##### 



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, 2006
 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
(State or other jurisdiction of incorporation or organization)
    
    52-1399362
(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
    Part
I Item 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations
 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
    
    
    22PART II
    
    OTHER INFORMATIONItem 6.
    
    Exhibits
    
    
    23Signatures
    
    
    24




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##### 



PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements.
 MARTEK BIOSCIENCES CORPORATION
  January 31,2006In thousands, except share and per share data
    

(restated, 
unaudited)
    
    
    October 31,2005AssetsCurrent assetsCash and cash equivalents
    
    $
    17,985
    
    
    $
    11,047Short-term investments and marketable securities
    
    
    18,700
    
    
    
    22,300Accounts receivable, net
    
    
    36,838
    
    
    
    27,603Inventories, net
    
    
    96,948
    
    
    
    91,535Other current assets
    
    
    8,482
    
    
    
    5,929Total current assets
    
    
    178,953
    
    
    
    158,414Property, plant and equipment, net
    
    
    288,469
    
    
    
    290,733Deferred tax asset
    
    
    45,457
    
    
    
    48,201Goodwill
    
    
    48,536
    
    
    
    48,490Other intangible assets, net
    
    
    32,214
    
    
    
    31,129Other assets, net
    
    
    1,489
    
    
    
    1,518Total assets
    
    $
    595,118
    
    
    $
    578,485Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    16,146
    
    
    $
    16,661Accrued liabilities
    
    
    16,676
    
    
    
    13,692Current portion of notes payable and other long-term obligations
    
    
    1,119
    
    
    
    3,113Current portion of unearned revenue
    
    
    2,263
    
    
    
    740Total current liabilities
    
    
    36,204
    
    
    
    34,206Long-term debt under revolving credit facility
    
    
    63,000
    
    
    
    55,000Notes payable and other long-term obligations
    
    
    10,897
    
    
    
    11,115Long-term portion of unearned revenue
    
    
    8,926
    
    
    
    8,959Total liabilities
    
    
    119,027
    
    
    
    109,280CommitmentsStockholders equityPreferred stock, $.01 par value, 4,700,000 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Series A 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; 32,064,751 and 32,026,595 shares issued and
outstanding, respectively
    
    
    3,206
    
    
    
    3,203Additional paid-in capital
    
    
    517,086
    
    
    
    515,237Accumulated other comprehensive income
    
    
    265
    
    
    
    1Accumulated deficit
    
    
    (44,466
    )
    
    
    (49,236
    )Total stockholders equity
    
    
    476,091
    
    
    
    469,205Total liabilities and stockholders equity
    
    $
    595,118
    
    
    $
    578,485
 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
    
    2006
    
    
    2005(restated)RevenuesProduct sales
    
    $
    60,497
    
    
    $
    63,111Contract manufacturing sales
    
    
    2,395
    
    
    
    3,378Total revenues
    
    
    62,892
    
    
    
    66,489Cost of revenues:Cost of
product sales, including idle capacity costs
    
    
    37,450
    
    
    
    36,102Cost of contract manufacturing sales
    
    
    2,039
    
    
    
    2,804Total cost of revenues
    
    
    39,489
    
    
    
    38,906Gross margin
    
    
    23,403
    
    
    
    27,583Operating expenses:Research and development (1)
    
    
    5,480
    
    
    
    4,816Selling, general and administrative (1)
    
    
    9,867
    
    
    
    8,145Other operating expenses
    
    
    41
    
    
    
    3,485Total operating expenses
    
    
    15,388
    
    
    
    16,446Income from operations
    
    
    8,015
    
    
    
    11,137Interest and other income, net
    
    
    363
    
    
    
    180Interest expense
    
    
    (864
    )
    
    
    (180
    )Income before income tax provision
    
    
    7,514
    
    
    
    11,137Income tax
provision (1)
    
    
    2,744
    
    
    
    4,065Net income
    
    $
    4,770
    
    
    $
    7,072Net income per shareBasic
    
    $
    0.15
    
    
    $
    0.24Diluted
    
    $
    0.15
    
    
    $
    0.23Weighted average common shares outstandingBasic
    
    
    32,055,930
    
    
    
