
and the claims for another are in a state of allowance. Two U.S. patents have
been licensed for exclusive use by the Company and 6 U.S. patent applications
are pending. Two new applications were filed in 1999 in the field of testing for
genetically enhanced agricultural crops.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------

U.S. Patent          Title

------------------------------------------------------------------------------------------------------------
<S>                  <C>
4,999,286            Sulfate reducing bacteria determination and control
5,200,346            Aldicarb immunoassay by sulfone equivalents
5,411,869            Immunological analogs for captan
5,449,611            Polyaromatic hydrocarbon (PAH) immunoassay method, its components and a kit for use in
                     performing the same
5,484,709            Immunoassay method for detecting an immunologically non-remarkable compound
5,547,877            Methods for the rapid detection of toxic halogenated hydrocarbons and kits useful in
                     performing the same
5,558,996            Fungus extraction method and kit
5,576,187            Standards for phosphorothioate insecticide immunoassays
5,593,850            Monitoring of industrial water quality using monoclonal antibodies to polymers
5,618,681            Polyaromatic hydrocarbon (PAH) immunoassay method, its components and a kit for use in
                     performing the same
5,658,463            Kits and processes for extraction of analytes from solid materials
5,679,574            Quantitative test for oils, crude oil, hydrocarbon, or other contaminants in soil and
                     a kit for performing the same
5,691,148            A petroleum immunoassay method, its components and a kit for performing the same
5,891,657            Immunoassay standards for volatile analytes with benzene rings
5,780,250            Immunoassay standards for polyaromatic hydrocarbon detection
5,834,222            Polychlorinated Biphenyls (PCB) immunoassay method
5,858,692            PCB immunoassay
5,874,216            Indirect label assay device for detecting small molecules and method of use thereof
5,994,145            Reagents, methods and kits for detecting TCE and PCE
5,541,079            Monoclonal and polyclonal antibodies and test method for determination of
                     organophosphates (license)
5,429,952            Marking of products to establish identity and source (license)
</TABLE>
                                       11
<PAGE>


         The Company believes that low-cost, easy to use, rapid field screening
tests have the potential to be significant products in its chosen markets.
Therefore, the Company is aggressively developing technology relating to
immunoassay formats with those features. Two of the Company's pending
applications involve one-step strip test formats, one of the applications has to
do with a novel latex filtration test format, and one has to do with novel
point-of-care diagnostic devices.

         There can be no assurance that the Company's patent applications will
result in the issuance of any patent or that any patents issued to the Company
would provide protection that is sufficiently broad to protect the Company's
technology and products. In addition, the Company cannot be certain that it was
the first creator of inventions covered by pending patent applications or that
it was the first to file patent applications for such inventions.

         In addition to seeking patent protection for the Company's proprietary
information, the Company also relies upon trade secrets, know-how and continuing
technical innovation to maintain competitiveness. The Company has developed a
number of proprietary technologies which the Company has chosen not to patent
including stabilization systems for reagents, chemical syntheses for conjugates,
immunogens and analyte analogs, and strategies relating to antibody development.
Regarding the latter, the Company's extensive expertise has enabled it to
develop antibodies and products that are unique to the industry including
monoclonal antibodies to transgenic plant proteins, water treatment polymers,
the explosive RDX, BTEX and TCE.

         Under two license agreements, the Company has been granted the right
and license throughout the world to use magnetocluster technology in connection
with the Company's RaPID Assay(R) products for the detection of environmental
analytes. This license carries royalties starting at 4% of net sales of such
products each year and declining to 2% based upon the volume of sales in such
year.

Competition

         Many of the Company's potential competitors are large companies with
substantially greater financial and other resources than the Company. To the
extent that any such companies enter into one or more of the Company's markets,
the Company's operations could be materially, adversely affected. The Company
anticipates increased competition as potential competitors perceive that the
Company's markets have become commercially proven. Other companies may be
developing additional products for one or more of the Company's markets that
could be competitive with the Company's products. Nevertheless, the Company
believes that its competitiveness has been significantly enhanced as a result of
the consolidation of the SDI, EnSys, Ohmicron and EnviroGard(TM) businesses.

         Currently, the Company believes that there are no similar competing
immunoassay products for the Company's RapidChek(R) Rice Blast, Botrytis and
SRB, proprietary chemical, industrial marker or water treatment polymer tests.
Competing products have begun to emerge in the testing for GMOs in seed and
grain applications. Competitive products have been announced for corn tests by
two smaller, privately held companies. The Company believes that it has several
competitive advantages, including the specificity and faster time to result of
its products over those of the current competing products.

         The Company holds U.S. patents relating to the Rice Blast and SRB tests
and believes they will help to provide a competitive advantage in the event that
competing products enter the market. The Company's water treatment polymer tests
are unique to the industry and the Company has secured U.S. patents and an
exclusive technology license and believes that such property will help to
provide a competitive advantage in the event that competing products enter the
market.

         A number of companies already have pursued, and are actively pursuing,
products for the detection of Cryptosporidium and Giardia in drinking water and
it is likely that the Company's Hydrofluor products will face increasing
competition in the future. Hydrofluor currently benefits from its designation as
the ASTM standard method for detection of these protozoa and from its selection
by the EPA as the method for use in complying to the EPA's Information
Collection Rule to establish the extent of contamination in the nation's
drinking water.


                                       12
<PAGE>

Employees

         As of December 31, 1999, the Company employed 193 full time and 2 part
time individuals including 185 regular and 10 contract employees. All of the
Company's employees have executed agreements with the Company agreeing not to
disclose the Company's proprietary information, assigning to the Company all
rights to inventions made during their employment, and prohibiting them from
competing with the Company. None of the Company's employees are covered by
collective bargaining agreements. The Company believes that its relations with
its employees are good.

ITEM 2. PROPERTIES

         The Company is headquartered in Newark, Delaware, and occupies
approximately 28,000 square feet of space under an operating lease expiring in
December 2007. The Company also leases approximately 26,000 square feet of
manufacturing and research space also in Newark, Delaware under three operating
leases that expire in October 2000, October 2001 and November 2003,
respectively.

          The Company leases regional sales offices near London, England, and
Chestnut Hill, Massachusetts. The Company also leases warehouse space of 1,600
square feet or less with leases that run one year or less. The Company believes
that its equipment and facilities are adequate for its present purposes.

         Strategic BioSolutions occupies approximately 8,000 square feet of
manufacturing, research and animal facility space, in Newark, DE and owns and
occupies approximately 45 acres of farmland near San Diego, California and 120
acres of farmland near Windham, Maine.

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 submitted to a vote of the Company's stockholders
during the fourth quarter of the fiscal year ended December 31, 1999.

                                       13


<PAGE>

 EXECUTIVE OFFICERS OF THE REGISTRANT


         The executive officers of the Company, their positions with the Company
and ages are as follows:
<TABLE>
<CAPTION>

         Name                               Age                        Position
         ----                               ---                        --------
<S>                                         <C>                        <C>
         Richard C. Birkmeyer               46                         President and Chief Executive Office
         Kelly J. Cullum                    39                         Vice President - Sales and Marketing
         Arthur A. Koch, Jr.                46                         Vice President - Finance & Chief Operating Officer
         Martha C. Reider                   45                         Vice President - Quality Assurance/Human Resources
         James W. Stave, Ph.D.              45                         Vice President - Research and Development
</TABLE>

         Richard C. Birkmeyer, age 46, cofounded SDI in 1990 and has served as
its President and Chief Executive Officer and a director since its inception.
Prior to founding SDI, Mr. Birkmeyer was employed by E.I. du Pont de Nemours
("DuPont") from 1983 to 1990, where he most recently served as Product Manager.
Mr. Birkmeyer received a Ph.D. in Biochemistry/Immunology from the State
University of New York at Binghamton and his BS in Biology from the State
University of New York at Plattsburgh. In addition, Mr. Birkmeyer completed
post-doctoral research in immunogenetics at Iowa State University.

         Kelly J. Cullum, age 39, joined the Company in February 1998 as Vice
President - Sales and Marketing. Prior to joining the Company, Ms. Cullum was
employed at Idexx Laboratories in Tokyo, Japan, as Corporate Vice President,
Pacific Rim Division. From 1994 to 1995, Ms. Cullum was Global Director of
Marketing for Veterinary Products Division at Idexx. Prior to this position and
since 1987, Ms Cullum held a variety of sales management positions at Idexx. Ms.
Cullum received her BS in Marketing from the University of Massachusetts,
Amherst.

         Arthur A. Koch, Jr., age 46, joined the Company in April 1997 as Vice
President - Finance and Chief Financial Officer. In October 1998, Mr. Koch was
appointed the Company's Chief Operating Officer. Prior to joining the Company,
Mr. Koch was Vice President and Chief Financial Officer of Paracelsian, Inc., a
publicly held biotechnology company. From 1992 to 1995, Mr. Koch was Vice
President and Chief Financial Officer of IBAH, Inc. a publicly held contract
clinical research corporation. Mr. Koch received a BA in Business Administration
from Temple University and is a Certified Public Accountant.

         Martha C. Reider, age 45, co-founded SDI in 1990 and served as Vice
President - Manufacturing and Secretary since inception through 1998. In 1998
Ms. Reider was appointed Vice President Quality Assurance/Human Resources. Ms.
Reider continues to serve as the Corporate Secretary. From inception to December
30, 1996, Ms. Reider was a director of SDI. Prior to founding SDI, Ms. Reider
worked for DuPont from 1976 to 1990 where she most recently served as supervisor
of Quality Control and Quality Assurance. Ms. Reider received her BA in
Biological Sciences from Ohio Northern University.

         James W. Stave, age 45, joined SDI in March 1991 as a research group
leader. Subsequently, Dr. Stave was promoted to director of Research and
Development, in October 1993 was promoted to Vice President - Research and
Development. Prior to joining SDI, Dr. Stave worked for DuPont. Molecular
Genetics, Inc. and the U.S. Department of Agriculture. Dr. Stave received his
Ph.D. in Microbiology from the University of Maryland and his B.S. in Biology
from Michigan Technological University.


