SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 FORM 10-KSB/A

  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 under Section 13 or 15(d) of the Securities Exchange
              Act of 1934 For the transition period from _________ to _________

                        Commission file number 33-60296

                                Globalink, Inc.
       (Exact name of small business issuer as specified in its charter)

                  Delaware                               54-1473222
         (State or other jurisdiction of              (I.R.S. Employer
          incorporation or organization)             Identification No.)

         9302 Lee Highway, 12th Floor, Fairfax, VA           22031
         (Address of principal executive offices)          (Zip Code)

         Registrant's telephone number, including area code (703) 273-5600
                                                  

Securities registered pursuant to Section 12(b) of the Exchange Act:Common Stock
Securities registered pursuant to Section 12(g) of the Exchange Act:none

Indicate by check mark whether the issuer (1) has filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes X                                                            No

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is contained in this form, and disclosure will be contained,  to the best of
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

 State the issuer's revenues for the most recent fiscal year: $14,729,000
 State the aggregate market value of the voting stock held by non-affiliates of
  the registrant: $15,973,701 based on the closing price on February 27, 1998.

 Indicate the number of shares outstanding of each of the issuer's classes of
  common equity:  Common Stock, par value $.01 per share --
                  9,160,236 as of February 27, 1998.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Proxy  Statement  for the 1997 Annual  Meeting of
Stockholders to be filed with the Securities and Exchange  Commission within 120
days  after  the  close  of  the  fiscal  year  ended  December  31,  1997,  are
incorporated by reference into Part III hereof.

Portions of the Registrant's  Registration  Statement number 33-60296 filed with
the  Securities  and  Exchange  Commission  on Form  SB-2  are  incorporated  by
reference into Part IV hereof.



<PAGE>

                                GLOBALINK, INC.
                               TABLE OF CONTENTS


                          Annual Report on Form 10-KSB
                  For the Fiscal Year ended December 31, 1997

Part I                                                                 Page No.
                                                                       --------
Item 1.    Business...................................................     3

Item 2     Properties.................................................    10

Item 3     Legal Proceedings..........................................    10

Item 4     Submission of Matters to a Vote of Security Holders........    10


Part II

Item 5     Market for Registrant's Common Equity and Related
           Stockholder Matters........................................    11

Item 6     Management's Discussion and Analysis of Financial Condition
           and Results of Operations..................................    13

Item 7     Financial Statements and Supplementary Data................    20

Item 8     Changes In and Disagreements with Accountants on Accounting
           and Financial Disclosure...................................    20


Part III

Item 9     Directors, Executive Officers of the Registrant............    21

Item 10    Executive Compensation.....................................    22

Item 11    Security Ownership of Certain Beneficial Owners and
           Management.................................................    23

Item 12    Certain Relationships and Related Transactions.............    23


Part IV

Item 13    Exhibits and Reports on Form 8-K ..........................    24

                                       2

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                                     PART I

ITEM 1   BUSINESS


The Company

Globalink, Inc. ("Globalink" or "the Company") is a leading provider of products
and services that help businesses and individuals  overcome  language  barriers.
The Company designs, develops,  publishes,  markets and supports translation and
language learning software;  provides  real-time  translations to Internet users
through its Comprende service;  and provides  professional  translation services
through the Globalink Translation Services Division.  With an extensive range of
software  and  service  offerings,  Globalink  helps  corporations,   government
agencies,  large organizations,  students,  educators and small businesses solve
language  problems.  The Company currently markets  bi-directional  software for
creating  draft  translations  between  English  and  French,  German,  Italian,
Portuguese  and  Spanish,  as well as language  learning  software  for English,
French,  German and Spanish. The Company continues to develop new generations of
its core  translation  technology  while also bringing new  applications of that
technology and related technologies to market, providing advanced and affordable
translation software and language learning software for its customers.

The Company also offers professional  translation services through its worldwide
network of translators.  Some of the materials routinely translated include: Web
Sites,  software user guides,  technical  manuals,  proposals,  legal contracts,
business  correspondence,  advertising  and  marketing  materials,  newsletters,
employee handbooks, and more. These services focus on translating documents in a
time  sensitive  production  environment  designed  to  meet  the  needs  of the
Company's domestic and international client base.

Background

As the global  economy  has  continued  to expand,  so too has the need to share
information.  As  post-industrial  economies are  transforming  into information
economies,  data is  increasingly  a vital  asset.  Timely  access to  pertinent
information is essential for the "knowledge workers" of these new economies. The
growth  of the  Internet  has  played  a  significant  role in this  new wave of
information processing. E-mail messages, Web sites, and HTML and word processing
documents are rapidly becoming  international  in the audience they address,  as
they are disseminated over the Internet.  While the Internet enables the flow of
information  across  national  and  cultural  boundaries,   communication  still
requires  overcoming  the  language  barrier.  As a leading  provider of machine
translation technology, the Company sees growth opportunities in providing tools
to enable communication. Machine translation, also known as "MT," is the process
of converting text from one language to another with a computer.  Today,  humans
still perform most  translations.  As more information is digitally  created and
transmitted,  alternative  translation  methods will play a larger role.  In the
case of the  Internet  and  e-business,  the  need  for  high-volume,  real-time
translations makes machine translation solutions particularly important.

Machine Translation (MT) Technology

Machine Translation (MT), the automated process of translating from one language
to another,  is the earliest type of language  processing.  Unlike software that
merely looks up words in a dictionary,  MT  grammatically  analyzes the original
language text (source language) and automatically  generates  corresponding text
in the target  language  desired.  This output may then be displayed  on-screen,
printed (with or without the corresponding source language),  e-mailed or posted
on a Web site,  among other options.  Globalink's  translation  applications use
three sets of data:  the input  text,  the  translation  program  and  permanent
knowledge  sources  (containing  a dictionary of words and phrases of the source
language),

                                       3

<PAGE>

and  information  about  the  concepts  evoked by the  dictionary  and rules for
sentence development. These rules are in the form of linguistic rules for syntax
and  grammar,  and  some  are  algorithms  governing  verb  conjugation,  syntax
adjustment,  gender and number agreement and word re-ordering. Once the user has
selected the source text and  initiated  the machine  translation  process,  the
program  begins  to match  words of the  input  text  with  those  stored in its
dictionary.  Upon finding a match,  the application  brings up a complete record
that includes  information  on possible  meanings of the word and its contextual
relationship  to other words that occur in the same sentence.  The time required
for the translation depends on the length of the text and the system running the
software.

Globalink's Products -- Core Technology

Globalink translation software products and services  (Comprende(TM),  Globalink
Language   Assistant(TM),   Globalink  Power   Translator(R),   Globalink  Power
Translator(R)  Pro  and  Globalink  Web   Translator(TM))   provide  high-speed,
computer-assisted draft translations for a wide range of applications. When used
with customized Subject  Dictionaries,  Globalink  translation  software creates
draft  translations of scientific,  technical,  or commercial  texts. The source
texts should use clearly written,  grammatically correct, declarative sentences.
The Company's software is not intended for use in translating  literary works or
poetry.

The most recent versions of these products are based on Globalink's  proprietary
Barcelona  technology.   Globalink's  Barcelona  technology,  with  its  modular
architecture of linguistics and programming components, enhances the development
of both the core  translation  technology and new language  pairs.  In addition,
Globalink  currently has research  efforts underway in the areas of context-free
parsing,  transformational  morphology,  statistical analysis,  and large-corpus
lexicography.

Globalink  translation  programs  convert the  original  text into the  selected
target  language,  utilizing  the machine  translation  dictionaries  as lexical
databases.  Users can  translate  entire  documents  with a single  command,  or
translate  selections or single  sentences  from the document.  Documents can be
created using the built-in editor of the program,  or can be imported from other
files in which the  documents  are  resident,  using import  filters that retain
formatting.  In addition,  some of the Company's programs allow users to operate
the program from within a word  processor  (e.g.  Microsoft  Word for  Windows).
Similarly,  Web Translator  and Comprende let users  translate Web pages as they
surf the Internet.  Other features allow for  translation of e-mail messages and
chat rooms.

All of Globalink's translation programs seek to be user-friendly and to generate
quality  draft  translations.  Users  can add new terms to the  dictionaries  or
modify  existing  terms.  They can also create special  Subject  Dictionaries or
purchase them from Globalink.  In programs such as Power  Translator,  the texts
are displayed in a split screen,  facilitating review of the source text and the
target text. Similarly,  the built in editor, with special features for entering
accented  and  foreign  character  entry,  permits  users  to edit  translations
on-screen. During the editing process, users can access alternative translations
or synonyms  for terms in the source  language  that may result in  translations
that are more accurate.

Special translation algorithms will perform multiple translations of a word in a
sentence based on parts of speech. Other translation features include: component
analysis of German compound  nouns,  the  disambiguation  of terms with multiple
parts of speech,  automatic  inflection of semantic  units,  and other automatic
grammatical functions.

The software  products  also  contain a special  reference  component  that will
display parts of speech,  translations  and other  grammatical  information  for
terms contained in the internal dictionaries of the products.

                                       4

<PAGE>

Market Strategy

Globalink's  objective is to become the world's leading  provider of translation
and language  solutions.  The Company's  target  market areas are  professional,
governmental,  educational,  industry,  and  consumer  mass  markets.  Globalink
translation  software  products are designed to emphasize  quality  translation,
adaptability to the end user, integration with market-leading applications (such
as Web browsers,  e-mail  packages,  word  processors and online  offerings) and
affordability.

Current Globalink  products and others under development are available on a wide
variety of computer  platforms  including IBM PCs and compatibles  under Windows
and  Internet-based  offerings  that  are  functional  across  platforms.  These
products and services are designed to deliver high  productivity  through  rapid
draft  translations.  The Company's products and services cover a range in price
for large  organizations as well as for general consumers.  The Company plans to
continue to broaden its product offerings with more language pairs, enhancements
to its  existing  products,  and new  products and services for areas such as e-
business.

The  Company  sells  its  products  and  services  primarily  through  worldwide
non-exclusive  distributor/dealer  channels and original equipment  manufacturer
(OEM) agreements.  Distributors normally agree to purchase inventory of products
upon  execution  of their  respective  distributor  agreements.  The  Company is
broadening  its  distribution  through  expansion  of  its   distribution/dealer
channels,  direct sales efforts  nationally,  OEM agreements,  on line (Internet
based) sales channels and extensive promotional programs. Distributor agreements
usually  contain  stock  rotation   provisions   which  allow   distributors  to
periodically  exchange  one  product  held in  inventory  for an equal  value of
another product upon written request. See "Management's  Discussion and Analysis
of Financial Condition and Results of Operations."

Products and Services

Globalink Comprende is a real-time Intranet-based translation service that gives
account  holders the capability to translate  documents,  web pages,  electronic
mail,  newsgroups,  and chat. Comprende account holders can surf the Internet in
any of the offered languages, turning the service on when necessary to translate
found material into the user's natural  language.  Once logged on, the Globalink
server  systems  remotely  retrieve  web  pages,  e-mail,  documents,  newsgroup
content,  or chat dialogue on demand,  run it through the Comprende  translation
engine,  and return the page  contents to the user for viewing.  Currently,  the
service offers  translation for the following  language pairs:  French{}English,
German{}English, Italian{}English, Portuguese{}English and Spanish{}English.

