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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q

|    |                                                                                         | 
|--- | --------------------------------------------------------------------------------------- | 
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 | 

For the Quarterly Period Ended January 31, 2003

or

|     |                                                                                          | 
|---- | ---------------------------------------------------------------------------------------- | 
|[  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 | 

For the Transition Period From                      to



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COMMISSION FILE NUMBER 0-22354


MARTEK BIOSCIENCES CORPORATION

(Exact name of registrant as specified in its charter)


|                                  |  |                                             
|--------------------------------- |  | --------------------------------------------
|Delaware
(State of Incorporation) |  | 52-1399362
(IRS Employer Identification No.)

6480 Dobbin Road, Columbia, Maryland 21045
(Address of principal executive offices)

Registrants telephone number including area code: (410) 740-0081

None
(Former name, former address and former fiscal year, if changed since last report)



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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

Common stock, par value $.10 per share: 23,558,905 shares outstanding
as of March 12, 2003





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PART I - FINANCIAL INFORMATION




Item 1. Financial Statements

MARTEK BIOSCIENCES CORPORATION

Consolidated Balance Sheets
($ in thousands, except share and per share data)

|                                           |                                                                                                                                                                             |   |             |          |             |   |         |          |  
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | -------- | ----------- | - | ------- | -------- | -
|                                           |                                                                                                                                                                             |   | January 31, |          | October 31,
|                                           |                                                                                                                                                                             |   | 2003        |          | 2002       
|                                           |                                                                                                                                                                             |   |             |          |            
|                                           |                                                                                                                                                                             |   | (Unaudited) |          |             |   |        
|Assets                                     |                                                                                                                                                                             |   |             |          |             |   |         |         
|Current assets                             |                                                                                                                                                                             |   |             |          |             |   |         |         
|                                           | Cash and cash equivalents                                                                                                                                                   |   | $           | 21,080   |             |   | $       | 20,419   |  
|                                           | Short-term investments and marketable securities                                                                                                                            |   |             |         |             |   |         | 2,000    |  
|                                           | Accounts receivable, net                                                                                                                                                    |   |             | 12,021   |             |   |         | 9,597    |  
|                                           | Inventories, net                                                                                                                                                            |   |             | 10,705   |             |   |         | 9,718    |  
|                                           | Other current assets                                                                                                                                                        |   |             | 2,085    |             |   |         | 1,312    |  
|                                           |                                                                                                                                                                             |   |             |          |             |   |         |          |  
|Total current assets                       |                                                                                                                                                                             |   | 45,891      |          |             |   | 43,046  |         
|Property, plant and equipment, net         |                                                                                                                                                                             |   | 42,250      |          |             |   | 36,506  |         
|Goodwill                                   |                                                                                                                                                                             |   | 25,257      |          |             |   | 25,568  |         
|Intangible asset-current products, net     |                                                                                                                                                                             |   | 10,117      |          |             |   | 10,295  |         
|Other intangible assets, net               |                                                                                                                                                                             |   | 8,192       |          |             |   | 8,202   |         
|Other assets                               |                                                                                                                                                                             |   | 496         |          |             |   | 695     |         
|                                           |                                                                                                                                                                             |   |             |          |             |   |         |          |  
|Total assets                               |                                                                                                                                                                             | $ | 132,203     |          |             | $ | 124,312 |         
|                                           |                                                                                                                                                                             |   |             |          |             |   |         |          |  
|Liabilities and stockholders equity       |                                                                                                                                                                             |   |             |          |             |   |         |         
|Current liabilities                        |                                                                                                                                                                             |   |             |          |             |   |         |         
|                                           | Accounts payable                                                                                                                                                            |   | $           | 4,797    |             |   | $       | 3,854    |  
|                                           | Accrued liabilities                                                                                                                                                         |   |             | 9,243    |             |   |         | 6,687    |  
|                                           | Obligations under capital leases                                                                                                                                            |   |             | 66       |             |   |         | 111      |  
|                                           | Note payable                                                                                                                                                                |   |             | 3,121    |             |   |         |         |  
|                                           | Current portion of unearned revenue                                                                                                                                         |   |             | 1,969    |             |   |         | 1,937    |  
|                                           |                                                                                                                                                                             |   |             |          |             |   |         |          |  
|Total current liabilities                  |                                                                                                                                                                             |   | 19,196      |          |             |   | 12,589  |         
|Long-term portion of unearned revenue      |                                                                                                                                                                             |   | 2,331       |          |             |   | 2,246   |         
|Commitments                                |                                                                                                                                                                             |   |            |          |             |   | 3,500   |         
|Stockholders equity                       |                                                                                                                                                                             |   |             |          |             |   |         |         
|                                           | Preferred 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; 23,557,026 and 23,331,091 shares issued
and outstanding at January 31, 2003 and October 31, 2002,
respectively |   |             | 2,356    |             |   |         | 2,333    |  
|                                           | Additional paid-in capital                                                                                                                                                  |   |             | 233,819  |             |   |         | 231,224  |  
|                                           | Deferred compensation                                                                                                                                                       |   |             |         |             |   |         | (20      | )
|                                           | Accumulated deficit                                                                                                                                                         |   |             | (125,499 | )           |   |         | (127,560 | )
|                                           |                                                                                                                                                                             |   |             |          |             |   |         |          |  
|Total stockholders equity                 |                                                                                                                                                                             |   | 110,676     |          |             |   | 105,977 |         
|                                           |                                                                                                                                                                             |   |             |          |             |   |         |          |  
|Total liabilities and stockholders equity |                                                                                                                                                                             | $ | 132,203     |          |             | $ | 124,312 |         
|                                           |                                                                                                                                                                             |   |             |          |             |   |         |          |  

See accompanying notes.

2



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MARTEK BIOSCIENCES CORPORATION

Consolidated Statements of Operations
(Unaudited - $ in thousands, except share and per share data)

|                                            |                                     |                                     |        |                                |        |      |        |            |       | 
|------------------------------------------- | ----------------------------------- | ----------------------------------- | ------ | ------------------------------ | ------ | ---- | ------ | ---------- | ----- | 
|                                            |                                     |                                     |        | Three months ended January 31,
|                                            |                                     |                                     |        |                               
|                                            |                                     |                                     |        | 2003                           |        | 2002
|                                            |                                     |                                     |        |                                |        |     
|Revenues:                                   |                                     |                                     |        |                                |        |      |        |           
|                                            | Product sales:                      |                                     |        |                                |        |      |        |            |      
|                                            |                                     | Nutritional product sales           |        | $                              | 20,209 |      |        | $          | 5,734 | 
|                                            |                                     | Fluorescent
detection product sales |        |                                | 289    |      |        |            | 209   | 
|                                            |                                     |                                     |        |                                |        |      |        |            |       | 
|                                            | Total product sales                 |                                     |        | 20,498                         |        |      |        | 5,943      |      
|                                            | Other revenue                       |                                     |        | 47                             |        |      |        | 27         |      
|                                            |                                     |                                     |        |                                |        |      |        |           
|Total revenues                              |                                     |                                     | 20,545 |                                |        |      | 5,970  |           
|Costs and expenses:                         |                                     |                                     |        |                                |        |      |        |           
|                                            | Cost of product sales               |                                     |        | 12,342                         |        |      |        | 4,184      |      
|                                            | Research and development            |                                     |        | 2,787                          |        |      |        | 2,996      |      
|                                            | Restructuring reversal              |                                     |        | (250                           | )      |      |        |           |      
|                                            | Selling, general and administrative |                                     |        | 3,742                          |        |      |        | 1,996      |      
|                                            |                                     |                                     |        |                                |        |      |        |            |       | 
|Total costs and expenses                    |                                     |                                     | 18,621 |                                |        |      | 9,176  |           
|                                            |                                     |                                     |        |                                |        |      |        |           
|Income/(loss) from operations               |                                     |                                     | 1,924  |                                |        |      | (3,206 | )         
|Other income (expense):                     |                                     |                                     |        |                                |        |      |        |           
|                                            | Interest income                     |                                     |        | 52                             |        |      |        | 164        |      
|                                            | Interest expense                    |                                     |        | (4                             | )      |      |        |           |      
|                                            | Other income                        |                                     |        | 89                             |        |      |        | 95         |      
|                                            |                                     |                                     |        |                                |        |      |        |            |       | 
|Total other income                          |                                     |                                     | 137    |                                |        |      | 259    |           
|                                            |                                     |                                     |        |                                |        |      |        |           
|Net income/(loss)                           |                                     | $                                   | 2,061  |                                |        | $    | (2,947 | )         
|                                            |                                     |                                     |        |                                |        |      |        |           
|Net income/(loss) per share:                |                                     |                                     |        |                                |        |      |        |           
|                                            | Basic                               |                                     | $      | 0.09                           |        |      | $      | (0.15      | )    
|                                            |                                     |                                     |        |                                |        |      |        |           
|                                            | Diluted                             |                                     | $      | 0.08                           |        |      | $      | (0.15      | )    
|                                            |                                     |                                     |        |                                |        |      |        |           
|Weighted average common shares outstanding: |                                     |                                     |        |                                |        |      |        |           
|                                            | Basic                               |                                     |        | 23,368,266                     |        |      |        | 20,185,410 |      
|                                            |                                     |                                     |        |                                |        |      |        |           
|                                            | Diluted                             |                                     |        | 24,662,609                     |        |      |        | 20,185,410 |      
|                                            |                                     |                                     |        |                                |        |      |        |           

See accompanying notes.