                                       14
<PAGE>


                                     PART II

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

         The Company's Common Stock is traded on The Nasdaq National Market
under the symbol "SDIX". Set forth below are the quarterly high and low bid
prices for the shares of Common Stock of the Company as reported by Nasdaq
withour retail mark-up, mark-down or commission and may not necessarily
represent actual transactions:

                                          Common Stock Price Range
                                           High              Low
                                           ----              ---
Fiscal Year Ended

December 31, 1999:
First Quarter                             3                 1 3/4
Second Quarter                            3 31/32           2 1/8
Third Quarter                             10 1/16           3 3/4
Fourth Quarter                            9 1/4             5 1/32

December 31, 1998:
First Quarter                             4 3/4             2 1/2
Second Quarter                            4                 2 7/8
Third Quarter                             3 5/8             1 29/32
Fourth Quarter                            2 5/8             1 5/8


         On March 13, 2000 there were approximately 4,712 holders (212 holders
of record) of the Common Stock of the Company. The Company has never paid any
cash dividends on its Common Stock and pursuant to the Company's acquisition
financing agreement with First Union National Bank, the Company's commercial
bank, no dividends of distributions may be paid on account of its Common Stock.


                                       15



<PAGE>


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                                     -----------------------
                                                               1999          1998          1997          1996(1)          1995
                                                               ----          ----          ----          -------          ----
STATEMENT OF OPERATIONS DATA:                                             (in thousands, except share and per share data)
<S>                                                       <C>           <C>           <C>             <C>              <C>
Revenues:
         Product related                                  $    21,225   $    14,172   $    12,703     $    3,402       $    1,605
         Contract and other                                     1,309         1,553         1,717          2,435            2,084
                                                          -----------   -----------    ----------     ----------       ----------
         Total revenues                                        22,534        15,725        14,420          5,837            3,689
Operating expenses:
         Manufacturing cost of sales                            9,078         6,222         5,305          2,839            1,288
         Research and development                               2,450         1,922         1,580          1,569            2,272
         Selling, general and administrative                    8,668         7,156         6,132          1,737            1,190
         Acquired research and development                      3,500             -             -          8,266                -
                                                          -----------   -----------    ----------     ----------       ----------
         Total operating expenses                              23,696        15,300        13,017         14,411            4,750
Operating income (loss)                                        (1,162)          425         1,403         (8,574)          (1,061)
Interest and other income (expense), net                         (372)          356           274            186             (165)
                                                          -----------   -----------    ----------     ----------       ----------
Income (loss) before taxes.                               $    (1,534)         $781   $     1,677     $   (8,388)      $   (1,226)
                                                          -----------   -----------    ----------     ----------       ----------
         Income tax benefit                                     5,317             -             -              -                -
                                                          -----------   -----------    ----------     ----------       ----------
Net income (loss)                                              $3,783          $781   $     1,677     $   (8,388)      $   (1,226)
                                                          -----------   -----------    ----------     ----------       ----------
Preferred stock dividends                                         (32)            -             -              -                -
Accretion of redeemable preferred
         stock liquidation value(1)                                 -             -             -           (635)            (367)
                                                          -----------   -----------    ----------     ----------       ----------
Net income (loss) applicable to common
         stockholders                                     $     3,751   $       781    $    1,677     $   (9,023)      $   (1,593)
                                                          ===========   ===========   ===========     ==========       ==========
Basic net income (loss) per share
         applicable to common stockholders                $      0.26   $      0.06         $0.13     $    (2.12)      $    (0.46)
                                                          ===========   ===========   ===========     ==========       ==========
Shares used in computing basic net income (loss)
         per share applicable to common stockholders       14,374,000    13,174,000    13,084,000      4,248,000        3,464,000
                                                          ===========   ===========   ===========     ==========       ==========
Diluted net income (loss) per share
         applicable to common stockholders                $      0.22   $      0.05   $      0.11         $(2.12)      $    (0.46)
                                                          ===========   ===========   ===========     ==========       ==========
Shares used in computing diluted net income (loss)
         per share applicable to common stockholders       17,088,000    16,103,000    15,712,000      4,248,000        3,464,000
                                                          ===========   ===========   ===========     ==========       ==========
</TABLE>
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                       ------------
                                                               1999          1998          1997          1996(1)          1995
                                                               ----          ----          ----          -------          ----
<S>                                                       <C>           <C>           <C>             <C>              <C>
BALANCE SHEET DATA:
Cash and cash equivalents                                 $     2,491   $     1,864   $     2,580     $      917       $       35
Short-term investments                                              -         3,990         3,638          5,710                -
                                                          -----------   -----------    ----------     ----------       ----------
         Sub total                                              2,491         5,854         6,218          6,627               35

Working capital (deficit)                                      10,130        10,158         9,403          7,170             (891)

Total Assets                                                   29,672        15,093        14,060         14,581            2,076

Redeemable convertible preferred stock(1)                           -             -             -              -            3,879

Long-term debt                                                  6,275           265            25             50                -

Stockholders' equity (deficit)                                 19,210        13,155        12,340         10,673           (4,064)
</TABLE>


(1) The redeemable convertible preferred stock was reclassified into
    stockholders' equity in connection with the Ensys merger.

                                       16
<PAGE>

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

Forward Looking Statements

         This Form 10-K contains forward-looking statements reflecting the
Company's current expectations. When used in this Form 10-K, the words
"anticipate", "enable", "believe", "estimate", "expect", "intend", "potential",
"will" and similar expressions as they relate to the Company are intended to
identify said forward-looking statements. Investors are cautioned that all
forward-looking statements involve risks and uncertainties, which may cause
actual results to differ from those anticipated at this time. Such risks and
uncertainties include, without limitation, the Company's ability to manage
growth, the integration of acquired companies, including HTI, unknown changes
related to acquisitions such as the amortization of significant goodwill and
other intangible assets, changes in demand for products, delays in product
development, delays in market acceptance of new products, inability to obtain
required governmental approvals, modifications of governmental regulations,
modifications to development and sales relationships, the ability to achieve
anticipated growth, seasonality, competition and other factors more fully
described in the Company's public filings with the U.S. Securities and Exchange
Commission.

Overview

         The Company develops, manufactures and markets immunoassay-based test
kits for rapid and inexpensive detection of a wide variety of substances in the
agricultural, water quality and environmental market segments. Through its
Strategic BioSolutions division, the Company also provides antibody and
immunoreagent research and development production services.

         Since its inception, the Company and its predecessors have in addition
to conducting internal research and development of new products, entered into
research and development agreements with multiple corporate partners that have
led to the introduction of various products to the water quality, environmental
testing, agricultural and other markets. These agreements generally provide that
sales and marketing costs associated with a new product are borne by the
corporate partner. In addition, the Company currently sells directly or through
distributors other products that it has independently developed or acquired. The
Company believes that its competitiveness has been enhanced through the
combinations of talents, technology and resources resulting from the
relationships and the acquisitions it concluded during the past four years.
These relationships and acquisitions have enabled the Company to achieve
meaningful economies of scale for the unique products it offers through the
utilization of its consolidated facilites in Newark, Delaware, for the
manufacture of test kits, antibodies and biochemicals, its facility located
outside of San Diego, California for the manufacture of antibodies and
biochemicals and its facility located in Windham, Maine for the manufacture of
custom, high-volume bulk polyclonal antibodies. These economies of scale, in
turn, enable the Company to offer its customers the most appropriate test for
each specific customer application.

         Another key strategy that the Company used to develop its business was
the formation in 1991 of TSD BioServices, a joint venture between the Company
and a subsidiary of Taconic Farms of Germantown, NY. Taconic Farms is a
privately held company whose business is the production and sale of mice and
rats, primarily to the research community. In 1996, the joint venture was
dissolved and the Company's interests were distributed into a wholly owned
subsidiary, TSD BioServices, Inc. ("TSD"). With TSD and the 1999 acquisitions of
HTI and the operating assets of the OEM business of Atlantic Antibodies, the
Company formed a new operating division, Strategic BioSolutions, which has now
become one of the largest producers of antibodies in the United States. The
mission of Strategic BioSolutions is to supply monoclonal and polyclonal
antibodies, immunochemical reagents and related services to medical diagnostic
and pharmaceutical companies, as well as research institutions.

         The Company believes that its products in the agricultural, water
quality and environmental testing markets are unique and fill potentially large,
unmet needs. The Company also believes that its products and technology
currently being developed have broad application in diverse markets. The Company
believes that its established product base, quality manufacturing expertise,
experienced sales and marketing organization, established network of
distributors, corporate partner relationships and proven research and
development expertise will be critical elements of its potential future success.

                                       17
<PAGE>


     Revenues in any particular quarter may not be indicative of revenues for
any subsequent quarter during the year, or for the year. As sales of the
Company's analytical tests for water-soluble polymers (which are generally not
affected by seasonal patterns) and agricultural products to other parts of the
world develop over the next few years, the Company expects its seasonal
fluctuations to become gradually less pronounced.

Results of Operations

Year ended December 31, 1999 versus year ended December 31, 1998

         Revenues: Net revenues increased $6.8 million or 43% in 1999 versus
1998. This increase is the result of a $7.1 million or 50% increase in product
related revenues offset by a $244 thousand or 16% decrease in contract and other
revenues. The growth in product revenues is primarily attributable to increases
in sales of products in the agricultural category, (tests to detect genetic
traits in genetically engineered plants) as sales in this category of products
grew 125% from the levels achieved in 1998, resulting from the expansion of the
agricultural product line to include kits designed for the quality assurance of
foundation seed and the launch of a product line designed for the food
processing and grain industry. 1999 included sales to distributors in the U.S.,
Japan and parts of Europe and South America. Increases in revenues of antibody
products grew 187% from the 1998 levels, due primarily to the inclusion of
revenues from the HTI acquisition in February of 1999, and the acquisition of
the operating assets of the OEM business of Atlantic Antibodies in May of 1999,
for which there were no comparable 1998 revenues. These increases were partially
offset by decreases in the Company's industrial/chemical category of 21%, water
quality category of 6% and other products category when compared to the 1998
revenues recorded in these categories. Revenues in the other products category
in 1998 included the sale of a line of antibodies and pre-commercial Macra Lp(a)
testing kits as described below for which there were no comparable amounts in
1999. The decline in contract and other revenues is primarily the result of the
Company's continued emphasis on internal research and development programs
versus contractual research and development programs.

