GLYKO BIOMEDICAL LTD, 10KSB, 1998-03-31

GLYKO BIOMEDICAL LTD
10KSB, 1998-03-31
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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U.S. Securities and Exchange Commission
Washington, D.C. 20549

Form 10-KSB
(Mark One)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December 31, 1997

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-21994

GLYKO BIOMEDICAL LTD.
(Exact name of small business issuer as specified in its charter)

Canada 68-0230537
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

11 Pimentel Court, Novato, California 94949
(Address of principal executive offices) Zip Code)

Registrant's telephone number: (415) 382-3500

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
(Title of Class)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III to the Form 10-KSB
or any amendment to this Form 10-KSB. ______

State issuer's revenues for its most recent fiscal year: $2,036,634.

The approximate aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of February 28, 1998 was
$26,068,815.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 21,930,057 common shares outstanding
as of February 28, 1998.

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GLYKO BIOMEDICAL LTD.

This report contains certain forward looking statements which involve
risks and uncertainties, including statements regarding the Company's
strategy, financial performance and revenue sources. The Company's
actual results could differ materially from the results anticipated in
these forward looking statements as a result of certain factors set
forth under "Risk Factors" and elsewhere in this report.

Item 1. Description of Business

Glyko Biomedical Ltd. was incorporated by Certificate and Articles of
Incorporation under the laws of Canada on June 26, 1992 ("Glyko" or the
"Company"). On December 21, 1992, simultaneously with an initial public offering
of the Company's Common Shares on The Toronto Stock Exchange, the Company
acquired 100 percent of the shares of Glyko, Inc. a corporation incorporated
under the laws of Delaware on October 15, 1990, upon an exchange of shares with
the stockholders of Glyko, Inc. The registered office of the Company is Scotia
Plaza, Suite 2100, 40 King Street West, Toronto, Canada M5H 3C2. The registered
and principal office of Glyko, Inc. is 11 Pimentel Court, Novato, California
94949. On October 25, 1996, the Company formed BioMarin Pharmaceutical, Inc.
("BioMarin"), a corporation incorporated under the laws of Delaware to develop
the Company's pharmaceutical products. BioMarin first issued stock on March 21,
1997, (inception) when it issued 1,500,000 shares of common stock to the Company
for $1.5 million. Beginning in October 1997, BioMarin raised capital from third
parties with the result that at December 31, 1997, the Company's ownership
interest in BioMarin had been reduced to 41 percent. In this Statement, unless
otherwise indicated, a reference to "Glyko" or to the "Company" means Glyko and
its wholly-owned subsidiary Glyko, Inc.

Glyko, Inc. was established in 1990 under a joint venture agreement, ("the Joint
Venture Agreement"), dated December 18, 1990 among Millipore Corporation
("Millipore"), Glycomed Incorporated ("Glycomed"), Gwynn R. Williams
("Williams"), and John C. Klock, M.D. (collectively, the "Founders"), Astroscan,
Ltd. and Astromed, Ltd., corporations controlled by Williams, and Glyko, Inc. to
conduct original scientific research aimed at developing novel analytic and
research instrumentation for carbohydrate research and for human medical
diagnosis. The Company's principal activities are the sale of chemical kits and
equipment incorporating its proprietary carbohydrate technology, the development
of commercial applications based on complex carbohydrates, and the development
of pharmaceutical products. The Company is developing new techniques to analyze
and manipulate carbohydrates for research and diagnostic purposes. The Company
may develop business opportunities in multiple areas such as research laboratory
instrumentation, human diagnostics, and the pharmaceutical industry. BioMarin
was formed to exploit opportunities in the pharmaceutical area. The Company's
scientific and business strategies are based on a product line of laboratory
instrumentation and chemical kits, referred to as analytic products, which are
used in carbohydrate testing including detection, separation, and sequencing.
The Company's technology is called "FACE(R)" or
Fluorophore-Assisted-Carbohydrate-Electrophoresis. There can be no assurance
that the Company will successfully develop any of such business opportunities.

The Company incurred research and development expenses of $606,000 and
$1,015,000 for the years ended December 31, 1997, and 1996, respectively.
Funding received from research grants and collaboration fees to fund research
and development expenses were $232,000 and $67,000 for the years ended December
31, 1997, and 1996, respectively.

As of December 31, 1997 the Company had 14 employees including two Ph.D.s/M.D.s
with specialized training in carbohydrate biotechnology.

Analytic Products

The Company manufactures integrated products for the analysis of carbohydrates.
The products consists of:

A series of kits with chemicals, enzymes, pre-cast gels, and standards for
performing analyses of carbohydrates. A cooled electrophoresis system for
performing high-quality analysis of the research sample.
A computer-controlled CCD camera system.
Copyrighted, proprietary software for image analysis and data
manipulation.

The Company believes the system has the advantages of low cost, ease of use,
high sensitivity and applicability to a broad range of carbohydrate materials
including genetically engineered products, pharmaceuticals and food and beverage
products. The Company began to market its products in 1994 directly and through
authorized distributors. The Company's customers include university research
laboratories, biotechnology companies and pharmaceutical companies.
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Diagnostic Products

Background

Currently, there are only a few carbohydrate-chemistry based diagnostics tests.
They include glucose monitoring for diabetics, certain blood typing tests and
the measurement of certain carbohydrates in the blood of persons with cancer.
The Company believes the development of carbohydrate diagnostic products has
been limited by the lack of appropriate analytical systems. The Company's
FACE(R) diagnostic technology should give clinicians the capability to detect
the presence of specific carbohydrate markers indicating certain disease states.

In November 1995, the Company received approval from the United States Food and
Drug Administration to market its diagnostic test for Lysosomal Storage
Diseases, the Urinary Carbohydrate Analysis Test Kit. The Company believes that
its technology has potential for further diagnostic applications. The Company
has successfully completed certain studies using human clinical samples which
are from several broad diagnostic categories: congenital and inborn metabolic
diseases, acquired metabolic diseases, and therapeutic drug monitoring. These
areas represent potential new diagnostic products.

The Company's efforts towards meeting these objectives may be limited by the
availability, or lack thereof, of additional funding. See "Risk Factors - Future
Capital Requirements - Uncertainty of Future Funding." Depending on available
funding, the Company may begin research in other key research areas, although
there is no assurance that it will be able to do so. There can be no assurance
that any of the Company's current or future products will be successfully
developed, prove to be effective in clinical trials, receive required regulatory
approvals or be successfully marketed. See "Risk Factors - Diagnostic
Products.".

Lysosomal Storage Diseases

Lysosomal Storage Diseases are a class of inherited metabolic diseases. There
are at least 25 different individual diseases, including Tay-Sachs disease,
Gaucher's disease and lesser known classes such as the mucopolysaccharidoses.
Currently, only a small fraction of patients are tested for these diseases,
usually those in high-risk groups (i.e. Ashkenazi Jews for Tay-Sachs disease) or
those with clinical symptoms such as physical deformity or mental retardation.
In November 1995, the Company received approval from the United States Food and
Drug Administration to market its Urinary Carbohydrate Analysis Test Kit. This
test is capable of detecting more than two dozen conditions in this group. The
Company markets the test kit to pediatricians as a primary screening test for
these conditions. The Company received an SBIR II Grant in the amount of
$279,866 for the period from June 1, 1997, to May 31, 1998 to develop a second
generation confirmatory test of individual enzyme defects. The Company plans to
have the second generation tests out to clinical evaluation sites later in 1998.
A third year SBIR II Grant in the amount of $290,234 for the period from June 1,
1998, to May 31, 1999, is currently in the approval process by the National
Institutes of Health.

Thrombosis

Heparin, a major anticoagulant drug, is a carbohydrate. The Company believes
there is currently no satisfactory direct analytic method for measuring heparin
which is approved for use. A test that would accurately measure serum levels of
heparin would enable physicians to more directly measure the effectiveness and
potential toxicity of this widely used drug. The Company has used its technology
to develop methods which could be used to measure the levels of heparin in the
blood of patients. In 1997, the Company entered into a development agreement
with Array Medical (Array) in which Array will fund the development of a
point-of-care test system which includes an instrument platform and reagents and
the Company will provide its expertise in heparin assay development. Array will
market the device on a world-wide basis for use during surgical and medical
procedures including open heart surgery, coronary and vascular angioplasty,
kidney dialysis and critical care. The Company's collaboration with Array must
be followed by additional clinical studies before FDA approval can be sought.
There is no assurance that such testing studies will be successful.

Osteoporosis

A test that would accurately measure the breakdown of bone would enable
physicians to more directly measure the metabolic state of patients as well as
the effectiveness of treatments. Glyko has used FACE(R) to develop a way to
measure the levels of carbohydrates in the urine of patients with osteoporosis.
Preliminary work shows that FACE(R)can reliably measure these carbohydrates
which appear in a characteristic pattern in urine tests. A non X-ray test that
could measure the rate of breakdown and build-up of bone would be a major step
forward in the management of these patients. The Company feels that on the basis
of its current studies that there is enough promise to continue with further
studies. Such studies will require funding and the Company may seek a partner to
share the cost of such studies. There is no assurance that such testing studies
will be successful.
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Pharmaceutical Products

Through its partially owned subsidiary, BioMarin, the Company is currently
developing pharmaceutical products through research grants with various
universities. BioMarin has initiated definitive trials of its lead enzyme
replacement product for Mucopolysaccharidosis (MPS) I, a crippling and fatal
disease that affects young children. A Phase I pivotal trial is being conducted
under a Company Investigational New Drug (IND) application which will encompass
10 patients with intermediate severity of MPS I. BioMarin received orphan drug
designation for its enzyme replacement therapy in September 1997, allowing
BioMarin to market the product exclusively for seven years following Food and
Drug Administration clearance. BioMarin focuses on the development of products
in five therapeutic areas: genetic diseases, fungal infections, burn and wound
care, male pro-fertility compounds and psoriasis. Such studies will require
funding and BioMarin plans on raising additional cash to fund these projects.
There is no assurance that such funds will be available nor that such testing
studies will be successful.

Patents and Trade Secrets

The Company has or has licensed a number of issued patents covering its core
technologies as well as a number of pending patent applications in the field.
Twenty of the Company's patents have been granted in the U.S., U.K. and the
European Common Market. The Company's success will depend in part on its ability
to obtain patents, protect trade secrets and not infringe the patents of others.
The Company has been issued patents as well as filed applications for U.S. and
foreign patents and has exclusive licenses to patents or patent applications of
others. The Company intends in the future to apply for patents in various
jurisdictions for inventions forming part of its technology. No assurance can be
given that patent applications will result in the issue of patents or that, if
issued, patents obtained by the Company will confer on the Company a preferred
position with respect to the technology or products claimed.

Competition

Carbohydrate biotechnology is a rapidly evolving field. Future technological
developments could result in the Company's potential products or services
becoming obsolete before the Company recovers its research and development and
capital expenditures. The Company will experience competition both from analytic
instrument companies as well as from diagnostic or pharmaceutical companies
which have other methods to analyze carbohydrates. The Company's diagnostic
products may face competition from major diagnostic companies which are large
medical and pharmaceutical companies. These companies have substantially greater
financial, manufacturing, marketing, and technical resources than the Company.
The Company believes that the relative speed with which others can develop
products, complete clinical testing and regulatory approval processes and supply
commercial quantities to the market will be important competitive factors. There
can be no assurance that others will not independently develop products similar
to the Company's, duplicate the Company's products or design around the
Company's patents. In addition the Company may be required to obtain licenses to
others' patents. No assurance can be given that such licenses can be obtained on
terms acceptable to the Company. These factors could cause the Company to
encounter delays in product market introductions or adversely affect the
Company's development or sale of products requiring licenses from third parties.
The Company's products and technologies could be subject to claims of
infringement by others. Patent conflicts and litigation can be expensive, and
could have a material adverse effect on the Company's financial position and
results of operations.

Government Regulation

The manufacture and sale of research products do not require government approval
in the United States or Canada. The manufacture and sale of medical diagnostic
products in the United States are controlled by the Food and Drug Administration
("FDA"), and the manufacture and sale of analytic products in Canada are
controlled by the Health Protection Branch ("HPB"). The laws of each country
require the licensing of manufacturing facilities located in its jurisdiction,
carefully controlled clinical trials in humans and extensive testing of
products. The manufacturer must establish the safety and efficacy of its
products, good manufacturing practices and control over marketing activities
before it will be allowed to market and sell its products. The safety and
efficacy of a new diagnostic product must be demonstrated through clinical
trials carried out under procedures acceptable to the FDA or the HPB, as the
case may be.In order to be able to market and sell its diagnostic products, the
Company must successfully complete clinical trials. The sales program is
initiated by applying to the FDA or the HPB, as the case may be, for permission
to manufacture and market products. The Company must submit specific information
on the results of carefully controlled clinical trials using blood or other
specimens obtained from humans. In addition, manufacturing methods and
standards, and the stability of the product components must be presented to
enable the regulatory agency to conclude that the product that may eventually be
sold to the public has the same composition and performance as that determined
to be effective in clinical trials. The controls on a new diagnostic product do
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not cease once it is on the market and continued reporting of its performance
must be submitted by the manufacturer to the FDA or the HPB, as the case may be.
This is required to keep the product on the market. The Company is unable to
predict whether future regulatory developments will affect the Company's
products under development.

<PAGE>

RISK FACTORS

Future Capital Requirements - Uncertainty of Future Funding

Since its inception, the Company has incurred cumulative losses of $14,990,000
and expects to continue to incur losses during 1998 due to the ongoing research
and development of pharmaceutical products by BioMarin. Management believes that
Glyko, Inc. has sufficient cash to sustain planned operations through the end of
1998 due to increased revenues and decreased expenditures. Management also
believes that BioMarin has sufficient cash to sustain planned operations through
the end of 1998 due to additional capital raised from outside shareholders at
the end of 1997. In order to continue operations beyond 1998, Glyko, Inc. and
BioMarin would need to obtain additional funding in the form of stock issuances,
licensing and marketing agreements and/or collaborative research agreements with
strategic partners. If adequate funding is not obtained, long-term operations
may be adversely affected. Glyko, Inc. and BioMarin will delay or eliminate
expenditures in respect of certain products under development such as additional
analytical kits, diagnostic testing equipment and pharmaceutical products in the
event sufficient funding is unavailable. In December 1992, the Company
successfully completed an initial public offering on the Toronto Stock Exchange.
Since that time, the Company has maintained liquidity by utilizing the proceeds
of that offering, by utilizing the proceeds of private equity placements in the
second quarter of 1995, the second quarter of 1996, and the first quarter of
1997, and by using cash flow from operations from Glyko, Inc. BioMarin has
maintained liquidity by utilizing proceeds from three private equity placements
during 1997. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital Resources".