    29,614,831Diluted
    
    
    32,431,559
    
    
    
    30,577,066(1) Includes the following amounts related to equity-based
compensation expense:Research and development
    
    
    352
    
    
    
    Selling, general and administrative
    
    
    636
    
    
    
    Income tax provision
    
    
    (361
    )
    
    
    
 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, 2005
    
    
    32,026,595
    
    
    $
    3,203
    
    
    $
    515,237
    
    
    $
    1
    
    
    $
    (49,236
    )
    
    $
    469,205Exercise of stock options and warrants
    
    
    38,156
    
    
    
    3
    
    
    
    704
    
    
    
    
    
    
    
    
    
    
    
    707Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    1,145
    
    
    
    
    
    
    
    
    
    
    
    1,145Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,770
    
    
    
    4,770Other comprehensive income:Unrealized gain on exchange rate forward
contract, net of tax of $159
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264
    
    
    
    
    
    
    
    264Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,034Balance
at January 31, 2006 (restated)
    
    
    32,064,751
    
    
    $
    3,206
    
    
    $
    517,086
    
    
    $
    265
    
    
    $
    (44,466
    )
    
    $
    476,091
 See accompanying notes.
 3




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##### 



MARTEK BIOSCIENCES CORPORATION
  Three months ended January 31,Unaudited  In thousands
    
    2006
    
    
    2005(restated)Operating activitiesNet income
    
    $
    4,770
    
    
    $
    7,072Adjustments to reconcile net income to net cash used in operating activities:Depreciation and amortization
    
    
    5,352
    
    
    
    3,756Deferred tax provision
    
    
    2,744
    
    
    
    4,065Equity-based compensation expense
    
    
    988
    
    
    
    Other
    
    
    
    
    
    
    288Changes in operating assets and liabilities:Accounts receivable
    
    
    (9,235
    )
    
    
    (10,730
    )Inventories
    
    
    (5,256
    )
    
    
    (7,060
    )Other assets
    
    
    (2,244
    )
    
    
    (1,707
    )Accounts payable
    
    
    (516
    )
    
    
    1,118Accrued liabilities
    
    
    2,060
    
    
    
    2,241Unearned revenue and other liabilities
    
    
    1,515
    
    
    
    (516
    )Net cash provided by (used in) operating activities
    
    
    178
    
    
    
    (1,473
    )Investing activitiesSale (purchase) of short-term investments and marketable securities, net
    
    
    3,600
    
    
    
    (25,812
    )Expenditures for property, plant and equipment
    
    
    (2,415
    )
    
    
    (26,316
    )Proceeds from sale-leaseback transaction
    
    
    
    
    
    
    4,128Capitalization of intangible and other assets
    
    
    (880
    )
    
    
    (394
    )Net cash provided by (used in) investing activities
    
    
    305
    
    
    
    (48,394
    )Financing activitiesRepayments of notes payable and other long-term obligations
    
    
    (2,252
    )
    
    
    (4,138
    )Borrowings (repayments) under revolving credit facility, net
    
    
    8,000
    
    
    
    (30,000
    )Proceeds
from the issuance of common stock and exercise of stock options and
warrants, net
    
    
    707
    
    
    
    83,090Net cash provided by financing activities
    
    
    6,455
    
    
    
    48,952Net increase (decrease) in cash and cash equivalents
    
    
    6,938
    
    
    
    (915
    )Cash and cash equivalents, beginning of period
    
    
    11,047
    
    
    
    29,445Cash and cash equivalents, end of period
    
    $
    17,985
    
    
    $
    28,530Supplemental cash flow disclosures:Interest paid
    
    $
    987
    
    
    $
    1,071
 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
    
    $
    289,749
    
    
    $
    (1,280
    )
    
    $
    288,469Deferred tax asset
    
    
    44,990
    
    
    
    467
    
    
    
    45,457Total assets
    
    
    595,931
    
    
    
    (813
    )
    
    
    595,118Accumulated deficit
    
    
    (43,653
    )
    
    
    (813
    )
    