         Operating Expenses: Operating expenses increased $4.9 million or 32% in
1999 to $20.2 million from $15.3 million in 1998, exclusive of the $3.5 million
one-time charge for acquired research and development as a result of the HTI
acquisition. This increase is primarily attributable to an increase in the
general business activity that occurred during the year and is described below.

         Manufacturing expenses, which include the cost of products sold,
increased $2.9 million or 46% in 1999 to $9.1 million from $6.2 million in 1998.
This is primarily the result of the 50% increase in product related revenues the
Company experienced in 1999 versus the same period in 1998.

         Research and development expenses increased $528 thousand or 27% in
1999 to $2.5 million from $1.9 million in 1998. This increase was due to the
Company's continuing investment in new product development for its agricultural
category of products (tests to detect genetic traits in genetically engineered
plants).

         Selling, general and administrative expenses increased $1.5 million or
21% in 1999 to $8.7 million from $7.2 million in 1998. Additional costs and
acquired personnel, related to the acquisitions of HTI and the operating assets
of the OEM business of Atlantic Antibodies, and the subsequent expansion of the
antibody business through Strategic BioSolutions were the primary reasons for
the increased costs in this category.

         For the year ended December 31, 1999, the Company incurred a one-time
special charge of $3.5 million for In-Process Research and Development related
to the acquisition of HTI. This item is more fully described in Note 3 to the
Financial Statements "Mergers and Acquisitions".

         Net Interest and Other Income: Net interest and other income decreased
$728 thousand or 204%, due to the interest paid on the $9 million of acquisition
financing used in the purchase of HTI and the operating assets of the OEM
business of Atlantic Antibodies.

         The Company has approximately $8.2 million of gross deferred tax assets
consisting primarily of the future tax benefit from net operating loss
carryforwards. In the fourth quarter of 1999, the Company concluded that it is
more likely than not it will realize a portion of the benefit of such tax

                                       18
<PAGE>

assets. Accordingly, the Company has reduced the valuation allowance against the
asset and recorded a tax benefit of $5.3 million in December 1999. Due to the
recognition of the Company's tax benefit in 1999, the Company expects that its
effective tax rate in future periods will approximate 38 to 40 percent.

         The recognition of these deferred tax assets under SFAS 109 has no
impact on the company's cash flows for income taxes despite the change in the
Company's effective tax rate. The recognition of these deferred tax assets
impacted reported earnings per share due to the benefit recorded to the
statement of operations.

         Net Income: Net income increased $1.2 million or 152%, (exclusive of
the $5.3 million income tax benefit and the $3.5 million one-time acquired
research and development charge, recorded in connection with the HTI
acquisition). This increase is primarily attributable to the increased sales of
the Company's agricultural and antibody products, and the corresponding
economies of scale realized by the Company's higher level of business activity.

Year ended December 31, 1998 versus year ended December 31, 1997

         Revenues: Revenues increased $1.3 million in 1998 or 9% over 1997. This
increase is the result of a $1.5 million (12%) increase in product related
revenues, offset by a $164 thousand (10%) decrease in contract and other
revenues. Product related revenues increased to $14.2 million from $12.7 million
in 1998 from 1997. This growth in product revenues is primarily attributable to
increases in sales of products in the agricultural category (tests to detect
traits in genetically engineered plants) of $1.3 million (62%), TSD BioServices
category (custom monoclonal antibody production and purification) of $651
thousand (31%) and Other revenue category (includes the sale of a line of
antibodies for $400,000 to a major customer and the $600,000 sale of
pre-commercial Macra Lp(a) test kits pursuant to the June 1998 supply agreement
with a major customer, both occurring during the second quarter of 1998) $1.1
million (196%), all increases over the 1997 revenues recorded in these
categories. These increases were partially offset by decreases in the
Industrial/Chemical category $354 thousand (7%), and Water Quality category $1.2
million (41%), when compared to the 1997 revenues recorded in these categories.
The decline in contract and other revenues is the result of the Company's
focusing its efforts on the food testing market during the second half of 1998.

         During the second half of 1998, the Company strategically refocused its
efforts and devoted significant resources to enter the European Market for food
testing to detect the presence of Genetically Modified Organisms (GMOs) in
agricultural commodities and food fractions that are used to manufacture
finished food products. This focus resulted in a reduction in contract and other
revenues and an increase in research and development, selling, general and
administrative expenses.

         Operating Expenses: Operating expenses increased $2.3 million (18%) in
1998, from $13.0 million in 1997 to $15.3 million in 1998. This increase is
primarily related to an increase in the general business activity that occurred
during the year and is described below.

         Manufacturing expenses, which include the costs of products sold,
increased $917 thousand (17%) in 1998 to $6.2 million. Increased costs in
materials, labor and overhead were associated with the mix of products sold in
1998 versus 1997.

         Research and development expenses increased $342 thousand (22%) to $1.9
million in 1998 from $1.6 million in 1997. This increase was due to the higher
costs of labor and materials associated with additional staff required to
develop new, and modify existing products for the Company's entry into the
European GMO food testing market.

         Selling, general and administrative expenses increased $1 million (17%)
to $7.2 million in 1998 from $6.1 million in 1997. Increased costs for public
relations, sales consulting, advertising and travel were recorded as the Company
increased its exposure in the markets it serves. Additional expenses were
incurred as efforts in the second half of 1998 were focused on the Company's
entry into the European market for GMO testing. The Company reorganized its
sales and marketing efforts in the second half of 1998 to focus on this rapidly
emerging opportunity. This major reorganization included closing two sales
offices in the industrial sales group, consolidating certain sales
responsibilities to the Company's headquarters and reassigning other individuals
to cover the agricultural market.

         Net Interest and Other Income: Net interest and other income increased
$82 thousand (30%) in 1998 to $356 thousand, from the $274 thousand earned in
1997. This increase is due to an increase in the level of invested balances
maintained throughout the year.

                                       19
<PAGE>


         Net Income: Net income decreased $896 thousand (53%) in 1998 to $781
thousand, from income of $1.7 million reported in 1997. This decrease in net
income is attributable to the increased costs, particularly research and
development and selling, general and administrative expenses, related to the
Company's entry into the European Food Market which more than offset increases
in revenues, all as described above.

Liquidity and Capital Resources

         The Company's working capital which consists principally of cash,
accounts receivable and inventory, decreased $28 thousand in 1999 to $10.1
million at December 31, 1999 from $10.2 million at December 31, 1998. This
decrease is attributable to the 62% increase in accounts receivable from $3.7
million in 1998 to $6.0 million in 1999, the 58% net decrease in cash, cash
equivalents and short-term investments from $5.9 million in 1998 to $2.5 million
1999, and the 198% increase in inventory from $1.9 million in 1998 to $5.5
million in 1999 offset by the increase in current liabilities of $2.5 million.
During 1999, the Company began to market certain products in the agricultural
products category through independent distributors. Future sales through these
additional distribution channels could be substantial but difficult to predict
from quarter to quarter, and the terms for payment of these types of sales are
somewhat extended from the Company's typical payment terms for direct sales and
will continue to evolve as business needs dictate.

         For the year ended December 31, 1999, the Company satisfied all of its
cash requirements from cash available and on-hand, and from a financing
agreement with a commercial bank for $9 million in acquisition financing for the
purchase of HTI and the operating assets of the OEM business of Atlantic
Antibodies. At December 31, 1999, the Company had $6.3 million in long-term debt
and stockholders' equity of $19.2 million.

         The Company believes it has, or has access to sufficient assets to meet
its operating requirements for the forseeable future. The Company's ability to
meet its long-term capital requirements will depend on a number of factors
including the success of its current and future products, the focus and
direction of its research and development program, competitive and technological
advances, future relationships with corporate partners, government regulation,
the Company's marketing and distribution strategy and the success of the
Company's plan to make future acquisitions. Accordingly, no assurance can be
given that the Company will be able to meet the future liquidity requirements
that may arise from these inherent and similar uncertainties (see Note 11 to the
Consolidated Financial Statements.)

Year 2000 Issues

         The Company has not experienced any Year 2000 issue problems or
disruptions. The Company will continue to contact critical suppliers,
collaborators and partners to determine if their operations, as they relate to
the Company, are Year 2000 compliant. The Company cannot presently estimate the
impact of the failure of such third parties to be Year 2000 compliant.

         Although the Company will take all practical measures to prevent
problems related with the Year 2000 programming issues, such problems and
failures may occur which could seriously affect the Company's progress. Because
of the unprecedented nature of such problems, the extent of the effect on the
Company's progress cannot be certain.

New Accounting Pronouncements

         On December 3, 1999, the staff of the Securities and Exchange
Commission, or SEC, issues Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements," or SAB No. 101. SAB No. 101 provides the
SEC staff's views on the recognition of revenue including nonrefundable
technology access fees received by biotechnology companies in connection with
research collaborations with third parties. SAB No. 101 states that in certain
circumstances the SEC staff believes that up-front fees, even if nonrefundable,
should be deferred and recognized systematically over the term of the research
agreement. SAB No. 101 requires registrants to adopt the accounting guidance
contained therein by no later than the first fiscal quarter of the fiscal year
beginning after December 15, 1999. The adoption of this standard is not expected
to have a material impact on the Company's financial position or results of
operations.

         In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
("Statement 133"). Statement 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. Statement 133 requires that an

                                       20
<PAGE>

entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure the instrument at fair value. The
accounting changes in the fair value of a derivative depend on the intended use
of the derivative and the resulting designation. This Statement, as amended, is
effective for the first fiscal quarter beginning after December 31, 2000. The
adoption of this standard will not have a material impact on the Company's
earnings or financial position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company has exposure to changing interest rates, and is currently
not engaged in hedging activities. Interest on $3 million of outstanding
indebtedness is at a fixed rate of 8.96% per annum, and the remaining principal
bears interest at a variable rate of 3% over the published London Interbank
Offered Rate.