History of Operating Losses - Uncertainty of Future Profitability

The Company commenced its research activities in December 1990 and first
recorded revenues in December 1992. While revenues increased in 1996 and 1997,
the Company's research products and diagnostics business has made a net annual
operating profit only in the current year. However, the Company's pro rata share
of BioMarin's net loss resulted in the Company reporting a net loss of
$2,056,000 for the year. There is no assurance that sales will increase in
future years and with the continuing research and development expenses incurred
by BioMarin, the Company anticipates net losses may continue. The accumulated
deficit as of December 31, 1997, was approximately $15.0 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Diagnostic Products - No Prior Commercial Manufacturing or Marketing

In 1996 the Company began marketing its first diagnostic product, the Urinary
Carbohydrate Analysis Kit. In order to manufacture its diagnostic products in
commercial quantities and to market products effectively, the Company will need
to expand its production and marketing efforts and/or establish arrangements
with third parties having the capacity for such manufacturing or marketing.
Anticipated operating revenues and cash resources will not be sufficient to
expand manufacturing and increase marketing efforts for diagnostic products
currently under development. There can be no assurance that the Company will be
able to successfully market or manufacture its diagnostic products. To the
extent that the Company arranges with third parties to manufacture or market any
diagnostic products, the commercial success of such products may depend upon the
efforts of those third parties. See "Description of Business--Business of the
Company."

Early Stage of Diagnostic Product Development

Only one of the Company's diagnostic products has been approved for commercial
sale, the Urinary Carbohydrate Analysis Kit. See "Diagnostic Products -
Lysosomal Storage Diseases". Potential products currently under development by
the Company will require significant additional development, and some must
undergo several phases of clinical testing and will likely require significant
further investment prior to their final commercialization. See "Government
Regulation." Anticipated operating revenues and cash resources will not be
sufficient to facilitate significant further development of diagnostic products.
There can be no assurance that any of the Company's products under development,
either now or in the future, will be successfully developed, prove to be
effective in clinical trials, receive required regulatory approvals, be capable
of being produced in commercial quantities at reasonable costs, or be
successfully marketed. See "Description of Business-Business of the Company."

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Technology and Competition

The primary competitive factors in biotechnology are the ability to create and
maintain scientifically advanced technology, to attract and maintain personnel,
and to have available adequate financial resources to maintain the Company
through its research, development and commercialization of technology stages.
The technology on which the Company's business is based uses proven laboratory
methods of electrophoresis and bioseparation. Nevertheless there is a technical
risk associated with reducing-to-practice the basic technology for new
applications. There is no assurance that the Company will be able to develop an
economical or practical way to separate human materials for clinical diagnosis,
or that it will be able to devise specific reagents required to obtain a needed
reaction. Other companies may develop basic carbohydrate technology which
directly competes for the carbohydrate diagnostic market. Furthermore,
conventional diagnostic technology (such as enzyme or radioactive immunoassay)
may accomplish new breakthroughs in analyzing carbohydrates (which so far has
been difficult). Additionally, other newer technologies such as nucleic acid
hybridization may become competitive and erode the Company's potential shares of
diagnostic markets.

Competition in bioinstrumentation is intense. Many companies, universities, and
research organizations are engaged in the research and development of products
in the areas being developed by the Company. Many of these have financial,
technical, manufacturing and marketing resources greater than those of the
Company. Several major research instrument companies have undertaken recently to
establish capabilities in carbohydrate technology and may apply such technology
for essentially the same purpose as the Company. As a result, carbohydrate
technology will become an area of more intense competition. In order to compete
successfully the Company must expand its efforts to develop new products and
uses for its current products in research and diagnosis. There can be no
assurance that the Company will be able to do so effectively.

In 1997, revenues (including licensing and technology fees) from three major
customers were 29 percent, 14 percent and 8 percent of total revenues.

Patents and Proprietary Technology

The Company's success will depend in part on its ability to obtain patents,
protect trade secrets and not infringe the patents of others. The Company has
been issued patents as well as filed applications for U.S. and foreign patents
and has exclusive licenses to patents or patent applications of others. The
Company intends in the future to apply for patents in various jurisdictions for
inventions forming part of its technology. No assurance can be given that patent
applications will result in the issue of patents or that, if issued, patents
obtained by the Company will confer on the Company a preferred position with
respect to the technology or products claimed. See "Description of
Business--Patents and Trade Secrets."

There can be no assurance that others will not independently develop products
similar to the Company's, duplicate the Company's products or design around the
Company's patents. In addition the Company may be required to obtain licenses to
others' patents. No assurance can be given that such licenses can be obtained on
terms acceptable to the Company. These factors could cause the Company to
encounter delays in product market introductions or adversely affect the
Company's development or sale of products requiring licenses from third parties.
The Company's products and technologies could be subject to claims of
infringement by others. Patent conflicts and litigation can be expensive, and
could have a material adverse effect on the Company's results of operations.

Product Liability and Lack of Insurance

The Company is subject to the risk of exposure to product liability claims in
the event that the use of its technology results in adverse effects during
testing or commercial sale. The Company currently does not maintain product
liability insurance. There can be no assurance that the Company will be able to
obtain product liability insurance coverage at economically reasonable rates, or
that such insurance will provide adequate coverage against all possible claims.

Uncertainty of Regulatory Approval

The Company's diagnostics products will require regulatory approval by
government agencies. This includes pre-clinical and clinical testing and
approval processes in the U.S. and other countries. Compliance can take several
years and require substantial expenditures. There can be no assurance that
difficulties or excessive costs will not be encountered by the Company in this
process or that required approvals will be obtained. The Company will not be
able to market its diagnostic products until required approvals have been
obtained. See "Description of Business-Government Regulation" and "Description
of Business-Diagnostic Products-Lysosomal Storage Diseases."

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Dependence on Key Personnel

The Company's success will depend in large part upon its ability to attract and
retain highly qualified scientific and management personnel. The Company faces
competition for such personnel from other companies, academic institutions,
government entities and other organizations. The Company depends on its key
management, including John Klock and Christopher Starr, and the departure of
either person could have a material adverse effect on the Company. Pursuant to
employment contract signed effective July 1, 1997, 30% of Dr. Klock's and Dr.
Starr's time will be committed to Glyko, Inc. and 70% will be committed to
BioMarin.

Employees

At February 28, 1998 the Company had 14 employees. Thirteen employees are full
time and 13 employees work in Novato, California.

Item 2. Description of Property

The Company moved to an 11,000 square foot facility in Novato, California in
February, 1997. The new facility includes approximately 3,000 square feet of
laboratory space, a 2,000 square foot manufacturing facility, and 6,000 square
feet of office space. Minimum lease payments for this facility in 1998 are
$109,000 and are subject to annual increases based upon the Consumer Price
Index. The terms of the lease extend through March 31, 2000. The Company
believes that its facility is adequate to meet its current and reasonably
foreseeable requirements for the conduct of its business, including the
manufacturing of analytic products. See "Certain Relationships and Related
Transactions" and "Legal Proceedings."

Item 3. Legal Proceedings

In April, 1997, Millipore Corporation filed suit in the Marin County Superior
Court against the Company to recover unpaid rent and related facilities charges
of approximately $366,000 for the Company's former leased facility plus an
additional $90,000 for alleged equipment and property damage resulting from the
abandonment of the premises. Additionally, the Company has a counter claim for
$300,000 representing sales royalties due from the lessor to the Company plus
the cost of building repairs paid by the Company on behalf of the lessor. The
Company's management is currently negotiating a settlement of this legal action.
To the best of the Company's knowledge, there were no other pending legal
proceedings against the Company or its property. While the Company does not
believe that the lessor's claim is valid and does not agree with the amount
claimed by the lessor, the amount of $365,880 has been accrued and is reflected
on the balance sheet at December 31, 1997. While the original lease agreement
extends through December 31, 1998, management does not believe the Company will
be held responsible for continuing lease obligations and, as such, no additional
amounts have been accrued beyond January 1997. The facility has been
subsequently leased.

Item 4. Submission of Matters to a Vote of Security-Holders. None

<PAGE>

PART II

Item 5. Market For Common Equity and Related Stockholder Matters

As of November 1993, the Company's stock has been listed on the OTC Bulletin
Board under the symbol "GLYK". The Company's Common Shares have been listed and
traded on The Toronto Stock Exchange (TSE) since December, 1992 under the symbol
"GBL." The following table sets forth the sales prices for the Common Shares for
the periods noted, as reported by TSE. Price of the Common Share refers to the
closing price on the TSE.

Prices
(In Canadian
Dollars)*
Year Period High Low

1996 First Quarter $1.65 $0.61
1996 Second Quarter $1.05 $0.55
1996 Third Quarter $0.80 $0.53
1996 Fourth Quarter $0.70 $0.40
1997 First Quarter $0.70 $0.40
1997 Second Quarter $0.96 $0.60
1997 Third Quarter $1.05 $0.65
1997 Fourth Quarter $1.40 $0.75

*As of December 31, 1997, the Canadian dollar to U.S. dollar exchange
rate was $0.7215.

Holders

As of February 28, 1998, there were 179 holders of record of 21,930,057
outstanding Common Shares of the Company.

Outstanding Options

As of February 28, 1998, options to acquire 2,459,261 of the Company's Common
Shares had been granted and were outstanding.

Outstanding Warrants

As of February 28, 1998, warrants to acquire 10,923,422 of the Company's Common
Shares were outstanding.

Certain Canadian Federal Income Tax Considerations

The following is a summary of the principal Canadian federal income tax
considerations generally applicable to a person (a "United States holder") who,
for the purposes of the Income Tax Act (Canada) (the "Canadian Tax Act") and the
Convention between Canada and the United States with respect to Taxes on Income
and Capital (the "Convention") and at all relevant times, is resident in the
United States and not resident in Canada, deals at arm's length with the
Company, holds Common Shares as capital property and does not use or hold and is
not deemed to use or hold the Common Shares in carrying on business in Canada.
Special rules, which are not discussed in this summary, may apply to a United
States holder that is an insurer that carries on an insurance business in Canada
and elsewhere.

This summary is based on the current provisions of the Convention and of the
Canadian Tax Act and the regulations thereunder, all specific proposals to amend
the Canadian Tax Act and the regulations announced by the Minister of Finance
(Canada) prior to the date hereof (the "Proposed Amendments") and the published
administrative practices of Revenue Canada, Taxation. This summary assumes the
Proposed Amendments will be enacted in the form currently proposed. This summary
does not take into account or anticipate any changes in the governing law, other
than the Proposed Amendments, whether by federal, governmental or legislative
decision or action, nor does it take into account the tax legislation or
considerations of any province, territory or foreign jurisdiction.
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This summary is of a general nature only and is not, and should not be
interpreted as, legal or tax advice to any particular United States holder and
no representation is made with respect to the Canadian income tax consequences
to any particular person. Accordingly, United States holders are advised to
consult their own tax advisors with respect to their particular circumstances.

Under the Canadian Tax Act and pursuant to the Convention, Canadian withholding
tax will apply to dividends on Common Shares paid or deemed to be paid to a
United States holder at the rate of 15 percent of the gross amount of such
dividends, or, in the case of a United States holder that is a corporation which
owns at least 10 percent of the voting stock of the company, six percent of the
gross amount of such dividends paid in 1996 and five percent of the gross
dividends paid thereafter.

In general, a United States holder will not be subject to Canadian income tax on
capital gains arising on the disposition of Common Shares unless (i) at any time
in the five-year period immediately preceding the disposition, 25 percent or
more of the issued shares of any class or series of the Company belonged to the
United States holder, to persons with whom the United States holder did not deal
at arm's length, or to the United States holder and persons with whom he did not
deal at arm's length, and (ii) the value of the Common Shares at the time of the
disposition is derived principally from real property (as defined in the
Convention) situated in Canada.

A disposition of Common Shares to the Company (unless the Company acquires the
shares in the open market in the manner in which shares would normally be
purchased by any member of the public) will result in a deemed dividend to the
United States holder equal to the amount by which the consideration paid by the
Company to acquire the Common Shares exceeds the paid-up capital of such shares
for purposes of the Canadian Tax Act. The amount of such deemed dividend will be
subject to the withholding tax described above.

Dividend Policy

The Company does not anticipate the payment of dividends in the foreseeable
future. At present, the Company's policy is to retain earnings, if any, to
finance the development of its business. The payment of dividends in the future
will depend upon, among other factors, the Company's earnings, capital
requirements and operating and financial condition.

Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Overview

The following discussion and analysis of financial condition and results of
operations contains certain forward looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from the
results anticipated in these forward looking statements.

Glyko Biomedical Ltd. is a Canadian holding company that owns all of the capital
stock of Glyko, Inc. and 41% of the capital stock of BioMarin Pharmaceutical,
Inc. at December 31, 1997. In this Statement, unless otherwise indicated, as
reference to "Glyko" or to the "Company" means Glyko and its wholly-owned
subsidiary Glyko, Inc. Glyko, Inc. and BioMarin Pharmaceutical, Inc. (BioMarin)
are operating companies based in California. The following discussion and the
accompanying consolidated financial statements include the accounts of Glyko
Biomedical Ltd. and Glyko, Inc. presented on a consolidated basis plus BioMarin
presented on the equity method of accounting . Numerical references in the
following discussion are rounded to the nearest thousand. Since its inception in
October 1990, the Company has engaged in research and development of new
techniques to analyze and manipulate carbohydrates for research, diagnostic and
pharmaceutical purposes. The Company has developed a line of analytic
instrumentation laboratory products that include an imaging system, analysis
software and chemical analysis kits. The Company is continuing to develop
additional chemical kits for use with the imaging system, and is also developing
a line of carbohydrate diagnostic products. In March 1997, the Company raised
Cdn.$2.0 million (USD$1.4 million) to fund the start-up of BioMarin which was
formed to develop the Company's pharmaceutical products. Although Glyko, Inc.
(the Company's research products and diagnostics business) has recorded its
first year of annual net operating profit in the amount of $385,000 for 1997,
the Company's pro rata share of BioMarin's net loss resulted in the Company
reporting a net loss of $2,056,000 for the year. There is no assurance that
sales will increase in future years and with the continuing research and
development expenses incurred by BioMarin, the Company anticipates net losses
may continue at least through 1998. For the period from its inception to
December 31, 1997, the Company has incurred cumulative losses of $14,990,000.