3



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MARTEK BIOSCIENCES CORPORATION

Consolidated Statements of Cash Flows
(Unaudited - $ in thousands)

|                      |                                                                                                    |                                                                        |                     |        |                                |        |      |         |         |        |  
|--------------------- | -------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------------------- | ------ | ------------------------------ | ------ | ---- | ------- | ------- | ------ | -
|                      |                                                                                                    |                                                                        |                     |        | Three Months Ended January 31,
|                      |                                                                                                    |                                                                        |                     |        |                               
|                      |                                                                                                    |                                                                        |                     |        | 2003                           |        | 2002
|                      |                                                                                                    |                                                                        |                     |        |                                |        |     
|Operating activities: |                                                                                                    |                                                                        |                     |        |                                |        |      |        
|                      | Net income/(loss)                                                                                  |                                                                        | $                   | 2,061  |                                |        | ($   | 2,947   | )      
|                      | Adjustments to reconcile net income/(loss) to net cash
provided by/(used in) operating activities: |                                                                        |                     |        |                                |        |      |         |        
|                      |                                                                                                    | Depreciation                                                           |                     |        | 626                            |        |      |         | 450     |       
|                      |                                                                                                    | Amortization                                                           |                     |        | 414                            |        |      |         | 36      |       
|                      |                                                                                                    | Amortization of deferred compensation                                  |                     |        | 20                             |        |      |         | 79      |       
|                      |                                                                                                    | Changes in operating assets and liabilities:                           |                     |        |                                |        |      |         |         |       
|                      |                                                                                                    |                                                                        | Accounts receivable |        |                                | (2,424 | )    |         |         | 1,374  |  
|                      |                                                                                                    |                                                                        | Inventories         |        |                                | (987   | )    |         |         | (2,387 | )
|                      |                                                                                                    |                                                                        | Other assets        |        |                                | (599   | )    |         |         | (358   | )
|                      |                                                                                                    |                                                                        | Accounts payable    |        |                                | 943    |      |         |         | (260   | )
|                      |                                                                                                    |                                                                        | Accrued liabilities |        |                                | 2,487  |      |         |         | (1,300 | )
|                      |                                                                                                    |                                                                        | Unearned revenue    |        |                                | 117    |      |         |         | (80    | )
|                      |                                                                                                    |                                                                        |                     |        |                                |        |      |        
|                      | Net cash provided by/(used in) operating activities                                                |                                                                        |                     | 2,658  |                                |        |      | (5,393  | )      
|Investing activities: |                                                                                                    |                                                                        |                     |        |                                |        |      |        
|                      |                                                                                                    | Purchase of short-term investments and marketable securities           |                     |        |                               |        |      |         | (10,005 | )     
|                      |                                                                                                    | Proceeds from sale of short-term investments and
marketable securities |                     |        | 2,000                          |        |      |         | 2,000   |       
|                      |                                                                                                    | Capitalization of patent cost                                          |                     |        | (200                           | )      |      |         | (215    | )     
|                      |                                                                                                    | Purchase of property, plant and equipment                              |                     |        | (6,370                         | )      |      |         | (2,313  | )     
|                      |                                                                                                    |                                                                        |                     |        |                                |        |      |        
|                      | Net cash used in investing activities                                                              |                                                                        |                     | (4,570 | )                              |        |      | (10,533 | )      
|Financing activities: |                                                                                                    |                                                                        |                     |        |                                |        |      |        
|                      |                                                                                                    | Principal payments on capital leases                                   |                     |        | (45                            | )      |      |         |        |       
|                      |                                                                                                    | Proceeds from the exercise of warrants and options                     |                     |        | 2,618                          |        |      |         | 2,958   |       
|                      |                                                                                                    | Proceeds from the issuance of
common stock in private placement        |                     |        |                               |        |      |         | 21,289  |       
|                      |                                                                                                    |                                                                        |                     |        |                                |        |      |        
|                      | Net cash provided by financing activities                                                          |                                                                        |                     | 2,573  |                                |        |      | 24,247  |        
|                      |                                                                                                    |                                                                        |                     |        |                                |        |      |        
|                      | Net increase in cash and cash equivalents                                                          |                                                                        |                     | 661    |                                |        |      | 8,321   |        
|                      | Cash and cash equivalents at beginning of year                                                     |                                                                        |                     | 20,419 |                                |        |      | 20,645  |        
|                      |                                                                                                    |                                                                        |                     |        |                                |        |      |        
|                      | Cash and cash equivalents at end of period                                                         |                                                                        | $                   | 21,080 |                                |        | $    | 28,966  |        
|                      |                                                                                                    |                                                                        |                     |        |                                |        |      |        

See accompanying notes.

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MARTEK BIOSCIENCES CORPORATION

Consolidated Statements of Stockholders Equity
(Unaudited - $ in thousands)

|                            |                                        |  |              |         |            |   |          |    |              |   |         |       |       |   |     |    |  |   |          |       |  |   |         |       | 
|--------------------------- | -------------------------------------- |  | ------------ | ------- | ---------- | - | -------- | -- | ------------ | - | ------- | ----- | ----- | - | --- | -- |  | - | -------- | ----- |  | - | ------- | ----- | 
|                            |                                        |  | Common Stock |         | Additional |   |          |    |              |   |         |       |       |   |     |    | 
|                            |                                        |  |              |         | Paid-in    |   | Deferred |    | Accumulated  |   |         |       |      
|                            |                                        |  | Shares       |         | Amount     |   | Capital  |    | Compensation |   | Deficit |       | Total
|                            |                                        |  |              |         |            |   |          |    |              |   |         |       |      
|Balance at October 31, 2002 |                                        |  | 23,331,091   |         |            | $ | 2,333    |    |              | $ | 231,224 |       |       | $ | (20 | )  |  | $ | (127,560 | )     |  | $ | 105,977 |      
|                            | Exercise of stock options
and warrants |  |              | 225,935 |            |   |          | 23 |              |   |         | 2,595 |       |   |     |    |  |   |          |       |  |   |         | 2,618 | 
|                            | Amortization of
deferred compensation  |  |              |         |            |   |          |    |              |   |         |       |       |   |     | 20 |  |   |          |       |  |   |         | 20    | 
|                            | Net income                             |  |              |         |            |   |          |    |              |   |         |       |       |   |     |    |  |   |          | 2,061 |  |   |         | 2,061 | 
|                            |                                        |  |              |         |            |   |          |    |              |   |         |       |       |   |     |    |  |   |          |       |  |   |         |      
|Balance at January 31, 2003 |                                        |  | 23,557,026   |         |            | $ | 2,356    |    |              | $ | 233,819 |       |       | $ |    |    |  | $ | (125,499 | )     |  | $ | 110,676 |      
|                            |                                        |  |              |         |            |   |          |    |              |   |         |       |       |   |     |    |  |   |          |       |  |   |         |      

See accompanying notes.

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MARTEK BIOSCIENCES CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation and Significant Accounting Policies

Basis of PresentationThe accompanying unaudited consolidated financial
statements of Martek Biosciences Corporation and its wholly owned subsidiary
(the Company) have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the quarter ended
January 31, 2003 are not necessarily indicative of the results that may be
expected for the year ending October 31, 2003. For further information, refer
to the financial statements and footnotes thereto included in Martek
Biosciences Corporations Annual Report on Form 10-K for the year ended October
31, 2002.

ConsolidationThe consolidated financial statements include the accounts of
Martek Biosciences Corporation and its wholly owned subsidiary Martek
Biosciences Boulder Corporation (formerly known as OmegaTech, Inc.) which was
acquired on April 25, 2002, after elimination of all significant intercompany
balances and transactions.

Use of EstimatesThe preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts 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.

Revenue RecognitionThe Company generally recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed or
determinable, and collectibility is probable. Revenue is recognized on product
sales when goods are shipped. Cash received as a prepayment on future purchases
is deferred and recognized as revenue as the related shipments are made.
Royalty revenue is recognized when product is sold to the end users. Cash
received as a prepayment on future royalties is deferred and recognized as
product is sold to the end users. Revenue from product licenses is deferred and
recognized over the term of the agreement. Revenues on cost reimbursement and
fixed price contracts are recognized on the percentage of completion method of
accounting as costs are incurred. Revenue recognized is not subject to
repayment. Cash received that is related to future performance under such
contracts is deferred and recognized as revenue when earned. At January 31,
2003, the Company had approximately $2.0 million in short-term and $2.3 million
in long-term unearned revenue relating to third-party license agreements and
prepayments on product purchases.

Net Income/Loss Per ShareBasic net income/loss per share is computed using the
weighted-average number of common shares outstanding during the period. Diluted
net income per share is computed using the weighted-average number of common
shares and dilutive potential common shares outstanding during the period.
Diluted net loss per share is computed using the weighted-average number of
common shares and excludes dilutive potential common shares outstanding, as
their effect is antidilutive. Dilutive potential common shares consist of stock
options and warrants.