         The Company conducts operations in Great Britain. The consolidated
financial statements of the Company are denominated in U.S. Dollars and changes
in exchange rates between foreign countries and the U.S. dollar will affect the
translation of financial results of foreign subsidiaries into U.S. dollars for
purposes of recording the Company's consolidated financial results.
Historically, the effects of translation have not been material to the
consolidated financial results.


                                       21
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPLEMENTARY DATA

         The following consolidated financial statements and supplemental
quarterly financial data of the Company and its subsidiaries are included as
part of this Form 10-K:

<TABLE>
<CAPTION>
<S>                                                                            <C>
                                                                               Page
                                                                               ----
Independent Auditors Report - 1999 and 1998.....................................F-1

Report of Independent Public Accountants 1997...................................F-2

Consolidated Balance Sheets as of December 31, 1999 and 1998....................F-3


Consolidated Statements of Operations for each of the years
         in the three year period ended December 31, 1999.......................F-4

Consolidated Statements of Changes in Stockholders' Equity and Comprehensive
         Income for each of the years in the three year period ended December
         31, 1999...............................................................F-5


Consolidated Statements of Cash Flows for each of the years
         in the three year period ended December 31, 1999.......................F-6

Notes to Consolidated Financial Statements......................................F-7

Quarterly Financial Data (unaudited)............................................F-18
</TABLE>


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

         The Company filed a Form 8-K on September 17, 1998, reporting a change
in the Company's auditors.

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

         The information contained under the caption "Election of a Class of
Directors" and the information contained under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Definitive Proxy
Statement is incorporated herein by reference.

ITEM  11. EXECUTIVE COMPENSATION

         The information contained under the caption "Executive Compensation" in
the Company's Definitive Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information contained under the caption "Stock Ownership of
Principal Stockholders and Management" in the Company's Definitive Proxy
Statement is incorporated herein by reference.

                                       22
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information contained under the caption "Certain Relationships and
Related Transactions" in the Company's Definitive Proxy Statement is
incorporated herein by reference.

                                     PART IV

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

(a) 1. Financial Statements
---------------------------

    See the Consolidated Financial Statements which begin on page F-1 of this
    Report.

    2. Financial Statement Schedules
    --------------------------------

    Financial statement schedules are omitted because they are either not
    required or not applicable or the required information is reflected in the
    financial statements or notes thereto.

    3. Exhibits
    -----------
<TABLE>
<CAPTION>

                                                                                       Previous
Exhibit                                                                                Exhibit
Number                                                                                  Number
------                                                                                 --------
<S>      <C>                                                                          <C>
3.1      Fourth Amended and Restated Certificate of Incorporation of the Company      (1)        4.1

3.2      Amended and Restated Bylaws of the Company                                   (1)        4.2

4.1      Reference is made to Exhibits 3.1 and 3.2

4.2      Forms of Warrants to Purchase Common Stock of the Company                    (1)        4.4

10.1     Warrant Agreement dated June 1, 1991 between John Hancock                    (2)       10.5
         Leasing Corporation and the Company, as amended December 19, 1991

10.3     EnSys Environmental Products, Inc. 1993 Stock Incentive Plan*                (2)       10.17

10.4     Amended and Restated EnSys Environmental Products, Inc. 1995
         Stock Incentive Plan*                                                        (3)

10.5     EnSys Environmental Products, Inc. 401(k) Plan Adoption
         Agreement                                                                    (2)       10.18

10.6     Lease Agreement dated June 1, 1989, between the Company and                  (2)       10.20
         Imperial Center Partnership and Petula Associates, Ltd. for premises
         at 4222 Emperor Boulevard, Morrisville, North Carolina, as
         amended December 22, 1991 and April 7, 1993

10.9     License Agreement by and between the Company and Meridian                    (4)       10.22
         Diagnostics, Inc. dated July 24, 1994
</TABLE>
                                       23
<PAGE>
<TABLE>
<CAPTION>

<S>      <C>                                                                          <C>
10.10    Asset Purchase Agreement among EnSys, Millipore Corporation,                 (5)        2.1
         and ImmunoSystems, Inc.

10.11    Agreement and Plan of Merger by and between EnSys and Strategic              (1)        2.1
         Diagnostics Inc. dated as of October 11, 1996

10.14    Employment Agreement dated December 30, 1996 by and between                  (6)       10.14
         Richard C. Birkmeyer and the Company*

10.15    Employment Agreement dated December 30, 1996 by and between                  (6)       10.15
         Grover C.Wrenn and the Company*

10.16    Registration Rights Agreement dated December 30, 1996 between                (6)       10.16
         the Company and the stockholders listed therein

10.18    Industrial Lease dated October 26, 1993, by and between Tober &              (6)       10.18
         Agnew Properties, Inc. and Strategic Diagnostics Incorporated

10.19    Industrial Lease dated August 9, 1990, by and between Tober &                (6)       10.19
         Agnew Properties, Inc. and Strategic Diagnostics Incorporated

10.20    Industrial Lease dated June 7, 1991 by and between Tober &                   (6)       10.2
         Agnew Properties, Inc. and TSD BioServices

10.21    Lease agreement dated October 29, 1997 by and between Pencader               (7)       10.21
         Courtyard, L.P. and Strategic Diagnostics Inc.

10.22    1998 Employee Stock Purchase Plan

10.23    Asset Purchase Agreeement dated as of May 11, 1999 by and among              (8)        2.1
         Strategic Diagnostics Inc., DiaSorin Inc., a Delaware corporation and
         Atlantic Antibodies, Inc., a Delaware corporation

10.24    Promissory Note in the amount of $3 million, dated May 11, 1999,             (8)       10.1
         payable to First Union National Bank.

10.25    Stock Purchase Agreement dated as of February 26, 1999 by and among          (9)        2.1
         Strategic Diagnostics Inc. and Robert J. Harman, Michael M. Dale,
         Eric S. Bean and Sean Boyd

10.26    Certificate of Powers, Designations, Preferences and Rights of the Series B  (9)        4.1
         Convertible Preferred Stock of the Company filed with the Secretary of the
         State of Delaware on February 26, 1999

10.27    Loan and Security Agreement, dated February 26, 1999, among the Company,     (9)       10.1
         TSD BioServices, Inc., and First Union National Bank

10.28    Promissory Note in the amount of $6 million, dated February 26, 1999,        (9)       10.1
         payable to First Union National Bank

21.1     Subsidiaries of the Company                                                  (6)       21.1

24.1     Consent of KPMG LLP

24.2     Consent of Arthur Andersen LLP

27       Financial Data Schedule (in electronic format only)
</TABLE>
                                       24
<PAGE>


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

(1)  Incorporated by reference to the designated exhibit of the EnSys
Registration Statement on Form S-4 ( No. 333-17505) filed on December 9, 1996.

(2)  Incorporated by reference to the designated exhibit of the EnSys
Registration Statement on Form S-1 ( No. 33-68440) filed on September 3, 1993.

(3) Incorporated by reference to Appendix F to the Joint Proxy
Statement/Prospectus contained in the EnSys Registration Statement on Form S-4
(No. 333-17505) filed on December 9, 1996.

(4) Incorporated by reference to the designated exhibit of the EnSys Form 10-K
for the fiscal year ended December 31, 1994.

(5) Incorporated by reference to the designated exhibit of the EnSys Form 10-Q
for the fiscal quarter ended March 31, 1996.

(6) Incorporated by reference to the designated exhibit of the Company's Form
10-K for the fiscal year ended December 31, 1996.

(7) Incorporated by reference to the designated exhibit of the Company's Form
10-K for the fiscal year ended December 31, 1997.

(8) Incorporated by reference to the identically numbered exhibit contained in
the Company's Form 8-K filed on May 26, 1999

(9) Incorporated by reference to the identically numbered exhibit contained in
the Company's Form 8-K filed on March 15, 1999

*Management contract or compensatory plan.


(b) Reports on Form 8-K (b)
---------------------------

    None.

                                       25


<PAGE>

                           INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Strategic Diagnostics Inc.:

We have audited the accompanying consolidated balance sheets of Strategic
Diagnostics Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income and cash flows for each of the years in the two-year period
ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Strategic
Diagnostics Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
two-year period ended December 31, 1999 in conformity with generally accepted
accounting principles.


                                                      KPMG LLP

Philadelphia, Pennsylvania
February 23, 2000

                                      F-1

<PAGE>

                           INDEPENDENT AUDITORS' REPORT

To Strategic Diagnostics Inc.:

We have audited the accompanying consolidated statements of operations,
stockholders' equity and comprehensive income and cash flows of Strategic
Diagnostics Inc. (a Delaware corporation) and subsidiaries for the year ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations of Strategic Diagnostics Inc.
and subsidiaries and their cash flows for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.