    
    (44,466
    )Total stockholders equity
    
    
    476,904
    
    
    
    (813
    )
    
    
    476,091Total liabilities and stockholders equity
    
    
    595,931
    
    
    
    (813
    )
    
    
    595,118
   As
    
    
    
    
    
    
    AsReported
    
    
    Adjustment
    
    
    RestatedCost of product sales, including idle capacity costs
    
    $
    36,170
    
    
    $
    1,280
    
    
    $
    37,450Total cost of revenues
    
    
    38,209
    
    
    
    1,280
    
    
    
    39,489Gross margin
    
    
    24,683
    
    
    
    (1,280
    )
    
    
    23,403Income from operations
    
    
    9,295
    
    
    
    (1,280
    )
    
    
    8,015Income before income tax provision
    
    
    8,794
    
    
    
    (1,280
    )
    
    
    7,514Income tax provision
    
    
    3,211
    
    
    
    (467
    )
    
    
    2,744Net income
    
    
    5,583
    
    
    
    (813
    )
    
    
    4,770Net income per share:Basic
    
    $
    0.17
    
    
    $
    (0.02
    )
    
    $
    0.15Diluted
    
    $
    0.17
    
    
    $
    (0.02
    )
    
    $
    0.15
 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
 Consolidation
 Use of Estimates
 Segment Information
 5




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##### 



Revenue Recognition
  Foreign Currency Transactions and Hedging Activities
  Research and Development
 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
  6




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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
  Goodwill and Other Intangible Assets
 Impairment of Long-Lived Assets
 Reclassification
 3. DSM SUPPLY AND LICENSE AGREEMENT
   7




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##### 



4. SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
  5. INVENTORIES
  January 31,
    
    
    October 31,2006
    
    
    2005Finished goods
    
    $
    40,335
    
    
    $
    34,328Work in process
    
    
    54,372
    
    
    
    55,073Raw materials
    
    
    3,841
    
    
    
    3,634Total inventory
    
    
    98,548
    
    
    
    93,035Less: inventory reserve
    
    
    (1,600
    )
    
    
    (1,500
    )Inventories, net
    
    $
    96,948
    
    
    $
    91,535
 6. PROPERTY, PLANT AND EQUIPMENT
  January 31,
    
    
    October 31,2006
    
    
    2005(restated)Land
    
    $
    2,320
    
    
    $
    2,318Building and improvements
    
    
    59,328
    
    
    
    45,515Machinery and equipment
    
    
    226,468
    
    
    
    187,922Furniture and fixtures
    
    
    3,246
    
    
    
    3,161Computer hardware and software
    
    
    11,429
    
    
    
    8,085302,791
    
    
    
    247,001Less: accumulated depreciation and amortization
    
    
    (37,822
    )
    
    
    (33,143
    )264,969
    
    
    
    213,858Construction in progress
    
    
    23,500
    
    
    
    76,875Property, plant and equipment, net
    
    $
    288,469
    
    
    $
    290,733
   8




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##### 



7. GOODWILL AND OTHER INTANGIBLE ASSETS
  January 31, 2006
    
    
    October 31, 2005Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedIntangible Asset
    
    Gross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetTrademarks
    
    $
    2,030
    
    
    $
    (434
    )
    
    $
    1,596
    
    
    $
    2,026
    
    
    $
    (401
    )
    
    $
    1,625Patents
    
    
    13,497
    
    
    
    (1,982
    )
    
    
    11,515
    
    
    
    11,741
    
    
    
    (1,734
    )
    
    
    10,007Core technology
    
    
    1,708
    
    
    
    (370
    )
    
    
    1,338
    
    
    
    1,708
    
    
    
    (342
    )
    
    
    1,366Current products
    
    
    10,676
    
    
    
    (2,694
    )
    
    
    7,982
    
    
    
    10,676
    
    
    
    (2,516
    )
    
    
    8,160Licenses
    
    
    11,091
    
    
    
    (1,308
    )
    
    
    9,783
    
    
    
    11,091
    
    
    
    (1,120
    )
    