Globalink  Intranet  Translator(TM)  is a product for corporate  Intranets which
translates e-mail messages, web pages, word processor files and other documents.
Language pairs supported are French{}English, German{}English, Italian{}English,
Portuguese{}English and Spanish{}English.  Chinese,  Japanese and Russian are in
development.  Globalink  Intranet  Translator  is  compatible  with many Windows
applications,  office  suites,  e-mail  packages,  Web  browsers  and  groupware
packages.  The server portion of Globalink Intranet Translator currently runs on
Windows NT, while desktop  clients  using Windows 3.X,  Windows 95 or Windows NT
interact   with  the  server.   Because   Globalink   Intranet   Translator   is
Intranet-based,  information  services (IS) departments can maintain and control
deployment of computer-based  translation  capabilities while providing similar,
scaleable  support for "clients" on workstations or notebook  computers  located
anywhere  throughout the enterprise.  This architecture also allows customers to
develop and control customized dictionaries.

                                       5

<PAGE>

Globalink Power  Translator(R)  and Globalink Power  Translator(R) Pro (versions
6.x). Globalink Power Translator is the Company's newest  shrink-wrapped  retail
product.  The product creates draft translations of documents,  including e-mail
and Web  pages  for  four or five  language  pairs  in one box  French{}English,
German{}English,  Italian{}English,  Portuguese{}English  and Spanish{}English--
Globalink Power Translator customers can create new documents, import files from
other  applications,  or  install  it to work  within  Microsoft  Word or  Corel
WordPerfect.  Globalink Power Translator also includes a utility for translating
within e-mail  applications,  a special version of Globalink Web  Translator(TM)
(see below),  and a Conversation  utility.  Advanced  features allow the user to
create,  prioritize and modify dictionaries;  edit documents interactively;  and
look  up or  inflect  words.  Globalink  Power  Translator  uses  the  Globalink
Barcelona(TM) technology and runs on Windows 95 or NT systems.

Globalink Power  Translator 5.1 (16 bit) is a similar product to Globalink Power
Translator  6.x (32 bit), but is for Windows 3.1 systems.  The product  includes
three language pairs: French{}English, German{}English and Spanish{}English.

Globalink Language Assistant is targeted at students,  travelers,  pen pals, and
home  computer  users.  Globalink  Language  Assistant  is useful  to  translate
letters,  articles,  recipes,  travel brochures,  bulletins and more. A suite of
reference tools gives users instant help when writing, studying, or translating.
Globalink Language Assistant products have extensive grammar help,  including an
on-line grammar "reference book" to help users get better  translation  quality.
Bilingual  dictionaries can be customized by adding new words and phrases, or by
modifying  existing  entries.  Finally,  for  writing in a foreign  language  or
entering new foreign  words to  dictionaries,  the program  contains an accented
character utility.

Globalink Web  Translator(TM) is a browser add-on for translating Web sites. The
product applies the Company's core MT technology to tasks such as  understanding
information from news bureaus, resorts, embassies, libraries, museums, and more.
Translations are draft-quality,  providing an understandable  translation of the
foreign  language site.  Translated pages maintain the hotlinks,  graphics,  and
formatting of the original pages.  Globalink Web Translator  works with Netscape
Navigator and Microsoft  Internet Explorer and translates while on-line so users
do not have to exit their browser.  Versions for Italian to and from English and
Portuguese  (Brazilian) to and from English are available.  This product runs on
Windows 3.1, Windows 95 or Windows NT.

New Products--During  1998, Globalink plans to release a variety of new products
and services.  These new offerings are expected to include  updated and improved
versions of existing  products,  new language pairs (such as French{}German  and
Spanish{}Portuguese)  within the Barcelona  technology  for use across  multiple
product   lines,   and  new   product   functions,   with  an  emphasis  on  the
Internet/Intranet/Extranet  environment,  and the market  segments of e-business
and  online  communication.  In  addition,  Globalink  plans to put  significant
emphasis on continued  development of its core Barcelona  technology,  expanding
its functionality and increasing both speed and translation quality. The Company
believes that any improvements in the Barcelona technology would benefit many of
Globalink's products and services.

Sales, Marketing and Distribution

The  Company  markets  and  sells its  software  products  through a variety  of
channels, primarily through worldwide non-exclusive  distributor/dealer channels
and OEM agreements.  Distributors  provide  products to retailers or value added
resellers  (VARs) who sell to end users or the  public.  In order to  accomplish
this  channel  sales  process  the  Company   employs  an  internal  retail  and
distribution sales team

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and  also the  services  of  merchandising  representatives  who call on  retail
establishments.  The  Company  also  participates  in trade shows and invests in
advertising  and other  promotional  activities.  The Company is broadening  its
distribution through expansion of its distribution/dealer channels, direct sales
efforts nationally, OEM agreements,  on-line (Internet-based) sales channels and
promotional  programs.  Distributor  agreements  usually  contain stock rotation
provisions which allow distributors to periodically exchange one product held in
inventory  for an equal  value of another  product  upon  written  request.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

Promotional  activities  of  varying  forms are the  single  largest  expense of
software product marketing.  Product promotion is a continuing business activity
and increases proportionally with increases in revenue.

Promotion and Advertising

With the recent private equity  placements,  the Company has been able to invest
in  advertising  campaigns and  promotions.  This has included  expanded  public
relations programs,  extended advertising in general business  publications,  as
well as trade  journals,  and  increased  use of free or general  news  coverage
publicity.

Currently,   the  Company's  promotion  and  advertising  programs  include  the
following:

Advertising - Product advertising appears at different times in different media,
as the Company performs targeted marketing. For example, campaigns have included
ads in trade magazines,  regional  promotions and promotions  targeting specific
demographic  sectors.  Catalog advertising  continues at a high rate in industry
and trade catalogs.  Online  advertising and promotions are expected to continue
to increase in importance in 1998.

Direct Mail - The Company  invests in direct mail programs to increase sales and
exposure  for its product  lines.  This  includes  programs  by industry  and by
demographic profiles of buyers.

Exhibits  - CeBIT  and  other  European  trade  shows  highlight  the  Company's
participation  in several  local,  national and  international  trade shows.  In
addition to Company  expenditures,  many of the distributors and agents employed
by the Company  participate  in local  exhibits.  Globalink is also the Official
Translation  Company of the  Internet  World  trade  shows in Latin  America and
Europe.

Public Relations - The Company plans to expand its public relations  programs to
educate the general  marketplace.  These  include the  employment  of  freelance
public relations agents or specialized companies throughout the world.

Distributors

The Company currently has a number of worldwide distributors.  These include the
larger  international  distributors such as Ingram Micro,  Merisel and TechData,
and various second tier  distributors.  In less developed parts of the world the
Company  uses  regional  or local  distributors.  In parts of  Europe  and South
America the Company uses sales agents to represent its interests.

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Product Development

Since  inception,  the  Company  has made  substantial  investments  in  product
development. To date, the Company's products have been developed by its internal
product development staff and independent contractors. The Company believes that
timely  development  of new products and  enhancements  to existing  products is
essential to maintaining a competitive position in the market.

The  Company  currently  has a staff of  development  personnel  located  in the
Research  and  Development  facility  in San Diego,  California.  The Company is
focusing its  development  efforts in three areas:  first, in the development of
algorithms to improve  translation  quality,  second,  in the development of new
language pairs to expand current markets or enter new markets, and third, in the
development   of   new   product   functions,    with   an   emphasis   on   the
Internet/Intranet/Extranet environment.

Competition

Competition  in the PC  software  industry  in general is intense  and  includes
competition not only between similar product companies but among all PC software
companies for retail shelf space.  The same battle for product  awareness is now
being waged in online environments;  thus, the Company's competitors include not
only other companies who produce and market machine  translation  products,  but
also  virtually  all software  companies who compete for shelf space in computer
software  retailers  and for  buyers of  translation  services  marketed  on the
Internet.

Within the software industry,  several manufacturers have made public statements
of their  intent  to  produce  or market  machine  translation  products.  These
companies  include   Microsoft,   Novell  and  IBM.  Among  direct  PC  software
competitors  there are a dozen or more companies,  including Logos,  Systran and
Transparent Language Inc., who market machine translation software products that
compete in either the PC marketplace or the online marketplace.

Globalink  holds  a  strong  position  in the  retail  marketplace  for  machine
translation  software.  The Company believes it has  successfully  pioneered and
dominated an emerging  software industry segment to date and will continue to do
so as long as the Company continues to generates new and advanced products.

In order to be successful in the future,  the Company must respond  promptly and
effectively  to the  challenges  of  technological  and  marketing  capabilities
competitors may offer.  The Company's  performance will depend on its ability to
innovate, as well as maintain and solicit quality people in technical, sales and
management positions.  The Company will continue to seek out and recruit capable
and experienced staff in order to maintain its competitive superiority.

The translation services market is also highly competitive. Although none of the
current  participants in this market has a significant market share, the Company
has numerous  competitors,  certain of whom have substantially greater resources
than the  Company.  The Company  competes  primarily  on the basis of quality of
translation, responsiveness and price.

The  Company  believes  that  competition  in  the   Internet/Intranet   machine
translation  market,  will be based upon accuracy,  functionality,  ease-of-use,
versatility and price.  There can be no assurance that the Internet and Intranet
machine translation products being developed by the Company will be commercially
successful.

                                       8

<PAGE>

Intellectual Property, Proprietary Rights, Licenses and Software Protection

The Company regards certain  features of its internal  operations,  software and
documentation  as  proprietary,   and  relies  on  a  combination  of  contract,
copyright,  trademark  and trade secret laws and other  measures to protect this
proprietary information. The Company has no patents, and existing copyright laws
afford only limited protection.  The Company believes that, because of the rapid
pace of technological change in the computer software industry, trade secret and
copyright  protection are less  significant  than factors such as the knowledge,
ability and experience of the Company's employees, frequent product enhancements
and the timeliness and quality of support services.

The Company  provides its products to end users typically  under  non-exclusive,
perpetual  term  licenses,  which  generally  are  nontransferable.  The Company
generally  licenses its products solely for the customer's  internal  operations
and only on designated computers.  In certain  circumstances,  the Company makes
available  enterprise-wide  licenses.  The  Company  does not make  source  code
available as this may  increase  the  likelihood  of  misappropriation  or other
misuse of the Company's intellectual property.

In December 1997, the Company  entered into a  non-monetary  transaction  with a
publishing company which included license  agreements  between the parties.  The
Company became a licensee under two agreements. The first was a one year license
for the use of six "Virtual Campuses" established by the publishing company. The
second was a one-year renewable license relating to "Campus Courseware" provided
by the publishing  company.  In exchange,  the Company granted a license for its
Barcelona Technology Server in five languages. In conjunction with this license,
the Company will provide  maintenance  for a period of one year from the date of
the agreement.

