##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM
10-Q/A
 Amendment No. 1
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended January 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From  to
 
 COMMISSION
FILE NUMBER 0-22354
 MARTEK BIOSCIENCES CORPORATION
  Delaware
    
    52-1399362(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 6480 Dobbin Road, Columbia, Maryland 21045
 (410) 740-0081
 
 
 þ o
  þ o o
 o þ




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##### 



EXPLANATORY NOTE
    o
    
    Part I Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operationso
    
    Part I Item 4  Controls and Procedures




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##### 



PART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    1Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 4.
    
    Controls and Procedures
    
    
    23PART II
    
    OTHER INFORMATIONItem 6.
    
    Exhibits
    
    
    24Signatures
    
    
    25




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##### 



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
 MARTEK BIOSCIENCES CORPORATION
  January 31,2007
    
    
    October 31,(restated,
    
    
    2006In thousands, except share and per share data
    

unaudited)
    
    

(restated)AssetsCurrent assetsCash and cash equivalents
    
    $
    14,752
    
    
    $
    15,578Short-term investments and marketable securities
    
    
    4,400
    
    
    
    11,250Accounts receivable, net
    
    
    34,401
    
    
    
    32,746Inventories, net
    
    
    106,731
    
    
    
    100,320Other current assets
    
    
    9,733
    
    
    
    10,074Total current assets
    
    
    170,017
    
    
    
    169,968Property, plant and equipment, net
    
    
    287,426
    
    
    
    286,922Deferred tax asset
    
    
    40,318
    
    
    
    41,619Goodwill
    
    
    48,653
    
    
    
    48,603Other intangible assets, net
    
    
    36,596
    
    
    
    36,828Other assets, net
    
    
    13,730
    
    
    
    14,033Total assets
    
    $
    596,740
    
    
    $
    597,973Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    18,952
    
    
    $
    21,663Accrued liabilities
    
    
    17,391
    
    
    
    24,098Current portion of notes payable and other long-term obligations
    
    
    1,234
    
    
    
    1,231Current portion of deferred revenue
    
    
    1,832
    
    
    
    2,794Total current liabilities
    
    
    39,409
    
    
    
    49,786Long-term debt under revolving credit facility
    
    
    41,000
    
    
    
    36,000Notes payable and other long-term obligations
    
    
    9,971
    
    
    
    10,277Long-term portion of deferred revenue
    
    
    9,722
    
    
    
    9,335Total liabilities
    
    
    100,102
    
    
    
    105,398CommitmentsStockholders equityPreferred stock, $.01 par value, 4,700,000 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Series B junior participating preferred stock, $.01 par value; 300,000 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock, $.10 par value; 100,000,000 shares authorized; 32,195,428 and 32,156,162 shares issued and
outstanding, respectively
    
    
    3,220
    
    
    
    3,216Additional paid-in capital
    
    
    524,926
    
    
    
    523,486Accumulated other comprehensive income
    
    
    40
    
    
    
    171Accumulated deficit
    
    
    (31,548
    )
    
    
    (34,298
    )Total stockholders equity
    
    
    496,638
    
    
    
    492,575Total liabilities and stockholders equity
    
    $
    596,740
    
    
    $
    597,973
 See accompanying notes.
 1




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##### 



MARTEK BIOSCIENCES CORPORATION
  Three months ended January 31,Unaudited - In thousands, except share and per share data
    

2007(restated)
    
    
    2006(restated)Revenues:Product sales
    
    $
    66,712
    
    
    $
    60,497Contract manufacturing sales
    
    
    3,549
    
    
    
    2,395Total revenues
    
    
    70,261
    
    
    
    62,892Cost of revenues:Cost of
product sales, including idle capacity costs
    
    
    42,969
    
    
    
    37,450Cost of contract manufacturing sales
    
    
    3,423
    
    
    
    2,039Total cost of revenues
    
    
    46,392
    
    
    
    39,489Gross margin
    
    
    23,869
    
    
    
    23,403Operating expenses:Research and development
    
    
    6,166
    
    
    
    5,480Selling, general and administrative
    
    
    11,954
    
    
    
    9,867Restructuring charge
    
    
    518
    
    
    
    Other operating expenses
    
    
    473
    
    
    
    41Total operating expenses
    
    
    19,111
    
    
    
    15,388Income from operations
    
    
    4,758
    
    
    
    8,015Interest and other income, net
    
    
    283
    
    
    