    
    9,971Goodwill
    
    
    48,536
    
    
    
    
    
    
    
    48,536
    
    
    
    48,490
    
    
    
    
    
    
    
    48,490$
    87,538
    
    
    $
    (6,788
    )
    
    $
    80,750
    
    
    $
    85,732
    
    
    $
    (6,113
    )
    
    $
    79,619
 8. NOTES PAYABLE AND LONG-TERM DEBT
    9. COMMITMENTS AND CONTINGENCIES
 Purchase Commitments
   Scientific Research Collaborations
 9




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##### 



OmegaTech Contingent Purchase Price
 Class Action Lawsuits
 Other
 10. STOCKHOLDERS EQUITY
 Equity-Based Compensation
    10




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##### 



Three months ended January 31,2006
    
    
    2005(restated)Net income, as reported
    
    $
    4,770
    
    
    $
    7,072Deduct: Total equity-based employee compensation expense
determined under fair value-based methods for all awards
    
    
    
    
    
    
    (35,794
    )Pro forma net income (loss)
    
    $
    4,770
    
    
    $
    (28,722
    )Net income (loss) per share:Basic  as reported
    
    $
    0.15
    
    
    $
    0.24Basic  pro forma
    
    $
    0.15
    
    
    $
    (0.97
    )Diluted  as reported
    
    $
    0.15
    
    
    $
    0.23Diluted  pro forma
    
    $
    0.15
    
    
    $
    (0.97
    )
   Expected volatility
    
    
    61.9
    %Risk-free interest rate
    
    
    4.4
    %Expected life of options
    
    5
    yearsExpected dividend yield
    
    
    0
    %Forfeiture rate
    
    
    2
    %
 Dividend Yield
 Expected Volatility
 Risk-Free Interest Rate
 Expected Life of the Option
 Forfeiture Rate
  11




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##### 



Number of
    
    
    Weighted Average
    
    
    AggregateShares
    
    
    Price/Share
    
    
    Intrinsic ValueOptions outstanding at October 31, 2005
    
    
    3,924
    
    
    $
    38.39Options exercisable at October 31, 2005
    
    
    3,438
    
    
    $
    40.14Granted
    
    
    18
    
    
    $
    27.83Exercised
    
    
    (6
    )
    
    $
    17.49Canceled
    
    
    (15
    )
    
    $
    43.93Options outstanding at January 31, 2006
    
    
    3,921
    
    
    $
    38.36
    
    
    $
    12,699Options exercisable at January 31, 2006
    
    
    3,500
    
    
    $
    39.72
    
    
    $
    10,884
    Stockholder Rights Plan
      12




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##### 



11. NET INCOME PER SHARE
   Three months ended January 31,2006
    
    
    2005(restated)Net income
    
    $
    4,770
    
    
    $
    7,072Weighted average shares outstanding, basic
    
    
    32,056
    
    
    
    29,615Effect of dilutive potential common shares:Employee stock options
    
    
    374
    
    
    
    944Warrants
    
    
    2
    
    
    
    18Total dilutive potential common shares
    
    
    376
    
    
    
    962Weighted average shares outstanding, diluted
    
    
    32,432
    
    
    
    30,577Net income per share, basic
    
    $
    0.15
    
    
    $
    0.24Net income per share, diluted
    
    $
    0.15
    
    
    $
    0.23
  12. COMPREHENSIVE INCOME
  Three months ended January 31,2006
    
    
    2005(restated)Net income, as reported
    
    $
    4,770
    
    
    $
    7,072Other comprehensive income (loss):Unrealized gain (loss) on exchange rate forward contract,
net of income tax
provision (benefit) of
$159 and ($154),
respectively
    
    
    264
    
    
    
    (324
    )Comprehensive income
    
    $
    5,034
    
    
    $
    6,748
 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, product
introductions, growth in nutritional product sales, margin and productivity improvements
and potential collaborations and acquisitions;
    
    expectations regarding sales to and by our infant formula licensees;
    
    expectations regarding marketing of our oils by our infant formula licensees;
    
    expectations regarding future efficiencies in manufacturing processes and the cost of production of our nutritional oils;
    
    expectations regarding future purchases 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 the effects of excess production capacity;
    
    expectations regarding future research and development costs;
    
    expectations regarding additional capital expenditures needed in relation to our fermentation and oil processing activities;
    
    expectations regarding possibly significant expenses to defend
putative securities class action lawsuits 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
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
   14