                                                    Arthur Andersen LLP


Philadelphia, Pennsylvania
January 30, 1998

                                      F-2

<PAGE>

                  STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                (in thousands, except share and per share data)
<TABLE>
<CAPTION>
                                                                  December 31,  December 31,
---------------------------------------------------------------------------------------------
                                                                      1999         1998
---------------------------------------------------------------------------------------------
 ASSETS
---------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>
 Current Assets
    Cash and cash equivalents                                        $ 2,491      $ 1,864
    Short-term investments                                                 -        3,990
    Receivables, net                                                   6,021        3,653
    Inventories                                                        5,524        1,855
    Other current assets                                                 281          469
---------------------------------------------------------------------------------------------
      Total current assets                                            14,317       11,831
---------------------------------------------------------------------------------------------

 Property and equipment, net                                           3,289          835
 Other assets                                                            431          494
 Deferred tax asset, net                                               7,071            -
 Intangible assets, net                                                4,564        1,933
---------------------------------------------------------------------------------------------
      Total assets                                                   $29,672      $15,093
---------------------------------------------------------------------------------------------
 LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------------------------------------------------
 Current Liabilities
    Accounts payable                                                 $ 1,375         $802
    Accrued expenses                                                     697          788
    Taxes payable                                                         55            -
    Deferred revenue                                                     162            -
    Current portion of long term debt                                   1,89           83
---------------------------------------------------------------------------------------------
      Total current liabilities                                        4,187        1,673
---------------------------------------------------------------------------------------------
 Long-term debt                                                        6,275          265
---------------------------------------------------------------------------------------------
 Stockholders' Equity
    Preferred stock, $.01 par value, 17,500,000 shares authorized,
      no shares issued or outstanding                                      -            -
    Series A preferred stock, $.01 par value, 2,164,362 shares
      authorized, no shares issued and outstanding at
      December 31, 1999; 2,164,362 shares issued and
      outstanding at December 31, 1998                                     -           22
    Series B preferred stock,  $.01 par value, 556,286 shares
      authorized, no shares issued and outstanding                         -            -
    Common stock, $.01 par value, 35,000,000 shares authorized,
      16,470,106 and 13,262,157 issued and outstanding
      at December 31, 1999 and December 31, 1998, respectively           164          133
    Additional paid-in capital                                        26,241       23,946
    Accumulated deficit                                               (7,170)     (10,921)
    Cumulative translation adjustments                                   (25)         (25)
---------------------------------------------------------------------------------------------
        Total stockholders' equity                                    19,210       13,155
---------------------------------------------------------------------------------------------
        Total liabilities and stockholders' equity                   $29,672      $15,093
---------------------------------------------------------------------------------------------
</TABLE>
        The accompanying notes are an integral part of these statements.

                                      F-3

<PAGE>

                  STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands, except share and per share data)

<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
-----------------------------------------------------------------------------------------------------
                                                                1999           1998           1997
-----------------------------------------------------------------------------------------------------
 NET REVENUES:
-----------------------------------------------------------------------------------------------------
<S>                                                         <C>            <C>            <C>
          Product related                                 $    21,225    $    14,172    $    12,703
          Contract and other                                    1,309          1,553          1,717
-----------------------------------------------------------------------------------------------------
                   Total net revenues                          22,534         15,725         14,420
-----------------------------------------------------------------------------------------------------
 OPERATING EXPENSES:
          Manufacturing                                         9,078          6,222          5,305
          Research and development                              2,450          1,922          1,580
          Selling, general and administrative                   8,668          7,156          6,132
          Acquired research and development                     3,500              -              -
-----------------------------------------------------------------------------------------------------
                   Total operating expenses                    23,696         15,300         13,017
-----------------------------------------------------------------------------------------------------

                   Operating income (loss)                     (1,162)           425          1,403


 Interest and other income (expense)                             (372)           356            274
-----------------------------------------------------------------------------------------------------

 Income (loss) before tax benefit                              (1,534)           781          1,677
-----------------------------------------------------------------------------------------------------

                   Income tax benefit                           5,317              -              -
-----------------------------------------------------------------------------------------------------

 Net income                                                     3,783            781          1,677
-----------------------------------------------------------------------------------------------------

 Preferred stock dividend                                         (32)             -              -
-----------------------------------------------------------------------------------------------------
 Net income
          applicable to common stockholders                     3,751            781          1,677
-----------------------------------------------------------------------------------------------------

 Basic net income per share
          applicable to common stockholders                     $0.26    $      0.06    $      0.13
-----------------------------------------------------------------------------------------------------

 Shares used in computing basic net income
          per share applicable to common stockholders      14,374,000     13,174,000     13,084,000
-----------------------------------------------------------------------------------------------------

 Diluted net income per share
          applicable to common stockholders               $      0.22    $      0.05    $      0.11
-----------------------------------------------------------------------------------------------------

 Shares used in computing diluted net income
          per share applicable to common stockholders      17,088,000     16,103,000     15,712,000
-----------------------------------------------------------------------------------------------------
</TABLE>
        The accompanying notes are an integral part of these statements.

                                      F-4

<PAGE>

                  STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                                 (in thousands)

<TABLE>
<CAPTION>
                                               Series A   Series B          Additional              Cumulative
                                               Preferred  Preferred Common   Paid-In   Accumulated Translation     Deferred
                                                Stock      Stock    Stock    Capital     Deficit    Adjustments  Compensation  Total

<S>                                            <C>        <C>         <C>    <C>        <C>             <C>        <C>    <C>
Balance,
December 31, 1996                                $ 22         -      131      23,905    (13,379)         -            (6)    $10,673
------------------------------------------------------------------------------------------------------------------------------------
Exercises of stock options, warrants and other     -          -        1           8       -             -             6          15
Net income and comprehensive income                -          -        -         -        1,677        (25)           -        1,652
------------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1997                                  22         -      132      23,913    (11,702)       (25)           -       12,340
------------------------------------------------------------------------------------------------------------------------------------

Exercises of stock options, warrants and other     -          -        1          33       -             -            -           34
Net income and comprehensive income                -          -        -         -          781          -            -          781
------------------------------------------------------------------------------------------------------------------------------------

Balance,
December 31, 1998                                  22         -      133      23,946    (10,921)       (25)           -      $13,155
------------------------------------------------------------------------------------------------------------------------------------

Exercises of stock options and warrants            -          -        3         815       -             -            -          818
Conversion of Series A Preferred
     Stock to Common Stock                        (22)        -       22         -         -             -            -          -
Issuance of Series B Preferred Stock               -          6        -       1,061       -             -            -        1,067
Conversion of Series B Preferred
     Stock to Common Stock                         -          6)       6         -         -             -            -          -
Tax benefit of stock option excercises             -          -        -         419       -             -            -          419
Payment of preferred stock dividend                -          -        -         -          (32)         -            -         (32)
Net income and comprehensive income                -          -        -         -        3,783          -            -        3,783
------------------------------------------------------------------------------------------------------------------------------------

Balance
December 31, 1999                                $ -          -      164      26,241     (7,170)       (25)           -      $19,210
====================================================================================================================================

</TABLE>

 The accompanying notes are an integral part of these statements.







                                       F-5

<PAGE>

                  STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                Twelve Months
                                                                                              Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                                    1999                  1998                 1997
------------------------------------------------------------------------------------------------------------------------------------
 Cash Flows from Operating Activities:
<S>                                                                                  <C>                    <C>                <C>
 Net income                                                                        $3,783                 $781               $1,677
          Adjustments to reconcile net income to
          cash provided by (used in) operating activities:
                   Depreciation and amortization                                      989                  614                  643
                   In-process research and development                              3,500                    -                   -
                   Amortization of deferred compensation                                -                    -                    6
                   Deferred tax benefit                                            (5,372)                   -                   -
 (Increase) decrease in:
          Receivables                                                              (1,590)                (494)                (825)
          Inventories                                                              (1,720)                 308)                  10
          Other current assets                                                        270                 (295)                 336
          Note receivable and other assets                                            390                  140                   81
 Increase (decrease) in:
          Accounts payable                                                             18                   83                 (947)
          Accrued expenses                                                           (225)                 165)              (1,113)
          Deferred revenue                                                            151                 (100)                 (41)
------------------------------------------------------------------------------------------------------------------------------------
 Net cash provided by (used in) operating activities                                  194                  356                 (173)

 Cash Flows from Investing Activities:
          Purchase of property and equipment                                         (398)                (674)                (159)
          Purchase of intangible assets                                              (316)                (380)                  -
          Short-term investment activity                                            3,990                 (352)               2,072
          Acquisition of HTI, net of cash acquired                                 (8,180)                   -                   -
          Acquisition of operating assets of OEM business of ATAB                  (3,150)                   -                   -
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities                                (8,054)              (1,406)               1,913

Cash Flows from Financing Activities:
          Proceeds from exercise of incentive stock options                           818                   34                    9
          Proceeds from issuance of long term debt                                  9,000                  323                   -
          Repayments on financing obligations and preferred dividends              (1,331)                 (23)                 (86)
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities                                 8,487                  334                  (77)

Net increase (decrease) in Cash and Cash Equivalents                                  627                 (716)               1,663

Cash and Cash Equivalents, Beginning of Year                                        1,864                2,580                  917
------------------------------------------------------------------------------------------------------------------------------------

Cash and Cash Equivalents, End of Year                                             $2,491               $1,864               $2,580
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Disclosure:

          Cash paid for interest                                                      505                   20                   36
------------------------------------------------------------------------------------------------------------------------------------
Non-cash investing and financing activity:
           Series B Preferred Stock issued for the acquisition of
           HTI Bio-Products, Inc.                                                   1,067                    -                   -
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
 The accompanying notes are an integral part of these statements

                                      F-6


<PAGE>



                  STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES
                  -------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                               DECEMBER 31, 1999
                               -----------------
                (in thousands, except share and per share data)


1. BACKGROUND:
   -----------

Business
--------

Strategic  Diagnostics Inc. (the "Company")  develops,  manufactures and markets
immunoassay  based  test  kits for  rapid and  inexpensive  detection  of a wide
variety of  substances  in the water  quality,  environmental  and  agricultural
markets.

Basis of Presentation
---------------------

The historical financial statements presented herein include the consolidated
financial statements of Strategic Diagnostics Inc. and its subsidiaries. As used
herein, unless the context requires otherwise, the Company collectively refers
to SDI and its subsidiaries for the periods indicated. All significant
intercompany balances and transactions have been eliminated in consolidation.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CERTAIN BALANCE SHEET
   --------------------------------------------------------------------
   INFORMATION:
   ------------

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Basic and Diluted Income per Share
----------------------------------

The Company has adopted Statement of Financial Standards ("SFAS") No. 128,
"Earnings per Share," which requires dual presentation of basic and diluted
earnings per share ("EPS") for complex capital structures on the face of the
statement of operations. Basic EPS is computed by dividing net income or loss by
the weighted-average number of common shares outstanding during the period.
Diluted EPS is similar to basic EPS except that the effect of converting or
exercising all potentially dilutive securities is also included in the
denominator. The Company's calculation of diluted EPS includes the effect of
converting preferred stock and exercising stock options and warrants into common
shares. The following table reflects the basic and diluted per share
calculation.