    363Interest expense
    
    
    (724
    )
    
    
    (864
    )Income before income tax provision
    
    
    4,317
    
    
    
    7,514Income tax provision
    
    
    1,567
    
    
    
    2,744Net income
    
    $
    2,750
    
    
    $
    4,770Net income per shareBasic
    
    $
    0.09
    
    
    $
    0.15Diluted
    
    $
    0.08
    
    
    $
    0.15Weighted average common shares outstandingBasic
    
    
    32,180,760
    
    
    
    32,055,930Diluted
    
    
    32,366,426
    
    
    
    32,431,559
 See accompanying notes.
 2




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##### 



MARTEK BIOSCIENCES CORPORATION
  AccumulatedAdditional
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedUnaudited - In thousands, except share data
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Deficit
    
    
    TotalBalance
at October 31, 2006 (restated)
    
    
    32,156,162
    
    
    $
    3,216
    
    
    $
    523,486
    
    
    $
    171
    
    
    $
    (34,298
    )
    
    $
    492,575Exercise of stock options
    
    
    39,266
    
    
    
    4
    
    
    
    635
    
    
    
    
    
    
    
    
    
    
    
    639Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    688
    
    
    
    
    
    
    
    
    
    
    
    688Tax benefit of exercise of non-qualified stock options
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    
    
    
    
    
    
    
    
    117Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,750
    
    
    
    2,750Other comprehensive income:Unrealized loss on exchange rate forward
contract, net of tax of $(79)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (131
    )
    
    
    
    
    
    
    (131
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,619Balance
at January 31, 2007 (restated)
    
    
    32,195,428
    
    
    $
    3,220
    
    
    $
    524,926
    
    
    $
    40
    
    
    $
    (31,548
    )
    
    $
    496,638
 See accompanying notes.
 3




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##### 



MARTEK BIOSCIENCES CORPORATION
  Three months ended January 31,Unaudited  In thousands
    

2007(restated)
    
    
    2006(restated)Operating activitiesNet income
    
    $
    2,750
    
    
    $
    4,770Adjustments to reconcile net income to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    6,334
    
    
    
    5,352Deferred tax provision
    
    
    1,567
    
    
    
    2,744Equity-based compensation expense
    
    
    609
    
    
    
    988Incremental tax benefit from exercise of non-qualified stock options
    
    
    (117
    )
    
    
    Loss from disposal and write-down of assets and other
    
    
    248
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,655
    )
    
    
    (9,235
    )Inventories
    
    
    (6,332
    )
    
    
    (5,256
    )Other assets
    
    
    363
    
    
    
    (2,244
    )Accounts payable
    
    
    (2,711
    )
    
    
    (516
    )Accrued liabilities
    
    
    (5,362
    )
    
    
    2,060Deferred revenue and other liabilities
    
    
    (626
    )
    
    
    1,515Net cash (used in) provided by operating activities
    
    
    (4,932
    )
    
    
    178Investing activitiesSale of short-term investments and marketable securities, net
    
    
    6,850
    
    
    
    3,600Expenditures for property, plant and equipment
    
    
    (1,628
    )
    
    
    (2,415
    )Repurchase of sale-leaseback transaction
    
    
    (3,910
    )
    
    
    Capitalization of intangible assets
    
    
    (2,710
    )
    
    
    (880
    )Net cash (used in) provided by investing activities
    
    
    (1,398
    )
    
    
    305Financing activitiesRepayments of notes payable and other long-term obligations
    
    
    (252
    )
    
    
    (2,252
    )Borrowings under revolving credit facility, net
    
    
    5,000
    
    
    
    8,000Proceeds from the exercise of stock options and warrants, net
    
    
    639
    
    
    
    707Incremental tax benefit from exercise of non-qualified stock options
    
    
    117
    
    
    
    Net cash provided by financing activities
    
    
    5,504
    
    
    
    6,455Net (decrease) increase in cash and cash equivalents
    
    
    (826
    )
    
    
    6,938Cash and cash equivalents, beginning of period
    
    
    15,578
    
    
    
    11,047Cash and cash equivalents, end of period
    
    $
    14,752
    
    
    $
    17,985Supplemental cash flow disclosures:Interest paid
    
    $
    754
    
    
    $
    987Income taxes paid
    
    $
    150
    
    
    $
    
 See accompanying notes.
 4




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1.
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
    As
    
    
    