In October 1997, BioMarin raised net proceeds of $3,647,000 (including $880,000
of bridge loans received in the third quarter of 1997 which were converted to
common stock) from outside investors in exchange for 4,039,000 shares (including
9

<PAGE>

shares issued to the placement agent for the financing). Concurrently, BioMarin
issued 2,500,000 shares of Common Stock to three executive officers of BioMarin,
two of whom are also executive officers of Glyko Biomedical Ltd. for an
aggregate of $2,500,000 in notes due on July 31, 2000. In December 1997,
BioMarin raised net proceeds of $5,016,000 from outside investors in exchange
for 5,527,500 shares (including shares issued to the placement agent for the
financing). As a result of such share issuances, Glyko Biomedical Ltd.'s
ownership in BioMarin was reduced to 41% of BioMarin's outstanding Common Stock.
Future fundraising efforts of BioMarin could result in a further reduction of
Glyko Biomedical Ltd.'s ownership percentage.

BioMarin and Glyko Biomedical Ltd. have entered into a License Agreement dated
June 26, 1997, pursuant to which Glyko Biomedical Ltd. granted BioMarin an
exclusive, worldwide, perpetual, irrevocable, royalty-free right and license to
all current and future worldwide patents, trade secrets, copyrights and other
proprietary rights to all know-how, processes, formulae, concepts, data and
other such intellectual property, whether patented or not, owned or licensed by
Glyko Biomedical Ltd. and its subsidiaries as of the date of the License
Agreement. Under the same License Agreement, BioMarin granted Glyko Biomedical
Ltd. a cross-license, similar in scope, to all improvements BioMarin may make
upon the licensed intellectual property. As consideration for this license,
BioMarin issued Glyko Biomedical Ltd. 7,000,000 shares of BioMarin common stock.

Results of Operations

Revenues in 1997 were $2,037,000 and consisted of sales of products and services
of $1,176,000 and other revenues representing development, technology and
licensing fees of $704,000 and grant revenues of $157,000. Sales of products and
services consisted of sales of chemical analysis kits, fees for custom analytic
services and sales of imaging systems. Revenues in 1996 were $1,331,000 and
consisted of sales of products and services of $1,272,000 and other revenues
(primarily grant fees and equipment rental revenues) of $59,000. The decline in
product revenues in 1997 was due principally to the relocation of the Company's
California facilities in February which caused approximately eight weeks of
delays in fulfilling orders. The increase in other revenues was due to new or
revised development, technology and licensing agreements negotiated in 1997.

Gross margin on sales of products and services was 59 percent in 1997 and 60
percent in 1996. As the Company is still in the early stages of product sales
and production, management expects that margins will fluctuate for some time and
that current margins are not necessarily indicative of future margins.

Research and development expenses in 1997 were $606,000 compared to $1,015,000
in 1996, a decrease of $409,000. The decrease is due to the shifting of lab
personnel in 1997 to BioMarin's payroll including the reduction of salary
allocated to Glyko, Inc. for Dr.Christopher Starr,Vice President of Research and
Development, whose time allocated to Glyko, Inc. went from 100% in 1996 to 30%
in 1997. One other full-time Ph.D. was shifted 100% to BioMarin in 1997. Also,
in October 1996, the Company effected lay-offs in an effort to reduce
expenditures, which included one full-time lab technician.

Selling, general and administrative expense was $563,000 in 1997, a decrease of
$862,000 from 1996 expense of $1,425,000. Marketing and promotional expenses
were lower in 1997 due to the cut-back of two full-time marketing positions in
the October 1996 layoffs. General and administrative expenses were reduced due
to the reduction of rent expense resulting from the Company's relocation to a
smaller facility in 1997 and due to the sublease rental income from BioMarin in
1997. Rent expense in 1996 was offset by a write-off of the deferred rent
balance of $62,538 at December 31, 1996 related to a lease abandonment (see Note
6 of the financial statements). General and administrative expenses were also
reduced due to the cut-back of administrative staff in October 1996 plus the
reduction of salary allocated to Glyko, Inc. for Dr. John Klock, President,
whose time allocated to Glyko, Inc. went from 100% in 1996 to 30% in 1997.

Interest income earned in 1997 and 1996 reflected earnings on cash invested in
short term interest bearing accounts. Interest expense in 1997 and 1996 was
immaterial.

Liquidity and Capital Resources

During the second quarter of 1996, the Company closed a second private equity
placement offering (the Q296 Financing). Investors participating in the Q296
Financing purchased 2.5 million units each consisting of one share of common
stock and one half of a two year warrant. One warrant is required to purchase
one share of common stock. The units were priced at Cdn.$0.60 with an exercise
price on the warrant of Cdn.$0.80. The Q296 Financing raised approximately
$1.077 million. An additional 175,000 units and 250,000 warrants valued together
at approximately $130,000 were distributed to brokers in exchange for services
rendered in connection with the Q296 Financing. The Company utilized the
Black-Scholes model to value all the warrants issued in the Q296 Financing at
approximately $156,000.
10

<PAGE>

In October 1997, BioMarin sold 3,740,000 shares of common stock for net proceeds
of $3,647,000 (including $880,000 of bridge loans received in the third quarter
of 1997 which were converted to common stock). Additionally, BioMarin issued
299,000 common shares and 299,000 warrants to purchase common shares exercisable
at $1.00 per share and valued under the Black Scholes model at $48,000.
Concurrently, BioMarin issued 2,500,000 shares of Common Stock to three
executive officers of BioMarin, two of whom are also executive officers of Glyko
Biomedical Ltd. for an aggregate of $2,500,000 in notes due on July 31, 2000.

In December 1997, BioMarin raised net proceeds of $5,016,000 from outside
investors in exchange for 5,527,500 shares (including 502,500 shares issued to
the placement agent for the financing). Additionally, BioMarin issued to the
placement agent 502,500 warrants to purchase common shares exercisable at $1.00
per share and valued under the Black Scholes model at $80,000. As a result of
such share issuances, Glyko Biomedical Ltd.'s ownership in BioMarin was reduced
to 41% of BioMarin's outstanding Common Stock. Future fundraising efforts of
BioMarin could result in a further reduction of Glyko Biomedical Ltd.'s
ownership percentage.

The Company's net cash position increased by $317,000 in 1997. Net cash proceeds
from the Q197 Financing of $1,424,000 and net cash provided by operating
activities of $441,000 were offset by the Company's cash investment in BioMarin
of $1,500,000 and purchases of property and equipment of $71,000.

The Company's net cash position decreased by $410,000 in 1996. Net cash proceeds
of $1.054 million from the Q296 Financing were offset by cash used in operating
activities of $1,389,000. Cash used in operating activities in 1996 reflected
the operating loss of $1,576,000 partially offset by collections of accounts
receivable and deferral of payments for facilities costs.

Since its inception, the Company has incurred cumulative
losses of $14,990,000 and expects to continue to incur losses during 1998 due to
the ongoing research and development of pharmaceutical products by BioMarin.
Management believes that Glyko, Inc. has sufficient cash to sustain planned
operations through the end of 1998 due to increased revenues and decreased
expenditures. Management also believes that BioMarin has sufficient cash to
sustain planned operations through the end of 1998 due to additional capital
raised from outside shareholders at the end of 1997. To maintain liquidity
beyond the end of 1998, BioMarin will have to raise additional capital, reduce
expenses considerably, generate significant revenues, or realize some
combination of the above. To maintain liquidity beyond the end of 1998, Glyko,
Inc. will have to reduce expenses considerably, increase sales significantly, or
realize some combination of the above. There can be no assurance that BioMarin
nor Glyko, Inc. will be successful in maintaining liquidity. Management may
consider selling certain assets or technology rights to raise additional
capital. The Company will continue to seek additional funding through various
means including but not limited to stock issuances, licensing and marketing
agreements and collaborative research agreements with strategic partners.
However, there can be no assurance that such agreements will be reached and that
additional funding will be obtained. See "Risk Factors - Future Capital
Requirements."

The Company is currently reviewing its computer systems in
order to evaluate necessary modifications for the year 2000. The Company does
not currently anticipate that it will incur material expenditures to complete
any such modifications.

Item 7. Financial Statements
The information required to be filed in this item appears on pages F.2 to F.25
and is incorporated herein by reference.

Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.

Not applicable.

<PAGE>

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons

Directors and Executive Officers

The directors and executive officers of the company are as follows:

<TABLE>
<CAPTION>
Year Joined
Name Age Position Company

<S> > <C> <C> <C>
R. William Anderson(1)(2) 56 Director 1992
John H. Craig 50 Secretary and Director 1992
John S. Glass 61 Director 1994
John C. Klock, M.D. (1) 53 President, Chief Executive Officer and 1990
Director
Christopher M. Starr, Ph.D. 45 Vice-President, Research and Development 1991
Gwynn R. Williams(1)(2) 64 Director 1990
Mark I. Young 42 Assistant Secretary and Director 1997

<FN>
(1) Member of Audit Committee
(2) Member of Compensation Committee
</FN>
</TABLE>

All directors hold office until the next annual meeting of stockholders or until
their successors are elected and qualified. Officers are appointed by the Board
of Directors and serve at the discretion of the Board. There are no family
relationships among the officers and directors of the Company.

Mr. R. William Anderson has served as a Director since 1992. Since 1997, he has
been Vice President, Finance and Chief Financial Officer at Fusion Medical
Technologies, Inc., a surgical sealant company. He held the same position at
Fidus Medical Technology, Inc., a developer of microwave cardiac ablation
equipment from 1996 to 1997. From 1994 to 1996 Mr. Anderson was a Director at
Recombinant Capital, a consulting firm specializing in strategic alliances in
the biotechnology industry. From 1989 to 1994 he served as Vice-President
Finance and Chief Financial Officer at Glycomed Incorporated, a therapeutic
pharmaceutical company based on complex carbohydrates. Mr. Anderson also held
financial positions as chief financial officer at Chiron Corporation and as
controller and as director of financial planning and analysis at Syntex
Laboratories. Mr. Anderson holds an MBA from the Harvard Business School.

Mr. John H. Craig has served as a Director and Secretary of the Corporation
since 1992 and has been a solicitor and partner with Cassels Brock and
Blackwell and previously with Holden Day Wilson, Toronto law firms, since 1973.
Mr. Craig is a director of a number of public companies listed on the
oronto Stock Exchange.

Mr. John S. Glass has served as a Director since August 1994 and is Vice
President and Chief Financial Officer of Milkhaus Laboratory, Inc., a
clinical stage biopharmaceutical company. In 1995 he was an independent
consultant. From 1968 to 1994 he served in various capacities at Millipore
Corporation, most recently as Director of Investor Relations and Vice
President of Millicorp, a venture capital subsidiary. Previously Mr. Glass
was a research and development manager at Polaroid Corporation. Mr. Glass
holds a Masters degree in management from the Massachusetts Institute of
Technology.

Dr. John C. Klock was formerly an academic physician and carbohydrate researcher
at the University of California at San Francisco (1976-1981), Scientific
Director of the Institute of Cancer Research of California Pacific Medical
Center in San Francisco (1982-1986), a research director at Murex Corporation, a
diagnostic pharmaceutical company (1985-1986) and the scientific founder of
Glycomed Incorporated, a therapeutic company based on complex carbohydrate
technology (1986-1990).

Dr. Christopher M. Starr has been Vice President-Research and Development of the
Company since 1991. He received his Ph.D. in Biochemistry from the State
University of New York, Upstate Medical Center (Syracuse) and did post-doctoral
work at the National Institutes of Health (1987-1991). He is a carbohydrate
biochemist and molecular biologist.
12

<PAGE>

Mr. Gwynn R. Williams is a founder of Glyko (established 1990). He was also
founder and owner of Astromed and Astroscan, UK manufacturers of scientific
equipment established in 1984, which are now both merged into Life Science
Research Ltd., a UK company. Mr. Williams was a partner in Arthur Andersen &
Co., (1971-1982). Previously he was a mathematician with General Motors Research
in Detroit (1961-1970) and with British Steel (1958-1960).

Mr. Mark I. Young has served a Director of the Corporation since March, 1997
and has been the Assistant Secretary of the Corporation since 1992. Mr. Young
is a solicitor and partner with Cassels Brock and Blackwell practicing in the
areas of corporate commercial and securities law. Mr. Young is an officer or
director of a number of public companies listed on The Toronto Stock Exchange.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's officers and directors,
as well as persons who own ten percent or more of a registered class of the
Company's equity securities, to file with the SEC initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company Officers, directors and ten percent or more stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.

To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company or written representations that no other reports were
required, during the fiscal year ended December 31, 1997, all officers,
directors, and ten percent stockholders complied with all Section 16(a) filing
requirements except that the Forms 5 for all officers, directors, and 10 percent
stockholders were filed late.