The Company has  registered  its  "GLOBALINK"  service mark and trademark in the
United  States for  language  translation  services  and  computer  software for
foreign language translation,  respectively. The Company has also registered the
following marks in the United States:  "POWER  TRANSLATOR" for computer software
for foreign language translation;  "GLOBALINK THE TRANSLATION COMPANY", together
with the oval logo, for computer hardware and software for language  translation
and  "TRANSLATE  DIRECT"  for  language  translation  services.  The Company has
applications   pending  for  federal   registration  of  the  following   marks:
"COMPRENDE", "NO COMPRENDE? NO COMPRENDE, KNOW THE WORLD", "TRANSLATEPLUS", "WEB
TRANSLATOR",   "GLOBALINK   THE   TRANSLATION   COMPANY"  with  the  flag  logo,
"TRANSLATION @ YOUR FINGERTIPS",  the "Flag Design", and the "Comprende Design".
The Company is in the process of registering the mark "GLOBALINK", together with
the Company's flag logo, in addition to the mark "WEB TRANSLATOR", in the United
States,  Canada, the European Community  (Austria,  Belgium,  Denmark,  Finland,
France,  Germany,  Greece, Ireland, Italy,  Luxembourg,  Netherlands,  Portugal,
Spain, Sweden and the United Kingdom) and other major  international  markets in
Asia and  South  America.  The mark  "GLOBALINK"  with the  Company's  flag logo
concerns  language  translation  software  and  services,  whereas the mark "WEB
TRANSLATOR" has been filed in connection with software. The use and registration
rights of a trademark  holder do not ensure that such holder has superior rights
to others that may have  registered or used  identical  related marks on related
goods or services.

The Company believes that copyright protection,  which generally applies whether
or not a license agreement exists, is sufficient to protect the Company's rights
regarding its products.

Employees

As of December 31, 1997, the Company had sixty-eight (68) full-time and five (5)
part-time employees;  including nineteen (19) in product  development,  thirteen
(13) in marketing  and sales,  twenty-six  (26) in finance,  administration  and
shipping,  two (2) in customer support,  and thirteen (13) in language services.
The Company's future success will depend on, in part, its ability to continue to
attract, retain and

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<PAGE>

motivate highly qualified  technical,  marketing and management  personnel.  The
Company's employees are not represented by any collective bargaining agreements,
and the Company has never experienced a work stoppage. The Company believes that
it has a satisfactory relationship with its employees.


ITEM 2   PROPERTIES

The Company leases  approximately 21,100 square feet of office space in Fairfax,
Virginia, pursuant to a lease that expires on August 31, 1999. This space, which
allows  some  room for  expansion,  is used as the  Company's  headquarters  and
includes marketing,  sales,  customer support,  and administrative  offices. The
Company  also leases  approximately  7,200  square  feet of office  space in San
Diego,  California,  pursuant to a lease that expires on December 7, 2000.  This
space  is  primarily   utilized  as  the  Research   and   Development   center.
Additionally,  the Company leases  approximately 300 square feet of office space
in Paris, France.  This space supports the European Sales and Marketing team.


ITEM 3   LEGAL PROCEEDINGS

The  Company is a party to various  legal  proceedings  arising in the  ordinary
course of its business.  The Company  believes  that the ultimate  resolution of
such claims,  either individually or in the aggregate,  will not have a material
adverse effect on the Company's financial position or results of operations.

The Company has also filed suit against one  customer in France,  for payment of
approximately  $1,547,000 of overdue OEM receivables.  The case is scheduled for
hearing in  September  1998 and the Company  believes  it is  probable  that the
balance of this receivable eventually will be fully collected.


ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to the  stockholders of the Company during the quarter
ended December 31, 1997.

                                       10

<PAGE>

                                    PART II


ITEM 5   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

The Company's  Common Stock was first listed for trading on June 4, 1993, on the
National   Association  of  Securities  Dealers  Automated  Quotations  (NASDAQ)
Small-Cap  Market  System  under  the  symbol  "GLNK."  As of May 1,  1994,  the
Company's  Common  Stock was listed for trading on the American  Stock  Exchange
(ASE) under the symbol "GNK." The table below  presents the  quarterly  high and
low sale prices for the Company's Common Stock as reported by the American Stock
Exchange.

         Calendar year 1996                       High       Low
                                                 -------   -------
         First Quarter.....................       8.000     5.000
         Second Quarter....................       9.375     5.875
         Third Quarter.....................       7.375     5.125
         Fourth Quarter....................       5.750     2.750


         Calendar year 1997                       High       Low
                                                 -------   -------
         First Quarter.....................       4.312     2.875
         Second Quarter....................       4.000     3.125
         Third Quarter.....................       3.562     1.125
         Fourth Quarter....................       3.500     1.688

The  Company has never paid cash  dividends  on its Common  Stock.  The Board of
Directors does not anticipate paying cash dividends in the foreseeable future as
it intends to retain future earnings to finance the growth of the business.  The
payment of future cash dividends will depend on such factors as earnings levels,
anticipated capital requirements,  the operating and financial conditions of the
Company and other factors deemed relevant by the Board of Directors.

As of February 27, 1998, there were  approximately  180 holders of record of the
Company's  Common  Stock.  The Company  believes that at such date there were in
excess of 2,700 beneficial owners of the Company's Common Stock.

In March 1997, the Company sold 2,502 shares of Series A-3 preferred  stock to a
private fund for a total of $2,502,000.  Each share was convertible  into shares
of  Common  Stock at the  lower of $3.44  per  share,  or 85% of the  arithmetic
average of the prior five days closing  prices.  As part of the  agreement,  the
Company also issued  85,568  options at an exercise  price of $4.30 per share to
the private  fund.  The  options  have a term of four years.  In  addition,  the
Company  issued 25,050 options at an exercise price of $3.44 per share to Tanner
Unman  Securities,  Inc.,  and 20,000  options at an exercise price of $4.30 per
share to Prudential  Securities,  Inc., both of which  facilitated the agreement
with the private  fund.  These  options  also have a term of four  years.  As of
December 31, 1997, the private fund had converted the Series A-3 preferred stock
into 2,382,268 shares of Common Stock.

In October 1997, the Company sold 727,274 units for a total of $1,000,000.  Each
unit  consisted of one share of common stock and one warrant which  entitles the
holder to purchase one share of Common  Stock at an exercise  price of $1.75 per
share. As part of the agreement,  the Company also issued  purchase  options for
72,727  additional units at an exercise price of $1.51 per unit to M.H. Meyerson
& Co., Inc., which served as the placement agent.  These purchase options have a
term of five years.

                                       11

<PAGE>

During 1997,  holders of Series A-2 preferred stock  converted  17,644 shares of
preferred stock into 176,440 shares of Common Stock.

During 1997, the Company granted  options to certain  directors and employees to
purchase an  aggregate  of 906,000  shares of Common  Stock.  Options for 70,000
shares were granted to directors,  all of which have an exercise  price of $3.44
per share,  have a term of 5 years and are fully  vested.  Options  for  836,000
shares were granted to  employees,  of which  759,500 have an exercise  price of
$3.44  per  share,  have a term of 8 years  and vest at the  rate of 50  percent
immediately and 50 percent in one year, 65,000 have exercise prices ranging from
$3.44 to $5.00,  have a term of 5 years and are fully  vested  and  11,500  have
exercise prices ranging from $3.13 to $3.44,  have a term of 5 years and vest at
a rate of 33-1/3 percent per year over 3 years.

The  issuances  of all  of  these  securities  are  claimed  to be  exempt  from
registration  pursuant  to  Section  4(2)  of  the  Securities  Act of  1933  as
transactions by an issuer not involving a public offering.

                                       12

<PAGE>

ITEM 6   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS


Forward-Looking Statements

This Form 10-KSB contains historical information and forward-looking  statements
within the meaning of Section 21E of the Private  Securities  Litigation  Reform
Act of 1995,  including  material  regarding the future business  operations and
projected financial results of the Company. These forward-looking statements are
subject  to risks and  uncertainties  which  could  cause the  Company's  actual
results to differ materially from the forward-looking statements. Such risks and
uncertainties,  include, but are not limited to: general business conditions and
growth  in the  language  translation  industry  and  the  economy;  competitive
factors,  such as competing language translation software products and services,
acceptance  of new  language  translation  software  products  and  services and
pricing  issues;  timing of language  translation  software  product and service
introductions;   unanticipated   costs,   complications  or  delays  in  product
development; fluctuations in customer demand; risk of inventory obsolescence due
to shifts in market demand; risk of nonpayment of material customer receivables;
continued  success in current  product  enhancements  and  language  translation
technology  advances;  risks  associated  with the sales of  products in foreign
markets, including currency fluctuations; unanticipated costs or adverse effects
associated  with  distributors,  vendors  and  suppliers;  litigation  involving
intellectual property, licensing and consumer issues; availability of sufficient
resources  including  short- and long-term  financing to carry out the Company's
product development and marketing plans; and other unanticipated  business risks
and uncertainties.

Year 2000 Issue

Management  has  undertaken  an  investigation  of whether the  Company  will be
adversely  impacted by the issue of whether its systems are Year 2000 compliant.
Based on this review,  management has determined that a material  adverse impact
on the Company's financial statements is unlikely.  In addition,  as none of the
Company's  products  utilize dates or date fields  mathematically,  they are not
subject to Year 2000 compliance issues.

Revenues


                                           Year Ended   Year Ended   Increase
                                            12/31/97     12/31/96       %
                                          ------------ ------------ ----------
Product Sales (net of returns)..........  $13,387,000  $12,429,000      8%
Translation Services....................    1,342,000    1,547,000    -13%
                                          ------------ ------------ ----------
Total Sales.............................  $14,729,000  $13,976,000      5%


Globalink's  total sales increased 5% to $14,729,000 for the year ended December
31, 1997, from $13,976,000 for the year ended December 31, 1996. During 1997 the
Company  introduced a Portuguese  version of Power  Translator Pro 6.2 which has
been well  accepted  in Brazil.  The Company  continues  to  experience  revenue
pressures resulting from increased efforts in reducing distributor  inventory in
the channels,  aligning  sell-through  campaigns with sales of products into the
channels,  and  collecting  existing  receivable  balances  to provide  for more
consistent sales cycles.

Product sales for the year ended December 31, 1997,  increased 8% or $958,000 to
$13,387,000  from  $12,429,000  for the  year  ended  December  31,  1996.  U.S.
distributor channel sales increased 8% to $5,798,000 for the year ended December
31, 1997, from $5,350,000 in the prior year. The Company

                                       13

<PAGE>

continues  to open new  distributor  channels,  increase  growth in the existing
distributor  channels,  and pursue  additional OEM  opportunities.  The Language
Assistant  Series  Localized  version  and the  Power  Translator  and  Language
Assistant  Series  versions  for  Windows in CD-ROM  media have been the primary
vehicles for sales to the Company's distributors and have been well accepted. In
addition,  the Company introduced Power Translator 6.0 in June 1996, and Talk to
Me in  December  1996,  Power  Translator  Pro 6.2 in March 1997,  and  Language
Assistant 2.0 in September 1997, all of which have also been well accepted.

For the year ended  December  31,  1997,  international  sales  increased  7% to
$7,589,000 from $7,079,000 in the prior year.  International  sales  represented
51% of total sales in 1997 and 1996.  The primary  exports  have been to Europe,
Canada,  and Latin and  South  America.  In 1997,  export  sales to Brazil  were
approximately $3,159,000, or 21% of total sales. In 1996, export sales to France
and Germany were approximately $2,126,000 and $1,495,000,  respectively,  or 15%
and 11% of total sales,  respectively.  International  sales have been primarily
attributable to further  development of the Company's  network of  international
distributors,  along with additional OEM contracts entered into in South America
and  Europe.  The  Company  has also  shifted  its focus in Europe away from the
exclusive use of key major  distributors  towards smaller,  more active,  second
tier  distributors  who the Company believes are better able to promote and sell
its products into the retail channel of their respective geographical locations.

Translation  Services  revenue  decreased 13% to  $1,342,000  for the year ended
December 31, 1997,  from  $1,547,000  for the year ended  December 31, 1996. The
decrease in revenues  for this group  resulted  from delays early in the year in
obtaining larger jobs and establishing  more long term projects with the group's
customers.

