892025--12/29/2010--MARTEK_BIOSCIENCES

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A substantial portion of our nutritional ingredients sales is made to three of our existing customers under agreements with no minimum purchase requirements. If demand by these customers for our nutritional ingredients decreases, our revenues may materially decline. A substantial portion of our branded consumer health product sales is made to two of our existing customers under agreements with no minimum purchase requirements. If demand by these customers decreases, the revenues associated with this business may materially decline. We are aware of several products that are currently available, and products under development, that may present a serious competitive threat to our nutritional ingredients. If we are unable to maintain a competitive differentiation from these products, our revenues may be adversely affected. The competitive pressures we face in our branded consumer health products business could lead to reduced demand for our products which could negatively impact sales, gross profits and prospects. If we are unable to obtain or maintain patent protection or if our patents do not provide protection or we are unable to obtain comparable protection after patent expiration against competitive products, our results of operations may be adversely affected. Our business could be adversely affected if we are unable to maintain the value of our brands or successfully protect our intellectual property or defend claims of infringement by others. Current economic and market conditions could adversely affect our revenue and profitability. Our nutritional ingredients are very sensitive to oxidation and may not be very compatible with many liquid or dry foods that are currently on the market. If economical methods are not developed to successfully incorporate our nutritional ingredients into various food and beverage applications, we may never be able to gain large-scale entry of our nutritional ingredients into the food and beverage and nutritional supplements markets. If our non-infant formula nutritional ingredients customers do not introduce products containing our nutritional ingredients on a broad scale into the marketplace and consumers do not purchase such products, our sales to these markets will be limited. Because food and beverage pricing is very competitive, the premium that our nutritional ingredients adds to the cost of a food or beverage may never allow it to be priced at levels that will allow acceptance by consumers. Experts differ in their opinions on the importance of DHA and/or ARA in infant formula and the levels of DHA and/or ARA required to achieve health benefits for babies. Some experts feel that they are not necessary ingredients for infant development. If clinical trials do not continue to yield positive results, certain favorable regulatory guidelines are not enacted or current favorable regulatory guidelines are amended, our future nutritional ingredients revenues in the infant formula market may be limited. If clinical trials do not continue to yield positive results on the benefits of DHA on cognitive function, cardiovascular health or other health applications, our future nutritional ingredients revenues may be limited in the food and beverage and the dietary supplement markets. If clinical trials do not continue to yield positive results on the benefits of certain active ingredients included in our branded consumer health products, our revenues in this segment may be limited. If it is determined that large amounts of eicosapentaenoic acid ( EPA ) must accompany DHA in order to achieve optimal health benefits, we may never be able to gain large-scale entry of our nutritional ingredients into the food and beverage and dietary supplements markets. We maintain significant manufacturing capacity for our nutritional ingredients business and have incurred substantial costs in building it. If we are unable to increase our revenues from our nutritional ingredients produced at these facilities, we may continue to experience excess production capacity and we may be unable to recover these plant expansion costs, which could result in a write-down of certain production assets. We have a single third-party supplier of our ARA for our nutritional ingredients business with whom we have a contractual relationship. If this supplier of our ARA is unable to supply us with our required amounts of ARA, our results of operations may be adversely affected. We rely on third-party manufacturers and certain key raw material and energy suppliers for the production of our product portfolio. We hold inventory and are committed to significant future inventory purchases. If our inventory on-hand or committed amounts cannot be sold, our results of operations and/or financial position may be adversely affected. Our nutritional ingredients opportunity in the U.S. infant formula market , which represents approximately half of our total infant formula sales, may be limited by the renewal rate of supplemented formulas into the Women, Infants and Children program if the eligibility requirements for participating in the program are made more restrictive, if the amount of infant formula offered to participants is reduced, or if legislative changes result in the reduction or elimination of ingredients added to infant formula currently provided under the program. If our nutritional ingredients are unable to be used in organic food and beverage products, the opportunity for sales of our nutritional ingredients into the food and beverage market will be limited to non-organic products. If we are unable to gain or maintain broad regulatory approvals for the incorporation of our nutritional ingredients into foods and beverages worldwide, our future revenues in the food and beverage market may be limited. If the FDA finalizes its proposed rule to prohibit nutrient content claims for DHA and EPA, our penetration of the food and beverage and dietary supplements markets may be limited. If the FDA narrowly interprets certain sections of the Food and Drug Administration Amendments Act of 2007, such an interpretation could have a material adverse effect on our business and financial condition. If we or our customers fail to secure authorized health claims regarding our nutritional ingredients within the European Union, future revenues from sales within the European Union could be adversely affected. Changes to regulatory requirements to which our business is subject could have a material effect on our results of operations. Our business would be harmed if we fail to comply with applicable good manufacturing practices as required by the FDA. Our nutritional ingredients manufacturing process involves the handling of hazardous materials and emission of regulated pollutants. If we fail to properly handle these hazardous materials and/or emissions, substantial costs and harm to our business could result. Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable federal and state regulations. Our business exposes us to liabilities related to allegedly unsubstantiated product efficacy claims. Concerns with safety and quality could cause customers to avoid our products. Our business exposes us to potential product liability claims and recalls, which could adversely impact our financial condition and performance. The transactions contemplated by our Merger Agreement with may be delayed or may not be consummated. We may fail to realize the anticipated strategic and sales synergies expected from the Amerifit acquisition, which could adversely affect our operating results and the market price of our common stock. The Amerifit acquisition may not be accretive and may cause dilution to our earnings per share, which may harm the market price of our common stock. We must be successful in the retention, motivation and recruitment of key executives and employees following the Amerifit acquisition. Our branded consumer health products business within Amerifit has a material amount of value associated with customer relationships, goodwill and trademarks, which, if they become impaired would result in a reduction to our earnings. The Amerifit acquisition may expose us to significant unanticipated liabilities that could adversely affect our business and results of operations. If we pursue and ultimately consummate additional business combinations, we may not realize all of the anticipated benefits of such mergers. Our management certification and auditor attestation regarding the effectiveness of our internal control over financial reporting as of October 31, 2010 excluded the operations of Amerifit. If we are not able to integrate Amerifit s operations into our internal control over financial reporting, our internal control over financial reporting will not be effective. We may need additional capital in the future to continue our research and development efforts, to conduct product testing, including preclinical and clinical trials, and to market our products. We may also need additional capital to expand our production capacity if market demand for our products continues to grow. The market price of our common stock may experience a high level of volatility due to factors such as the volatility in the market for biotechnology stocks generally, and the short-term effect of a number of possible events. If significant shares eligible for future sales 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. Changes in foreign currency exchange rates or interest rates could reduce profitability.

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892025--12/29/2010--MARTEK_BIOSCIENCES_CORP