    
    
    
    AsReported
    
    
    Adjustment
    
    
    RestatedProperty, plant and equipment, net
    
    $
    293,564
    
    
    $
    (6,138
    )
    
    $
    287,426Deferred tax asset
    
    
    38,082
    
    
    
    2,236
    
    
    
    40,318Total assets
    
    
    600,642
    
    
    
    (3,902
    )
    
    
    596,740Accumulated deficit
    
    
    (27,646
    )
    
    
    (3,902
    )
    
    
    (31,548
    )Total stockholders equity
    
    
    500,540
    
    
    
    (3,902
    )
    
    
    496,638Total liabilities and stockholders equity
    
    
    600,642
    
    
    
    (3,902
    )
    
    
    596,740
  As
    
    
    
    
    
    
    AsReported
    
    
    Adjustment
    
    
    RestatedCost of product sales, including idle capacity costs
    
    $
    41,354
    
    
    $
    1,615
    
    
    $
    42,969Total cost of revenues
    
    
    44,777
    
    
    
    1,615
    
    
    
    46,392Gross margin
    
    
    25,484
    
    
    
    (1,615
    )
    
    
    23,869Income from operations
    
    
    6,373
    
    
    
    (1,615
    )
    
    
    4,758Income before income tax provision
    
    
    5,932
    
    
    
    (1,615
    )
    
    
    4,317Income tax provision
    
    
    2,153
    
    
    
    (586
    )
    
    
    1,567Net income
    
    
    3,779
    
    
    
    (1,029
    )
    
    
    2,750Net income per share:Basic
    
    $
    0.12
    
    
    $
    (0.03
    )
    
    $
    0.09Diluted
    
    $
    0.12
    
    
    $
    (0.04
    )
    
    $
    0.08
  5




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##### 



2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
 Consolidation
 Use of Estimates
 Segment Information
 Revenue Recognition
  Shipping Income and Costs
 Foreign Currency Transactions and Hedging Activities
  6




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##### 



Research and Development
 Advertising
 Other Operating Expenses
 Deferred Income Taxes
  Equity-Based Compensation
 Net Income Per Share
 Comprehensive Income
 Cash and Cash Equivalents
 Short-Term Investments and Marketable Securities
   7




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Fair Value of Financial Instruments
 Trade Receivables
 Inventories
 Property, Plant and Equipment
 Asset Description
    
    Useful Life (years)Building
    
    15  30Fermentation equipment
    
    10  20Oil processing equipment
    
    10  20Other machinery and equipment
    
    5  10Furniture and fixtures
    
    5  7Computer hardware and software
    
    3  7
  Patent Costs
 Goodwill and Other Intangible Assets
 Impairment of Long-Lived Assets
 8




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##### 



Recently Issued Accounting Pronouncements
  3. DSM SUPPLY AND LICENSE AGREEMENT
  4. SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
  9




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##### 



5. INVENTORIES
  January 31,
    
    
    October 31,2007
    
    
    2006Finished goods
    
    $
    58,232
    
    
    $
    43,928Work in process
    
    
    58,370
    
    
    
    66,968Raw materials
    
    
    3,229
    
    
    
    3,024Total inventories
    
    
    119,831
    
    
    
    113,920Less: inventory reserve
    
    
    (1,100
    )
    
    
    (1,600
    )Total inventories, net
    
    
    118,731
    
    
    
    112,320Less: long-term portion
    
    
    (12,000
    )
    
    
    (12,000
    )Total inventories, net
    
    $
    106,731
    
    
    $
    100,320
   6. PROPERTY, PLANT AND EQUIPMENT
  January 31,
    
    
    October 31,2007
    
    
    2006(restated)
    
    

(restated)Land
    
    $
    2,320
    
    
    $
    2,320Building and improvements
    
    
    62,673
    
    
    
    61,855Machinery and equipment
    
    
    252,903
    
    
    
    248,107Furniture and fixtures
    
    
    2,907
    
    
    
    2,716Computer hardware and software
    
    
    11,522
    
    
    
    11,413332,325
    
    
    
    326,411Less: accumulated depreciation and amortization
    
    
    (55,514
    )
    
    
    (50,473
    )276,811
    
    
    
    275,938Construction in progress
    
    
    10,615
    
    
    