Comprehensive Income Comprehensive income is comprised of net
income and other comprehensive income, which includes certain
changes in equity that are excluded from net income. The Company
includes components of other comprehensive income on its Consolidated
Statements of Stockholders Equity. At January 31, 2003 and October 31, 2002,
there are no components of comprehensive income to report.

ReclassificationCertain amounts in the prior years financial statements have
been reclassified to conform to the current year presentation.

Recently Issued Accounting PronouncementsIn December 2002, the FASB issued
Statement of Financial Accounting Standards No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure an Amendment of FASB
Statement No. 123 (SFAS 148). SFAS 148 amends SFAS 123 to provide
alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
more prominent disclosures in both annual and interim financial statements
regarding the method of accounting for stock-based employee compensation and
the effect of the method used on reported results. The alternative methods of
transition of SFAS 148 are effective for fiscal years ending after December 15,
2002. The disclosure provision of SFAS 148 is effective for interim periods
beginning after December 15, 2002. The Company follows APB 25 in accounting for
its employee stock options. The Company does not expect the adoption of SFAS
148 to have a material impact on its operating results or financial position.

6



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##### 



In November 2002, the Emerging Issues Task Force (EITF) reached a consensus
on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF
Issue No. 00-21 provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services and/or
rights to use assets. The provisions of EITF Issue No. 00-21 will apply to
revenue arrangements entered into in fiscal periods beginning after June 15,
2003. The Company believes that the adoption of this standard will have no
material impact on its financial statements.

2. Inventories

Inventories consist of the following:

|                       |                 |      |             |        |             |   |       |       | 
|---------------------- | --------------- | ---- | ----------- | ------ | ----------- | - | ----- | ----- | 
|                       |                 |      | January 31, |        | October 31,
|In thousands           |                 | 2003 |             | 2002  
|                       |                 |      |             |       
|Finished products      |                 | $    | 5,017       |        |             | $ | 3,443 |      
|Work in process        |                 |      | 5,577       |        |             |   | 6,078 |      
|Raw materials          |                 |      | 411         |        |             |   | 397   |      
|                       |                 |      |             |        |             |   |       |      
|                       | Total inventory |      |             | 11,005 |             |   |       | 9,918 | 
|Less inventory reserve |                 |      | (300        | )      |             |   | (200  | )    
|                       |                 |      |             |        |             |   |       |      
|                       | Net inventory   |      | $           | 10,705 |             |   | $     | 9,718 | 
|                       |                 |      |             |        |             |   |       |      

3. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

|                                  |  |             |         |             |  |   |         |  
|--------------------------------- |  | ----------- | ------- | ----------- |  | - | ------- | -
|                                  |  | January 31, |         | October 31,
|In thousands                      |  | 2003        |         | 2002       
|                                  |  |             |         |            
|Land                              |  | $           | 150     |             |  | $ | 150     |  
|Building and improvements         |  |             | 4,609   |             |  |   | 1,871   |  
|Machinery and equipment           |  |             | 41,620  |             |  |   | 23,906  |  
|Furniture and fixtures            |  |             | 1,667   |             |  |   | 1,598   |  
|Leasehold improvements            |  |             | 556     |             |  |   | 556     |  
|Construction in progress          |  |             | 5,809   |             |  |   | 19,960  |  
|                                  |  |             |         |             |  |   |         |  
|Property, plant and equipment     |  |             | 54,411  |             |  |   | 48,041  |  
|Less accumulated depreciation     |  |             | (12,161 | )           |  |   | (11,535 | )
|                                  |  |             |         |             |  |   |         |  
|Net property, plant and equipment |  | $           | 42,250  |             |  | $ | 36,506  |  
|                                  |  |             |         |             |  |   |         |  

4. Goodwill and Intangible Assets

As of January 31, 2003 and October 31, 2002, the Companys intangible assets
and related accumulated amortization consisted of the following:

|                 |  |                        |        |                        |  |             |        |       |  |              |        |     |  |   |        |             |  |   |      |   |  |   |        | 
|---------------- |  | ---------------------- | ------ | ---------------------- |  | ----------- | ------ | ----- |  | ------------ | ------ | --- |  | - | ------ | ----------- |  | - | ---- | - |  | - | ------ | 
|                 |  | As of January 31, 2003 |        | As of October 31, 2002
|                 |  |                        |        |                       
|                 |  |                        |        |                        |  | Accumulated |        |       |  |              |        |     |  |   |        | Accumulated |  |   |      |  
|In thousands     |  | Gross                  |        | Amortization           |  | Net         |        | Gross |  | Amortization |        | Net
|                 |  |                        |        |                        |  |             |        |       |  |              |        |    
|Trademarks       |  | $                      | 1,811  |                        |  | $           | (30    | )     |  | $            | 1,781  |     |  | $ | 1,809  |             |  | $ |     |   |  | $ | 1,809  | 
|Patents          |  |                        | 5,486  |                        |  |             | (754   | )     |  |              | 4,732  |     |  |   | 5,287  |             |  |   | (602 | ) |  |   | 4,685  | 
|Core technology  |  |                        | 1,708  |                        |  |             | (29    | )     |  |              | 1,679  |     |  |   | 1,708  |             |  |   |     |   |  |   | 1,708  | 
|Current products |  |                        | 10,676 |                        |  |             | (559   | )     |  |              | 10,117 |     |  |   | 10,676 |             |  |   | (381 | ) |  |   | 10,295 | 
|Goodwill         |  |                        | 25,257 |                        |  |             |       |       |  |              | 25,257 |     |  |   | 25,568 |             |  |   |     |   |  |   | 25,568 | 
|                 |  |                        |        |                        |  |             |        |       |  |              |        |     |  |   |        |             |  |   |      |   |  |   |        | 
|Total            |  | $                      | 44,938 |                        |  | $           | (1,372 | )     |  | $            | 43,566 |     |  | $ | 45,048 |             |  | $ | (983 | ) |  | $ | 44,065 | 
|                 |  |                        |        |                        |  |             |        |       |  |              |        |     |  |   |        |             |  |   |      |   |  |   |        | 

The Company recorded amortization expense of approximately $414,000 during the
three months ended January 31, 2003, compared to approximately $36,000 during
the three months ended January 31, 2002.

7



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##### 



5. Note Payable

In connection with the purchase of OmegaTech, Inc., the Company assumed an
obligation to pay a minimum of $7.0 million over the next eight years
associated with an agreement with a third party relating to human and animal
applications for OmegaTechs DHA. On December 20, 2002 the Company signed an
amendment to this agreement under which the Company paid $500,000 and signed a
non-interest bearing promissory note for $3.25 million in exchange for the
discharge of all future obligations under the agreement. The first payment
under the note of $1.0 million is payable in August of 2003 with the remainder
due in December of 2003. The Company imputed interest on the note at 4.5%, or
approximately $129,000, the balance of which is classified as accrued
liabilities on the consolidated balance sheets.

6. Restructuring Charge

On July 29, 2002, the Company announced a restructuring of the food and
beverage sales and marketing efforts in Boulder, Colorado, which included the
termination of eight employees and five consultants. Costs estimated at the
time of the restructuring included employee separation benefits, such as
severance, medical, and other benefits and other costs such as consultant
terminations costs, idle office space and professional fees. The following
table summarizes the activity related to the liability for restructuring costs
as of January 31, 2003:

|                                                   |  |            |      |         |  |       |      |   |  |   |       |  
|-------------------------------------------------- |  | ---------- | ---- | ------- |  | ----- | ---- | - |  | - | ----- | -
|                                                   |  | Employee   |      |         |  |       |      |   |  |  
|                                                   |  | Separation |      | Other   |  |       |      |  
|In thousands                                       |  | Benefits   |      | Charges |  | Total
|                                                   |  |            |      |         |  |      
|Initial charge in the third quarter of fiscal 2002 |  | $          | 766  |         |  | $     | 500  |   |  | $ | 1,266 |  
|Cash
payments (8/1/02  10/31/02)                  |  |            | (242 | )       |  |       | (187 | ) |  |   | (429  | )
|                                                   |  |            |      |         |  |       |      |   |  |   |       |  
|Balance at October 31, 2002                        |  |            | 524  |         |  |       | 313  |   |  |   | 837   |  
|Cash
payments (11/1/02  1/31/03)                  |  |            | (34  | )       |  |       | (25  | ) |  |   | (59   | )
|Adjustments (1)                                    |  |            | (264 | )       |  |       | 14   |   |  |   | (250  | )
|                                                   |  |            |      |         |  |       |      |   |  |   |       |  
|Balance at January 31, 2003                        |  | $          | 226  |         |  | $     | 302  |   |  | $ | 528   |  
|                                                   |  |            |      |         |  |       |      |   |  |   |       |  



| |  |  | Note 1: Due to changes in previous estimates, the Company reduced its
liability for employee separation benefits related to severance costs.
Additionally, the Company increased the restructuring liability related to
other charges such as consultant termination fees and costs related to idle
space. The net result of the related adjustments to the restructuring
liability was a reversal of $250,000 in the quarter ended January 31, 2003.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7. Commitments

As a result of the acquisition of OmegaTech, Inc., the Company is subject to a
prior commitment to purchase a minimum quantity of DHA biomass on favorable
terms from a third party manufacturer. The three-year commitment expires on
December 31, 2004 and totals approximately $2.4 million per year.