Item 10. Executive Compensation

Summary Compensation Table

The following table sets forth the total compensation that was awarded to,
earned by or paid to the Company's Chief Executive Officer and the other most
highly compensated officers other than the Chief Executive Officer who earned
more than $100,000 and who were serving as executive officers as of the end of
the fiscal years ended December 31, 1997 and 1996, (together, "the Named
Officers"). No other executive officer of the Company earned more than $100,000
during the years ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation

Name and Principal Position Year Salary Option grants

<S> <C> <C> <C>
John C. Klock, M.D. 1997 $ 244,140 64,740
President, Chief Executive Officer & Director 1996 $ 187,297 -

Christopher M. Starr, Ph.D. 1997 $ 149,666 40,350
Vice-President, Research and Development 1996 $ 126,528 -
</TABLE>

<TABLE>
Option/SAR Grants In Last Fiscal Year

<CAPTION>
% of Total
Options
Name and Principal # of Granted to Exercise
Position Options Employees in Price of Expiration Date of
Granted 1997 Options Options
<S> <C> <C> <C> <C>
John C. Klock, M.D.
President, Chief Executive Officer & Director 64,740 27% Cdn$0.65 December 31, 2001

Christopher M. Starr, Ph.D.
Vice-President, Research and Development 40,350 17% Cdn$0.65 December 31, 2001
</TABLE>

<PAGE>

Aggregated Fiscal Year End Option Values

There were no option exercises in fiscal 1997 by the Named Officers. The
following table provides information with respect to the value of unexercised
options held by the Named Officers at the close of business on December 31,
1997. <TABLE>

<CAPTION>
Number of Number of Value of Value of
Unexercised Unexercised Unexercised Options Unexercised Options
Options at Fiscal Options at at Fiscal Year End, at Fiscal Year End,
Year End, Fiscal Year End, Exercisable (1) Unexercisable (1)
Exercisable Unexercisable

<S> <C> <C> <C> <C>
John C. Klock, M.D. 675,288 10,536 $ 87,971 $ 86,071
Christopher M. Starr, Ph.D. 278,259 166 $ 73,484 $ 73,454

<FN>
(1) The market value of underlying securities is based on the closing price of
the Company's common shares on December 31, 1997 of $0.9019 minus the exercise
price. The closing price of $0.9019 was calculated by applying a Canadian
dollar/US dollar exchange rate of $0.7215 to the closing price at December 31,
1997 of Canadian $ 1.25. </FN> </TABLE>

Director Compensation

During the fiscal year ended December 31, 1997, the Company's directors,
including non-employee directors, were granted stock options in lieu of
compensation for services provided as directors for 1997 and 1996.

Employment Agreement

In connection with the Joint Venture Agreement, Glyko, Inc. entered into an
employment agreement (the "Employment Agreement") with Dr. John C. Klock, M.D.
(Klock) dated December 20, 1990. The Board of Directors ("the Board") approved a
renewal of the Employment Agreement for an additional two years effective
January 1, 1996 retaining Klock as the Company's president. Under the renewed
Employment Agreement, the Board annually reviews Klock's salary and makes
adjustments which the Board in its discretion deems to be appropriate. Glyko,
Inc. is obligated to continue paying Klock's compensation for a period of six
months following Klock's mental or physical incapacity or his death. Absent
notification of intention not to renew by Klock or the Board, the Employment
Agreement renews for subsequent periods, subject to agreement by the parties on
Klock's compensation for the renewal terms. The Employment Agreement may be
terminated by Klock upon three months' notice and by Glyko, Inc. upon six
months' notice or immediately upon a breach of Klock's duties required under the
Employment Agreement. By its terms, the Employment Agreement does not terminate
upon a merger, consolidation or sale of substantially all of the Company's
assets, and the obligations under the Employment Agreement shall be delegated to
the successor entity in such a situation.

Effective July 1, 1997, Drs. Klock and Starr signed an employment agreement with
BioMarin committing 70% of their efforts to BioMarin and 30% to Glyko, Inc.

Stock Option Plan

Glyko has a stock option plan (the "Plan") under which options to purchase
Common Shares may be granted by the board of directors of Glyko to directors,
officers, consultants and key employees of Glyko. Options granted under the Plan
may either be "incentive stock options" under Section 422 of the United States
Internal Revenue Code, or non-statutory options. The Plan is administered by the
board of directors of Glyko. Options granted under the Plan will have an
exercise price which will not be less than the market price, less any
permissible discounts, of the Common Shares on the date prior to the date of
grant, which market price is deemed to be the closing sales price, or the
closing bid price if no sales were reported, of the Common Shares on any
established stock exchange or national market system upon which the Common
Shares are listed, including The Toronto Stock Exchange, or, if listed upon more
than one exchange or system, the exchange or system with the greatest volume of
trading in Common Shares on the date prior to the date of grant, or, if there is
no established market for the Common Shares, the fair market value of the Common
Shares as determined by the board of directors. Options will be exercisable over
a number of years specified at the time of the grant which cannot exceed ten
years. The aggregate number of Common Shares subject to options granted under
the Plan cannot exceed three million Common Shares and no one optionee is
entitled to hold options exceeding five percent of the Common Shares outstanding
at the time of the grant. Also, the maximum number of shares which may be
reserved for issuance to insiders under the Plan shall not exceed 10 percent of
common shares outstanding at the time of the grant.
14

<PAGE>

Incentive stock options granted under the Plan terminate within 90 days of the
termination of an optionee's employment. Non-statutory options granted under the
Plan terminate within a period of time following the termination of the
optionee's employment, consulting or officer or director relationship which is
determined by the board of directors. Options also terminate within 12 months of
the death or total and permanent disability of the optionee. Options granted
under the Plan are not transferable. As of February 28, 1998, 2,459,261 options
(net of exercised options) had been approved by the board of directors.

Options will only be granted in compliance with applicable securities
legislation, and the Plan will be operated in conformity with the requirements
of any stock exchange upon which the Common Shares of the Company may become
listed.

15
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table lists certain information regarding beneficial ownership of
the Glyko's Common Shares as of February 28, 1998, by (i) those persons who own
more than 5 percent of the Company's common stock, (ii) the Company's Chief
Executive Officer, (iii) each of the Company's directors, and (iv) the total
amount of Common Shares held by the Company's officers and directors as a group.
<TABLE>

<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Owner of Class

<S> <C> <C> <C>
Common Shares Millipore Corporation (1) 2,461,177 11.2%
80 Ashby Road
Bedford, MA 01730

Common Shares Gwynn R. Williams (2) 3,464,968 15.4%
c/o Life Science Research, Ltd.
3rd Floor Salisbury House
15 Victoria Street
Douglas, Isle of Man IM1 2LW
British Isles

Common Shares New York Life Insurance Company (3) 4,528,750 18.9%
51 Madison Avenue
New York, NY 10010

Common Shares Trianon Opus One, Inc. (4) 3,528,000 14.9%
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands

Common Shares Glycomed Inc. 1,326,654 6.1%
10275 Science Center Drive
San Diego, CA 92121

Common Shares John C. Klock, M.D. (5) 1,049,769 4.6%
c/o Glyko, Inc.
11 Pimentel Court
Novato, CA 94949

Common Shares Christopher M. Starr (6) 297,592 1.3%
c/o Glyko, Inc.
11 Pimentel Court
Novato, CA 94949

Common Shares R. William Anderson (7) 102,300 *
c/o 1804 North Shoreline Blvd.
Mountain View, CA 94043

Common Shares John H. Craig (7) 103,301 *
c/o Scotia Plaza, Suite 2100
40 King Street West
Toronto, Canada M5H 3C2

Common Shares John Glass (8) 99,000 *
c/o 48 Main Street
Boxford, MA 01921

<PAGE>

Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Owner of Class

Common Shares Mark I. Young (9) 31,000 *
c/o Scotia Plaza, Suite 2100
40 King Street West
Toronto, Canada M5H 3C2

Common Shares All Officers and Directors (10) 5,147,930 21.7%

<FN>
* Less than 1%.
(1) Does not reflect pending issuance of 500,000 shares in exchange for
termination of marketing rights.
(2) Includes 102,300 Common Shares issuable upon exercise of options within 60
days of February 28, 1998, and 416,758 Common Shares issuable upon exercise
of common stock warrants.
(3) Includes 2,092,500 Common Shares issuable upon exercise of common stock
warrants.
(4) Includes 1,764,000 Common Shares issuable upon exercise of common stock
warrants.
(5) Includes 676,417 Common Shares issuable upon exercise of options within 60
days of February 28, 1998, and 20,207 Common Shares issuable upon exercise
of common stock warrants.
(6) Includes 281,648 Common Shares issuable upon exercise of options within 60
days of February 28, 1998, and 7,772 Common Shares issuable upon exercise
of common stock warrants.
(7) Includes 102,300 Common Shares issuable upon exercise of options within 60
days of February 28, 1998.
(8) Includes 99,000 Common Shares issuable upon exercise of options within 60
days of February 28, 1998.
(9) Includes 31,000 Common Shares issuable upon exercise of options within 60
days of February 28, 1998.
10) Includes 1,394,965 Common Shares issuable
upon exercise of options within 60 days of February 28, 1998,
and 444,747 Common Shares issuable upon exercise of common stock warrants
excludes shares held by Millipore , New York Life, Trianon Opus One, Inc.
and Glycomed.
</FN>
</TABLE>

<PAGE>

Item 12. Certain Relationships and Related Transactions

All material transactions of the Company during the past two years in which any
director or senior officer, or any principal stockholder of the Company has an
interest are as described below:

The Company rented facilities from Millipore in 1997 and 1996, incurring rental
and facilities expense of $20,060 and $274,284 respectively.

On March 21, 1997, the Company closed a Cdn.$2.0 million financing (the Q197
Financing) to fund the start-up of BioMarin Pharmaceutical, Inc. which was
formed to develop the Company's pharmaceutical products. As a result of this
financing, the Company issued 4.0 million units at Cdn.$0.50 per unit, each unit
consisting of one common share and one common share purchase warrant. Each
warrant can be exercised for one share of common stock at Cdn.$1.00 per share,
expiring on March 21, 1999. An additional 280,000 units and 280,000 warrants
together valued at approximately $161,000 were distributed to the brokers in
exchange for services rendered in connection with the Q197 Financing. The
Company utilized the Black-Scholes model to value all the warrants issued in the
Q197 Financing at approximately $496,000. As a result of additional funds raised
by BioMarin during 1997 (see Footnote 6 to Glyko Biomedical, Ltd. Financial
Statements), the Company's ownership in BioMarin was reduced to 41% of
BioMarin's outstanding common stock at December 31, 1997. Future fundraising
efforts of BioMarin could result in a further reduction the Company's ownership
percentage.

BioMarin and the Company have entered into a License Agreement dated June 26,
1997, pursuant to which the Company granted BioMarin an exclusive, worldwide,
perpetual, irrevocable, royalty-free right and license to all current and future
worldwide patents, trade secrets, copyrights and other proprietary rights to all
know-how, processes, formulae, concepts, data and other such intellectual
property, whether patented or not, owned or licensed by the Company. and its
subsidiaries as of the date of the License Agreement. Under the same License
Agreement, BioMarin granted the Company. a cross-license, similar in scope, to
all improvements BioMarin may make upon the licensed intellectual property. As
consideration for this license, BioMarin issued the Company 7,000,000 shares of
BioMarin common stock.

The Company subleases office and lab space, certain administrative and research
and development functions to BioMarin. BioMarin reimburses the Company for rent,
salaries and related benefits and other administrative costs and the Company
reimburses BioMarin for salaries and related benefits. The Company reimbursed
BioMarin $133,000 during the year ended December 31, 1997, and BioMarin
reimbursed the Company $ 373,848 during the year ended December 31, 1997. The
Company also provided analytical services and products to BioMarin at a 27%
discount in 1997. Total receipts to the Company from sales to BioMarin total
$39,301 during 1997.

Millipore

In 1992 Glyko, Inc. granted Millipore exclusive worldwide rights to market and
sell Glyko, Inc.'s analytic products to the laboratory research market, (the
"Distribution Agreement"). The Distribution Agreement had a term of six years
commencing on October 1, 1992. In September, 1993, the Company negotiated an
amendment to the Distribution Agreement pursuant to which the Company received
the non-exclusive right to market and distribute its analytic products in
certain markets, principally the United States. In April 1994, the Company and
Millipore agreed to terminate the Distribution Agreement. In exchange for
relinquishing marketing rights to Glyko products, Millipore will receive 500,000
shares of Glyko common stock pending regulatory approval. In the third quarter
of 1994, the Company recorded a charge of $219,811 for costs related to the
termination of the Distribution Agreement. This amount represents the estimated
fair market value, at April 1994, of stock to be issued to Millipore as a result
of the termination of the Distribution Agreement. The Toronto Stock Exchange has
not permitted the issuance of the 500,000 shares due to an arms-length issue and
requires that an independent valuation be performed in order to reconsider the
issuance of these shares. No such valuation has been performed to date.

Share Transfer Restrictions

Millipore, Glycomed and Williams (the "Corporate Partners") have agreed to
certain restrictions relating to their shares in Glyko. The Corporate Partners'
shares in Glyko may not be transferred except to Glyko or Glyko, Inc., when
transferred to an 80 percent or more owned subsidiary of the Corporate Partner
that agrees to be bound by the share transfer restrictions, in a transaction in
which at least 65 percent of the voting power of Glyko is acquired by a party
other than a Corporate Partner, in a transaction (including a public offering),
in which no more than 5 percent of Glyko's voting stock is transferred to any
single person or group, pursuant to Rule 144 of the 1933 Act (when applicable),
in response to a tender offer made by or on behalf of, or not opposed by, Glyko
and the offeror agrees to be bound by the sale of business provisions of the
Joint Venture Agreement and the Distribution Agreement. In addition, a Corporate
18

<PAGE>

Partner may sell shares in the case of a tender offer for at least 40 percent of
Glyko's shares; provided that Glyko shall have an assignable right of first
refusal with respect to the Corporate Partner's shares in such situation.

Pursuant to an agreement (the "Escrow Agreement") dated December 10, 1992 among
the Founders, Montreal Trust Company of Canada (the "Trustee") and Glyko,
6,030,428 Common Shares (the "Escrowed Shares") were placed on closing on
deposit with the Trustee. The Trustee will release the Escrowed Shares to the
Founders as follows: (a) 10 percent on September 10, 1993; (b) 20 percent on
September 10, 1994, September 10, 1995 and September 10, 1996, respectively; and
(c) the remaining 30 percent on September 10, 1997. As of December 31, 1996,
1,809,124 of the escrowed shares remained on deposit with a trustee and as of
December 31, 1997, no shares remained in escrow.