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##### 




    
    the timing of infant formula market introductions by our licensees
both domestically and internationally;
    
    the timing and extent of stocking and destocking of inventory by our
licensees, including the potential that licensees 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 state-administered reimbursement programs in the U.S.;
    
    the continued acceptance of these products by consumers and continued demand by our customers;
    
    the ability by us, DSM and other 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.
  OVERVIEW AND RECENT HIGHLIGHTS
 CITRACAL Prenatal + DHA
  Odwalla Soymilk Odwalla Soymilk Odwalla Soymilk
  Bright Beginnings Target GlucoBurst CITRACAL Prenatal +
DHA Odwalla Soymilk
 MANAGEMENT OUTLOOK
  15




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PRODUCTION
       16




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CRITICAL ACCOUNTING POLICIES AND
THE USE OF ESTIMATES
  RESULTS OF OPERATIONS
 Revenues
  Three months ended January 31,2006
    
    
    2005Product sales
    
    $
    60,497
    
    
    $
    63,111Contract manufacturing sales
    
    
    2,395
    
    
    
    3,378Total revenues
    
    $
    62,892
    
    
    $
    66,489
     17




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Cost of Revenues
  Three months ended January 31,2006
    
    
    2005(restated)Cost of
product sales, including idle capacity costs
    
    $
    37,450
    
    
    $
    36,102Cost of contract manufacturing sales
    
    
    2,039
    
    
    
    2,804Total cost of revenues
    
    $
    39,489
    
    
    $
    38,906
 Cost of Product Sales
 Cost of Contract Manufacturing Sales
  Operating Expenses
  Three months ended January 31,2006
    
    
    2005Research and development
    
    $
    5,480
    
    
    $
    4,816Selling, general and administrative
    
    
    9,867
    
    
    
    8,145Other operating expenses
    
    
    41
    
    
    
    3,485Total operating expenses
    
    $
    15,388
    
    
    $
    16,446
 Research and Development
 Selling, General and Administrative
 Other
Operating Expenses
 18




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Interest and Other Income, Net
  Interest Expense
  Income Tax Provision
    Net Income
     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.
 19




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Less than
    
    
    1-3
    
    
    3-5
    
    
    More thanIn thousands
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsNotes payable (1)
    
    $
    12,262
    
    
    $
    1,182
    
    
    $
    9,732
    
    
    $
    451
    
    
    $
    897Borrowings under revolving credit facility
    
    
    63,000
    
    
    
    
    
    
    
    
    
    
    
    63,000
    
    
    
    Operating and capital lease obligations
    
    
    15,047
    
    
    
    3,667
    
    
    
    7,277
    
    
    
    3,731
    
    
    
    372Unconditional inventory purchase obligations
    
    
    28,345
    
    
    
    20,861
    
    
    
    7,484
    
    
    
    
    
    
    
    Total
contractual cash obligations (2)
    
    $
    118,654
    
    
    $
    25,710
    
    
    $
    24,493
    
    
    $
    67,182
    
    
    $
    1,269
 
 (1)
    
    Minimum payments above include interest and principal due under these notes.(2)
    
    Does not include $3 million capital reimbursement
obligation to DSM related to the Amendment
signed in February 2006.     20




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
    
    the cost and extent of capital expenditures at our manufacturing facilities;
    
    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 putative securities class action lawsuits; and
    
    the costs of marketing and commercializing our products.
  OFF-BALANCE SHEET ARRANGEMENTS
    21




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Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
 22




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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. 23




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SIGNATURES
  MARTEK BIOSCIENCES CORPORATION
                            (Registrant)Date:
May 8, 2007
    
    /s/ Peter L. BuzyPeter L. Buzy, Chief Financial Officer and Treasurer(Principal Financial and Accounting Officer)
 24