8



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8. Net Income/(loss) per share

The following table presents the calculation of basic and diluted net
income/(loss) per share. Basic net income/(loss) per share is computed using
the weighted average number of common shares outstanding during the period.
Diluted net income/(loss) per share is computed using the weighted average
number of common shares outstanding plus dilutive potential common shares
relating to stock options and warrants, using the treasury stock method.

|                                            |                        |      |                                |       |  |   |        |   | 
|------------------------------------------- | ---------------------- | ---- | ------------------------------ | ----- |  | - | ------ | - | 
|                                            |                        |      | Three months ended January 31,
|                                            |                        |      |                               
|In
thousands, except per share amounts      |                        | 2003 |                                | 2002 
|                                            |                        |      |                                |      
|Net income/(loss)                           |                        | $    | 2,061                          |       |  | $ | (2,947 | )
|Weighted average shares - basic             |                        |      | 23,368                         |       |  |   | 20,185 |  
|Effect of dilutive potential common shares: |                        |      |                                |       |  |   |        |  
|                                            | Employee stock options |      |                                | 1,219 |  |   |        |  | 
|                                            | Warrants               |      |                                | 75    |  |   |        |  | 
|                                            |                        |      |                                |       |  |   |        |  
|Total dilutive potential common shares      |                        |      | 1,294                          |       |  |   |       |  
|                                            |                        |      |                                |       |  |   |        |  
|Weighted average shares - diluted           |                        |      | 24,663                         |       |  |   | 20,185 |  
|                                            |                        |      |                                |       |  |   |        |  
|Net income/(loss) per share - basic         |                        | $    | 0.09                           |       |  | $ | (0.15  | )
|                                            |                        |      |                                |       |  |   |        |  
|Net income/(loss) per share - diluted       |                        | $    | 0.08                           |       |  | $ | (0.15  | )
|                                            |                        |      |                                |       |  |   |        |  

Employee stock options to purchase
approximately 1.5 million shares in the first quarter of fiscal 2003 were
outstanding, but were not included in the computation of diluted net
income per share because the exercise price of the stock options was
greater than the average share price of the Companys stock for
the quarter, and therefore, the effect would have been antidilutive.
None of the approximately 3.5 million shares of employee stock
options outstanding in the first quarter of fiscal 2002 were included
in the computation of diluted net loss per share because the effect
on net loss would have been antidilutive.

9. Subsequent Event

On February 25, 2003, the Company established a one-year, $10 million secured
working capital line of credit facility with Allfirst Bank at a rate that
approximates the prime rate. The credit facility is secured primarily by the
Companys accounts receivable and inventories.

9



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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, production expansion,  margin and
productivity improvements, applications and potential collaborations and
acquisitions;
- expectations regarding sales and royalties by and from 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 and purchase   of third-party
manufactured oils;
- expectations regarding production capacity and our ability to meet future demands for our DHA and ARA oils;
- expectations regarding future research and development costs;
- expectations regarding our expansion at our Winchester, KY facility;
- expectations regarding additional capital expenditures needed in relation to our fermentation and oil processing activities;
- expectations regarding the integration of the former OmegaTech with Martek; and
- expectations regarding production from the FermPro Manufacturing, LP (FermPro) facility.

Forward-looking statements include those statements containing words such as:

-will,
-should,
-could,
-anticipate,
-believe,
-plan,
-estimate,
-expect,
-intend, and other similar expressions.

All of these forward-looking statements involve risks and uncertainties. They
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 the risks that could cause such differences in this
Managements Discussion and Analysis to this Form 10-Q under the caption Risk
Factors, 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

Martek was founded in 1985. We are a leader in the development and
commercialization of products derived from microalgae. Our leading products are
nutritional oils used as ingredients in infant formula and foods, and as
ingredients in, and encapsulated for use as, dietary supplements. Our
nutritional oils are comprised of fatty acid components, primarily
docosahexaenoic acid, commonly known as DHA, and arachidonic acid, commonly
known as ARA. Many researchers believe that these fatty acids may enhance
mental and visual development in infants and play a pivotal role in brain
function throughout life. Low levels of DHA in adults have also been linked
with a variety of health risks. Research is underway to assess what impact, if
any, supplementation with our DHA will have on these health risks. Additional
applications of our patented technology based upon microalgae include our algal
genomics technology and our currently marketed fluorescent detection products
and technologies that can be used by researchers as an aid in drug discovery
and diagnostics.

In 1992, we realized our first revenues from license fees related to our
nutritional oils containing DHA and ARA and sales of sample quantities of these
oils. In 1995, we recognized our first product and royalty revenues from sales
of infant formula containing these oils, and in 1996, we began to realize
revenues from the sale of Neuromins®, a DHA dietary supplement. In 1998, we
first realized revenues from the sale of our fluorescent detection products. We
currently have license agreements with nine infant formula
manufacturers, including Mead Johnson Nutritionals, Wyeth, Abbott Laboratories,
Nutricia, Novartis, Maarbarot, Heinz, Ordesa and a ninth company whom we have
contractually agreed not to disclose. Collectively, these companies represent
approximately 60% of the estimated $7.5 to $8.0 billion worldwide wholesale
market for infant formula. Mead Johnson Nutritionals, Wyeth, Abbott
Laboratories, Nutricia, Novartis and Maarbarot are now marketing term infant
formula products containing our oils in over 30 countries and pre-term infant
formula products containing our oils in over 60 countries around the world. The
three licensees that are not currently marketing term infant formula products
containing our oils represent approximately 3% of the the estimated worldwide
wholesale market for infant formula. Supplemented term infant formulas
manufactured by Mead Johnson Nutritionals, Abbott Laboratories and Wyeth are
currently being marketed in the United States.

10



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In April 2002, we purchased OmegaTech, Inc. (OmegaTech or Martek Boulder) a
low-cost algal DHA producer located in Boulder, Colorado. OmegaTech had been in
the fermentable DHA business since 1987, and had accumulated over 100 issued
and pending patents protecting its DHA technology. Its revenues mainly
consisted of sales of DHA into the dietary supplement, food, beverage, and
animal feed markets. We acquired OmegaTech to obtain their low-cost DHA oil and
related intellectual property for use in the food and beverage and adult
supplement markets.

We have incurred losses in each year since our inception. At January 31, 2003,
our accumulated deficit was approximately $125.3 million. Although we
anticipate significant growth in sales of our nutritional oils, and we achieved
an operating profit for the last two consecutive fiscal quarters, we may
continue to experience quarter-to-quarter and year-to-year fluctuations in our
future operating results, some of which may be significant. The timing and
extent of such fluctuations will depend, in part, on the timing and receipt of
oils-related revenues. The extent and timing of future oils-related revenues
are largely dependent upon the following factors:



| |  |  | the timing of infant formula market introductions by our licensees;                                                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the timing and extent of introductions of DHA into various child and/or adult applications;                                  
|
| |  |  | the timing and extent of acceptance of products containing our oils
under state-sponsored reimbursement programs in the U.S.;
|
| |  |  | the acceptance of these products by consumers;                                                                               
|
| |  |  | the production of adequate levels of our nutritional oils by ourselves and our third party manufacturers;                    
|
| |  |  | competition from alternative sources of DHA and ARA; and/or                                                                  
|
| |  |  | agreements with other future third-party collaborators to market our products or develop new products.                       

Because of this, the likelihood, timing and extent of future profitability are
largely dependent on factors such as those mentioned above, as well as others,
over which we have limited or no control.

Critical Accounting Policies and the Use of Estimates

The preparation of our consolidated financial statements in conformity
with accounting principles generally accepted in the U.S. requires management
to make estimates and assumptions that affect the amounts reported in our
consolidated financial statements and accompanying notes. On an on-going basis,
we evaluate our estimates and judgments, which are based on historical and
anticipated results and trends and on various other assumptions that we believe
are reasonable under the circumstances, including assumptions as to future
events. By their nature, estimates are subject to an inherent degree of
uncertainty and, as such, actual results may differ from our estimates. We
discuss accounting policies and assumptions that involve a higher degree of
judgment and complexity than others in our Managements Discussion and Analysis
in our annual report to shareholders on Form 10-K for the year
ended October 31, 2002.

Management Outlook

We believe that the outlook for future revenue growth remains positive,
although quarterly results may show fluctuations, and we expect fiscal 2003
sales to surpass prior year levels. Specifically, we believe that for fiscal
2003 as a whole, term infant formulas containing our oils will be introduced in
additional countries and sales of our nutritional oils will continue to grow in
countries where our oils are currently sold. To date, six of our infant formula
licensees have obtained the regulatory approval, where required, to sell term
infant formula products containing our oils in over 30 countries and pre-term
infant formula products containing our oils in over 60 countries around the
world. Supplemented term infant formulas manufactured by three of our licensees
are currently being marketed in the United States and we expect these sales to increase in fiscal
2003.