19
<PAGE>

Item 13. Exhibits, List and Reports on Form 8-K

(a) The following documents are filed as part of this report

Exhibit
Number Description

3.1 Registrant's Articles of Incorporation and Bylaws (filed as
exhibit 3.1 to Form 10-SB Registration Statement No. 0-21994
dated August 6, 1993 and incorporated herein by reference).
3.2 Restated Certificate of Incorporation of BioMarin Pharmaceutical,
Inc. (filed as exhibit 3.1 to Form
10-QSB dated September 30, 1997, and incorporated herein by
reference).
3.3 Bylaws of BioMarin Pharmaceutical, inc. (filed as exhibit 3.2 to
Form 10-QSB dated September 30, 1997, and incorporated herein by
reference).
4.1 Registrant's Articles of Incorporation and Bylaws (filed as
exhibit 3.1 to Form 10-SB Registration Statement No. 0-21994
dated August 6, 1993 and incorporated herein by reference).
Restated Certificate of Incorporation of BioMarin
Pharmaceutical, Inc. (filed as exhibit 3.1 to Form 10-QSB
dated September 30, 1997, and incorporated herein by
reference).
10.1 Registrant's Stock Option Plan (filed as exhibit 10.1 to Form
10-SB Registration Statement No. 0-21994 dated August 6, 1993 and
incorporated herein by reference).
10.2 Joint Venture Agreement between: Registrant; Millipore
Corporation; Glycomed Incorporated; Gwynn R.
Williams; Astroscan, Ltd.; and Astromed, Ltd. dated December 18,
1990(filed as exhibit 10.2 to Form 10-SB Registration Statement
No. 0-21994 dated August 6, 1993 and
incorporated herein by reference).
10.3 Distribution Agreement between Registrant and Millipore
Corporation dated December 18, 1990 (filed as exhibit 10.3 to
Form 10-SB Registration Statement No. 0-21994 dated August 6,
1993 and incorporated herein by reference).
10.4 License Agreement between Registrant, and Astroscan, Ltd. and
Astromed, Ltd. (filed as exhibit 10.4 to Form 10-SB Registration
Statement No. 0-21994 dated August 6, 1993 and incorporated
herein by reference).
10.5 License Agreement between Registrant and Glycomed Incorporated
(filed as exhibit 10.5 to Form 10-SB Registration Statement No.
0-21994 dated August 6, 1993 and
incorporated herein by reference).
10.6 Loan Agreement between Registrant, and Millipore Corporation and
Gwynn R. Williams, dated April 9, 1992(filed as exhibit 10.6 to
Form 10-SB Registration Statement No. 0-21994 dated August 6,
1993 and incorporated herein by reference).
10.7 Employment Agreement between Registrant and John C. Klock, M.D.,
dated December 20, 1990 (filed as exhibit 10.7 to Form 10-SB
Registration Statement No. 0-21994 dated August 6, 1993 and
incorporated herein by reference).
10.8 Exchange Agreements between Registrant, and the share and option
holders of Glyko, Inc., dated December 10, 1992 (filed as exhibit
10.8 to Form 10-SB Registration Statement No. 0-21994 dated
August 6, 1993 and incorporated herein by reference).
10.9 Amendment Number Two to Exclusive Distribution and Supply
Agreement between Registrant and Millipore Corporation dated
September 22, 1993 (filed as exhibit 10.4 to Form 10-KSB
Statement dated December 31, 1993 and incorporated herein by
reference).
10.10 Amendment Number Two to Joint Venture Agreement between:
Registrant; Millipore Corporation; Glycomed
Incorporated; Gwynn R. Williams; Astroscan, Ltd.; and Astromed,
Ltd. dated April 28, 1994 (filed as
exhibit 10.1 to Form 10-QSB dated March 31, 1994 and incorporated
herein by reference).
10.11 Employment Agreement between Registrant and John C. Klock, M.D.,
dated January 1, 1994 (filed as exhibit 10.2 to Form 10-QSB dated
March 31, 1994 and incorporated herein by reference).
10.12 Glyko Biomedical Share Option Plan - 1994 (filed as exhibit 10.1
to Form 10-QSB dated June 30, 1994 and incorporated herein by
reference).
10.13 Development and Supply Agreement between Registrant and Bio-Rad
Laboratories, Inc., dated February 16, 1995 (filed as exhibit
10.1 to Form 10-KSB dated March 31, 1996 and incorporated herein
by reference).
10.14 International Distribution Agreement between Registrant and
Toyobo Co., Ltd. and MC Medical. Inc.
dated September 12, 1995 (filed as exhibit 10.2 to Form 10-KSB
dated March 31, 1996 and incorporated
herein by reference).
10.15 Commercial Lease between Registrant and Douglas R. Kaye
dated December 23, 1996
20

<PAGE>

Exhibit
Number Description

10.16 Toyobo Distribution Agreement (confidential portions of exhibit
have been omitted pursuant to a request for confidential
treatment and filed separately with the Commission). Filed as
exhibit 10.1 to Form 10-QSB dated March 31, 1997, and
incorporated herein by reference.
10.17 First Amendment to Bio-Rad Laboratories, Inc. Agreement
(confidential portions of exhibit have been omitted pursuant to a
request for confidential treatment and filed separately with the
Commission). Filed as exhibit 10.1 to Form 10-QSB dated June 30,
1997, and incorporated herein by reference.
10.18 Array Medical License and Development Agreement (confidential
portions of exhibit have been omitted pursuant to a request for
confidential treatment and filed separately with the Commission).
Filed as exhibit 10.2 to Form 10-QSB dated June 30, 1997, and
incorporated herein by reference.
10.19 License Agreement between Glyko Biomedical Ltd. and BioMarin
Pharmaceutical, Inc. (filed as
exhibit 10 to Form 10-QSB dated September 30, 1997, and
incorporated herein by reference.)
21.1 List of Registrant's Subsidiaries (filed as exhibit 22.1 to Form
10-SB Registration Statement No. 0-021994 dated August 6, 1993
and incorporated herein by reference).
24.1 Power of Attorney (see Power of Attorney hereto attached at page
22).
27.1 Financial Data Schedule (see Financial Data Schedule hereto
attached at page 49)

(b) Reports on Form 8-K

No reports were filed on Form 8-K during the quarter ended December 31, 1997.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act, the registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLYKO BIOMEDICAL LTD.

Dated: March 30, 1998 By: \s\ John C. Klock, M.D.
- --------------------------------------- ---------------------------------
John C. Klock, M.D.
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John C. Klock, his attorney-in-fact, with
the power of substitution, for him in any and all capacities, to sign any
amendments to the Report on Form 10-KSB and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.

In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated. <TABLE>

<CAPTION>
Signature Title Date

<S> <C>
\s\ John C. Klock, M.D. <C> March 30, 1998
- --------------------------------- --------------------
John C. Klock, M.D. President, Chief Executive Officer, Director
and Chief Accounting Officer

\s\Christopher M. Starr, Ph.D. March 30, 1998
- --------------------------------- --------------------
Christopher M. Starr, Ph.D. Vice-President Research and Development

\s\ R. William Anderson March 30, 1998
- --------------------------------- --------------------
R. William Anderson Director

\s\ John S. Craig March 30, 1998
- --------------------------------- --------------------
John H. Craig Secretary and Director

\s\ John S. Glass March 30, 1998
- --------------------------------- --------------------
John S. Glass Director

\s\ Gwynn R. Williams March 30, 1998
- --------------------------------- --------------------
Gwynn R. Williams Director

\s\ Mark I. Young March 30, 1998
- --------------------------------- --------------------
Mark I Young Assistant Secretary and Director
</TABLE>

<PAGE>

Index to Financial Statements

Glyko Biomedical, Ltd.'s Consolidated Financial Statements
Report of Independent Public Accountants F.2
Consolidated Balance Sheets at December 31, 1997 and 1996 F.3
Consolidated Statements of Operations for the years
ended December 31, 1997 and 1996 F.4
Consolidated Statements of Stockholders' Equity
(Deficit) for the years ended December 31, 1997 and 1996 F.5
Consolidated Statements of Cash Flows
for the years ended December 31, 1997 and 1996 F.6
Notes to Consolidated Financial Statements F.7 to F.14
BioMarin Pharmaceutical, Inc.'s Financial Statements
Report of Independent Public Accountants F.15
Balance Sheet at December 31, 1997 F.16
Statement of Operations for the period from
March 21, 1997 (inception) to December 31, 1997 F.17
Statement of Stockholders' Equity for the period from
March 21, 1997(inception) to December 31, 1997 F.18
Statement of Cash Flows for the period from
March 21, 1997 (inception) to December 31, 1997 F.19
Notes to Financial Statements F.20 to F.25

F.1

<PAGE>

Report of Independent Public Accountants

To the Stockholders of Glyko Biomedical Ltd.:

We have audited the accompanying consolidated balance sheets of Glyko
Biomedical Ltd. and subsidiaries (the Company) as of December 31, 1997
and 1996 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Glyko
Biomedical Ltd. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

San Francisco, California \s\Arthur Andersen LLP
February 20 , 1998 Arthur Andersen LLP

F.2
<PAGE>

PART I.

ITEM 1. Financial Statements

GLYKO BIOMEDICAL LTD.
CONSOLIDATED BALANCE SHEETS
(In U.S. dollars)

<TABLE>

<CAPTION>
December 31, December 31,
1997 1996
--------------------- ----------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 528,280 $ 210,992
Trade receivables 141,743 156,176
Inventories 95,210 68,452
Other current assets 15,179 26,025
--------------------- ----------------------
Total current assets 780,412 461,645
Investment in BioMarin Pharmaceutical, Inc. 3,025,990 -
Property, plant and equipment, net 118,910 108,045
Other assets 2,206 2,200
--------------------- ----------------------
Total assets $ 3,927,518 $ 571,890
===================== ======================

Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 38,916 $ 174,732
Accrued liabilities 173,597 204,504
Deferred rent and related costs 365,880 269,718
Payable to stockholder 219,811 219,811
--------------------- ----------------------
Total current liabilities 798,204 868,765

--------------------- ----------------------
Total liabilities 798,204 868,765

Stockholders' equity (deficit):
Common stock, no par value, unlimited shares
authorized, 21,573,044 and 17,243,044 shares
issued and outstanding at December 31, 1997 and
December 31, 1996, respectively 13,154,224 12,203,065
Additional Paid In Capital 4,068,564 -
Common stock warrants and options 929,585 433,897
Deferred compensation (33,364) -
Accumulated deficit (14,989,695) (12,933,837)
--------------------- ----------------------
Total stockholders' equity (deficit) 3,129,314 (296,875)
--------------------- ----------------------
Total liabilities and stockholders' equity (deficit) $ 3,927,518 $ 571,890
===================== ======================
</TABLE>

The accompanying notes are an integral art of these statements.
F.3

<PAGE>

GLYKO BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In U.S. dollars)

<TABLE>

<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996
---------------- --------------------
<S> <C> <C>
Revenues:
Sales of products and services $ 1,175,699 $ 1,271,933
Other revenues 860,935 58,702
---------------- --------------------
Total revenues: 2,036,634 1,330,635

Expenses:
Cost of products and services 482,770 509,248
Research and development 605,803 1,014,966
Selling, general and administrative 562,888 1,425,484
---------------- --------------------
Total expenses: 1,651,461 2,949,698
---------------- --------------------
Income (loss) from operations 385,173 (1,619,063)
Equity in loss of BioMarin Pharmaceutical, Inc. (2,452,422) -
Interest income 12,610 18,367
Other income (loss) (1,219) 24,837
---------------- --------------------
Net loss $ (2,055,858) $ (1,575,859)
================ ====================

Net loss per common share, basic and diluted $ (0.10) $ (0.10)
================ ====================

Weighted average number of shares
used in computing per share amounts 20,536,058 16,058,994
================ ====================
</TABLE>

The accompanying notes are an integral art of these statements.
F.4

<PAGE>

GLYKO BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In U.S. dollars)

Common Stock Additional Common Stock Deferred Accumulated
------------------------------ Paid In
Shares Amount Capital Warrants Compensation Deficit Total
---------------- -------------- ------------ ------------- ------------- ------------ ----------------

<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 14,567,944 $ 11,304,356 $ - $ 278,085 $ - $(11,357,978) $ 224,463

Net loss for the year - - - (1,575,859) (1,575,859)

Exercise of stock options 100 48 - - 48

Issuance of common stock and
warrants in a private placement
financing, net of issuance
costs of $152,156 2,675,000 898,661 155,812 1,054,473

---------------- -------------- ------------- ----------- ----------- ---------------- ----------------
Balance at December 31, 1996 17,243,044 $ 12,203,065 $ - $ 433,897 $ - $(12,933,837) $ (296,875)

Net loss for the year - - - (2,055,858) (2,055,858)

Exercise of stock options 50,000 22,976 - - 22,976

Grant of options to consultants 90,152 (33,364) 56,788

Issuance of common stock and
warrants in a private placement
financing, net of issuance
costs of $160,881 4,280,000 928,183 495,688 1,423,871

Additional paid in capital
resulting from 3,978,412 3,978,412
the sale of common stock by
BioMarin Pharmaceutical, Inc.