    10,984Property, plant and equipment, net
    
    $
    287,426
    
    
    $
    286,922
   10




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##### 



7. GOODWILL AND OTHER INTANGIBLE ASSETS
  January 31, 2007
    
    
    October 31, 2006Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedIntangible Asset
    
    Gross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetTrademarks
    
    $
    2,062
    
    
    $
    (583
    )
    
    $
    1,479
    
    
    $
    2,053
    
    
    $
    (545
    )
    
    $
    1,508Patents
    
    
    20,162
    
    
    
    (2,573
    )
    
    
    17,589
    
    
    
    19,233
    
    
    
    (1,835
    )
    
    
    17,398Core technology
    
    
    1,708
    
    
    
    (484
    )
    
    
    1,224
    
    
    
    1,708
    
    
    
    (455
    )
    
    
    1,253Current products
    
    
    10,676
    
    
    
    (3,406
    )
    
    
    7,270
    
    
    
    10,676
    
    
    
    (3,228
    )
    
    
    7,448Licenses
    
    
    11,091
    
    
    
    (2,057
    )
    
    
    9,034
    
    
    
    11,091
    
    
    
    (1,870
    )
    
    
    9,221Goodwill
    
    
    48,653
    
    
    
    
    
    
    
    48,653
    
    
    
    48,603
    
    
    
    
    
    
    
    48,603$
    94,352
    
    
    $
    (9,103
    )
    
    $
    85,249
    
    
    $
    93,364
    
    
    $
    (7,933
    )
    
    $
    85,431
 8. NOTES PAYABLE AND LONG-TERM DEBT
    9. RESTRUCTURING CHARGE
    EmployeeSeparationCosts
    
    
    Other
    
    
    TotalLiability for restructuring costs at October 31, 2006
    
    $
    1,972
    
    
    $
    74
    
    
    $
    2,046Costs incurred in quarter ended January 31, 2007
    
    
    
    
    
    
    518
    
    
    
    518Cash payments
    
    
    (1,757
    )
    
    
    (444
    )
    
    
    (2,201
    )Adjustments
    
    
    (23
    )
    
    
    
    
    
    
    (23
    )Liability for restructuring costs at January 31, 2007
    
    $
    192
    
    
    $
    148
    
    
    $
    340
 11




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##### 



10. COMMITMENTS AND CONTINGENCIES
 Purchase Commitments
 Scientific Research Collaborations
 OmegaTech Contingent Purchase Price
  Patent Infringement Litigation
 Class Action Lawsuit
 Other
 12




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##### 



11. STOCKHOLDERS EQUITY
    12. NET INCOME PER SHARE
   Three months ended January 31,2007(restated)
    
    
    2006(restated)Net income
    
    $
    2,750
    
    
    $
    4,770Weighted average shares outstanding, basic
    
    
    32,181
    
    
    
    32,056Effect of dilutive potential common shares:Stock options
    
    
    183
    
    
    
    374Restricted stock units
    
    
    2
    
    
    
    Warrants
    
    
    
    
    
    
    2Total dilutive potential common shares
    
    
    185
    
    
    
    376Weighted average shares outstanding, diluted
    
    
    32,366
    
    
    
    32,432Net income per share, basic
    
    $
    0.09
    
    
    $
    0.15Net income per share, diluted
    
    $
    0.08
    
    
    $
    0.15
  13. COMPREHENSIVE INCOME
  Three months ended January 31,2007(restated)
    
    
    2006(restated)Net income, as reported
    
    $
    2,750
    
    
    $
    4,770Other comprehensive income (loss):Unrealized (loss) gain on exchange rate forward contract,
net of income tax (benefit) provision of $(79) and $159, respectively
    
    
    (131
    )
    
    
    264Comprehensive income
    
    $
    2,619
    
    
    $
    5,034
 13




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 This Managements Discussion and Analysis of Financial Condition and Results of Operations contains
forward-looking statements concerning our business and operations, including, among other things,
statements concerning the following:
 
    
    expectations regarding future revenue growth, gross margin, operating cash flow and overall profitability;
    
    expectations regarding product introductions and growth in nutritional product sales;
    
    expectations regarding potential collaborations and acquisitions;
    
    expectations regarding demand for products with our nutritional oils;
    
    expectations regarding sales to and by our infant formula licensees and supplemented infant formula market penetration levels;
    
    expectations regarding marketing of our oils by our infant formula licensees;
    
    expectations regarding future agreements with and revenues from companies in the food
and beverage, perinatal and nutritional supplement markets;
    