Throughout 1997, the Company placed increasing  emphasis on developing  multiple
channels of  distribution,  including  distributors,  resellers,  VARs and OEMs.
Globalink  also  continued  to develop a telesales  group which has proven to be
successful.

Sales returns and allowances  decreased to $3,807,000 in fiscal 1997 compared to
$4,665,000  for the prior year.  The Company has continued its efforts to reduce
distributor  inventory and align  sell-through  campaigns with sales of products
into the channels.  Distribution  agreements  typically  allow for the return of
certain  merchandise to provide for stock  balancing.  The Company  continuously
monitors these programs and makes appropriate  accruals monthly to handle future
distribution stock balancing. The following table shows the gross product sales,
returns and net product sales for the periods indicated.



                                           Year Ended   Year Ended
                                            12/31/97     12/31/96
                                          ------------ ------------
Gross Product Sales................       $17,194,000  $17,094,000
Returns............................        (3,807,000)  (4,665,000)
                                          ------------ ------------
Net Sales.........................        $13,387,000  $12,429,000


                                       14

<PAGE>

Costs and Expenses


                                           Year Ended   Year Ended    Change
                                            12/31/97     12/31/96       %
                                          ------------ ------------ ----------
Cost of product sold...................   $ 2,347,000  $ 1,766,000     33%
Direct labor & fringes.................       705,000      799,000    -12%
Amortization of capitalized software...       650,000      570,000     14%
Product development....................       898,000    1,452,000    -38%
Selling, marketing & other.............     7,978,000    8,245,000     -3%
General & administrative...............     3,744,000    3,357,000     12%
                                          ------------ ------------ ----------
Total costs and expenses...............   $16,322,000  $16,189,000      1%


Cost of products sold  increased  33% in fiscal 1997 to  $2,347,000  compared to
$1,766,000  in the  prior  year.  The  increase  in cost of  products  sold  was
primarily due to a charge of $650,000 associated with a non-monetary transaction
the Company  entered  into with a customer  in December  1997 (see Note O to the
Company's  Financial  Statements  for further  discussion  of the  transaction).
Otherwise,  cost of products sold decreased by $69,000 due to decreased costs of
certain packaging  components.  This was partially offset by the increased costs
of certain  products due to associated  royalties for the licensing of products,
such as Talk to Me, and various  features,  such as speech  recognition and word
processing filters in other products. Gross profit margin was 84% in fiscal 1997
compared  to 87% in the prior year.  The  decrease  in gross  profit  margin was
directly attributable to the increase in cost of products sold.

Direct labor & fringes,  which  principally  include charges for independent and
in-house  translators  within the translation  services group,  decreased 12% in
fiscal  1997 to  $705,000  compared  to  $799,000  in 1996  as a  result  of the
decreased  revenues  in  1997.  These  expenses  increased  from 52% to 53% as a
percentage  of  Translation  Services  revenues.  This  increase  was  primarily
attributable  to  fluctuations  in the  number and  relative  size of jobs being
performed,  as the gross margin varies with the size of the job due to the fixed
administrative tasks which still must be performed.

Amortization  of  capitalized  software for the period ended  December 31, 1997,
increased 14% to $650,000 from $570,000 for the prior year. The increase was due
to the  release  of new  products  in the  latter  part of 1996 and in March and
September of 1997 for which previously  capitalized  software  development costs
began to be  amortized.  This was  partially  offset by the  impact  of  certain
previously  capitalized  software  development costs becoming fully amortized in
June of 1997.

Product   development   expenses,   which   consist  of  the  current   cost  of
non-capitalizable   development   expenses,   decreased  38%  to  $898,000  from
$1,452,000  for the prior  year.  The  decrease  was a result  of the  Company's
completion of several new products  resulting in reduced costs  associated  with
certain  outside  consultants  who were  assisting in the  development  of those
products.

Selling,  marketing  and other  expenses,  which  include  the costs of selling,
marketing,  customer  support,  shipping and  administration  for product sales,
decreased 3% or $267,000 to $7,978,000  for the period ended  December 31, 1997,
from $8,245,000 for the prior year. This decrease was primarily  attributable to
the Company's  increased focus of fiscal  resources on more effective  promotion
and  advertising  programs,   particularly  in  print  media  and  retail  store
promotions.

General and  administrative  expenses  consist  primarily of payroll and related
expenses,  occupancy costs,  travel and related expenses for senior  management,
finance and accounting,  legal and  administration.  For the year ended December
31, 1997, general and administrative expenses increased 12% or $387,000 from the
prior year. The increases occurred primarily in the areas of payroll,  legal and
accounting  fees,

                                       15

<PAGE>

insurance  costs,  rent and  depreciation  as a result  of  additional  expenses
incurred to support the anticipated growth of the Company.

Other Income/Expense

Interest  expense was $22,000 for the fiscal year ended  December 31,  1997,  as
compared to $32,000 in the prior year. This was due to interest expense incurred
as a result of draws on the Company's revolving and equipment lines of credit.

Income Tax Expense

No provision for income taxes was required for the years ended December 31, 1997
and  1996,  due to the  Company's  net  operating  loss  ("NOL")  carryforwards.
Approximately $10,478,000 of NOL carryforwards existed at December 31, 1997. The
use of the NOL  carryforwards  is  limited  to future  taxable  earnings  of the
Company.

Variability of Operating Results

Although the Company has not identified any specific seasonality,  the Company's
revenues and operating results have varied  substantially from period to period.
Historically,  the  Company,  with the  exception  of its  Translation  Services
operations,  has  operated  with little  backlog of orders  because its software
products are  generally  shipped as orders are  received.  Product sales and OEM
agreements are difficult to forecast due to the relatively  early stages of both
the consumer market and of the machine translation software market. As a result,
small variations in the timing of product sales can cause significant variations
in operating results from period to period.

Liquidity and Financial Resources

The Company has a $3,000,000 demand loan and a $750,000 equipment line of credit
with First  Union  National  Bank.  As of  December  31,  1997,  the Company had
$1,250,000  outstanding  under the demand  note,  which is being used to finance
accounts  receivable and other working capital needs.  In addition,  the Company
had $326,000  outstanding  at December 31, 1997,  under the equipment line which
was used to finance furniture and equipment purchases.

During  1997 and  1996 the  Company's  principal  uses of cash  were to fund the
losses incurred and support the development of the Company's  software  products
and increases in accounts receivable and fixed assets.

In October  1996 the Company  sold three (3) prepaid  warrants to an investor at
$500,000  per warrant for a total  consideration  of  $1,500,000.  Each  prepaid
warrant was  convertible  into a number of shares of Common Stock  determined by
dividing  the  exercise  amount by the  lower of $5.25 or 85% of the  arithmetic
average of the  closing  price of the Common  Stock on the five (5)  consecutive
trading days immediately  preceding the exercise date. The prepaid warrants were
convertible  on the  90th,  120th  and 150th day  following  the  closing  date,
respectively.

In December  1996 and January 1997 the Company  issued 40,224 and 4,191 units of
Series A-2 8%, convertible,  redeemable preferred stock and associated warrants,
respectively. Each unit consisted of one (1) share of 8% convertible, redeemable
Preferred  Stock and one (1) Warrant to purchase ten (10) shares of Common Stock
at $4.18 per  share.  Each share of  preferred  stock was  convertible  into ten
shares of common stock at the holders  option.  Dividends on the preferred stock
are cumulative and payable  annually in arrears,  beginning  January 1, 1998, in
either cash or shares of common stock at the

                                       16

<PAGE>

option of the Company.  The offering  resulted in net proceeds to the Company of
approximately $1,253,000.

In March  1997 the  Company  issued  2,502  shares  of Series  A-3  convertible,
redeemable preferred stock and associated stock warrants to a private fund for a
total of $2,502,000.  Each share was convertible  into shares of common stock at
the lower of $3.44 per share, or 85% of the arithmetic average of the prior five
days closing  prices.  In addition,  the Company raised  $1,000,000 in a private
placement of 727,274 units in October 1997.  Each unit consisted of one share of
common stock and one warrant which  entitles the holder to purchase one share of
common stock at an exercise price of $1.75.

During 1997,  approximately  $2,160,000 was used to finance accounts receivable,
$473,000 was used to finance capitalized software,  $328,000 was used to finance
a long-term receivable, and $136,000 was used to purchase fixed assets. This was
primarily funded by an increase in accounts payable of $354,000 and the issuance
of  common  stock  and  preferred  stock  totaling   $3,153,000.   During  1996,
approximately  $1,860,000 was used to finance accounts receivable,  $437,000 was
used to finance  capitalized  software,  $333,000 was used to finance inventory,
and $271,000 was used to purchase fixed assets.  This was primarily funded by an
increase  in  accounts  payable of $316,000  and the  issuance of common  stock,
preferred stock and stock warrants totaling  $2,558,000.  The remaining proceeds
have  been  invested  in  short-term  repurchase  agreements  collateralized  by
government securities.

For the year ended December 31, 1997,  the Company's cash and cash  equivalents,
invested cash and marketable  securities decreased to $1,068,000 from $1,606,000
primarily as a result of the loss incurred for the year along with the financing
of accounts  receivable,  capitalized  software and fixed assets,  offset by the
amortization of capitalized  software and depreciation  totaling  $1,078,000 and
the  proceeds  from  issuance  of common  stock  and  preferred  stock  totaling
$3,153,000.  As of December  31,  1997,  the Company had  $9,130,000  in working
capital. The Company has no significant capital asset commitments.

For  the  year  ended  December  31,  1997,  accounts  receivable  increased  to
$11,200,000 from $9,040,000.  This increase of $2,160,000  resulted  principally
from the  increase in OEM  contracts,  which  typically  provide  for  graduated
installment payments over a period of up to 12 months. In addition,  the Company
has  experienced  certain  payment  delays from some of its OEM customers due to
various  factors,   such  as,  local  banking  regulations  in  Brazil  and  tax
withholding  requirements  in other  countries.  The Company has also filed suit
against one customer in France,  which  represents  approximately  $1,547,000 of
overdue  OEM  receivables.  The case will be heard on  September  4,  1998,  and
management  believes it is probable that the balance of this  receivable will be
fully collected.  The Brazilian economy has experienced  significant  shifts and
currency  fluctuations  during the last several years.  With the introduction of
the  Portuguese  version of Power  Translator Pro 6.2 in March 1997, the Company
experienced  significant  revenue  generation in the Brazilian market.  Accounts
receivable  at December 31, 1997,  included  approximately  $3,425,000  due from
Brazilian  partners.  While the Company has experienced some delays in scheduled
payments from such  partners,  it is  management's  belief that payments will be
made in full over the next  several  months.  Management  of the  Company  works
closely  with its  partners  on a  continuous  basis in order to  insure  timely
collection  of amounts owed to the  Company.  If the  Brazilian  economy were to
worsen  significantly,  timeliness of cash receipts from these partners could be
jeopardized  and thus adversely  impact the Company's  overall  working  capital
position.

In December 1997, the Company  entered into a  non-monetary  transaction  with a
publishing  company which included license  agreements  between the parties.  No
gain or loss was recorded on this  transaction,  as there was an equal  exchange
between the two companies.

The  Company  became a licensee  under two  agreements.  The  first,  a one-year
license for the use of six  "Virtual  Campuses"  established  by the  publishing
company,  had a value of  $600,000.  At  December  31,

                                       17

<PAGE>
1997,  this amount was  capitalized as a prepaid  license,  the balance of which
will be amortized over the term of the license agreement. The second, a one-year
renewable  license  relating to "Campus  Courseware"  provided by the publishing
company, had a value of $650,000 which was expensed in 1997.