-------------- ---------------- ------------- ------------ ---------- -------------- ----------------
Balance at December 31, 1997 21,573,044 $ 13,154,224 $ 4,068,564 $ 929,585 $ (33,364) $(14,989,695) $ 3,129,314
=============== ================ ============= ============ ========== ============== ================
</TABLE>

The accompanying notes are an integral art of these statements.
F.5

<PAGE>

GLYKO BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars)

<TABLE>

<CAPTION>
Year ended December
------------------------------------
1997 1996
---------------- ---------------

<S> <C> <C>
Net loss $ (2,055,858) $ (1,575,859)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 115,481 61,139
Equity in the loss of BioMarin Pharmaceutical, Inc. 2,452,422 -
Loss on disposal of property and equipment 1,452 4,046
Gain on lease abandonment - (62,538)
Change in assets and liabilities:
Trade receivables 14,433 200,630
Inventories (26,758) 40,066
Other assets 10,840 (20,854)
Accounts payable (135,816) 52,357
Accrued liabilities (30,907) (16,956)
Deferred revenue - (174,386)
Deferred rent and related costs 96,162 103,183
---------------- ---------------
Total adjustments 2,497,309 186,687
---------------- ---------------
Net cash provided by (used in) operating activities 441,451 (1,389,172)

Investment in BioMarin Pharmaceutical, Inc. (1,500,000) -
Purchases of property and equipment (71,010) (61,061)
---------------- ---------------
Net cash used in investing activities (1,571,010) (61,061)

Net proceeds from the issuance of common stock and warrants
in private placement financings 1,423,871 1,054,521
Proceeds from exercise of stock options 22,976 -
Repayments on capital lease obligations - (14,016)
---------------- ---------------
Net cash provided by financing activities 1,446,847 1,040,505

---------------- ---------------
Net increase (decrease) in cash 317,288 (409,728)
Cash and cash equivalents, beginning of period 210,992 620,720
---------------- ---------------
Cash and cash equivalents, end of period $ 528,280 $ 210,992
================ ===============

Common stock and common stock warrants issued
in exchange for financing services $ 160,881 $ 129,539
Stock options issued in exchange for consulting services $ 90,152 -
</TABLE>

The accompanying notes are an integral art of these statements.
F.6

<PAGE>

1. The Company and Description of the Business

Glyko Biomedical Ltd. (the Company) is a Canadian company which was
established in 1992 to acquire all of the outstanding capital stock of
Glyko, Inc., a Delaware corporation. The Company, through its
wholly-owned subsidiary Glyko, Inc., is developing new techniques to
analyze and manipulate carbohydrates for research, diagnostic and
pharmaceutical purposes. The Company has developed a product line of
laboratory instruments and chemical kits, referred to as analytic
products, which are used in carbohydrate analysis. Shipments of these
products began in December 1992. The Company is also developing certain
carbohydrate diagnostic products. In October, 1996, the Company formed
BioMarin Pharmaceutical, Inc. (BioMarin), a Delaware corporation, to
develop the Company's pharmaceutical products. BioMarin first issued
stock on March 21, 1997 (inception) when it issued 1,500,000 shares of
common stock to the Company for $1.5 million. Beginning in October 1997,
BioMarin raised capital from third parties with the result that at
December 31, 1997, the Company's ownership interest in BioMarin had been
reduced to 41%.

Since its inception, the Company has incurred cumulative losses of
$14,989,695 and expects to continue to incur losses during 1998 due to
the ongoing research and development of pharmaceutical products by
BioMarin. Management believes that Glyko, Inc. has sufficient cash to
sustain planned operations through the end of 1998 due to increased
revenues and decreased expenditures. Management also believes that
BioMarin has sufficient cash to sustain planned operations through the
end of 1998 due to additional capital raised from outside shareholders
at the end of 1997. In order to continue operations beyond 1998, Glyko,
Inc. and BioMarin would need to obtain additional funding in the form of
stock issuances, licensing and marketing agreements and/or collaborative
research agreements with strategic partners. If adequate funding is not
obtained, long-term operations may be adversely affected. Glyko, Inc.
and BioMarin will delay or eliminate expenditures in respect of certain
products under development such as additional analytical kits,
diagnostic testing equipment and pharmaceutical products in the event
sufficient funding is unavailable. In December 1992, the Company
successfully completed an initial public offering on the Toronto Stock
Exchange. Since that time, the Company has maintained liquidity by
utilizing the proceeds of that offering, by utilizing the proceeds of
private equity placements in the second quarter of 1995, the second
quarter of 1996, and the first quarter of 1997, and by using cash flow
from operations from Glyko, Inc. BioMarin has maintained liquidity by
utilizing proceeds from three private equity placements during 1997.

2. Summary of Significant Accounting Policies

The accompanying consolidated financial statements and related footnotes
have been prepared in conformity with U.S. generally accepted accounting
principles using U.S. dollars. At December 31, 1996, the consolidated
financial statements include the accounts of the Company and its wholly
owned subsidiary Glyko, Inc. As of December 31, 1997, the Company owns
41 percent of BioMarin and, as such, BioMarin's activities have been
reported in the Company's financial statements for the year ended
December 31, 1997, based on the equity method of accounting. To the
extent that the issuance of stock by BioMarin to third parties results
in an increase in or decrease in the Company's ownership of the net
assets of BioMarin, the Company reflects this increase or decrease as
paid-in capital as reflected in the Consolidated Statements of
Stockholders' Equity (Deficit). All significant intercompany accounts
and transactions have been eliminated. Certain balances in the prior
years have been reclassified to conform with the current year
presentation.

Use of Estimates:

The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make certain estimates and assumptions that effect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the consolidated financial
statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could
differ from those estimates. Significant estimates made by management
include allowance
F.7
<PAGE>

for doubtful accounts receivable, and certain other reserves, including
an accrual for deferred rent (see Footnote 5).

Cash and Cash Equivalents:

Cash and cash equivalents consist of amounts held with banks and
short-term investments with original maturities of 90 days or less.
Inventories:

Inventories consist of raw materials, analytic kits, and instrument-based
systems held for sale. Inventories are stated at the lower of cost
(first-in, first-out method) or estimated market value.
The components of inventories are as follows:

December 31,
1997 1996
----------------- ----------------
Raw materials $90,647 $62,925
Finished products 4,563 5,527
----------------- ----------------
$95,210 $68,452
================= ================

Property, Plant and Equipment:

Property, plant and equipment are stated at cost. The cost and
accumulated depreciation for property, plant and equipment sold, retired,
or otherwise disposed of are relieved from the accounts, and the
resulting gains or losses are reflected in the consolidated statements of
operations. Depreciation is computed using the straight-line method over
the following estimated useful lives:

Office furniture 5 years
Computer equipment 3 years
Lab and production equipment 5 years

Foreign Exchange:

As all of the Company's operations are located in the United States, the
Company has adopted the U.S. dollar as its functional currency. In
accordance with Statement of Financial Accounting Standard No. 52,
"Foreign Currency Translation", assets and liabilities denominated in
foreign currency, except for intercompany accounts that are considered
permanent in nature, are translated into U.S. dollars at the current rate
of exchange existing at year end and revenues and expenses are translated
at the average monthly exchange rates. Transaction gains and losses
included in the consolidated statements of operations are not material.

Product Sales:

The Company recognizes product revenues and related cost of sales upon
shipment of products. Service revenues are recognized upon completion of
services as evidenced by the transmission of reports to customers. Other
revenues, principally licensing and distribution fees, are recognized
upon completion of applicable contractual obligations.

At times, the Company has received payments in advance for future product
shipments or hardware maintenance and service contracts. Such payments
are classified as deferred revenue on the accompanying consolidated
balance sheets. Upon shipment of products, revenue is recognized and the
corresponding liability (deferred revenue) is reduced. Revenues from
maintenance and service contracts are recognized monthly pro rata over
the period of the contract and the corresponding liability (deferred
revenue) is reduced.

F.8

<PAGE>

Total revenues of $2,036,634 in 1997 and $1,330,635 in 1996 consisted
entirely of direct product sales, sales to distributors for resale,
analytical service fees, technology and licensing fees, and grant
revenues. In 1997, revenues (including licensing and technology fees)
from three major customers were 29 percent, 14 percent and 8 percent of
total revenues. Grant revenues in 1997 represented eight percent of total
revenues. In 1996, revenues from three major customers were 14 percent,
14 percent and 13 percent of total revenues.

In 1990, the Company entered into an agreement (the "Agreement") giving
one of its stockholders the exclusive right to market and distribute the
Company's analytic products for an initial period of six years from the
time the Company developed a commercially marketable product. During
1993, the Agreement was amended to grant the Company the non-exclusive
right to market and distribute the Company's analytic products in the
United States (direct product sales). In April 1994, the stockholder and
the Company agreed to terminate the Agreement. In exchange for
relinquishing its rights under the Agreement, the stockholder will
receive 500,000 shares of common stock, subject to regulatory approval.
In the third quarter of 1994 the Company recorded a charge to operations
of $219,811 for costs related to the termination of the Agreement. This
amount represents the estimated fair market value of stock to be issued
as a result of the termination of the Agreement. The Toronto Stock
Exchange has not permitted the issuance of the 500,000 shares because the
transaction is not considered arms length. The Toronto Stock Exchange
requires that an independent valuation be performed in order to
reconsider the issuance of these shares. No such valuation has been
performed to date.

Income Taxes:

In 1992 the Company adopted FASB Statement No. 109, "Accounting for
Income Taxes," which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed annually for differences between the
financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the differences are
expected to affect taxable income.

Net Loss per Share:

Net loss per share is based on the weighted average number of common
shares outstanding during each period, presented in accordance with
Statement of Financial Accounting Standards No. 128 (SFAS No. 128),
"Earnings Per Share".

Potentially dilutive securities include 2,424,402 and 2,254,597 common
stock options and 10.9 million and 6.4 million common stock warrants
outstanding at December 31, 1997 and 1996, respectively. These securities
were not considered in the computation of dilutive loss per share because
their effect would be anti-dilutive for the years ended December 31, 1997
and 1996.

F.9

<PAGE>

3. Property, Plant and Equipment

Property, plant and equipment at December 31, 1997 and 1996 consisted of
the following:

December 31,
1997 1996
---------------- ----------------
Lab equipment $229,701 $282,468
Computer equipment 94,712 212,330
Production equipment 37,164 42,095
Office furniture 13,510 18,069
Leasehold improvements 68,343 8,554
---------------- ----------------
443,430 563,516
Less accumulated depreciation (324,520) (455,471)
---------------- ----------------
Property, plant and equipment, net $118,910 $108,045
================ ================

4. Income Taxes

The Company's deferred tax asset at December 31, 1997 and 1996 is:

December 31,
1997 1996
---------------- ----------------
Net operating loss carryovers $5,153,000 $ 5,167,000
Research and development expenses
capitalized for tax purposes 62,000 151,000
Research and development
credit carryovers 593,000 524,000
Issue cost carryovers 137,000 152,000
Other temporary differences (255,000) (258,000)
---------------- ----------------
5,690,000 5,736,000
Valuation allowance (5,690,000) (5,736,000)
---------------- ----------------
Net deferred tax asset $ -- $ --
================ ================

F.10

<PAGE>

The reconciliation of the effective tax rate is as follows:
<TABLE>

<CAPTION>
December 31,
1997 1996
Amount % Amount %
----------------- ------------ ------------------- ------------
<S> <C> <C> <C> <C>
U.S. Statutory tax rate $(699,000) (34)% $(536,000) (34)%
State taxes, net of federal
income tax benefit (123,000) (6)% (95,000) (6)%
Effects of international
losses and loss in equity of
subsidiary 933,000 45 % 48,000 3 %
Research and development tax
credit (56,000) (2)% (22,000) (1)%
Loss carryforward utilized (105,000) (5)% - -
Other 4,000 - (155,000) (10)%
Change in valuation allowance
46,000 2 % 760,000 48 %
----------------- ------------ ------------------- ------------
Provision for income taxes $ -- 0 % $ -- 0 %
================= ============ =================== ============
</TABLE>

Total U.S. federal and state net tax operating loss carryforwards as of
December 31, 1997 are approximately $11.9 million and $5.9 million,
respectively. Federal operating loss carryforwards expire from 2006 to
2012 and state operating loss carryforwards expire from 1997 to 2001. The
Company also has federal and state research and development credit
carryovers of $593,000 which expire from 2007 to 2011. For Canadian
income tax purposes, the Company has net operating loss carryforwards of
approximately $1.3 million which expire from 1999 to 2003. Under current
U.S. tax law, future changes in ownership of the Company may limit the
utilization of U.S. net operating loss and credit carryforwards.

5. Commitments and Contingencies

Leases
The Company leases its facilities, and office and other equipment under
agreements that expire at various dates through 2000.

The Company leased its facilities from one of its stockholders through
January, 1997. The Company had negotiated payment deferrals for rent
payments and related facility charges under this agreement.

In October, 1996, the company notified the lessor that the lease would be
abandoned in January, 1997. In 1997, the lessor claimed $365,880 in
deferred rent and related costs for part of 1995 through January 1997.
The lessor also claimed an additional $90,000 of equipment and property
damage resulting from the abandonment of the premises. The Company has a
counter claim for $300,000 representing sales royalties due from the
lessor to the Company plus the cost of building repairs paid by the
Company on behalf of the lessor. While the Company does not believe that
the lessor's claim is valid and does not agree with the amount claimed by
the lessor, the amount of $365,880 has been accrued and is reflected on
the balance sheet at December 31, 1997. While the original lease
agreement extends through December 31, 1998, management does not believe
the Company will be held responsible for continuing lease obligations
and, as such, no additional amounts have been accrued beyond January
1997. The facility has been subsequently leased.

The Company recognized rental expense under the agreement on a
straight-line basis calculated over the full term of the sublease
agreement. The difference between cumulative rental payments under the
original lease agreement and rental expense was classified as a
non-current liability at December 31, 1995. As a result of the
abandonment in 1997, the remaining deferred rent balance at December 31,
1996 of $62,538 was written-off against selling, general and
administrative expenses.

F.11

<PAGE>

Aggregate minimum annual rental commitments under operating leases
(excluding the abandoned lease) are as follows:

Years ending December 31,
---------------------------------------

1998 115,692
1999 125,582
2000 34,559
2001 and thereafter --
---------------
$275,833
===============

Rent expense was $57,950 (net of sublease rental income) in 1997 and
$274,284 in 1996.

Product Liability and Lack of Insurance
The Company is subject to the risk of exposure to product liability
claims in the event that the use of its technology results in adverse
effects during testing or commercial sale. The Company currently does not
maintain product liability insurance. There can be no assurance that the
Company will be able to obtain product liability insurance coverage at
economically reasonable rates, or that such insurance will provide
adequate coverage against all possible claims.