    expectations regarding growing consumer recognition of the key health benefits of DHA and ARA;
    
    expectations regarding competitive products;
    
    expectations regarding future efficiencies and improvements in manufacturing
processes and the cost of production of our nutritional oils;
    
    expectations regarding future purchase volumes and costs of third-party manufactured oils;
    
    expectations regarding the amount of production capacity and our ability to meet future demands for our nutritional oils;
    
    expectations regarding the amount of inventory held by us or our customers;
    
    expectations regarding production capacity utilization and
the effects of excess production capacity and the plant restructuring;
    
    expectations regarding future selling, general and administrative and research and development costs;
    
    expectations regarding future capital expenditures;
    
    expectations regarding levels of consumption through governmental programs of infant
formula products containing our nutritional oils;
    
    expectations regarding possibly significant expenses to
defend a putative securities
class action lawsuit alleging false and material misstatements and omissions of material
facts concerning our business and prospects; and
    
    expectations regarding our ability to protect our intellectual property.
 Forward-looking statements include those statements containing words such as the following:
 
    
    will,
    
    should,
    
    could,
    
    anticipate,
    
    believe,
    
    plan,
    
    estimate,
    
    expect,
    
    intend, and other similar expressions.
 All of these forward-looking statements involve risks and uncertainties. They and other
forward-looking statements in this Form 10-Q/A are all made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. We wish to caution you that our actual
results may differ significantly from the results we discuss in our forward-looking statements. We
discuss some of the risks that could cause such differences in Part
II, Item 1A. Risk Factors in the original report
on Form 10-Q and in our various other filings with the Securities and Exchange Commission. Our
forward-looking statements speak only as of the date of this document, and we do not intend to
update these statements to reflect events or circumstances that occur after that date.
 GENERAL
 lifesDHA lifesDHA
 14




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##### 




    
    the timing of infant formula market introductions by our customers both domestically and internationally;
    
    the timing of our customers production and ordering patterns;
    
    the timing and extent of stocking and destocking of inventory by our customers,
including the potential that customers will move to just in time inventory purchasing now
that we have reached a base finished goods inventory level;
    
    the timing and extent of our customers plant maintenance shutdowns;
    
    the timing and extent of introductions of DHA into various child and/or adult applications;
    
    the continued acceptance of products containing our oils under WIC programs in the U.S.;
    
    the continued acceptance of these products by consumers and continued demand by our customers;
    
    the ability by us and our third-party manufacturers to produce adequate levels of our nutritional oils on a consistent basis;
    
    our ability to protect against competitive products through our patents;
    
    competition from alternative sources of DHA and ARA; and
    
    agreements with other future third-party collaborators to market our products or develop new products.
  RECENT HIGHLIGHTS
 lifesDHA lifesDHA
 Foods and Beverages
 
    
    Dynamic Confections re-formulated the Botticelli Choco-Omeg® line of nutritional bars to include lifesDHA.
    
    Latteria Merano/Milchhof Meran launched Mente Viva fortified drinkable yogurt with lifesDHA.
    
    Centrale Del Latte Di Brescia launched Sprintissimo fortified drinkable yogurt with lifesDHA.
    
    General Mills launched Yoplait Kids® with lifesDHA.
    
    WhiteWave Foods launched Silk® Plus Omega-3 DHA Soymilk with lifesDHA.
    
    ZenSoy launched Soy on the Go Soymilk with lifesDHA.
 15




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##### 




    
    Life Science Nutritionals launched Nutri-Kids Nutrition-2-Go with lifesDHA.
    
    NutraBella launched new Bellybar flavor with lifesDHA.
    
    FoodTech International launched Veggie Patch All Natural California Veggie Burgers with lifesDHA.
 Perinatal Products
 
    
    Everett Laboratories launched Vitafol® -OB+DHA with lifesDHA.
    