In exchange,  the Company granted a license for its Barcelona  Technology Server
in five languages  with a value of $1,025,000  which has been included in income
in 1997. In conjunction with this license,  the Company will provide maintenance
for a period  of one  year  from the  date of the  agreement.  The  value of the
maintenance  agreement is $225,000 which has been recorded as deferred income at
December  31,  1997,  and will be  recognized  over the term of the  maintenance
agreement.

In addition,  accounts  receivable from distributors has increased.  In general,
the  contractual  payment  terms from  distributors  are between 60 and 90 days;
however,   the  Company  has  experienced  a  longer  payment  cycle  with  some
distributors  which has resulted in an increase in their  accounts.  The Company
introduced  new product  offerings in Latin America late in the second and third
quarters of 1997. In order to assist with the introduction of these new products
to the market,  the Company has allowed certain  distributors  extended  payment
terms on their purchases of these new products which, in most instances,  extend
through June 1998.

For the years  ended  December  31,  1997 and 1996,  net cash used in  operating
activities  was  approximately  $3,162,000  and  $3,009,000,  respectively,  due
primarily to net losses from  operations  and financing of accounts  receivable,
inventory  and  prepaid  expenses,  offset by the  amortization  of  capitalized
software, depreciation and increases in accounts payable.

For the year ended December 31, 1997, net cash used in investing  activities was
approximately  $610,000. For the year ended December 31, 1996, net cash provided
by investing activities was approximately  $871,000. In 1997 and 1996, investing
activities  consisted primarily of increases in capitalized software development
costs,  purchases  and sales of marketable  securities,  and purchases of office
equipment.

For the years ended  December 31, 1997 and 1996,  capital  expenditures  totaled
$136,000  and  $271,000,  respectively.  Capital  expenditures  were higher than
normal  in 1996  due to a  number  of  factors,  including  purchases  of new PC
equipment and software for new employees, new trade show booths, and other fixed
assets to accommodate the personnel growth of the organization.

For the years ended  December  31,  1997 and 1996,  cash  provided by  financing
activities was approximately  $3,234,000 and $2,924,000,  respectively.  For the
years ended December 31, 1997 and 1996, financing activities consisted primarily
of the  issuance of  warrants,  preferred  stock and common stock along with the
issuance and repayment of debt under the Company's revolving and equipment lines
of credit.

The  Company  anticipates  that the net  proceeds  from the sale of the  prepaid
warrants and the issuance of the preferred and common stock units, together with
cash flow from operations, existing cash balances, and periodic borrowings under
the  Company's  bank  lines of credit  will be  adequate  to meet the  Company's
expected cash requirements through 1998.

While operating  activities may provide cash in certain  periods,  to the extent
the Company  experiences growth in the future, the Company  anticipates that its
operating and product development activities,  along with extended payment terms
for  certain  distributors,  may use cash,  and  consequently,  such  growth may
require the Company to obtain additional  sources of financing.  There can be no
assurances that unforeseen  events may not require more working capital than the
Company currently has at its disposal.

                                       18

<PAGE>

If  additional  funds are raised  through the issuance of equity or  convertible
securities,  the  Company's  current  shareholders  will  experience  additional
dilution.  While management of the Company believes  additional  funding will be
available  if and  when  needed,  there  can  be no  assurance  that  additional
financing will be available on terms  acceptable to the Company,  if at all. The
inability  to obtain  additional  financing,  if and when  needed,  would have a
material adverse effect on the Company, including possibly requiring the Company
to curtail or cease operations.

Other than as discussed above, the Company is not aware of any known trends,  or
uncertainties,  that have had or are reasonably likely to have a material effect
on the Company's liquidity, capital resources, or operations.


                                       19

<PAGE>

ITEM 7   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


         Index to Financial Statements                       Form 10-KSB
                                                             -----------
         Independent Auditors' Report                            F-1

         Balance Sheets as of
           December 31, 1997 and 1996                            F-2

         Statements of Operations for the years
           ended December 31, 1997 and 1996                      F-3

         Statements of Stockholders' Equity for the years
           ended December 31, 1997 and 1996                      F-4

         Statements of Cash Flows for the years
           ended December 31, 1997 and 1996                      F-5

         Notes to the Financial Statements                    F-6 to F-22


ITEM 8   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE


         None


                                       20

<PAGE>

                                    PART III


ITEM 9   DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's Directors and Executive Officers are as follows:

    Name                            Age               Position

    Harry E. Hagerty, Jr. (2)       57      Chairman, Chief Executive Officer
    John F. McCarthy, III (1)(2)    52      Director, Secretary, Vice President
                                            and General Counsel
    Ronald W. Johnston              51      Director, President,
                                            Chief Operating Officer
    William E. Kimberly (1)(2)      64      Director
    Thomas W. Patterson (1)         38      Director
    David H. Biggs                  52      Director
    Mark A. Paiewonsky              35      Chief Financial & Accounting Officer
    Philippe J. Kuperman            54      Executive Vice President of
                                            Sales & Marketing


Biographical Information

Mr. Harry E. Hagerty, Jr., a director of Globalink since its inception, has been
President of Hagerty &  Associates,  a company that invests in and consults with
start-up and early-stage  businesses since 1986 Mr. Hagerty  participated in the
initial  funding of the  Discovery  Channel and was a founder of Digital  Switch
Corporation  (now  "DSC  Communications,  Inc.").  He  served  on the  Board  of
Directors of CCAIR,  Inc. a regional airline based in Charlotte,  NC., from 1987
to 1989.  Mr.  Hagerty  currently  serves on the Boards of Directors of Learning
2000 Corporation and Systems Impact.

Mr. John F. McCarthy,  III, has been a director of Globalink since 1993 and Vice
President and General Counsel since August 1995. From 1990 to 1993, Mr. McCarthy
was Vice  President  and General  Counsel for Computone  Corporation,  which was
engaged in the development of computer peripheral  products.  From 1988 to 1990,
he was the managing  partner of the  Washington,  DC, offices of the law firm of
Burnham, Connolly, Osterle and Henry.

Mr.  Ronald W.  Johnston  brings over 25 years of executive  experience  with an
emphasis  on  operations,  administration  and  finance  to  Globalink.  He  has
first-hand knowledge of foreign and domestic markets and an extensive background
in overseas business,  due in part to 11 years in senior management positions at
Whittaker  Corporation.  Mr.  Johnston  joined  Globalink in April 1995 as Chief
Operating  Officer.  In  October  1997  he was  promoted  to  President  and was
appointed   as  a   director.   Beginning   in  1993  Mr.   Johnston   became  a
Principal/General  Partner in McCarthy,  Johnston & Associates,  a  professional
consulting firm.  Mr. McCarthy is also a Principal/General Partner of this firm.

Mr.  William E.  Kimberly,  a director of the Company since 1990, is Chairman of
NAZTEC  International  Group, Inc. a McLean,  VA based investment  banking firm.
Prior to this, Mr. Kimberly worked for  Kimberly-Clark  Corporation from 1959 to
1983, where he held various management  positions  including Marketing Director,
CEO of a major subsidiary and Senior Vice President. Mr. Kimberly has held Board
of  Director  positions  at Pabst  Brewing  Co.,  Blue Cross and Blue  Shield of
Wisconsin  and First  National  Bank of Neenah,  Wisconsin.  He is  currently  a
director of several emerging companies.

                                       21

<PAGE>

Mr.  Thomas W.  Patterson was appointed as a director of Globalink in March 1997
and has over fifteen years of combined  experience in  information  security and
electronic  commerce.  He has  advised  the  White  House,  U.S.  Congress,  NII
Committee,  Departments of Defense, Treasury, Energy and Commerce, and scores of
large businesses and  organizations  around the world.  From Fall 1993 to Spring
1995, Mr. Patterson was the Information  Security Director for  MicroElectronics
and Computer  Technology  Corp.  ("MCC") and the Chief Strategist for Electronic
Commerce  for IBM  Corporation.  Since that time,  Mr.  Patterson  has served as
Corporate Vice President for Cyberguard Corporation.

Mr. David H. Biggs was  appointed  as a director of  Globalink in January  1998.
From February 1968 to May 1997,  Mr. Biggs was Vice  President of Operations and
Product Development at Bently Nevada Corporation where he managed operations for
a number of domestic and international  sites. He is the author of a book called
Market Aimed  Products.  Since June 1997, Mr. Biggs has been a Vice President at
R. D.  Garwood,  Inc. Mr. Biggs is the  designee of M.H.  Meyerson & Co.,  Inc.,
("Meyerson"),  which  has the  right to  designate  a  director  of the  Company
pursuant to an Agency  Agreement  between the Company and Meyerson dated October
15, 1997.

Mr. Mark A.  Paiewonsky  joined the Company in May 1994. He has over 10 years of
finance and accounting  experience in the computer software industry.  From 1992
to 1994, he was the Corporate  Controller  for Best  Programs,  Inc., a software
development  company  offering  solutions  to  the  accounting,  tax  and  human
resources  software  markets.  From 1986 to 1990,  he was an Audit Senior in the
Small Business  Enterprise  group at Arthur Andersen & Co., where he performed a
variety of business and accounting functions on behalf of publicly and privately
held  companies  in  the   manufacturing,   distribution,   retail  and  service
industries.

Mr.  Philippe J.  Kuperman  joined  Globalink in August 1996 as Vice  President,
International.  From  January  1989 to June  1996,  Mr.  Kuperman  was Sr.  Vice
President,  Indirect  Sales of  SOFTWARE  AG. In January  1997 he was  appointed
Executive Vice President of Sales & Marketing.

Directors hold their offices until the next annual  meeting of the  stockholders
and  thereafter  until their  successors  have been duly elected and  qualified.
Executive  officers are elected by the Board of Directors on an annual basis and
serve at the discretion of the Board or pursuant to an employment agreement.

Except for the foregoing information, the information required by this item will
be contained in the Company's Proxy Statement for its 1997 Annual  Stockholders'
Meeting to be filed with the Securities and Exchange  Commission within 120 days
after December 31, 1997, and is incorporated herein by reference.


ITEM 10  EXECUTIVE COMPENSATION


The  information  required by this item will be contained in the Company's Proxy
Statement  for its  1998  Annual  Stockholders'  Meeting  to be  filed  with the
Securities and Exchange  Commission within 120 days after December 31, 1997, and
is incorporated herein by reference.

                                       22

<PAGE>

ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT


The  information  required by this item will be contained in the Company's Proxy
Statement  for its  1998  Annual  Stockholders'  Meeting  to be  filed  with the
Securities and Exchange  Commission within 120 days after December 31, 1997, and
is incorporated herein by reference.


ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


During 1996, The Company loaned $95,000 to two officers.  One officer was loaned
$25,000 at an  interest  rate of 9 1/4 %, which was payable on demand and repaid
during 1997. A second  officer was loaned  $70,000 at an interest rate of 8%, in
two separate  promissory notes. Both notes were payable on or before December 1,
1997, with interest.

Additional  notes were issued to the second  officer during fiscal year 1997. On
December 17, 1997, all outstanding notes for this officer were consolidated into
one note of $327,750, including accrued interest. The note is a demand note with
an interest rate of 8.95% and is due in full, without demand notice, on December
17, 2000.  As part of the  agreement,  this officer  pledged  140,000  shares of
common stock as collateral.