6. Stockholders' Equity

In December 1992, the Company completed an initial public offering of
2,881,601 shares of its common stock on the Toronto Stock Exchange

During the second quarter of 1996, the Company closed a second private
equity placement offering (the Q296 Financing). Investors participating
in the Q296 Financing purchased 2.5 million units each consisting of one
share of common stock and one half of a two year warrant. One warrant is
required to purchase one share of common stock. The units were priced at
Cdn. $0.60 with an exercise price on the warrant of Cdn. $0.80. The Q296
Financing raised approximately $1.077 million. An additional 175,000
units and 250,000 warrants valued at approximately $130,000 were
distributed to brokers in exchange for services rendered in connection
with the Q296 Financing. The Company utilized the Black-Scholes model to
value the 1,587,500 warrants issued in the Q296 Financing at
approximately $156,000.

On March 21, 1997, the Company closed a Cdn.$2.0 million (USD$1.4
million) financing (the Q197 Financing) to fund the start-up of BioMarin
Pharmaceutical, Inc. which was formed to develop the Company's
pharmaceutical products. As a result of this financing, the Company
issued 4.0 million units at Cdn.$0.50 per unit, each unit consisting of
one common share and one common share purchase warrant. Each warrant can
be exercised for one share of common stock at Cdn.$1.00 per share,
expiring on March 21, 1999. An additional 280,000 units and 280,000
warrants valued at approximately $161,000 were distributed to the brokers
in exchange for services rendered in connection with the Q197 Financing.
The Company utilized the Black-Scholes model to value all the warrants
issued in the Q197 Financing at approximately $496,000. The Company used
the proceeds of the offering and additional cash to purchase 1,500,000
common shares of BioMarin for $1.5 million.

BioMarin and the Company have entered into a License Agreement dated June
26, 1997, pursuant to which the Company granted BioMarin an exclusive,
worldwide, perpetual, irrevocable, royalty-free right and license to all
current and future worldwide patents, trade secrets, copyrights and other
proprietary rights to all know-how, processes, formulae, concepts, data
and other such intellectual property, whether patented or not, owned or
licensed by the Company. and its subsidiaries as of the date of the
License Agreement. Under the same License Agreement, BioMarin granted the
Company. a cross-license, similar in scope, to all improvements BioMarin
may make upon the licensed intellectual

F.12

<PAGE>

property. As consideration for this license, BioMarin issued the
Company 7,000,000 shares of BioMarin common stock.

In October 1997, BioMarin sold 3,740,000 shares of common stock to
outside investors for net proceeds of $3,647,000 (including $880,000 of
bridge loans received in the third quarter of 1997 which were converted
to common stock). Additionally, BioMarin issued to the placement agent
299,000 common shares and 299,000 warrants to purchase common shares
exercisable at $1.00 per share and valued under the Black Scholes model
at $48,000. Concurrently, BioMarin issued 2,500,000 shares of common
stock to three executive officers of BioMarin, two of whom are also
executive officers of Glyko Biomedical Ltd. for an aggregate of
$2,500,000 in notes due on July 31, 2000.

In December 1997, BioMarin raised net proceeds of $5,016,000 from outside
investors in exchange for 5,527,500 shares (including 502,500 shares
issued to the placement agent for the financing). Additionally, BioMarin
issued to the placement agent 502,500 warrants to purchase common shares
exercisable at $1.00 per share and valued under the Black Scholes model
at $80,000. As a result of such share issuances, Glyko Biomedical Ltd.'s
ownership in BioMarin was reduced to 41% of BioMarin's outstanding Common
Stock. Future fundraising efforts of BioMarin could result in a further
reduction of Glyko Biomedical Ltd.'s ownership percentage.

7. Stock Option Plan

The Company has a stock option plan (the Plan) under which options to
purchase common stock may be granted by the Board of Directors to
directors, officers, consultants and key employees at not less than fair
market value, less any permissible discounts, on the date of grant.
Options granted under the Plan may be incentive stock options (as defined
under Section 422 of the U.S. Internal Revenue Code) or non-statutory
stock options. Options are exercisable over a number of years specified
at the time of the grant which cannot exceed ten years. The maximum
aggregate number of shares which may be granted and sold under the Plan
is 3,000,000 shares.

The Company accounts for the Plan under APB Opinion No. 25, under which
no compensation cost has been recognized, except for options granted to
consultants, because, under the Option Plan, the option exercise price
equals the market value of stock on the date of grant. In general, the
Plan options vest over 48 months and all options expire after 5 years or
90 days after employee termination.

Had compensation cost for the Plan been determined consistent with FASB
Statement No. 123, the Company's net loss would have been increased to
the following pro forma amounts:

1997 1996
Net loss As reported $(2,055,858) $(1,575,859)
Pro forma $(2,138,587) $(1,644,687)

Net loss per As reported $(0.10) $(0.10)
common Pro forma $(0.10) $(0.10)
share

Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.

F.13

<PAGE>

A summary of the status of the Company stock option plan at December 31,
1997 and 1996 and changes during the years then ended is presented in the
table and narrative below:
<TABLE>

<CAPTION>
1997 1996
Shares Wtd avg ex Shares Wtd avg ex
price (2) price
<S> <C> <C> <C> <C>
Outstanding beginning
of year 2,254,597 Cdn. $ 1.36 2,204,879 Cdn. $1.39
Granted (1) 528,870 Cdn. $ 0.71 118,000 Cdn. $0.55
Exercised (50,000) Cdn. $ 0.65 (100) Cdn. $0.60
Canceled (309,065) Cdn. $ 1.41 (68,182) Cdn. $0.88
--------- ----------
Outstanding at end of
year 2,424,402 Cdn. $1.22 2,254,597 Cdn. $1.36
Exercisable at end of year 2,045,312 1,965,086
Weighted average fair
value of options granted Cdn. $0.50 Cdn. $0.22

<FN>
(1) In 1996, includes 100,000 options issued to a consultant with a
fair value of $0.26 per option excluded from pro forma net loss
and pro forma net loss per common share. In 1997, includes
150,000 options issued to consultants with an average fair value
of $ 0.22 per option excluded from pro forma net loss and pro
forma net loss per common share.
(2) The US$ equivalent of Canadian $1.00 at December 31, 1997 was
approximately $0.7215.
</FN>
</TABLE>

There are 575,598 options available for grant under the plan at December
31, 1997. The average remaining contractual life of the options
outstanding at December 31, 1997 is 2 years.

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1997 and 1996,
respectively: risk-free weighted average interest rates of 6.3 and 5.3
percent; expected dividend yield of zero percent; expected life of 4 years
for the Plans' options; expected volatility of 92 and 87 percent.

9. Related Party Transactions

The Company has entered into certain transactions with its stockholders
since its inception. These transactions include the purchase of supplies
and equipment and rental of the Company's facilities. Total costs of
these transactions for the years ended December 31, 1997 and 1996 were
approximately $20,060 and, $274,284, respectively (see Note 5).

The Company subleases office and lab space, certain administrative and
research and development functions to BioMarin. BioMarin reimburses the
Company for rent, salaries and related benefits and other administrative
costs and the Company reimburses BioMarin for salaries and related
benefits. The Company reimbursed BioMarin $133,000 during the year ended
December 31, 1997 and BioMarin reimbursed the Company $ 373,848 during
the year ended December 31, 1997. The Company also provided analytical
services and products to BioMarin at a 27% discount in 1997. Total
receipts to the Company from sales to BioMarin total $39,301 during 1997.

F.14

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of
BioMarin Pharmaceutical, Inc.:

We have audited the accompanying balance sheet of BioMarin Pharmaceutical, Inc.
(a Delaware corporation in the development stage) as of December 31, 1997 and
the related statement of operations, changes in stockholders' equity and cash
flows for the period from March 21, 1997 (inception) to December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BioMarin Pharmaceutical, Inc.
as of December 31, 1997 and the results of its operations and its cash flows for
the period from March 21, 1997 (inception) to December 31, 1997 in conformity
with generally accepted accounting principles.

San Francisco, California, \s\Arthur Andersen
February 20, 1998 Arthur Andersen

F.15

<PAGE>

BIOMARIN PHARMACEUTIAL, INC.
(a development-stage company)

BALANCE SHEET
AS OF DECEMBER 31, 1997

<TABLE>

<CAPTION>
1997
ASSETS

<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,987,433
Short-term investments 900,827
Due from Glyko, Inc. 9,135
Due from Glyko Biomedical, Ltd. 79,607
Prepaid expenses 539,445
-----------------

Total current assets 7,516,447

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $4,790
145,683
-----------------

Total assets $ 7,662,130
=================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable $ 168,062
Accrued expenses 43,395
Due to Glyko, Inc. 70,207
-----------------

Total current liabilities 281,664
-----------------

STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.001 par value: 30,000,000 shares authorized, 20,566,500
issued and outstanding at December 31, 1997 20,567
Additional paid-in capital 12,548,924
Warrants 128,240
Deferred compensation (217,000)
Notes receivable from stockholders (2,337,500)
Deficit accumulated during development stage (2,762,765)
-----------------

Total stockholders' equity 7,380,466
-----------------

Total liabilities and stockholders' equity $ 7,662,130
=================
</TABLE>

The accompanying notes are an integral part of these statements.

F.16

<PAGE>

BIOMARIN PHARMACEUTICAL, INC.
(a development-stage company)
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTON) TO DECEMBER 31, 1997

Period from March
21, 1997
(inception), to
December 31, 1997
-------------------

OPERATING COSTS AND EXPENSES:
Research and development $ 1,913,795
General and administrative expenses 914,299
-------------------

Loss from operations (2,828,094)

INTEREST INCOME 65,329
-------------------

Net loss $ (2,762,765)
===================

NET LOSS PER SHARE, basic and diluted $(0.34)
===================

WEIGHTED AVERAGE COMMON SHARE OUTSTANDING 8,136,475
===================

The accompanying notes are an integral part of these statements.

F.17

<PAGE>

BIOMARIN PHARMACEUTICAL, INC.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTION) TO DECEMBER 31, 1997

<TABLE>

Additional
Common Stock Paid-in Warrants Deferred
------------------------- --------------------------
Shares Amount Capital Shares Amount Compensation
------------- ----------- -------------- ------------ ------------ ----------------

<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 21, 1997 - - - - - -

Issuance of common stock to Glyko 1,500,000 1,500 1,498,500 - - -
Biomedical, Ltd. on March 21, 1997 for
cash, $1.00 per share

Issuance of common stock to Glyko
Biomedical Ltd. in June 1997, in exchange 7,000,000 7,000 (7,000) - - -
for technology, $1.00 per share

Issuance of common stock in October 1997,
$1.00 per share (net of issuance costs 3,740,000 3,740 3,296,540 - - -
of $439,720)
Issuance of common stock at $1.00 per share 299,000 299 298,701 299,000 47,840
and warrants in October 1997 for -
brokerage services
Issuance of common stock to employees in 2,500,000 2,500 2,497,500 - - (200,000)
exchange for notes, $1.00 per share

Issuance of common stock and warrants on -
December 31, 1997, $1.00 per share (net 5,025,000 5,026 4,427,665 - -
of issuance costs of $592,309)
Issuance of common stock at $1.00 per share 502,500 502 501,998 502,500 80,400 -
and warrants on December 31, 1997 for
brokerage services
Common stock options granted in exchange 35,020 - - (17,000)
for services - -
Interest on notes receivable - - - - -
-
Net loss for the period from March 21, 1997 - - - - - -
(inception) to December 31, 1997
------------- ----------- -------------- ------------ ------------- ---------------
BALANCE, DECEMBER 31, 1997 20,566,500 $ 20,567 $ 12,548,924 801,500 $ 128,240 $(217,000)
============= =========== ============== ============ ============= ===============
</TABLE>

The accompanying notes are an integral part of these statements.
F.18

<PAGE>

BIOMARIN PHARMACEUTICAL, INC.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTION) TO DECEMBER 31, 1997
(continued)

<TABLE>

<CAPTION>
Deficit
Notes Accumulated Total
Receivable from During Stockholders'
Stockholders Development Stage Equity
------------------ -------------------- ----------------

<S> <C> <C> <C>
BALANCE, MARCH 21, 1997 - - $ -

Issuance of common stock to Glyko - - 1,500,000
Biomedical, Ltd. on March 21, 1997 for
cash, $1.00 per share

Issuance of common stock to Glyko
Biomedical Ltd. in June 1997, in exchange - - -
for technology, $1.00 per share
Issuance of common stock in October 1997,
$1.00 per share (net of issuance costs - - 3,300,280
of $439,720)
Issuance of common stock at $1.00 per share 346,840
and warrants in October 1997 for
brokerage services
Issuance of common stock to employees in (2,300,000) - -
exchange for notes, $1.00 per share

Issuance of common stock and warrants on
December 31, 1997, $1.00 per share (net - - 4,432,691
of issuance costs of $592,309)
Issuance of common stock at $1.00 per share - - 582,900
and warrants on December 31, 1997 for
brokerage services
Common stock options granted in exchange - 18,020
for services -
Interest on notes receivable (37,500) (37,500)

Net loss for the period from March 21, 1997 - (2,762,765) (2,762,765)
(inception) to December 31, 1997
-------------------- ------------------- ----------------

BALANCE, DECEMBER 31, 1997 $ (2,337,500) $ (2,762,765) $7,380,466
=================== ==================== ================
</TABLE>

The accompanying notes are an integral part of these statements.
F.18

<PAGE>

BIOMARIN PHARMACEUTICAL, INC.
(a development-stage company)

STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTON) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>

Period from
March 21, 1997
(Inception),
to December
31, 1997
----------------

<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,762,765)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 4,790
Compensation in the form of common stock and common stock options 18,020
Changes in operating assets and liabilities:
Receivables from Glyko Biomedical, Ltd. and Glyko, Inc. (88,742)
Prepaid expenses (539,445)
Accounts payable 168,062
Accrued expenses 43,395
Due to Glyko, Inc. 70,207
----------------

Net cash used in operating activities (3,086,478)
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (150,473)
Purchase of short-term investments (900,827)
----------------

Net cash used in investing activities (1,051,300)
----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Bridge loan 880,000
Accrued interest on notes receivable from stockholders (37,500)
Proceeds from sale of common stock, net of issuance costs 9,282,711
----------------

Net cash provided by financing activities 10,125,211
----------------

Net increase in cash and cash equivalents 5,987,433

CASH AND CASH EQUIVALENTS:
Beginning of year -
---------------

End of year $ 5,987,433
================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash transactions:
Common stock issued in exchange for notes $ 2,500,000
Compensation in the form of common stock and common stock options 18,020
Common stock and common stock warrants issued in exchange for financing services
929,740
Bridge loan retired in exchange for common stock 880,000
</TABLE>

The accompanying notes are an integral part of these statements.