In the first quarter of 2003, over 90% of our revenues related to the sales of
our oils for use in infant formula products. We anticipate increased sales of
our oils in 2003 for other products such as products developed for pregnant and
nursing mothers and for the food and beverage market. We expect that the
majority of these sales will come through partnering relationships with larger
companies in the nutritional and food and beverage markets. We anticipate that
over the next few years these sales will expand and represent a larger
potential market than infant formula.

The demand for our nutritional oils
exceeded our customers initial forecasts in the first quarter
of 2003, resulting in customer orders in excess of our planned
production. As a result, we have requested from our customers that
they provide us with longer lead-times to fill their orders. We have
been actively working to accelerate our production buildout plans to
meet this increased demand.
Our expanded facilities in Winchester, KY are currently in the start-up phase and not yet
producing at maximum capacity. We expect to be producing at maximum capacity
within the next few months, which should allow us to meet all
projected orders for our nutritional oils, based on current demand. DSM Gist B.V. (DSM) is also in
the process of improving its production capability for ARA and estimates
completion in the next few months. Once these improvements are complete,
we should have the production capacity to generate nutritional oil sales of
approximately $120 to

11



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##### 



$160 million per year. If the start-up phase of our
production expansion does not proceed as planned, if DSM is not able to achieve the production
improvements that they project, or if market demand increases
faster than currently anticipated, our sales could be limited due to our
inability to meet demand for our products. We are accelerating plans for
further expansion of our production facilities to meet additional customer
demand and are evaluating future expansion in one or more of the following ways:



| |  |  | further expand our manufacturing facilities at our Winchester, KY plant;      
| | - |  | ------------------------------------------------------------------------------
|
| |  |  | acquire existing manufacturing facilities;                                    
|
| |  |  | fund, or partially fund, expansion of third-party manufacturing facilities; or
|
| |  |  | construct a second manufacturing plant.                                       

Our cost of ARA is experiencing upward pressure due to the decline of the U.S.
Dollar against the Euro. Declining exchange rates may offset a portion, or all
of the savings that we anticipate from production efficiencies. We are
reviewing several options to reduce the cost of ARA, including production of
ARA in the U.S.

On March 12, 2003, an explosion occurred at a public wastewater treatment works
in Winchester, KY, resulting in property damage. State and local fire officials
are conducting an investigation into possible causes of the incident, with
which Martek is cooperating, and are considering whether hexane discharges
from our operations were a factor. On March 17, the state fire marshal issued
a finding that Martek had not met certain applicable requirements and directed
us to prevent any introduction of hexane into the sanitary sewer system. We
had already done so. At this time, we do not believe this matter will have a
material impact on production output or our results of operations; however,
we are still gathering information about the incident.

Results of Operations

RevenuesNutritional product sales increased by $14.5 million or 252% in the
quarter ended January 31, 2003 as compared to the quarter ended January 31,
2002 primarily due to increased sales of our oils to our infant formula
licensees. Over 90% of our nutritional product sales in the quarter ended
January 31, 2003 relate to the sale of our oils for use in infant formulas.
Although we do not have visibility into what countries the infant formula
containing our oils are ultimately sold into, we believe that over 60% of the
increase in sales to infant formula licensees relates to U.S. sales. The first
infant formulas containing our oils were introduced in the U.S. in the first
quarter of 2002. Approximately $562,000 of the increase is from revenue related
to the ongoing operations of OmegaTech.

Approximately 65% of our nutritional product sales in the quarter ended January
31, 2003 was generated by sales of DHA and ARA to Mead Johnson and
approximately 27% was generated by sales of DHA and ARA to Wyeth and Abbott.
All three of these companies are currently manufacturing infant formulas
supplemented with our oils for sale in the U.S., and Mead Johnson, Abbott and
Wyeth are collectively marketing supplemented term infant formula in over 30
countries around the world. We anticipate sales of nutritional products will
continue to grow as infant formulas containing our oils are introduced in
additional countries and sales of our nutritional oils will continue to grow in
countries where our oils are currently sold.

Sales of fluorescent detection products increased $80,000 or 38% in the quarter
ended January 31, 2003 as compared to the quarter ended January 31, 2002.

Other revenue, which consists primarily of revenues from research and
development contracts, grants and third party license agreements increased
$20,000 or 74% in the quarter ended January 31, 2003 as compared to the quarter
ended January 31, 2002.

As a result of the above, total revenues increased by $14.6 million or 244% in
the quarter ended January 31, 2003 as compared to the quarter ended January 31,
2002.

Cost of Product Sales and RoyaltiesOur cost of product sales decreased as a
percentage of product sales to 60% in the quarter ended January 31, 2003 as
compared to 70% in the quarter ended January 31, 2002 primarily due to lower
costs from DSM, our third-party supplier of ARA. Seventy-eight percent of the
decrease in our cost of ARA from DSM was a result of increased purchase
volumes, while 22% of the decrease was as a result of the complete amortization of the
start-up costs of DSM (previously included in the cost of ARA). We expect
continued decreases in the future costs of ARA from DSM as our sales volume
increases. However, volume savings could be offset by continued decreases in
the exchange ratio between the Euro and the U.S. Dollar. We also anticipate
reductions in DHA oil production costs as: (1) economies of scale are realized
from increased output from the fermentation expansion which is currently in the
start-up phase of production at our Winchester, KY production plant, and (2)
yield improvements from our research and development efforts are realized.

Research and DevelopmentOur research and development costs decreased $209,000
or 7% in the quarter ended January 31, 2003 as compared to the quarter ended
January 31, 2002. Our research and development expenses in the first quarter of
2003 have decreased as many of the large-scale development projects occurring
in 2002 at the Companys Winchester plant have been completed. This decrease
was partially offset by the ongoing costs of Martek Boulder (the former
OmegaTech) which was acquired in April 2002, and added an additional $540,000
in research and development costs in the quarter ended January 31, 2003, that
we had not incurred in the quarter ended January 31, 2002.

RestructuringDue to changes in previous estimates, we reversed approximately
$250,000 of expense related to the restructuring of our food and beverage sales
efforts. We reduced the liability for employee separation benefits related to
severance costs by approximately $264,000 and increased the restructuring
reserve for net increases in other charges by approximately $14,000. The other
costs adjusted include consultant termination fees, costs related to idle space
and professional fees. As of January 31, 2003, the remaining liability related
to the restructuring totals approximately $528,000 and is included in accrued
liabilities.

12



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##### 



Selling, General and AdministrativeOur selling, general and administrative
costs increased by $1.7 million or 85% for the quarter ended January 31, 2003
as compared to the quarter ended January 31, 2002. $1.1 million of this
increase relates to operating costs associated with the ongoing operations at
Martek Boulder that were not present in the quarter ended January 31, 2002. The
remainder of the increase primarily relates to increases in insurance and other
overhead costs related to our overall corporate growth. We anticipate modest
increases in these costs for the remainder of fiscal 2003.

Other IncomeOur other income decreased by approximately $122,000 or 47% in the
quarter ended January 31, 2003 as compared to the quarter ended January 31,
2002. The primary reason for this decrease was that interest income decreased
by approximately $112,000 as short-term interest rates have continued to fall
over the past year.

Net Income/(loss)As a result of the foregoing, we recognized approximately
$2.1 of net income in the quarter ended January 31, 2003 as compared to a net
loss of ($2.9) million in the quarter ended January 31, 2002. Approximately
$250,000 of the net income in the first quarter of 2003 was related to the
reversal of a portion of our restructuring reserve.

Provision for Income TaxesWe did not record a provision for income taxes as
we have net operating loss carryforwards for federal income tax purposes of
$168.6 million at October 31, 2002, which will expire, if unused, in the year
2003 through the year 2022.

Liquidity and Capital Resources

At January 31, 2003, our primary source of liquidity was our cash and cash
equivalents totaling $21.1 million. Cash and cash equivalents increased
approximately $661,000 since October 31, 2002. This net increase was primarily
attributable to cash from operating activities, which provided approximately
$2.7 million, cash from the exercise of options and warrants, which provided
approximatley $2.6 million, and cash from the sale of short-term investments of
$2.0 million, offset by capital expenditures of $6.4 million. Capital
expenditures consisted primarily of expenditures for the further expansion of
and improvements made to our production facility in Winchester, KY.

The table below sets forth our contractual obligations at January 31, 2003.