On October 15,  1997,  the Company  entered into an Agency  Agreement  with M.H.
Meyerson & Co.,  Inc.  ("Meyerson"),  pursuant  to which  Meyerson  acted as the
placement  agent for an offering of 727,274 units,  each consisting of one share
of Common Stock and one warrant which  entitled the holder to purchase one share
of Common Stock at an exercise price of $1.75. Pursuant to the Agency Agreement,
the Company granted  Meyerson the right to appoint one director to the Company's
board of directors and issued  purchase  options to Meyerson to purchase  72,727
additional units.


                                       23

<PAGE>

                                    PART IV

ITEM 13  EXHIBITS AND REPORTS ON FORM 8-K

(A) Index of Exhibits as required by Item 601 of Regulations S-B.

    Exhibit Number    Description of Exhibit

       3.1 (a)        Articles of Incorporation                           (1)

       3.1 (b)        Certificate of Amendment of
                      Certificate of Incorporation                        (3)

       3.1 (c)        Certificate of Designations of Series
                      A-1 Convertible Preferred Stock                     (3)

       3.1 (d)        Certificate of Designations of Series
                      A-2 8% Convertible Redeemable
                      Preferred Stock                                     (3)

       3.1 (e)        Certificate of Designations of Series
                      A-3 Convertible Preferred Stock                     (4)

       3.2            Bylaws                                              (1)

       4.1 (a)        Common Stock Specimen                               (1)

       4.1 (b)        Form of Stock Option                                (2)

       4.1 (c)        Form of Warrant Purchase Agreement
                      between the Company and the Pangaea
                      Fund Limited dated October 2, 1996                  (3)

       4.1 (d)        Form of Unit Purchase Agreement
                      between the Company and J. Michael
                      Reisert, Inc. dated December 20, 1996               (3)

       4.1 (e)        Form of Subscription Agreement
                      between the Company and The Pangaea
                      Fund Limited dated March 27, 1997                   (4)

       4.1 (i)        Form of Warrants issued on October 20, 1997         (5)

       4.1 (j)        Form of Purchase Option issued to M.H. Meyerson
                      & Co., Inc., on October 20, 1997                    (5)

       10.3           Form of Agency Agreement with M.H. Meyerson & Co.,
                      Inc., dated October 15, 1997                        (5)

       10.4           Employee Stock Option Plan and form of Non-
                      Incentive Stock Option Agreement for options
                      granted under the plan                              (5)

                                       24

<PAGE>

         (1)    Incorporated herein by reference from the Registration Statement
                number 33-60296 as filed by the Company on Form SB-2.

         (2)    Incorporated herein by reference from the Registration Statement
                number 33-82062 as filed by the Company on Form S-8.

         (3)    Incorporated  herein by reference from the Annual Report on Form
                10-KSB  as  filed  by the  Company  for the  fiscal  year  ended
                December 31, 1996.

         (4)    Incorporated herein by reference from the Current Report on Form
                8-K as filed by the Company on April 7, 1997.

         (5)    Filed herewith.


(B)      Reports on Form 8-K

         None.


                                       25

<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of Sections  13 or 15(d) of the  Securities  and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its  behalf  by the  undersigned,  thereunto  duly  authorized,  in the  city of
Fairfax, State of Virginia, on the 25th day of August, 1998.

                                               GLOBALINK, INC.


                                               By:  /s/ Ronald W. Johnston

                                                    ----------------------
                                                        Ronald W. Johnston
                                                        President


                                       26

<PAGE>









Report of Independent Certified Public Accountants


Board of Directors
Globalink, Inc.


We have  audited the  accompanying  balance  sheets of  Globalink,  Inc.,  as of
December  31,  1997  and  1996,  and  the  related   statements  of  operations,
stockholders'  equity 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 Globalink, Inc., as of December
31, 1997 and 1996,  and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.




Vienna, Virginia
February 27, 1998
                                                                             F-1

<PAGE>
<TABLE>
<CAPTION>

Globalink, Inc.

Balance Sheets


December 31,                                              1997           1996
--------------------------------------------------------------------------------


Assets
<S>                                                   <C>           <C>
Current Assets
  Cash and cash equivalents                          $     68,241  $    406,088
  Invested cash                                         1,000,000     1,200,000
  Accounts receivable, net                             11,200,143     9,040,297
  Inventories, net                                        760,659       818,294
  Prepaid expenses and deposits                           791,415       108,745
  Other receivables                                        37,134       126,894
                                                     ---------------------------  

Total Current Assets                                   13,857,592    11,700,318

Long-Term Receivable                                      327,750            -

Equipment and Furniture, net                              587,783       879,753

Capitalized Software, net                                 641,821       817,988
                                                     ---------------------------

                                                     $ 15,414,946  $ 13,398,059
                                                     ===========================


Liabilities and Stockholders' Equity

Current Liabilities
  Accounts payable--trade                            $  2,410,886  $  2,057,002
  Accrued and other liabilities                           832,847       763,948
  Line of credit                                        1,484,356     1,279,000
                                                     ---------------------------

Total Current Liabilities                               4,728,089     4,099,950

Long-Term Notes Payable                                    92,000       216,356

Deferred Rent                                              42,015        65,706

Commitments and Contingencies                                  -             -

Stockholders' Equity
  Preferred stock, $.01 par value, 250,000 shares
    authorized; 26,771 and 40,224 shares issued
    and outstanding in 1997 and 1996, respectively        755,354     1,154,658
  Common stock, $.01 par value, 20,000,000 shares
    authorized; 9,160,236 and 5,341,352 shares issued
    and outstanding in 1997 and 1996, respectively         91,602        53,413
  Additional paid-in capital--common stock             22,143,154    18,702,013
  Dividends payable                                        72,573            -
  Accumulated deficit                                 (12,509,841)  (10,894,037)
                                                     ---------------------------

                                                       10,552,842     9,016,047
                                                     ---------------------------

                                                     $ 15,414,946  $ 13,398,059
                                                     ===========================


<FN>
                The accompanying notes are an integral part of these statements.

                                                                             F-2
</FN>

<PAGE>
<CAPTION>

Globalink, Inc.

Statements of Operations


Year ended December 31,                                   1997           1996
--------------------------------------------------------------------------------

<S>                                                    <C>           <C>
Product Sales, net of returns and allowances of
  $3,807,485 and $4,664,942 in 1997 and 1996,
  respectively                                       $ 13,386,873  $ 12,429,362
Translation Service Revenue                             1,342,242     1,546,672
                                                     ---------------------------

                                                       14,729,115    13,976,034

Costs and Expenses
    Cost of products sold                               2,347,514     1,765,951
    Direct labor and fringes                              705,241       799,206
    Amortization of capitalized software                  649,597       570,247
    Development                                           897,715     1,451,687
    Selling, marketing and other                        7,978,294     8,244,992
    Administrative                                      3,744,099     3,356,443
                                                     ---------------------------

                                                       16,322,460    16,188,526
                                                     ---------------------------

Loss from Operations                                   (1,593,345)   (2,212,492)

Interest Expense, net                                     (22,459)      (32,393)
                                                     ---------------------------

Loss Before Income Taxes                               (1,615,804)   (2,244,885)

Income Tax Expense                                             -             -
                                                     ---------------------------

Net Loss                                             $ (1,615,804) $ (2,244,885)

                                                     ===========================


Loss per Common Share (Basic and Diluted)            $       (.25) $       (.42)
                                                     ===========================

Weighted-Average Number of Common Shares
    Outstanding During the Year                         6,876,743     5,333,852
                                                     ===========================


                                                                                                                     
<FN>
                The accompanying notes are an integral part of these statements.

                                                                             F-3
</FN>

<PAGE>
<CAPTION>

Globalink, Inc.

Statements of Stockholders' Equity

Years ended December 31, 1997 and 1996
------------------------------------------------------------------------------------------------------------------------------------

                                                      Additional
                                                       Paid-in
                                                       Capital-
                                Common     Common       Common    Preferred   Preferred    Dividend     Accumulated
                                Shares      Stock       Stock      Shares       Stock      Payable        Deficit         Total
------------------------------------------------------------------------------------------------------------------------------------

<S>                            <C>          <C>        <C>          <C>       <C>           <C>         <C>              <C>
Balance at January 1, 1996     5,304,017  $ 53,040  $  17,246,384         -  $         -  $       -  $   (8,649,152)  $   8,650,272

Exercise of Stock Options         30,000       300        109,700         -            -          -               -         110,000

Common Stock Issued in
  Payment of Debt                  7,335        73         52,647         -            -          -               -          52,720

Sale of Stock Warrants                 -         -      1,293,282         -            -          -               -       1,293,282

Preferred Stock Issued                 -         -              -    40,224    1,154,658          -               -       1,154,658

Net Loss for the Year                  -         -              -         -            -          -      (2,244,885)     (2,244,885)
                              ------------------------------------------------------------------------------------------------------

Balance at December 31, 1996   5,341,352    53,413     18,702,013    40,224    1,154,658          -     (10,894,037)      9,016,047

Issuance of Preferred Stock            -         -              -     6,693    2,381,777          -               -       2,381,777

Conversions to Common Stock    3,091,610    30,916      2,770,367   (20,146)  (2,781,081)   (20,202)              -               -

Issuance of Common Stock         727,274     7,273        763,549         -            -          -               -         770,822

Preferred Stock Dividends              -         -        (92,775)        -            -     92,775               -               -

Net Loss for the Year                  -         -              -         -            -          -      (1,615,804)     (1,615,804)
                              ------------------------------------------------------------------------------------------------------

Balance at December 31, 1997   9,160,236  $ 91,602  $  22,143,154    26,771  $   755,354  $  72,573  $  (12,509,841)  $  10,552,842
------------------------------------------------------------------------------------------------------------------------------------


<FN>
                The accompanying notes are an integral part of these statements.

                                                                             F-4
</FN>
<PAGE>
<CAPTION>

Globalink, Inc.

Statements of Cash Flows


Year ended December 31,                                   1997           1996
--------------------------------------------------------------------------------

<S>                                                    <C>           <C>
Increase (Decrease) in Cash and Cash Equivalents and
     Invested Cash

Cash Flows from Operating Activities
  Net loss                                           $ (1,615,804) $ (2,244,885)
                                                     ---------------------------
  Adjustments to reconcile net loss to net cash
    used in operating activities
      Non-monetary transaction                           (375,000)           -
      Amortization of capitalized software                649,597       570,247
      Depreciation                                        428,180       370,852
      Reserve for obsolete inventories                         -        100,000
      Changes in assets and liabilities
        Increase in accounts receivable                (2,159,846)   (1,859,697)
        Decrease (increase) in other receivables           89,760       (33,642)
        Decrease (increase) in inventories                 57,635      (332,944)
        (Increase) decrease in prepaid expenses
           and deposits                                   (82,670)      154,306
        Increase in long-term receivable                 (327,750)           -
        Increase in accounts payable--trade               353,884       316,017
        Decrease in accrued and other liabilities        (156,101)      (31,801)
        Decrease in deferred rent                         (23,691)      (17,873)
                                                     ---------------------------

Total Adjustments                                      (1,546,002)     (764,535)
                                                     ---------------------------

Net Cash Used in Operating Activities                  (3,161,806)   (3,009,420)
                                                     ---------------------------

Cash Flows from Investing Activities
  Purchase of marketable securities                            -     (2,778,279)
  Proceeds from sales of marketable securities                 -      4,357,516
  Increase in capitalized software                       (473,430)     (436,911)
  Capital expenditures for equipment and furniture       (136,210)     (271,071)
                                                     ---------------------------

Net Cash (Used in) Provided by Investing Activities      (609,640)      871,255
                                                     ---------------------------

Cash Flows from Financing Activities
  Sale of common stock                                    770,823       110,000
  Sale of preferred stock                               2,381,776     1,154,658
  Sale of stock warrants                                       -      1,293,282
  Repayment of debt                                      (801,000)     (253,000)
  Proceeds from issuance of debt                          882,000       619,467
                                                     ---------------------------

Net Cash Provided by Financing Activities               3,233,599     2,924,407
                                                     ---------------------------

Net (Decrease) Increase in Cash and Cash Equivalents     (537,847)      786,242

Cash and Cash Equivalents and Invested Cash at
    Beginning of Year                                   1,606,088       819,846
                                                     ---------------------------

Cash and Cash Equivalents and Invested Cash at
    End of Year                                      $  1,068,241  $  1,606,088
                                                     ===========================

<FN>
                The accompanying notes are an integral part of these statements.