                                      F-7

<PAGE>



<TABLE>
<CAPTION>
                                                                                            Twelve months ended
                                                                                                December 31,
                                                                         1999                     1998                      1997
                                                                    ------------                ----------               -----------
<S>                                                                    <C>                         <C>                       <C>
Average common shares outstanding                                    14,373,869                 13,174,151                13,084,060

  Shares used in computing basic net income
       per share                                                     14,373,869                 13,174,151                13,084,060
                                                                    ============                ==========                ==========
  Series A preferred stock before conversion                          1,486,825                  2,164,362                 2,164,362

  Series B preferred stock before conversion                            190,637                        -                         -

  Stock options                                                         894,452                    546,278                   298,400

  Warrants                                                              142,454                    218,347                   165,219
                                                                     -----------                ----------                ----------
  Shares used in computing diluted net income
       per share                                                     17,088,237                 16,103,138                15,712,041
                                                                     ===========                ==========                ==========
</TABLE>


         During the third quarter of 1999, the 2,164,362 shares of the Company's
Series A preferred stock was converted by its holders into 2,164,362 shares of
the Company's common stock.


Statements of Cash Flows
------------------------

The Company considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents.

Accounts Receivable
-------------------

As of December 31, 1999, 1998 and 1997, the allowance for doubtful accounts was
$214, $97 and $120, respectively. In 1999, 1998 and 1997, approximately $64, $23
and $60 of write-offs were charged to this allowance in each of the respective
years. If receivables become uncollectible or unbillable, the Company's policy
is to charge these write-offs against the allowance. The Company continually
reviews the realizability of its receivables and charges current period earnings
for the amount deemed unrealizable. At December 31, accounts receivable
consisted of the following:



                                     1999              1998             1997
                                 ----------        ----------       ----------
 Accounts receivable             $    5,539        $    3,152       $    2,745
 Unbilled accounts receivable           482               501              414
                                 ----------        ----------       ----------
                                 $    6,021        $    3,653       $    3,159
                                 ==========        ==========       ==========

Inventories
-----------

The Company's inventories, which consist primarily of test kit components, bulk
serum and antibody products are valued at the lower of cost or market. Cost is
determined using the first in, first out method. Realization of the Company's
inventories is dependent upon the successful marketing of its products. At
December 31, inventories consisted of the following:

                                            1999           1998          1997
                                          --------       --------      --------

  Raw materials                           $  2,258       $    700      $    619
  Work in progress                             804             93            51
  Finished goods                             2,462          1,062           877
                                          --------       --------      --------
                                          $  5,524       $  1,855      $  1,547
                                          ========       ========      ========

                                       F-8

<PAGE>

Property and Equipment
----------------------

Property and equipment are stated at cost. Depreciation and amortization is
computed using the straight-line method over the estimated useful lives
(generally three to five years) of the assets. Leasehold improvements are
depreciated over the shorter of, the lease term or the estimated useful life.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of
-----------------------------------------------------------------------

Long-Lived assets and intangibles are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to the future undiscounted net
cash flows expected to be generated by the assets. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less the cost to sell.


Revenue Recognition
-------------------

Product related revenues which include the sale of immunoassay-based test kits
are generally recognized upon shipment. Included in product related revenues are
also the sale of antibodies and immunochemical reagents which are sold through
longer term development agreements. These revenues are recognized on a
percentage of completion method. Contract revenues recorded under the Company's
collaborative agreements are recognized upon the completion of certain
performance requirements of the contracts.

Research and Development
------------------------

Research and development costs are charged to expense as incurred.


Accounting for Income Taxes
---------------------------

Deferred income tax assets and liabilities are determined based on differences
between the financial statement reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. The measurement of
deferred income tax assets is reduced, if necessary, by a valuation allowance
for any tax benefits which are not expected to be realized. The effect on
deferred income tax assets and liabilities of a change in tax rates is
recognized in the period that such tax rate changes are enacted.

Comprehensive Income
--------------------

The Company adopted FAS No. 130 "Reporting Comprehensive Income" ("FAS
130"). Under FAS 130, the Company is required to display comprehensive
income (loss) and its components as part of the Company's full set of
financial statements. Comprehensive income (loss) is comprised of net
income (loss) and net unrealized gains (losses) on securities and is
presented in the consolidated statements of changes in stockholders'
equity. The Statement requires only additional disclosures in the
consolidated financial statements; it does not affect the Company's
financial position or results of operations.



3. MERGERS AND ACQUISITIONS:
   -------------------------


Acquisition of HTI BioProducts, Inc..
-------------------------------------

On February 26, 1999, the Company completed the acquisition of HTI Bio-Products
Inc. (HTI), a privately held manufacturer of custom and proprietary antibody
products and services located near San Diego, California. Under the terms of the
agreement to acquire HTI, the Company paid approximately $8.4 million in cash
and issued 556,286 shares of Series B preferred stock, with a fair market value
of approximately $1.1 million. Under the terms of the agreement, on June 16,
1999, such shares were converted into the Company's common stock on a 1 for 1
basis. The Company is also obligated to pay a percentage of net sales of certain
products over the next three years, not to exceed $3 million which will be
recorded as additional goodwill. Approximately $6 million of acquisition

                                       F-9

<PAGE>

financing was provided by a commercial bank under a Term Loan, with the balance
coming from existing cash on hand (see Note 8 to the Consolidated Financial
Statements).

The Company recorded expenses of $3.5 million of in-process research and
development in the quarter ended March 31, 1999. This amount represents an
allocation of the purchase price of HTI to projects that are currently under
development but have not yet been launched commercially because the development
is not complete. Because technological feasibility has not been established and
no alternative use determined, the entire amount of in-process research and
development has been expensed. The identified research and development consists
of in process projects for the development of eleven antibodies, as listed
below:

 Troponin I              Fatty Acid Binding Protein   Cystatin C
 Human Red Blood Cell    cAMP                         Brain Natriuretic Peptide
 Serum Amyloid A         cGMP                         Phosphorylated Amino Acids
 Phosphorylated Tau      APE

At this time, management believes that Troponin I and Cystatin C have the
greatest immediate potential as commercial products. Troponin I has potential
use as a diagnostic marker for the coronary care market. Cystatin C has
potential use as a diagnostic marker for kidney malfunction. In future years,
others of the in-process research and development assets, such as Human Red
Blood Cell, may prove to have even greater potential as commercial products.

There is no guarantee that any of these markers will be commercially viable.

The Company commissioned an appraisal of these in-process research and
development projects by an independent firm familiar with such appraisals. This
independent appraisal valued the in-process research and development projects at
$3.5 million by considering, the nature and history of HTI's business,
description of the in-process research and development assets, the general
economic outlook, the outlook for the antibody production industry, the expected
future cash flows of the products and usage of a discounted cash flow analysis.
The average completion stage of the products was estimated at 93% and a 20%
discount rate was used in computing the present value of the future cash flows
of the products.

Acquisition of the Operating Assets of the OEM Business of Atlantic Antibodies,
-------------------------------------------------------------------------------
Inc.
---

On May 11, 1999, the Company completed the acquisition of the operating assets
of the OEM business of Atlantic Antibodies of Windham, Maine, one of the first
suppliers of custom and high-volume, bulk polyclonal antibodies for use in
diagnostic test kits and research. This unit serves a wide range of customers
including pharmaceutical, biotechnology, diagnostic companies and major research
centers in the United States and the Pacific Rim. Under the terms of the
agreement to acquire the operating assets of the OEM business of Atlantic
Antibodies, the Company paid $3.2 million in cash, including closing costs, and
has agreed to a deferred payment of $150,000, upon the earlier of the sale of
certain real estate or November 11, 2000. The Company's commercial bank provided
$3 million of long-term acquisition financing under the Term Loan (see Note 8 to
the Consolidated Financial Statements).

Unaudited Pro Forma Combined Results of Operations
--------------------------------------------------

The following unaudited pro forma statement of operations gives
effect to the HTI transaction, which was accounted for, using the purchase
method of accounting, as if the HTI purchase had occurred on January 1, 1998,
and includes certain adjustments, including amortization of goodwill, increased
interest expense and preferred stock dividends related to the HTI purchase. The
1999 pro forma results exclude $3.5 million of in-process research and
development expenses incurred in connection with the HTI transaction.

                                      F-10

<PAGE>


Unaudited Pro Forma Combined Results of Operations
(unaudited in thousands)
<TABLE>
<CAPTION>
                                                                          Twelve Months Ended                  Nine Months Ended
                                                                              December 31,                        September 30,
------------------------------------------------------------------------------------------------------------------------------------
                                                                          1999             1998              1999             1998
<S>                                                                        <C>              <C>                <C>            <C>
------------------------------------------------------------------------------------------------------------------------------------
     Revenues                                                            $23,317        $21,362            $17,635           $16,323
------------------------------------------------------------------------------------------------------------------------------------
     Income before non-recurring charges directly
     attributable to the HTI acquisition                                 $ 6,865        $   353            $ 1,175           $   994
------------------------------------------------------------------------------------------------------------------------------------
     Basic net income per share before non-recurring
     charges directly attributable to the HTI acquisition                $  0.48        $  0.03             $ 0.09           $  0.08
------------------------------------------------------------------------------------------------------------------------------------
     Diluted net income per share before non-recurring
     charges directly attributable to the HTI acquisition                $  0.40        $  0.02             $ 0.07           $  0.06
====================================================================================================================================
</TABLE>



Supplemental Disclosure of Cash Flow Information
------------------------------------------------

The purchase price of HTI Bio-Products Inc. and certain assets of the OEM
business of Atlantic Antibodies Inc. was allocated as follows (in thousands):

  HTI                                             ATAB
  ---                                             ----
  Cash                                  $  249    Land                    $  360
  Other Assets                           1,562    Fixed  Assets            1,215
  Fixed Assets                           1,004    Inventory                1,575
  Liabilities                            (863)                            ------
  In-process research & development      3,500    Cash Paid               $3,150
  Goodwill                               4,044                            ======
                                        ------
  Total fair value                      $9,496
                                        ======
  Cash Paid                             $8,429

  Series B Preferred Stock Issued       $1,067



4. PROPERTY AND EQUIPMENT:
  ----------------------

As of December 31, property and equipment consisted of the following:

                                                            1999          1998
                                                          --------     ---------

 Equipment                                               $ 3,747       $ 1,518
 Furniture and fixtures                                       81            66
 Land                                                        710             -
 Leasehold improvements                                      561           502
                                                          ------       -------
 Less- Accumulated depreciation and amortization          (1,810)       (1,251)
                                                          ------       -------
                                                         $ 3,289       $   835
                                                         =======       =======


Depreciation expense was $559, $322, and $391 in 1999, 1998, and 1997
respectively.