In thousands

|                                   |  |       |       |        |  |             |       |             |  |         |       |  |  |   |   |       |  |   |   | 
|---------------------------------- |  | ----- | ----- | ------ |  | ----------- | ----- | ----------- |  | ------- | ----- |  |  | - | - | ----- |  | - | - | 
|                                   |  |       |       |        |  | Less than   |       |             |  |         |       |  |  |   |   | After
|Contractual Obligation             |  | Total |       | 1 Year |  | 1 - 3 Years |       | 4 - 5 Years |  | 5 Years
|                                   |  |       |       |        |  |             |       |             |  |        
|Long-term debt                     |  | $     |      |        |  | $           |      |             |  | $       |      |  |  | $ |  |       |  | $ |  | 
|Capital lease obligations          |  |       | 66    |        |  |             | 66    |             |  |         |      |  |  |   |  |       |  |   |  | 
|Operating lease obligations        |  |       | 1,810 |        |  |             | 692   |             |  |         | 1,116 |  |  |   | 2 |       |  |   |  | 
|Unconditional purchase obligation  |  |       | 4,800 |        |  |             | 2,400 |             |  |         | 2,400 |  |  |   |  |       |  |   |  | 
|Other long-term obligation         |  |       | 3,250 |        |  |             | 3,250 |             |  |         |      |  |  |   |  |       |  |   |  | 
|                                   |  |       |       |        |  |             |       |             |  |         |       |  |  |   |   |       |  |   |   | 
|Total contractual cash obligations |  | $     | 9,926 |        |  | $           | 6,408 |             |  | $       | 3,516 |  |  | $ | 2 |       |  | $ |  | 
|                                   |  |       |       |        |  |             |       |             |  |         |       |  |  |   |   |       |  |   |   | 

The expansion and continuing development and optimization of our production
facility in Winchester, KY continue to be the largest factors relating to our
liquidity and capital resources. Since October 31, 2002, we have spent
approximately $5.9 million on facilities and capital equipment relating to the
expansion of our fermentation facility, offices, warehouse and packaging
facilities.  We are accelerating plans for
further expansion of our facilities to meet anticipated anticipated future
demand for our nutritional oils in 2004 and beyond and are considering
expanding in one or more of the following ways:



| |  |  | further expand our manufacturing facilities at our Winchester, KY plant;         
| | - |  | ---------------------------------------------------------------------------------
|
| |  |  | acquire existing manufacturing facilities;                                       
|
| |  |  | fund, or partially fund, expansion of of third-party manufacturing facilities; or
|
| |  |  | construct a second manufacturing plant.                                          

Based on preliminary estimates, it may cost between $20 million to $40 million over
the next 12-18 months
for additional expansion and other capital projects
including those to improve our production yield.

Subsequent to the end of the first quarter, on February 25, 2003, we
established a one-year, $10 million secured working capital line of credit
facility with Allfirst Bank. We believe that our existing capital
resources, combined with this line of credit, will provide us with adequate
capital to meet our current obligations as well as our existing operations for
at least the next 12 months. However, we

13



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##### 



will need additional cash to continue
expanding our production capacity to meet the anticipated future demand for our
nutritional oils. We plan to raise additional capital in 2003 in the form of
equity securities or debt, or a combination of equity and debt, to finance
additional production capacity. The ultimate amount of additional funding that
we will require will depend, among other things, on one or more of the
following factors:



| |  |  | the cost of capital expenditures at our manufacturing facilities;                                                                                                                                                                
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the cost of acquiring additional and/or operating existing
manufacturing facilities for our various products and potential products
(depending on which products we decide to manufacture and continue to
manufacture ourselves);
|
| |  |  | growth in our infant formula, food and beverage and other nutritional product sales;                                                                                                                                             
|
| |  |  | the extent and progress of our research and development programs;                                                                                                                                                                
|
| |  |  | the costs involved in filing, protecting and enforcing patent claims;                                                                                                                                                            
|
| |  |  | competing technological and market developments; and                                                                                                                                                                             
|
| |  |  | the costs of marketing and commercializing our products.                                                                                                                                                                         

We can offer no assurance that, if needed, any of these financing alternatives
will be available to us on terms that would be acceptable, if at all.

Risk Factors

We have experienced significant operating losses each year since our inception
and have not yet generated a sustained revenue stream to be a viable business
in the long-term.

We have experienced net operating losses in each annual period since our
inception. As of January 31, 2003, we have an accumulated deficit of $125.5
million. Our balance of cash and cash equivalents at January 31, 2003 was
approximately $21 million. Although this cash, along with our $10
million secured working capital line of credit, which expires on
February 28, 2004, should allow us to meet our
current operating needs for at least the next 12 months, we must achieve
sustained profitability to generate the cash necessary to be a viable business
in the long term, and at this time we have not yet generated a sustained source
of revenue to achieve this.

Experts differ in their opinions on the importance of DHA and ARA in infant
formula. Some experts feel that they are not necessary ingredients for infant
formulas and that supplemented formulas will remain a premium product and never
gain widespread acceptance. If this occurs, or if clinical trials that are now
ongoing do not yield positive results on the benefits of DHA on
cardiovascular or other health problems, our future revenues may be limited in
the infant formula market as well as the adult supplement market.

Ultimately our success in the infant formula industry depends on growing
acceptance of our nutritional oils as necessary or beneficial additives to
infant formulas. Notwithstanding existing clinical results that have
demonstrated the beneficial effects of adding our nutritional oils to infant
formula, some experts in the field of infant nutrition do not believe that our
nutritional oils are necessary or that they provide any long-term beneficial
effects. There have also been clinical studies where no beneficial effects have
been found, possibly due to dose, duration or other factors. Experts generally
recommend that mothers breastfeed rather than use infant formulas whether or
not they contain our nutritional oils. Some experts also believe that infant
formula without our oils contains sufficient precursor fats that infants can
convert into DHA and ARA as needed. In addition, some physicians are
unimpressed by studies showing that infant formulas fortified with our oils
improve infants cognitive ability at early ages, suggesting that these results
may not carryover to improved results later in life. Due to these differences
in opinion, we are subject to the risk that the use of DHA and ARA in infant
formula may never gain widespread acceptance. As of January 31, 2003, our
products have been in the U.S. infant formula market for approximately 11
months and we estimate that these products have penetrated approximately 12 -
15% of the U.S. infant formula market. Internationally, our products have been
included in term infant formula in over 30 countries. Many of these
introductions have occurred in the last 2 - 3 years. We estimate that our
products have penetrated approximately 10 - 15% of the international infant
formula market. Combined, these markets brought us revenues of approximately
$19 million in the first quarter of 2003.

In addition to sales into the infant formula market, approximately 3% of our
current nutritional product revenues come from sales of our nutritional oils to
the food and adult supplement market. Investigators at universities and at
other research centers, such as the National Institutes of Health, have
observed a relationship between low levels of DHA and a variety of health
risks. We are currently trying to establish what contribution, if any,
supplementation with our oils will make in addressing these problems. Although
clinical data are not required to market food ingredients or nutritional
supplements outside of the infant formula market, we believe that further
clinical studies are needed to validate the benefits of DHA supplementation.
Accordingly, we are sponsoring studies to further investigate the potential
benefit of DHA supplementation on cardiovascular health and breast cancer, and
we are aware of research being conducted regarding the impact of DHA
supplementation on certain visual and neurological disorders. Unless these
studies, which are more extensive than earlier pilot studies, establish and
quantify the positive impact of DHA supplementation, we may only have a limited
adult market opportunity.

14



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##### 



If we are unable to successfully scale-up our production capacity or enter into
favorable agreements with third parties to produce our oils, our customers may
not be able to obtain a sufficient supply of DHA and ARA from us and our future
revenues from these products may be limited.

To meet our customers projected demand for our nutritional oils, we have
developed a process for the large-scale production of our oils at our
Winchester, KY manufacturing plant. We estimate the worldwide infant formula
market to be approximately $7.5 to $8 billion. If our licensees were to
penetrate 100% of this market with DHA and ARA supplemented formulas, we
estimate that we would receive approximately $350 to $400 million in revenues
annually from these sales. To date, our licensees products containing our oils
have penetrated approximately 12% to 15% of the worldwide infant formula market. Our
sales into the non-infant nutritional supplement and food markets to date have
been less then $10 million annually. To the extent that demand increases beyond
our current production capabilities, we may be unable to provide the required
quantities of oil cost effectively and may experience backlogs. Although our
licensees have a right to manufacture DHA and ARA, we are not aware of any of
our licensees doing so or preparing to do so. We estimate that it may take a
licensee approximately one year or more to develop their own process of making
our oils. In addition, we do not believe that any of our other customers have
the capacity to manufacture our products at this time. We believe that our
initial fermentation expansion at our Winchester, KY plant, which is currently
in the start-up phase and should be up to full production by the second quarter
of 2003, should more than double our production capacity at our plant. However,
our ability to maintain commercial production at these higher levels at our
plant has not been successfully tested. As we increase our production at our
Winchester, KY plant and at other locations, we may encounter many risks
associated with our commercial manufacturing such as:



| |  |  | the start-up phase of our fermentation expansion at our plant may not be completed in the timeframe
that we have planned;
| | - |  | -------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we may experience problems processing, handling and shipping the higher quantities of oil produced
from this expansion;  
|
| |  |  | the costs of expanding, operating and maintaining our production facility may exceed our expectations;                   
|
| |  |  | product defects may result;                                                                                              
|
| |  |  | product losses may be higher than we anticipate;                                                                         
|
| |  |  | environmental liabilities
resulting from our production process; and                                                     
|
| |  |  | the scale-up of our production process may result in regulatory issues.                                                  

If we were to experience any one or more of these problems, there could be a
material adverse effect on our business, financial condition, or results of
operations.