                                                                             F-5
</FN>
</TABLE>

<PAGE>

Globalink, Inc.

Notes to Financial Statements

December 31, 1997 and 1996


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


    Nature of Operations

    The Company  designs,  develops,  publishes,  markets and  supports  foreign
    language   translation   and  language   learning   software  for  business,
    professional  and  personal  use  for  the  microcomputer  marketplace.   In
    addition,  the Company provides  professional  language services through its
    multilingual  staff  and  through  contract  arrangements  with  independent
    linguists/translators.   The  Company's   products  and  services  are  sold
    worldwide.

    Using Estimates in Preparing Financial Statements

    In preparing  financial  statements in conformity  with  generally  accepted
    accounting  principles,   management  is  required  to  make  estimates  and
    assumptions  that affect the reported  amounts of assets and liabilities and
    the  disclosure  of  contingent  assets and  liabilities  at the date of the
    financial  statements and revenue and expenses during the reporting  period.
    Actual results could differ from those estimates.

    Revenue Recognition and Significant Estimates

    Revenue  from  sales to  distributors  or  dealers  is  recognized  when the
    products  are  shipped   (transfer  of  title  occurs)  and  no  significant
    obligation  remains to the Company.  Revenue  billed or collected in advance
    for future  product  shipments  is  deferred  and  recorded as income in the
    period in which the products are shipped. Revenue from royalties pursuant to
    license  arrangements  with  certain  distributors  and  Original  Equipment
    Manufacturers (OEMs) is recognized upon delivery of the software. Generally,
    the  Company  has no,  or  insignificant,  obligations  remaining  under the
    agreement after delivering the software.  Payment terms under OEM agreements
    are  based  on  graduated  payment  schedules   generally  over  12  months.
    Allowances  for estimated  future  returns and exchanges are recorded in the
    period in which the related revenue is recognized.  Distribution  agreements
    typically  allow for the return of certain  merchandise to provide for stock
    balancing.   The  Company  continually   monitors  such  programs  and  uses
    historical  and  current  information  to  estimate  and record  appropriate
    accruals to provide for future stock  balancing.  Although it is  reasonably
    possible that  management's  estimate for future returns and exchanges could
    change in the near future,  management is not currently  aware of any events
    that would result in a change to its estimate which would be material to the
    Company's financial position or its results of operations.

    In October 1997,  the  American  Institute  of Certifited Public Accountants
    issued Statement of Position 97-2 ("SOP 97-2"), Softwae Revenue Recognition,
    which is effective for  transactions entered into  in fiscal years beginning
    after December 15, 1997.   Retroactive application of the provisions of this
    SOP  is  prohibited.   The SOP 97-2 provides guidance on applying  generally
    accepted  accounting  principles  in  recognizing  revenue  on  software
    transactions.   This SOP supersedes SOP 91-1,  Software Revenue Recognition.
    The effect of adopting this new standard is not expected to be material.

    Inventories

    Inventories  are stated at the lower of first-in,  first-out  (FIFO) cost or
    market.


                                                                             F-6

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued


    Research and Development

    Research and development costs are expensed as incurred.

    Capitalized Software Costs

    The Company  capitalizes  certain  initial  software  development  costs and
    enhancements  thereto  incurred  after  technological  feasibility  has been
    demonstrated.  To date, all products and enhancements  thereto have utilized
    proven technology.  Such capitalized  amounts are amortized  commencing with
    product  introduction over the greater of the ratio of current gross revenue
    for a product  to the total  expected  gross  revenue  over the life of that
    product,  or the straight-line  method over the remaining estimated economic
    life,  ranging from 24 to 36 months.  The unamortized  capitalized  costs by
    product  are  reduced to an amount  not to exceed the future net  realizable
    value by product at each balance sheet date.  Future net realizable value is
    determined  through  sales  forecasts  based  on  existing  and  anticipated
    dealer/distributor  agreements  and other  sales  contracts.  Although it is
    possible  that  management's  estimate for the future net  realizable  value
    could change in the near future,  management is not  currently  aware of any
    events that would result in a change to its estimate which would be material
    to the Company's financial position or its results of operations.

    The amount of development  costs capitalized in accordance with Statement of
    Financial  Accounting  Standards  No. 86 for 1997 and 1996 was  $473,429 and
    $436,911,  respectively.  Amortization of software development costs charged
    to costs and expenses during the years ended December 31, 1997 and 1996, was
    $649,597 and $570,247, respectively.

    Income Taxes

    The Company accounts for income taxes under the liability method pursuant to
    SFAS No.  109,  "Accounting  for Income  Taxes."  Deferred  taxes arise from
    temporary   differences,   primarily  attributable  to  differences  between
    depreciation and amortization for tax and financial statement purposes,  and
    reserves accrued for book purposes on accounts receivable and inventories.

    As a result of net  operating  losses for tax  purposes  for the years ended
    December 31, 1997 and 1996, a provision  for deferred  income taxes  arising
    from  temporary  differences,  primarily  due  to  differences  between  the
    treatment  of  capitalized  software  costs  and  depreciation  for  tax and
    financial statement purposes, has not been recognized.

    Depreciation

    Depreciation  is provided  for in amounts  sufficient  to relate the cost of
    depreciable  assets to operations  over their estimated  service lives.  The
    estimated lives used in determining depreciation are--

         Office and other equipment                             3-5 years
         Furniture and fixtures                                 5-7 years

    The  straight-line  method of  depreciation  is followed  for all assets for
    financial reporting purposes. Accelerated methods are used for tax purposes.


                                                                             F-7

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued


    Loss per Common Share

    In 1997,  the  Financial  Accounting  Standards  Board  issued  Statement of
    Financial  Accounting  Standards (SFAS) No. 128, "Earnings Per Share" (EPS).
    This Statement  replaces the presentation of primary EPS with a presentation
    of basic EPS. It also requires dual presentation of basic and diluted EPS on
    the face of the income  statement  for all  entities  with  complex  capital
    structures and requires a reconciliation of the numerator and denominator of
    the basic EPS  computation  to the numerator and  denominator of the diluted
    EPS  computation.  Basic EPS  excludes  dilution and is computed by dividing
    income available to common  stockholders by the  weighted-average  number of
    common shares outstanding for the period. Diluted EPS reflects the potential
    dilution that could occur if  securities or other  contracts to issue common
    stock were  exercised  or  converted  into  common  stock or resulted in the
    issuance  of common  stock that then  shared in the  earnings of the entity.
    Diluted  EPS is computed  similarly  to fully  diluted  EPS  pursuant to APB
    Opinion 15. In complying with the  requirements of SFAS No. 128, the Company
    has recalculated all prior period EPS data resulting in no change.

    The  following  table  reconciles  basic and diluted EPS for the years ended
    December 31:

                                                          1997           1996
                                                     ---------------------------
    Numerator
       Net loss                                      $ (1,615,804) $ (2,244,885)
       Preferred stock dividend                           (92,775)           -
                                                     ---------------------------

       Net loss available to common stockholders     $ (1,708,579) $ (2,244,885)
                                                     ---------------------------

       Denominator
          Weighted-average shares                       6,876,743     5,333,852
                                                     ---------------------------

    The loss per  common  share  for 1997  and 1996 do not  include  the  common
    equivalent  shares because the effect of such inclusion would be to decrease
    the loss per share. No  reconciliation  has been presented for the numerator
    and  denominator,  as the  antidilution of common  equivalent  shares causes
    basic and diluted EPS to be the same.

    Advertising Costs

    The Company  expenses the costs of first-time  advertising when the material
    is published. Prepaid advertising and brochures consist of advertising costs
    paid in advance of  publication.  Also included in prepaid  advertising  and
    brochures expense are the costs of developing  various marketing and product
    materials  for new  software.  These costs are expensed when the software is
    released.

                                                                             F-8

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued


    Employee Stock Options

    Statement of Financial  Accounting Standards (SFAS) No. 123, "Accounting for
    Stock-Based   Compensation,"  requires  that  stock-based   compensation  be
    accounted  for on the fair value  method as described in SFAS No. 123, or on
    the intrinsic  value-based method of Accounting Principles Board Opinion No.
    25 (APB 25),  whereby  if options  are priced at or above the quoted  market
    price on the date of grant,  there is no compensation  expense recognized by
    the Company as a result of the options. If the intrinsic  value-based method
    is used, pro forma net income and earnings per share must be disclosed as if
    the fair  value-based  method had been  applied.  The Company  continues  to
    account for its employee stock options in accordance with APB 25; therefore,
    the required pro forma  disclosures are contained in Note H to the financial
    statements.

    Cash and Cash Equivalents

    The Company considers all highly liquid securities purchased with a maturity
    of three months or less to be cash equivalents.

    Invested Cash

    The Company has  invested  excess cash in money market  accounts.  This cash
    investment is consistent with the Company's investment strategy to set aside
    cash not to be used for Company operations but to allow for liquidity as the
    need arises. At December 31, 1997 and 1996, invested cash totaled $1,000,000
    and $1,200,000, respectively, which amounts are collateralized by government
    securities held by the Company's bank.

    Liquidity

    The Company has incurred losses and used cash in its recent operation.   The
    Company anticipates that the net proceeds from past equity offerings, exist-
    ing cash balances, and periodic borrowings under the Company's bank lines of
    credit  will be  adequate to meet  the Company's  expected cash requirements
    through 1998.   In addition, the Company anticipates obtaining equity during
    1998.

    Reporting Comprehensive Income

    The  Financial  Accounting  Standards  Board  recently  issued  Statement of
    Financial  Accounting  Standards  (SFAS) No. 130,  "Reporting  Comprehensive
    Income,"  effective for fiscal years beginning after December 15, 1997. This
    Statement  establishes  standards for reporting and display of comprehensive
    income and its components  (revenue,  expenses,  gains and losses) in a full
    set of  general-purpose  financial  statements.  This Statement requires all
    items required to be recognized under accounting  standards as components of
    comprehensive  income be reported in a financial statement that is displayed
    with the same  prominence as other financial  statements.  SFAS No. 130 does
    not require a specific format for that financial statement but requires that
    an enterprise display an amount representing total comprehensive  income for
    the period in that  financial  statement.  The  Statement  requires  that an
    enterprise classify items of other comprehensive income by their nature in a
    financial   statement   and  display  the   accumulated   balance  of  other
    comprehensive  income  separately


                                                                             F-9

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

    
    from retained earnings and  additional paid-in capital in the equity section
    of a statement of financial position.  Reclassification  of financial state-
    ments for earlier periods  provided for comparative  purposes  is  required.
    The  Company  will  comply  with the disclosure requirements of SFAS No. 130
    in fiscal year 1998.