    Mission Pharmacal launched Citracal® Prenatal 90 + DHA with lifesDHA.
 Journal of the American College of Nutrition lifesDHA lifesDHA lifesDHA
 Early Human Development
 MANAGEMENT OUTLOOK
 lifesDHA
   PRODUCTION
   16




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##### 



CRITICAL ACCOUNTING POLICIES AND
THE USE OF ESTIMATES
  17




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##### 



RESULTS OF OPERATIONS
 Revenues
  Three months ended January 31,2007
    
    
    2006Product sales
    
    $
    66,712
    
    
    $
    60,497Contract manufacturing sales
    
    
    3,549
    
    
    
    2,395Total revenues
    
    $
    70,261
    
    
    $
    62,892
  Three months ended January 31,2007
    
    
    2006Infant formula market
    
    $
    60,852
    
    
    $
    56,911Food and beverage market
    
    
    721
    
    
    
    300Pregnancy
and nursing, nutritional supplements and animal feeds
    
    
    3,973
    
    
    
    2,422Other non-nutritionals
    
    
    1,166
    
    
    
    864Total product sales
    
    $
    66,712
    
    
    $
    60,497
 lifesDHA .
     Cost of Revenues
  Three months ended January 31,2007
    
    
    2006(restated)
    
    
    (restated)Cost of
product sales, including idle capacity costs
    
    $
    42,969
    
    
    $
    37,450Cost of contract manufacturing sales
    
    
    3,423
    
    
    
    2,039Total cost of revenues
    
    $
    46,392
    
    
    $
    39,489
 18




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##### 



Operating Expenses
  Three months ended January 31,2007
    
    
    2006Research and development
    
    $
    6,166
    
    
    $
    5,480Selling, general and administrative
    
    
    11,954
    
    
    
    9,867Restructuring charge
    
    
    518
    
    
    
    Other operating expenses
    
    
    473
    
    
    
    41Total operating expenses
    
    $
    19,111
    
    
    $
    15,388
 Research and Development
 Selling, General and Administrative
 Restructuring Charge
 Other Operating Expenses
 Interest and Other Income, Net
  Interest Expense
  Income Tax Provision
   Net Income
  19




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##### 



RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS
   LIQUIDITY AND CAPITAL RESOURCES
  
    
    cash generated from operations;
    
    proceeds from the sale of equity securities;
    
    cash received from the exercise of stock options and warrants; and
    
    debt financing.
    20




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##### 



Less than
    
    
    1-3
    
    
    3-5
    
    
    More thanIn thousands
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsNotes payable (1)
    
    $
    11,071
    
    
    $
    1,156
    
    
    $
    8,815
    
    
    $
    343
    
    
    $
    757Borrowings under revolving credit facility
    
    
    41,000
    
    
    
    
    
    
    
    
    
    
    
    41,000
    
    
    
    Operating lease obligations
    
    
    4,267
    
    
    
    1,061
    
    
    
    1,918
    
    
    
    956
    
    
    
    332Unconditional purchase obligations (2)
    
    
    34,255
    
    
    
    4,184
    
    
    
    30,071
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    90,593
    
    
    $
    6,401
    
    
    $
    40,804
    
    
    $
    42,299
    
    
    $
    1,089
 
 (1)
    
    Minimum payments above include interest and principal due under these notes.(2)
    
    Primarily includes future inventory purchases from DSM pursuant to the guarantee
described below in Off-Balance Sheet Arrangements.     
    
    our ability to operate profitably and generate positive cash flow;
    
    growth in our infant formula, food and beverage and other nutritional product sales;
    
    the extent and progress of our research and development programs;
    
    the progress of pre-clinical and clinical studies;
    
    the time and costs of obtaining and maintaining regulatory clearances for our products that are subject to such clearances;
    
    the costs involved in filing, protecting and enforcing patent claims;
    
    competing technological and market developments;
    
    the development or acquisition of new products;
    
    the cost of acquiring additional and/or operating and expanding existing manufacturing
facilities for our various products and potential products (depending on which products we
decide to manufacture and continue to manufacture ourselves);
    
    the costs associated with our internal build-up of inventory levels;
    
    the costs associated with our defense against a putative securities class action and other lawsuits;
    
    the costs of any merger and acquisition activity; and
    
    the costs of marketing and commercializing our products.
  21




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##### 



OFF-BALANCE SHEET ARRANGEMENTS
    22




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##### 



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
 23




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##### 



PART II  OTHER INFORMATION
 Item 6. Exhibits.
 31.01
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).*31.02
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).*32.01
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *32.02
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
 *
    
    Filed or furnished herewith. 24




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##### 



SIGNATURES
  MARTEK BIOSCIENCES CORPORATION(Registrant)Date:
May 8, 2007
    
    /s/ Peter L. BuzyPeter L. BuzyChief Financial Officer, Treasurer and Executive Vice Presidentfor Finance and Administration(Principal Financial and Accounting Officer)
 25