As a result of the acquisition of OmegaTech, we also have several contractual
agreements with third party manufacturers to produce our DHA for use in
nutritional supplements and foods, including an agreement with C.P. Kelco. In
addition, we have begun receiving DHA from FermPro Manufacturing L.P., a
contract fermentation company in South Carolina, under a 5-year manufacturing
agreement which was signed in March 2002. The output under this agreement
should increase our annual DHA production capacity by approximately 10% of 2003
output. We believe that with our current expansion and the output from FermPro,
we will be able to produce enough DHA to supply approximately 30% to 40% of the
worldwide infant formula market. If we are: (a) unable to cost effectively
manufacture our DHA-containing oils at our Winchester, KY plant; (b) unable to
look to FermPro as a source of DHA sufficient to meet increased demand beyond
our own capacity; (c) unable to enter into other satisfactory third-party
manufacturing agreements; or (d) our licensees are unable to find alternative
sources for our DHA-containing oils, then our licensees may not be able to meet
demand and our future revenues may be limited.

Although we are able to produce ARA-containing oil at our Winchester plant, we
have entered into an agreement with a third party manufacturer, DSM, to supply
our ARA-containing oil. DSM is currently expanding its production capacity to
provide us with sufficient quantities of ARA oil to supply approximately 30% to
40% of the worldwide infant formula market. If DSM fails to supply us with
required amounts under the contract, we would not be able to meet our
customers demands unless we were able to utilize alternative sources of
supply. In this regard, we would have to either manufacture the ARA-containing
oil at our plant, which would reduce our DHA-containing oil production
capacity, or enter into other third party manufacturer supply agreements. If we
are unable to find alternative supply sources or are unable to cost effectively
manufacture the ARA-containing oil in our Winchester plant, our licensees may
not be able to meet future product demand and our future revenues from sales of
ARA-containing oils may be limited.

15



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##### 



Our oils are very sensitive to oxidation and are not very compatible with most
liquid or dry foods that are currently on the market. If economical methods are
not developed to successfully incorporate our oils into various food and
beverage applications, we may never be able to gain large scale entry into the
food and beverage market.

Although we believe that the food and beverage market could be a large market
for DHA fortification, the potential in this market could be limited if methods
are not developed that allow good compatibility of our DHA oil with various
foods and beverages. The flavor, texture and stability of our oils in finished
products such as cereals, milk and nutritional bars have not yet been
successfully established. Even if we can successfully incorporate our oils into
foods and beverages, manufacturers of these products will have to develop
methods to demonstrate feasibility in their production process. The timing and
extent of our sales into the food and beverage market, therefore, is dependent
not only on market demand, but also on manufacturing issues over which we have
no control.

Since infant formula pricing is very competitive, the premium that our oils add
to the cost of the formula may never allow it to be priced at levels that will
allow widespread acceptance by consumers.

Infant formula pricing is very competitive and the market is very sensitive to
product price changes. Because the inclusion of our oils into infant formula
may add 10% to 20% to the retail cost of standard infant formula, there is the
risk that our licensees may not be able to sell supplemented products at prices
that will allow them to gain broad market acceptance while at the same time be
profitable. This may lead to price pressure on us. If we have to reduce our
prices, we may not be able to sell products at a price that would enable us to
be profitable. None of our license agreements requires our licensees to
purchase any minimum amount of products from us now or in the future and all of
our license agreements allow our licensees to manufacture our products
themselves or purchase nutritional oils from other sources.If market demand for our products continues to grow, we will need significant
additional capital to expand our production capability. We may also need
additional capital in the future to continue our research and development
efforts, conduct product testing, including preclinical and clinical trials,
and market our products.

Our nutritional oil sales are increasing, and meeting future demand will
require expanding our production capability for our nutritional oils. We have
just completed an initial fermentation expansion plan at our Winchester, KY
facility which cost approximately $15 million, and our office, warehouse and
packaging expansion at the site cost an additional $4 million.
At January 31, 2003 we had approximately $21 million in cash and cash equivalents available to meet future capital
requirements. However, we believe that additional funds of
approximately $20
million to $40 million may be needed in the longer-term to fund additional expansion of our
production capacity (at our Winchester, KY facility and at other third party
manufacturing facilities), our research and development, product testing, and
marketing activities. The timing and extent of our additional cash needs will
primarily depend on: (a) the timing and extent of future launches of infant
formula products containing our oils by our licensees; (b) the timing and
extent of introductions of DHA into foods and/or nutritional supplements for
children and adults; (c) whether or not we enter into collaborations with other
third parties to produce our nutritional oils; and (d) our ability to generate
profits from the sales of our nutritional products.

To continue to fund our growth, we will pursue various sources of funding,
which may include equity issuances, debt financing, asset based borrowing,
lease financing, and collaborative arrangements with partners. We have recently
established a one-year secured working capital credit line of $10 million. More
extensive debt financing arrangements may require us to comply with financial
covenants, which we may not be able to meet. Additionally, funding from other
sources may not be available, or may not be available on terms that would be
commercially acceptable or permit us to continue the planned commercialization
of our products or expansion of our production capacity. Future equity
issuances may be dilutive to our existing shareholders. If we obtain funds
through collaborative or strategic partners, these partners may require us to
give them technology or product rights, including patents, that could
ultimately diminish our value. If we cannot secure adequate funding, we may
need to scale back our research, development, manufacturing, and
commercialization programs which may have a materially adverse affect on our
future business.

The market price of our common stock may experience a high level of volatility
due to factors such as its relative illiquidity, the volatility in the market
for biotechnology stocks generally, and the effect of short term events like
product launches and license announcements.

We are a public growth company in the biosciences sector. As frequently occurs
among these companies, the market price for our common stock may experience a
high level of volatility. During the fifty-two week period ending January 31,
2003, our common stock price traded between $34.25 and $12.50. During the
fifty-two week period ending January 31, 2002, our common stock price traded
between $30.90 and $12.25. The following are examples of items that may
significantly impact the market price for our common stock:



| |  |  | Announcements of technical innovations, new commercial products and product launches;
| | - |  | -------------------------------------------------------------------------------------

16



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##### 





| |  |  | Arrangements or strategic partnerships by us or our competitors;                                              
| | - |  | --------------------------------------------------------------------------------------------------------------
|
| |  |  | Announcements of license agreements, acquisitions or strategic alliances;                                     
|
| |  |  | patent or other intellectual property achievements or disputes;                                               
|
| |  |  | quarterly fluctuations in our results of operations;                                                          
|
| |  |  | failure to scale-up our commercial manufacturing or enter into favorable third party manufacturing agreements;
|
| |  |  | Announcements of product launches by competitors;                                                             
|
| |  |  | regulatory decisions (approvals or disapprovals) concerning our products and our competitors products; and   
|
| |  |  | general market conditions for growth companies and bioscience companies.                                      

Because we may experience a high level of volatility in our common stock, you
should not invest in our stock unless you are prepared to handle a significant
loss of your capital. At any given time, you may not be able to sell your
shares at a price that you think is acceptable.

The market liquidity for our stock is very low. As of January 31, 2003, we had
23,557,026 shares of common stock outstanding. Since our initial public
offering of common stock on November 23, 1993, the average daily trading volume
in our common stock as reported on the Nasdaq National market has been 97,324
shares. The average trading volume in our common stock during the fifty-two
week period ending January 31, 2003 was 258,914 shares. Although a more active
trading market may develop in the future, the limited market liquidity for our
stock may affect your ability to sell at a price which is satisfactory to you.

If significant shares eligible for future sale are sold, the result may depress
our stock price by increasing the supply of our shares in the market at a time
when demand may be limited.

Because we continue to require additional outside sources of capital to
finance, among other things, our research and development, product testing, and
the manufacturing and marketing of our products, we may need to raise
additional capital through the sale of equity securities. As of January 31,
2003, we had 23,557,026 shares of common stock outstanding, stock options
outstanding to purchase an aggregate of 4,338,618 shares of common stock, many
of which are exercisable at below current market prices, and warrants
outstanding to purchase up to 251,299 shares of common stock at an exercise
price of $19.05. To the extent that these options and warrants for our common
stock are exercised, the increase in the number of our outstanding shares of
common stock may adversely affect the price for our common stock. This could
hurt our ability to raise capital through the sale of equity securities.

We have agreed to register for resale up to 2,290,533 additional shares,
subject to certain adjustments, that may be issued to former OmegaTech
stockholders, if certain operational and financial milestones are achieved before October 31,
2004. As
a result, a substantial number of our shares may become eligible for resale if
these milestones are achieved. The market price of our common stock could
decline as a result of sales of a large number of shares of our common stock in
the market or the perception that these sales could occur, which could limit
your ability to sell at a price satisfactory to you.

Our current patents may not be able to provide protection against competitive
products and we may be unable to protect our intellectual property portfolio in
the future.

European and United States patent authorities have not adopted a consistent
policy regarding the breadth of claims allowed for health and bioscience
patents. Our issued patents, or patents that we may obtain in the future, may
not afford adequate protection against competitors with competing technology
because governmental agencies may revoke our patents or may limit the scope of
our patents. If this happens, companies may be able to produce products using
our previously patented technology.

Aventis S.A. and Nagase & Co. Ltd. are challenging our European patent covering
our DHA-containing oils. At a hearing in October, 2000, the Opposition Division
of the European Patent Office revoked our patent on the grounds that it is not
novel. We immediately appealed this ruling, and in July 2002 we received a
positive ruling from an Appeal Board of the European Patent Office, setting
aside the prior decision to revoke this patent. Consistent with our request,
the patent will now be returned to the Opposition Division for a determination
as to whether it has met the legal requirement of inventive step. During this
process the patent will remain in full force and effect. The appeal process may
not be completed until some time in 2004, at the earliest.