                                      F-11

<PAGE>

5. OTHER ASSETS:
   -------------


As of December 31, other assets consisted of the following:
<TABLE>
<CAPTION>

                                                                    1999                   1998
                                                                 ---------              ----------
<S>                                                                     <C>                  <C>
  Deferred rent                                                  $     149              $      206
  Note receivable - non current  (net of allowance)                    235                     241
  Deposits and other                                                    47                      47
                                                                 ---------
                                                                 $     431              $      494
                                                                 =========              ==========
</TABLE>

The Company maintains a note receivable from a former executive of EnSys. The
original loan amount was $350 and is secured by the individual's personal
residence. The loan bears interest at 5.8% per annum. At December 31, 1999, the
outstanding loan balance was approximately $336 of which approximately $6 in
principal is payable in the year 2000 with the balance payable in January 2001.

6. INTANGIBLE ASSETS:
   ------------------

<TABLE>
<CAPTION>
                                                          1999                   1998                     Lives
                                                          ----                   ----                     -----

<S>                                                       <C>                       <C>                   <C>
  Developed Technology                                   $  -                   $1,250                        7
  Goodwill                                               4,044                     743                   7 - 20
  Intellectual and license rights (Note 14)                380                     380                        -
  Other                                                    316                     208                   5 - 10
  Less - Accumulated Amoritization                        (176)                   (648)
                                                       -------                  ------
                                                        $4,564                  $1,933
                                                        ======                  ======
</TABLE>

Amortization of these intangible assets was $451, $279 and $278 in 1999, 1998
and 1997, respectively. In the fourth quarter of 1999, approximately $1.3
million of net intangible assets, were eliminated in accordance with SFAS 109,
as the Company believes it will utilize the tax benefits of the net operating
losses, acquired in the transactions that occurred in 1996.

7. ACCRUED EXPENSES:
   -----------------


   As of December 31, accrued expenses consisted of the following:


                                                    1999       1998

     Royalties                                    $  275     $  291
     Accrued purchases                                29        185
     Accrued other                                   393        312
                                                  ------     ------
                                                  $  697     $  788
                                                  ======     ======

8. LONG-TERM DEBT:
   ---------------

The Company entered into a financing agreement with a commercial bank during
1999, pursuant to which the Company borrowed a total of $9.0 million, in
connection with the acquisitions of HTI and the operating assets of the OEM
business of Atlantic AntiBodies. The acquisition financing consists of a
five-year term loan (the Term Loan) with monthly amortization of equal principal
payments plus interest. Interest on $3 million of original principal amount is
at a fixed rate of interest of 8.96% per annum, and the remaining principal
bears interest at a variable rate of 3% over the published London Interbank
Offered Rate ("LIBOR"). Also under the terms of the financing, the Company is
required to meet certain financial covenants including debt to net worth,
minimum cash flows and no dividends or distributions may be paid on account of
the Company's common stock. At December 31, 1999, the Company is in compliance
with all such covenants. The financing is secured by substantially all of the
Company's assets.

The Company also maintains two term loans acquired in 1998, for the purchase of
specific equipment and leasehold improvements. The maturities of these loans are
48 and 60 months. These notes are secured with Certificates of Deposit (CD) of

                                      F-12

<PAGE>

$338 purchased by the Company and bear an interest rate of 1% over the purchased
CD rate. As of December 31, 1999, the maturities of long term debt are listed
below:

  2000                                                        $     1,898
  2001                                                              1,897
  2002                                                              1,900
  2003                                                              1,865
  2004                                                                613
                                                              -----------
                                                                    8,173
  Less- Current portion of long-term debt obligations              (1,898)
                                                              -----------

  Long-term debt                                              $     6,275
                                                              ===========

Interest expense was $565, $20 and $36 in 1999, 1998 and 1997 respectively.

9. STOCK OPTIONS:
  ---------------

The Company has two stock option plans (the "1993 Plan" and the "2000 Plan")
which authorize the granting of incentive and nonqualified stock options to
officers, key employees, directors and consultants. Incentive stock options are
granted at not less than 100% of fair market value at the date of grant (110%
for stockholders owning more than 10% of the Company's common stock).
Nonqualified stock options are granted at not less than 85% of fair market value
at the date of grant. All previously issued SDI options were converted into the
2000 Plan. A maximum of 2,500,000 shares of common stock are issuable under the
2000 Plan.

Certain additional options have been granted outside the plans. These options
generally follow the provisions of the 2000 Plan. Information with respect to
the stock options granted under the plans and options granted separately from
the plans is summarized as follows:
<TABLE>
<CAPTION>

                                                                         Price          Aggregate
                                                         Number          Range           Proceeds
                                                       ----------------------------------------------
<S>                                                    <C>            <C>           <C>
Balance, December 31, 1996                             1,044,239     $ 0.19 - $ 7.50  $       1,759
    Granted                                              545,000                1.88          1,022
    Cancelled                                            (99,555)      0.19 -   7.50           (138)
    Exercised                                            (25,502)      0.19 -   0.64             (7)
                                                       ---------     ---------------   ------------

  Balance, December 31, 1997                           1,464,182     $ 0.19 - $ 3.25   $      2,636
                                                       ---------     ---------------   ------------
    Granted                                              380,000       2.00 -   2.63            888
    Cancelled                                            (22,377)      0.64 -   1.88            (34)
    Exercised                                            (93,172)      0.19 -   1.88            (34)
                                                       ---------     ---------------   ------------

  Balance, December 31, 1998                           1,728,633     $ 0.19 - $ 3.25   $      3,456
                                                       =========     ===============   ============
     Granted                                             371,000       2.31 -   4.69          1,020
    Cancelled                                            (18,000)      2.63 -   2.63            (47)
    Exercised                                            368,918)      0.19 -   3.25           (818)
                                                       ---------     ---------------   ------------
  Balance, December 31, 1999                           1,712,715     $ 0.19 - $ 3.25   $      3,611
                                                       =========     ===============   ============
</TABLE>


As of December 31, 1999, options covering 848,715 shares were exercisable with
an aggregate exercise price of $1,529 and 398,129 shares were available for
future grant under the plans. For options granted, the Company recognizes as
deferred compensation the excess of the deemed value for accounting purposes of
the common stock issuable upon the exercise of options over the aggregate
exercise price of such options. The deferred compensation is amortized over the
vesting period of the options.

                                      F-13

<PAGE>
<TABLE>
<CAPTION>

                                Options Outstanding                              Options Exercisable
                      --------------------------------------------          -----------------------------
                                            Weighted Average
                       Shares          --------------------------                              Wtd. Average
    Range of          Outstanding        Remianing        Exercise             Shares            Exercise
 Exercise Prices      At 12/31/99      Contractual Life    Price             Exercisable          Price
 ---------------      -----------      ----------------   -------            -----------        --------
<S>                     <C>              <C>               <C>                 <C>                <C>
 $0.19                  114,288          4.3 Years         $0.19               114,288            $0.19
 $0.64                   57,136          4.3 Years         $0.64                57,136            $0.64
 $1.38 - $2.00          693,862          7.2 Years         $1.90               425,862            $1.90
 $2.13 - $3.25          826,429          7.7 Years         $2.63               251,429            $2.62
 $4.69                   21,000          9.6 Years         $4.69                  -                 -
 -------------        ---------        -----------         -----               -------            -----
 $0.19   $4.69        1,712,715          7.3 Years         $2.39               848,715            $1.80
 =============        =========        ===========         =====               =======            =====
</TABLE>


In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." Effective January 1, 1995, the Company adopted the disclosure
requirement of this pronouncement. Had compensation cost for the Company's stock
option plans been determined based upon the fair value at the grant date for
awards under SFAS 123, the Company's net income applicable to common
stockholders for 1999, 1998 and 1997 would have been $3,295, $493, and $1,575
and diluted net income per share applicable to common stockholders would have
been $.19, $.03, and $.10, respectively. Because the SFAS 123 method of
accounting has not been applied to options granted prior to January 1, 1995, the
resulting pro forma compensation cost, and thus pro forma net income (loss), may
not be representative of that to be expected in future years.

The weighted average fair value at the date of grant for options granted during
1999, 1998 and 1997 is estimated at $2.76, $1.97 and $1.37 per share,
respectively, using the Black-Scholes option-pricing model. The assumptions used
in the Black-Scholes model are as follows: dividend yield of 0%, expected
volatility of 118% in 1999, 97% in 1998 and 80% in 1997, risk-free interest rate
of 6.14% in 1999, 6.14% in 1998 and 6.4% in 1997, and an expected option life of
5 years in 1999, 5 years in 1998 and 6 years in 1997.

10. SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION
    --------------------------------------------

The company has two reportable segments. The Test Kit segment develops,
manufactures and markets immunoassay-based test kits for rapid, cost-effective
detection of a wide variety of different analytes in three primary market
categories: agriculture, water quality and environmental testing.

The Antibody Segment, Strategic BioSolutions (SBS), includes TSD BioServices,
HTI and the acquired operating assets of the OEM business of Atlantic
Antibodies. These businesses provide fully integrated polyclonal and monoclonal
antibody development and large scale manufacturing services to pharmaceutical
and medical diagnostic companies.