F.19

<PAGE>

BIOMARIN PHARMACEUTICAL, INC.
(a development-stage company)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of Operations

BioMarin Pharmaceutical, Inc. (BioMarin or the Company) is a development-stage
pharmaceutical company specializing in the discovery and development of
proprietary, naturally occurring carbohydrate-active enzyme therapeutics as
treatments for major human diseases. BioMarin was incorporated on October 25,
1996 in the state of Delaware. BioMarin first issued stock on March 21, 1997
(inception) when it issued 1,500,000 shares of common stock to Glyko Biomedical,
Ltd. (GBL) fof $1.5 million. At inception, the Company was wholly-owned by GBL,
which also owns 100 percent of an affiliate, Glyko, Inc. (Glyko). Beginning in
October 1997, BioMarin issued stock to outside investors resulting in GBL's
ownership of BioMarin being reduced to 41 percent at December 31, 1997.

Since inception, the Company has devoted substantially all of its efforts to
product research and development through a network of experts in the disease
areas being studied.

The Company is in the development stage, and its products are in early-stage
clinical trials. There can be no assurance that the Company's research and
development efforts will be successfully completed or that its products will be
shown to be safe and effective. There can be no assurance that its products will
be approved for marketing by the FDA or any foreign government agency or that
its products will be successfully introduced or achieve any significant degree
of market acceptance.

Concentration of Business Risks

BioMarin's core technology is derived from the successful cloning of
carbohydrate-active enzymes developed by Glyko. Rights to this technology were
transferred to BioMarin by GBL in exchange for 7,000,000 shares of BioMarin
common stock (see Note 3). Certain of the Company's products rely on proprietary
technology and patents owned by certain universities. These universities also
provide research and development for product development. Cessation of
relationships with these universities could significantly affect the Company's
future operations.

In order to compete successfully, the Company must expand its efforts to develop
new products and uses for its current products in pharmaceutical applications.
The Company will also need to establish its own production capabilities and to
develop its own marketing capabilities and/or establish arrangements with third
parties having the capacity for such manufacturing or marketing.

BioMarin's products will require regulatory approval by government agencies.
This includes pre-clinical and clinical testing and approval processes in the
U.S. and other countries. Compliance can take several years and require
substantial expenditures. There can be no assurance that difficulties or
excessive costs will not be encountered by the Company in this process which
could delay or preclude the Company from marketing its products. There can be no
assurance that any of BioMarin's current or future products will be successfully
developed, prove to be effective in clinical trials, receive required regulatory
approvals, be capable of being produced in commercial quantities at reasonable
costs, or be successfully marketed.

Concentration of Credit Risk

Financial instruments that may potentially subject the Company to concentration
of credit risk consist principally of cash, cash equivalents and short-term
investments. All cash, cash equivalents and short-term investments are with
financial institutions with strong credit ratings, which minimizes the risk of
loss due to nonpayment. The Company has not experienced any losses due to credit
impairment related to its financial instruments.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates made by management includes determination of progress to date under
research and development contracts (see Footnote 6).

F.20

<PAGE>

Cash

Cash and cash equivalents are stated at cost, which approximates market, and
consist of short-term highly liquid investments with original maturities of less
than three months.

Available-for-Sale Securities

The Company's policy is to record its investment securities as
available-for-sale because the sale of such securities may be required prior to
maturity. The Company's short-term investments at December 31, 1997, consisted
of U.S. Treasury Bills stated at amortized cost, which approximated fair value
at December 31, 1997.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the
straight-line method. Leasehold improvements are amortized over the life of the
asset or the term of the lease, whichever is shorter. Additions and improvements
are capitalized, while repairs and maintenance are charged to expenses as
incurred.

Property and equipment consist of the following at December 31, 1997:

Estimated Useful Lives
Computer hardware and software $ 27,688 3 years
Laboratory equipment 119,002 5 years
Leasehold improvements 3,783 Shorter of life of asset
or lease term
-------------
150,473
Less: Accumulated depreciation (4,790)
-------------
$ 145,683
=============

Depreciation expense for the year ended December 31, 1997, was $4,790.

Accrued Liabilities

Accrued liabilities consist of the following at December 31, 1997:

Accrued vacation $ 25,579
Accrued legal fees 17,816
-----------

$ 43,395
============

Research and Development

Research and development costs include contract research funding to third
parties and clinical and regulatory costs. Research and development costs are
expensed as incurred.

Income Taxes

The Company provides for income taxes under Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under SFAS No. 109,
deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each period-end. The Company has

F.21

<PAGE>

a cumulative net operating loss carryforward since inception, resulting in net
deferred tax assets. A valuation allowance is placed on the net deferred tax
assets to reduce them to their net realizable values.

Net Loss per Share

Net loss per share is based on the weighted average number of common shares
outstanding in accordance with SFAS No. 128, "Earnings per Share."

Potentially dilutive securities include 297,000 common stock options and 801,500
common stock warrants; these securities were not considered in the computation
of dilutive loss per share because their effect would be anti-dilutive for the
year ended December 31, 1997.

Adoption of Accounting Pronouncements

For the year ending December 31, 1998, the Company will report Comprehensive
Income based upon the recently issued Statement of Financial Accounting
Standards No. 130 (SFAS No. 130), "Comprehensive Income." The pro forma effect
of this accounting change on the period from March 21, 1997 (inception) to
December 31, 1997 is:

Net Loss as reported $(2,762,765)
Pro forma effect of SFAS No. 130 0
Comprehensive income pro forma $(2,762,765)

2. BRIDGE LOANS:

In the third quarter of 1997, the Company drew upon a bridge loan facility from
stockholders in the amount of $880,000. This bridge loan was converted into
880,000 shares of common stock in the fourth quarter of 1997.

3. STOCKHOLDERS' EQUITY:

Common Stock and Warrants

On March 21, 1997, BioMarin's parent company, GBL, provided equity funding by
purchasing 1,500,000 shares of common stock for $1,500,000.

BioMarin and GBL have entered into a License Agreement dated June 26, 1997,
pursuant to which GBL granted BioMarin an exclusive, worldwide, perpetual,
irrevocable, royalty-free right and license to all current and future worldwide
patents, trade secrets, copyrights and other proprietary rights to all know-how,
processes, formulae, concepts, data and other such intellectual property,
whether patented or not, owned or licensed by GBL and its subsidiaries as of the
date of the License Agreement. Under the same License Agreement, BioMarin
granted GBL a cross-license, similar in scope, to all improvements BioMarin may
make upon the licensed intellectual property. As consideration for this license,
BioMarin issued to GBL 7,000,000 shares of BioMarin common stock.

In October 1997, BioMarin closed a private equity placement offering which
raised net proceeds of $3,647,000. The Company issued 6,240,000 shares of common
stock at $1.00 per share, including $2,500,000 in notes from stockholders at an
interest rate of six percent. Included in the issued shares are 299,000 shares
issued to brokers in exchange for services rendered in connection with the
financing, and 880,000 shares issued to stockholders to retire an $880,000
bridge loan. The brokers also received for their services warrants to purchase
299,000 shares of common stock exercisable at $1 per share and valued under the
Black-Scholes valuation model at $47,840. The warrants expire October 1, 2001.

On December 31, 1997, the Company issued 5,025,000 shares of common stock at $1
per share to investors for net proceeds of $5,016,000. In addition, the Company
issued to brokers 502,500 shares and warrants to purchase 502,500 shares of
common stock at $1 per share in exchange for services rendered in connection
with the financing. The warrants were valued under the Black-Scholes valuation
model at $80,400. The warrants expire on December 31, 2001.

The October 1997 and December 31, 1997 offerings reduced GBL's ownership in
BioMarin to 41 percent.

F.22

<PAGE>

Notes Receivable from Stockholders

Notes receivable from stockholders relate to shares issued in October 1997 to
employees, bear interest at six percent per annum and are due July 31, 2000, or
the date of the employee's termination, whichever is earlier. Notes are secured
by the underlying stock. Interest was imputed at 9%, resulting in a discount and
related deferred compensation of $200,000.

4. INCOME TAXES:

The significant components of net deferred tax assets and liabilities as of
December 31, 1997, are as follows:

Net operating loss carryforwards $ 1,054,000
Research and development credit carryforwards 200,000
Other (30,000)
Valuation allowance (1,224,000)
-----------------
Net deferred tax asset $ -
=================

The reconciliation of the effective tax rate is as follows:

Period from March 21, 1997
(inception) to
December 31,1997
Amount %
----------------- ------------
U.S. Statutory tax rate $ (939,000) (34)%
State taxes, net of federal
income tax benefit (167,000) (6)%
Research and development tax
credit (200,000) (7)%
Other 82,000 3 %
Change in valuation allowance
1,224,000 44 %
----------------- ------------
Provision for income taxes $ -- 0 %
================= ============

As of December 31, 1997, net operating loss carryforwards are approximately $2.4
million and $2.5 million for federal and California income tax purposes,
respectively. These federal and state carryforwards expire beginning in the year
2011 and 2004, respectively.

The Company also has research and development credits available to reduce future
federal and California income taxes, if any, of approximately $143,000 and
$56,000, respectively, at December 31, 1997.

The Tax Reform Act of 1986 contains provisions that may limit the net operating
loss carryforwards and research and development credits available to be used in
any given year should certain events occur, including sale of equity securities
and other changes in ownership. There can be no assurance that the Company will
be able to utilize net operating loss carryforwards and credits before
expiration.

5. STOCK OPTION PLANS:

The Company's 1997 Stock Option Plan (the Plan) provides for the grant of
incentive common stock options and nonstatutory common stock options to
employees and consultants of the Company. The maximum aggregate number of shares
that may be optioned and sold under the Plan is 3,000,000 shares.

The Company accounts for the Plan under APB Opinion No. 25, under which no
compensation cost has been recognized, as options have been granted at an option
exercise price equal to the market value of common stock as determined by the
Board of Directors on the date of the grant, except for options granted to
consultants. The Company recognized compensation expense for options granted to
consultants, pursuant to SFAS No. 123, based on a valuation as determined using
the Black-Scholes valuation model.

F.23

<PAGE>

Had compensation cost for the Plan been determined consistent with SFAS No. 123
for option grants to employees, the effect on the Company's net loss would have
been as follows:

Period from March
21,1997
(inception) to
December 31, 1997
--------------------

Net loss:
As reported $(2,762,765)
Pro forma (2,764,405)

A summary of the status of the Company's stock option plan is as follows:
<TABLE>
<CAPTION>

Weighted Average
Weighted Exercisable Fair Value of
Option Average at End of Options Granted
Shares Exercise Price Year
----------- ----------------- -------------- ---------------------

<S> <C> <C> <C> <C>
Outstanding at March 21, 1997 0 $0.00 0

Granted 297,000 1.00 $0.22
Exercised 0 0.00
Canceled 0 0.00
----------- ----------------- -------------- ---------------------

Outstanding at December 31, 1997 297,000 $1.00 232,000
=========== ================= ==============
</TABLE>

There are 2,703,000 options available for grant under the plan at December 31,
1997. The average remaining contractual life of the options outstanding at
December 31, 1997 is 4 years.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997: risk-free weighted-average interest rates
of 6.15 percent; expected dividend yield of 0 percent; expected life of 4 years
for the Plans' options; and expected volatility of 0 percent.

6. COMMITMENTS AND CONTINGENCIES:

Lease Commitments

The Company leases office space for its administrative office and its research
and testing laboratory pursuant to a month-to-month operating sublease from the
Company's affiliate, Glyko, Inc. Lease payments for this operating lease is
charged to expense over the lease terms as they become payable. Rent expense for
the period from March 21, 1997 (inception) to December 31, 1997 was $34,830.

Research and Development Funding Commitments

The Company uses experts at universities and other institutions to perform
research and development activities. Funding commitments to these institutions
as of December 31, 1997, are as follows:

1998 $ 997,156
1999 186,451
---------------

$ 1,183,607
===============

F.24

<PAGE>

Consulting Agreements

BioMarin has agreements with two consultants whereby the consultants are paid
cash and granted common stock options in exchange for services; options for
206,000 shares of common stock have been granted in satisfaction for these
services. Total compensation related to these options is $35,020.

8. RELATED-PARTY TRANSACTIONS

BioMarin shares office space, certain administrative, and research and
development functions with Glyko, Inc., its affiliate.
BioMarin reimburses Glyko, Inc. for rent, salaries and related benefits,
and other administrative costs. Glyko, Inc. reimburses BioMarin for salaries
and related benefits. BioMarin reimbursed Glyko, Inc. for $373,848 and
Glyko, Inc. reimbursed BioMarin for $133,000 for the period March 21, 1997
(inception) to December 31, 1997.

F.25

<PAGE>

EXHIBIT INDEX

Exhibit No. Description Location in Form 10-KSB

27.1 Financial Data Schedule Page 49

<PAGE>

<ARTICLE> 5

<CIK> 0000908401
<NAME> Glyko Biomedical, Ltd.
<MULTIPLIER> 1
<CURRENCY> US Dollars

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.000
<CASH> 528,280
<SECURITIES> 0
<RECEIVABLES> 141,743
<ALLOWANCES> 0
<INVENTORY> 95,210
<CURRENT-ASSETS> 780,412
<PP&E> 443,430
<DEPRECIATION> (324,520)
<TOTAL-ASSETS> 3,927,518
<CURRENT-LIABILITIES> 798,204
<BONDS> 0
0
0
<COMMON> 13,154,224
<OTHER-SE> (10,024,910)
<TOTAL-LIABILITY-AND-EQUITY> 3,927,518
<SALES> 1,175,699
<TOTAL-REVENUES> 2,036,634
<CGS> (482,770)
<TOTAL-COSTS> (482,770)
<OTHER-EXPENSES> (1,168,691)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,055,858)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,055,858)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,055,858)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)

</TABLE>