BASF A.G., F. Hoffman  LaRoche A.G., Friesland Brands B.V., Societe des
Produits Nestle S.A., and Suntory Limited have filed in the European Patent
Office their grounds for opposing our ARA patent issued by the European Patent
Office. The validity of the patent is unaffected by these filings. The
opposition process is not expected to be completed until sometime in 2005, at
the earliest.

17



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##### 



BASF A.G., F. Hoffman  LaRoche A.G., Societe des Produits Nestle S.A., and
Suntory Limited have filed in the European Patent Office their grounds for
opposing our blended-oils (blend of DHA and ARA oils) patent issued by the
European Patent Office. The validity of the patent is unaffected by these
filings. The opposition process is not expected to be completed until sometime
in 2006, at the earliest.

Aventis Research and Technologies GmbH & Co. KG and Nagase Limited have filed
in the European Patent Office their grounds for opposing our patent covering
the DHA-containing oils that we assumed in the OmegaTech purchase. At a hearing
in December, 2000, the Opposition Division of the European Patent Office upheld
some of the claims and revoked other claims. OmegaTech immediately appealed
this ruling, as did Aventis. During the appeal process the patent will remain
in full force and effect. The appeal process may
not be completed until some time in 2004, at the earliest.

Suntory, of Osaka, Japan has contacted us and asserted that the sale of certain
of our products may infringe on one or more of their patents in Japan and
Australia and that certain of our patents may be invalid. We have been
discussing with Suntory how this matter might be resolved amicably.

If any of the challenges described above or any other challenges to our patents
which may arise in the future are successful, our competitors may be able to
produce our products and, as a result, we may experience decreases in the
future sales of our nutritional oils, decreases in the revenues on sales of
infant formula containing our oils and decreases in license fees related to our
oils. If our products are found to infringe on the intellectual property rights
of others, we may have to pay substantial damages. Although our revenues may
decrease under our license agreements, the revocation of our European DHA
patent, ARA patent and blended-oils patent would not terminate any of our
license agreements.

We expect that in the future, as our nutritional oils continue to be
commercialized, opposition to our intellectual property by our competitors will
continue and most likely increase. We believe that challenges to our suite of
U.S. patents may arise in the future. We may incur substantial costs in the
future defending our patents.

We are aware of several products that are currently available, and products
under development, that may present a serious competitive threat to our
products.

Our success depends upon achieving and maintaining a superior competitive
position in infant formula and adult nutritional product markets. Many
potential competitors, which include companies such as BASF, F. Hoffman-LaRoche
Ltd., Suntory Limited, Celanese Ventures and Nagase & Co. Ltd., have
substantially greater research and development capabilities, marketing,
financial and managerial resources and experience in the industry. If a
competitor develops a better product or technology, our products or
technologies may be rendered obsolete.

We believe that, to date, we have developed the purest forms of DHA and ARA
oils commercially available; however, we are aware that other sources of DHA
and ARA are available. Specifically:



| |  |  | the Ross Products Division of Abbott Laboratories filed a Generally
Recognized as Safe notification on January 2, 2002 seeking FDA concurrence
that its fish oil source of DHA and its fungal source of ARA are Generally
Recognized as Safe when used as ingredients in infant formula. At this
time, the notification continues to be under consideration by the FDA;                                                                                                                  
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | some infant formulas and other products now on the market outside the
United States use oils derived from other sources, such as fish or eggs.
Although fish oil DHA is a lower cost product relative to our DHA, it has
odor, stability and taste characteristics that may limit its usefulness.
Only a very small percentage of supplemented infant formulas currently
marketed outside the United States contain DHA and ARA that have not been
produced by us;                       
|
| |  |  | fish oil based products currently dominate the adult DHA supplement market;                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | we are aware that Celanese Ventures has recently announced that one of its
operating units, Nutrinova, plans to market a DHA-rich microalgal oil to
the food and beverage and dietary supplement markets in the United States.
We are currently unable to evaluate the competitive threat that may arise
with respect to this announcement; and                                                                                                                                          
|
| |  |  | we are aware of the development of microencapsulated fish oil products by
several large companies, including BASF and F. Hoffman-LaRoche Ltd.
Although microencapsulation of the oil resolves much of the odor,
stability and taste issues found with fish oil, a microencapsulated
product is significantly more costly than regular fish oil. Because fish
oil is significantly less costly than our DHA oil, fish oil presents a
substantial competitive threat to our Neuromins® DHA.

18



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##### 



To date no other sources of DHA and ARA have received clearance from the FDA to
be marketed in U.S. infant formulas.

The integration of Martek and Omegatech operations is still ongoing, which
could harm our results of operations.

On April 25, 2002, we completed the acquisition of OmegaTech. Upon the closing
of the merger, the name of OmegaTech was changed to Martek Biosciences Boulder
Corporation. We are still in the process of integrating our operations with the
operations of the former OmegaTechs business. This integration may be more
expensive than anticipated or take longer than planned. If there are delays or
unexpected costs involved with the integration, these could have a material
adverse effect on our business and financial results. The difficulties involved
in integrating the companies, which could be substantial, include the
following:



| |  |  | management and key personnel could be distracted from the day-to-day business of managing the new company;                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | implementing uniform controls, systems and procedures, especially information and accounting systems, could be
costly and time-consuming;     
|
| |  |  | key officers and scientific, sales and customer support personnel may not be satisfied or happy in the new
company and may elect to leave; and
|
| |  |  | major customers, suppliers or strategic business partners may choose not to do business with the merged companies.                            

If the FTC finds that our advertising claims related to our DHA and ARA
products cannot be adequately substantiated, we could be required to alter our
advertising claims or take other remedial steps.

The Federal Trade Commission (FTC) regulates certain aspects of the advertising
and marketing of our products. Under the Federal Trade Commission Act (FTCA), a
company must be able to substantiate both the express and implied claims that
are conveyed by an advertisement.

On May 30, 2002, we received a letter from the FTC notifying us that the FTC is
conducting a non-public inquiry into the advertising and promotional activities
relating to our DHA and ARA products. It is not uncommon for the FTC to conduct
an investigation of the claims that are made about products in new and emerging
areas of science that involve a potentially vulnerable population such as
infants. The agency has asked us to provide copies of all advertisements and to
provide copies of the literature that support mental and visual function
claims. The purpose of the inquiry is to determine whether Martek has
substantiation to support the express and implied claims that are made for its
DHA and ARA products. We intend to be fully responsive to the FTCs inquiry.
While we have no reason at this time to believe that the inquiry will have an
adverse effect on us, we could be required to alter our advertising claims or
take other remedial steps if the FTC does not find our advertising claims to be
adequately substantiated.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Quantitative and qualitative disclosures about market risk are not required
because the underlying risk items are not material.

Item 4. Controls and Procedures



| | a) |  | Evaluation of disclosure controls and proceduresThe Chief Executive
Officer and the Chief Financial Officer have reviewed our disclosure
controls and procedures within the 90-day period prior to the filing of
this quarterly report. Based on that review, they have concluded that
these disclosure controls and procedures are, in design and operation,
effective to assure that the information required to be included in this
report has been properly collected, processed, and timely communicated
to those responsible in order that it may be included in this report.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Changes in internal controlsSubsequent to the date on which the
Chief Executive Officer and the Chief Financial Officer evaluated our
disclosure controls and procedures, there have been no significant
changes, including corrective actions, in our internal controls or in
other factors that could significantly affect the disclosure controls
and procedures.                                                                                                                                                                                                               

19



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##### 



PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There have not been any material developments in legal proceedings.

Item 2. Changes in Securities.

Not applicable

Item 3. Defaults Upon Senior Securities.

Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information.

None

Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibit 10.49: Loan and Security Agreement Between Martek Biosciences Corporation, a Delaware Corporation, Martek       Biosciences
Boulder Corporation, a Delaware Corporation, borrower and Allfirst Bank, lender, $10,000,000.00 Revolving
Line of        Credit, Dated: February 25, 2003 (filed herewith).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Reports on Form 8-K:                                                                                                                                                                                                                                                                                           
|   
|    |  | None                                                                                                                                                                                                                                                                                                           

Separately, the Chief Executive Officer and the Chief Financial Officer have
submitted certifications to the SEC required by Section 906 of the Sarbanes -
Oxley Act of 2002.

20



---



##### 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

MARTEK BIOSCIENCES CORPORATION
(Registrant)

|                      |  |  |  |                                                      
|--------------------- |  |  |  | -----------------------------------------------------
|Date:  March 17, 2003 |  |  |  | /s/ Peter L. Buzy                                    
|                      |  |  |  |                                                      
|                      |  |  |  | Peter L. Buzy, Chief Financial and Accounting Officer

21



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##### 



CERTIFICATIONS

I, Henry Linsert, Jr., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Martek Biosciences
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

Date: March 17, 2003

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

22



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##### 



I, Peter L. Buzy, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Martek Biosciences
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

Date: March 17, 2003

/s/ Peter L. Buzy
Peter L. Buzy
Chief Financial Officer

23