  Geographic:

<TABLE>
<CAPTION>
  Net Revenues                                 1999             1998           1997
  -------------                                ----             ----           ----

<S>                                          <C>             <C>             <C>
  United States                              $ 19,150        $ 13,257        $ 12,421
  Rest of the World                             3,384           2,468           1,999
                                             --------        --------        --------

  Total                                      $ 22,534        $ 15,725        $ 14,420
                                             ========        ========        ========
</TABLE>

There were no individual countries outside of the United States that represents
more than 10% of the total revenues of the Company. There are no significant
long-lived assets located outside the United States.

                                      F-14

<PAGE>

         Information about Major Customers:

In 1999, no customer accounted for 10% of the Company's revenues. In 1998, Delta
and Pine Land Company accounted for 10% of the Company's revenues. Delta & Pine
Land Company and Rohm and Haas Corp. each accounted for 10% of the Company's
1997 revenues.

         Reportable Segments:

For reporting purposes a "pro-rata" share of common costs including a management
fee is charged to the Antibody segment by the test kit segment. Segment profit
is based on income before income taxes excluding the $3.5 million one time
charge for in-process research and development in connection with the
acquisition of HTI.

Segment Information:
<TABLE>
<CAPTION>
For the twelve months ended December 31,            Test Kits            Antibody            Total

<S>                                                  <C>                   <C>             <C>
1999     Revenues                                    $14,609               $7,925          $22,534
         Segment profit                                2,157                 (191)           1,966
         Segment assets                               24,036                5,636           29,672
         Depreciation and amortization                   621                  368              989
         Capital expenditures                            398                   -               398

1998     Revenues                                    $12,960               $2,765          $15,725
         Segment profit                                  957                 (176)             781
         Segment assets                               14,731                  362           15,093
         Depreciation and amortization                   614                   -               614
         Capital expenditures                            674                   -               674

1997     Revenues                                    $12,306               $2,114          $14,420
         Segment profit                                1,719                  (42)           1,677
         Segment assets                               13,919                  141           14,060
         Depreciation and amortization                   643                   -               643
         Capital expenditures                            159                   -               159
</TABLE>


11. COMMITMENTS AND CONTINGENCIES:
    ------------------------------

The Company leases its office and manufacturing facilities and other equipment
under operating leases. Rent expense for the years ended December 31, 1999, 1998
and 1997, was $684, $598 and $466, respectively. Future commitments under these
non-cancelable leases at December 31 are as follows:

  2000                                                          $  436
  2001                                                             383
  2002                                                             351
  2003                                                             362
  2004                                                             308
  2005 and thereafter                                              980
                                                                ------
                                                                $2,820
                                                                ------

The Company is party to various claims arising in the ordinary course of
business. Although the ultimate outcome of these matters is presently not
determinable, management, after consultation with legal counsel, does not
believe that the outcome of these matters will have a material adverse effect on
the Company's financial position or results of operations.

                                      F-15

<PAGE>

12. RETIREMENT SAVINGS PLAN:
   ------------------------

In 1992, the Company instituted a retirement savings plan qualified under
Section 401(k) of the Internal Revenue Code. The plan allows for eligible
employees to contribute a portion of their gross wages to the plan. The Company
matches employees' contributions on a 50% basis up to 6% of gross wages. In
1999, 1998 and 1997, the Company recognized expense of $104, $77 and $76
respectively, associated with this plan.

13. INCOME TAXES:
    -------------

         The provision for income tax (benefit) consists of the following:

                                               1999                   1998
                                               ----                   ----

         Federal           Current         $      40                $    -
                           Deferred           (5,149)                    -

         State             Current                15                     -
                           Deferred             (223)                    -
                                            --------                 -------
                                           $  (5,317)               $    -
                                           =========                =======

The following table summarizes the significant differences between the U.S.
Federal statutory rate and the Company's effective tax rate for financial
statement purposes:

                                             1999        1998         1997
                                             ----        ----         ----
Statutory tax rate                          (34.0)%      34.0%        34.0%
State taxes, net of U.S. Federal benefit       .6          .5            -
Changes in net valuation reserve            316.3)      (35.4)       (34.9)
Other, net                                    3.1          .9           .9
                                           ------       -----        -----
                                           (346.6)%      -   %         -  %
                                           ------       -----        -----

Significant components of the Company's deferred tax assets as of December 31
are as follows:

                                             1999                    1998
                                             ----                    ----

 Net operating loss carryforwards          $ 5,925                 $ 7,288
 Credit carryforwards                           40                     -
 Amortization and depreciation               2,076                     699
 Non-deductible reserves                       118                      55
 Inventory costs not currently deductible      130                      63
                                            ------                 -------
 Total deferred tax assets                 $ 8,289                 $ 8,105

 Valuation allowance                        (1,218)                 (8,105)
                                            ------                  ------

 Net deferred tax assets                   $ 7,071                 $  -
                                           -------                  ------


Management continually reviews the valuation allowance on the Company's deferred
tax assets. In the fourth quarter of 1999 management concluded that it was more
likely than not that the Company would realize the tax benefits associated with
its federal deferred tax assets and a portion of its state deferred tax assets
and recorded a deferred tax benefit. A valuation allowance remains for a portion
of the state deferred assets and all of the foreign deferred tax assets.

                                      F-16

<PAGE>

The reduction of the valuation allowance is attributed to management's belief
that, at December 31, 1999, it is more likely than not the deferred tax assets
will be realized through future earnings and/or tax planning strategies.

The amount of net operating loss carryforwards which can be utilized in any one
period, if any, will be limited by federal tax regulations since a cumulative
change in ownership of more than 50% has occurred within a three year period.
The fourth quarter reduction in the valuation allowance on the Company's
deferred tax assets, included approximately $1.3 million related to net
operating losses that were acquired in connection with business acquisitions and
mergers. The reduction in the valuation allowance related to the acquired net
operating losses was recorded as a reduction in the remaining intangibles
associated with the acquisition.

The net operating loss carryforwards differ from the accumulated deficit
principally due to differences in the recognition of certain research and
development expenses, depreciation and amortization, other non-deductible
reserves and the accretion of preferred stock for financial and federal income
tax reporting.

As of December 31, 1999, the Company had federal net operating loss
carryforwards of approximately $14.1 million, which begin to expire as follows:

                                2004   $   922
                                2005     2,565
                                2006     2,603
                                2007     2,584
                                2008     1,182
                                2009     2,081
                                2010     2,183
                                       -------
                               Total   $14,120


14. SALE OF TECHNOLOGY:
    -------------------

In July 1998, the Company entered into an exclusive agreement to sell its
analytical test to detect concentrations of lipoprotein (a) to a biotechnology
company.

At December 31, 1999, pursuant to the terms of the July 1998 agreement, the
Company and the purchaser expected to determine the purchase price to be paid to
the Company for its right, title and interest in the product. Such purchase
price is to be based on a multiple of sales volumes achieved during the second
half of 1999. In July 1998, the Company purchased intellectual and licensing
rights to the product for $380. The Company and purchaser are evaluating the
transactions and sales volumes for 1999, and have not yet reached an agreement
on the final sales price. Accordingly, the Company has not recognized any gain
on the sale of this asset through December 31, 1999. The Company expects to
record the sale of the asset during fiscal year 2000, after the sales price has
been determined, and expects to report a gain at that time.




                                      F-17

<PAGE>









15.      QUARTERLY FINANCIAL DATA (unaudited):
         -------------------------------------


<TABLE>
<CAPTION>
                                                                         Three Months Ended
-------------------------------------------------------------------------------------------------------------------------------
                                              March 31                  June 30           September 30              December 31
-------------------------------------------------------------------------------------------------------------------------------
                                                              (In thousands except per share data)
1999
<S>                                           <C>                        <C>              <C>                          <C>
  Revenues                                    $3,919                   $5,475             $7,459                      $5,681
  Gross profit (1)                             2,351                    3,030              4,223                       3,852
  Net income (loss)                           (3,310)                     305              1,010                       5,778
  Basic earnings (loss) per share              (0.25)                    0.02               0.07                        0.35
  Diluted earnings (loss) per share            (0.25)                    0.02               0.06                        0.33

1998
  Revenue                                     $2,896                   $5,176             $4,031                      $3,622
  Gross profit (1)                             1,765                    3,387              2,391                       1,960
  Net income (loss)                               20                      770                443                        (452)
  Basic earnings (loss) per share                  -                     0.06               0.03                       (0.03)
  Diluted earnings (loss) per share                -                     0.05               0.03                       (0.03)

</TABLE>
 (1) Gross profit is net revenues less manufacturing expenses.

Results for the three months ended March 31, 1999, includes a $3.5 million
charge for in-process research and development related to the acquisition of HTI
on February 26, 1999. Results for the three months ended December 31, 1999
includes a $5.3 million income tax benefit related to the valuation of the
Company's deferred tax assets.

                                      F-18

<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

      STRATEGIC DIAGNOSTICS INC.

Date:       March 30, 2000       /s/  Richard C. Birkmeyer
                                 -------------------------
                                 Richard C. Birkmeyer
                                 President, Chief Executive Officer
                                 (Principal Executive Officer) and Director

Date:       March 30, 2000       /s/  Arthur A. Koch, Jr.
                                 ------------------------
                                 Arthur A. Koch, Jr.
                                 Vice President - Finance, Chief Operating
                                 Officer, and Chief Financial Officer (Principal
                                 Financial and Accounting Officer)

         Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.

Date:       March 30, 2000       /s/  Richard J. Defieux
                                 -----------------------
                                 Richard J. Defieux
                                 Director

Date:       March 30, 2000       /s/  Robert E. Finnigan
                                 -----------------------
                                 Robert E. Finnigan
                                 Director

Date:       March 30, 2000       /s/  Stephen O. Jaeger
                                 ----------------------
                                 Stephen O. Jaeger
                                 Director

Date:       March 30, 2000       /s/  Kathleen E. Lamb
                                 ---------------------
                                 Kathleen E. Lamb
                                 Director

Date:       March 30, 2000       /s/  Curtis Lee Smith, Jr.
                                 --------------------------
                                 Curtis Lee Smith Jr.
                                 Director

Date:       March 30, 2000       /s/  Grover C. Wrenn
                                 --------------------
                                 Grover C. Wrenn
                                 Director

                                      F-19