    Disclosures About Segments of an Enterprise and Related Information

    The  Financial  Accounting  Standards  Board  recently  issued SFAS No. 131,
    "Disclosures  About  Segments of an  Enterprise  and  Related  Information,"
    effective for periods  beginning  after  December 15, 1997.  This  Statement
    establishes  standards for the way that public business  enterprises  report
    information  about  operating  segments in annual  financial  statements and
    requires that those enterprises report selected  information about operating
    segments  in  interim  financial  reports  issued to  shareholders.  It also
    establishes  standards for related  disclosures about products and services,
    geographic areas and major customers.

    This Statement requires a public business enterprise to report financial and
    descriptive  information about its reportable operating segments.  Operating
    segments are  components of an  enterprise  about which  separate  financial
    information is available that is evaluated  regularly by the chief operating
    decision-maker  in  deciding  how to  allocate  resources  and in  assessing
    performance.  Generally, financial information is required to be reported on
    the basis that it is used internally for evaluating segment  performance and
    deciding how to allocate  resources to segments.  This Statement  requires a
    public  business  enterprise  to report a measure  of segment  profit  loss,
    certain  specific  revenue and expense items and segment  assets and certain
    other related  information;  and information  about the revenue derived from
    the  enterprise's  products or services  (or groups of similar  products and
    services),  about the  countries in which the  enterprise  earns revenue and
    holds  assets  and  about  major   customers   regardless  of  whether  that
    information is used in making operating decisions.  However,  this Statement
    does not require an  enterprise to report  information  that is not prepared
    for internal use if  reporting it would be  impracticable.  The Company will
    comply with the disclosure requirements of SFAS No. 131 in fiscal year 1998.






NOTE B--ACCOUNTS RECEIVABLE


    Accounts receivable consist of the following at December 31:

                                                          1997           1996
                                                     ---------------------------

       Trade                                         $ 13,893,969  $ 12,044,950
       Allowance for returns and uncollectible
          accounts                                     (1,676,110)   (1,863,653)
       Allowance for advertising and other credits     (1,017,716)   (1,141,000)
                                                     ---------------------------

                                                     $ 11,200,143  $  9,040,297
                                                     ---------------------------

    
                                                                            F-10

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE B--ACCOUNTS RECEIVABLE--Continued


    The Company provides for an allowance for uncollectible  accounts receivable
    based on experience.  Although it is reasonably  possible that  management's
    estimate  for  uncollectible  accounts  could  change  in the  near  future,
    management  is not aware of any events that would  result in a change to its
    estimate  which  would be material to the  Company's  financial  position or
    results of operations.

    Included  in the  accounts  receivable  balance at  December  31,  1997,  is
    $1,547,000  due from a customer  which is currently in litigation in France.
    The case will be heard in April 1998, and management believes it is probable
    the balance of this receivable will be fully collected.


NOTE C--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS


    Inventories

    Inventories consist of the following at December 31:

                                                          1997           1996
                                                     ---------------------------
       
       Finished goods                                $    661,479  $    649,495
       Allowance                                         (150,000)     (150,000)
                                                     ---------------------------

                                                          511,479       499,495
       Work-in-process                                    249,180       318,799
                                                     ---------------------------

                                                     $    760,659  $    818,294
                                                     ---------------------------


    Prepaid Expenses and Deposits

    Prepaid expenses and deposits consist of the following at December 31:

                                                          1997           1996
                                                     ---------------------------

       Prepaid license                               $    600,000  $         -
       Prepaid advertising and brochures                   23,334        47,671
       Other prepaid amounts                              168,081        61,074
                                                     ---------------------------

                                                     $    791,415 $     108,745
                                                     ---------------------------


                                                                            F-11

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE C--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS--Continued


    Equipment and Furniture

    Equipment and furniture consist of the following at December 31:

                                                          1997           1996
                                                     ---------------------------

       Office and other equipment                    $  1,620,150  $  1,532,574
       Furniture and fixtures                             112,399       115,808
                                                     ---------------------------

                                                        1,732,549     1,648,382
       Accumulated depreciation                        (1,144,766)     (768,629)
                                                     ---------------------------
 
                                                     $    587,783  $    879,753
                                                     ---------------------------
 

    Capitalized Software

    Capitalized software consists of the following at December 31:

                                                          1997           1996
                                                     ---------------------------

       Capitalized software                          $  5,941,614  $  5,468,185
       Accumulated amortization                        (5,299,793)   (4,650,197)
                                                     ---------------------------

                                                     $    641,821  $    817,988
                                                     ---------------------------


    Accrued and Other Liabilities

    Accrued and other liabilities consist of the following at December 31:

                                                          1997           1996
                                                     ---------------------------

       Accrued salaries, taxes and fringe benefits   $    491,828  $    623,958
       Deferred income--maintenance fee                   293,000            -
       Accrued royalties                                   48,019        89,990
       Other accrued liabilities                               -         50,000
                                                     ---------------------------

                                                     $    832,847  $    763,948
                                                     ---------------------------


                                                                            F-12

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE D--FINANCIAL INSTRUMENTS


    The financial statements include various estimated fair value information as
    of  December  31, 1997 and 1996,  as required by SFAS No. 107,  "Disclosures
    About Fair Value of Financial Instruments." Such information, which pertains
    to the Company's  financial  instruments,  is based on the  requirements set
    forth in the  Statement  and does not purport to represent the aggregate net
    fair value of the Company.

    The following  methods and assumptions  were used to estimate the fair value
    of each  class of  financial  instruments  for  which it is  practicable  to
    estimate that value:

    Cash and Cash Equivalents

    The  carrying  amount  approximates  fair value  because  of the  short-term
    maturity of these  instruments.  At December 31, 1997 and 1996, the carrying
    amount/estimated  fair value of these  assets is  approximately  $68,000 and
    $406,000, respectively.

    Invested Cash

    The  carrying  amount  approximates  fair value  because  of the  short-term
    maturity of these  instruments.  At December 31, 1997 and 1996, the carrying
    amount/estimated fair value of these assets is approximately  $1,000,000 and
    $1,200,000, respectively.

    Loans Receivable

    Outstanding loans receivable  included in other receivables  represent loans
    to  the  employees  of  the  Company.  The  carrying  amount  of  the  loans
    approximates  the fair value due to the nature of the  transactions  and the
    rates of interest  corresponding  to quoted market  prices  available to the
    Company. At December 31, 1997 and 1996, the carrying  amount/estimated  fair
    value of these assets is approximately $328,000 and $95,000, respectively.

    Line of Credit and Notes Payable

    Quoted  market  prices for the same or similar  issues or the current  rates
    offered to the Company for debt of the same remaining maturities are used to
    estimate  the fair value of the  Company's  line of credit.  At December 31,
    1997 and 1996,  the  carrying  amount/estimated  fair  value of this debt is
    approximately  $1,576,000  and  $1,495,000,   respectively,  recorded  as  a
    short-term  line of credit,  and  long-term  notes  payable in the financial
    statements.


                                                                            F-13

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE E--LINE OF CREDIT


    At December 31,  1997,  the Company had  available a  $3,000,000  short-term
    working  capital  line of credit at the lower of the bank's  prime rate plus
    .25%,  or LIBOR  plus  2.75%.  At  December  31,  1996,  the  Company  had a
    $2,000,000  short-term  working  capital line of credit (the  borrowing base
    facility) and a $2,000,000  intermediate-term working capital line of credit
    (the cash flow  facility),  at the lower of the  bank's  prime rate or LIBOR
    plus 2.50%.  In 1997, the short-term and  intermediate-term  working capital
    lines of credit were replaced by the  $3,000,000  line of credit  referenced
    above. Also, at December 31, 1997 and 1996, the Company had a $750,000 fixed
    asset  line  of  credit  at the  bank's  prime  rate  plus  3/4%  and  1/4%,
    respectively.  All credit facilities are collateralized by the assets of the
    Company.  Under these credit  facilities the Company is required to maintain
    certain financial covenants.

    The rate of interest on the  short-term  working  capital  line of credit at
    December 31, 1997, was 8.47%. The short-term  working capital and the unused
    portion of the fixed  asset  line of credit  were set to expire on April 30,
    1999. On March 4, 1998,  the Company's loan agreement was modified to change
    the  $3,000,000  line of credit  from a time note having a maturity of April
    30,  1999,  to a  demand  note  which  shall  be  payable  on  demand.  This
    modification also removed all financial covenants from the agreement.

    At December 31, 1997,  $326,356 and $1,250,000 were outstanding on the fixed
    asset and short-term  working  capital lines of credit,  respectively,  with
    principal payments as follows:

         Year ending December 31,

              1998                                   $  1,484,356
              1999                                         92,000
                                                     -------------

                                                     $  1,576,356
                                                     -------------

    At December 31, 1996,  $495,356 and $1,000,000 were outstanding on the fixed
    asset and intermediate-term  working capital lines of credit,  respectively.
    The bank's rate of interest at December  31, 1996,  was 8.25%.  The lines of
    credit were renewed by the Company before their expiration on June 30, 1997.


NOTE F--LEASES


    The Company leases its office  facilities and certain office equipment under
    various operating leases. Lease terms range from one to four years.


                                                                            F-14

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE F--LEASES--Continued


    Minimum annual rental and lease commitments for leases with a remaining term
    of one year or more at December 31, 1997, are as follows:

         Year ending December 31,

              1998                                   $    537,000
              1999                                        413,000
              2000                                        117,000
                                                     -------------

              Net minimum lease payments             $  1,067,000
                                                     -------------



    Rent expense was $587,000 and $628,000 for the years ended December 31, 1997
    and 1996, respectively.


NOTE G--RELATED PARTY TRANSACTIONS


    During 1996,  the Company  loaned  $95,000 to two officers.  One officer was
    loaned  $25,000 at an interest  rate of 9 1/4%,  which was payable on demand
    and repaid during 1997. A second  officer was loaned  $70,000 at an interest
    rate of 8%, in two separate  promissory notes. Both notes were payable on or
    before December 1, 1997, with interest.

    Additional  notes were issued to the second officer during fiscal year 1997.
    On  December  17,  1997,  all  outstanding   notes  for  this  officer  were
    consolidated into one note of $327,750, including accrued interest. The note
    is a demand note with an interest rate of 8.95% and is due in full,  without
    demand notice, on December 17, 2000. As part of the agreement,  this officer
    pledged 140,000 shares of common stock as collateral.


NOTE H--COMMITMENTS


    Employment Agreements

    The Company has entered into employment agreements with three employees. The
    agreements are each for a three-year  period  commencing  between March 1995
    and June 1996 and will renew  automatically  for  succeeding  periods of one
    year unless sooner  terminated.  In the event the Company terminates without
    cause the employment of any of these  employees,  the employee shall receive
    an  amount  equal to one  year's  base  salary  plus  accrued  benefits  and
    incentive  compensation.  The agreements  contain a provision  which triples
    certain amounts due in the event of a hostile takeover.  The agreements also
    contain provisions for the accelerated vesting of options if certain defined
    changes to the composition of the Board of Directors should occur.


                                                                            F-15

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE H--COMMITMENTS--Continued


    The minimum amounts due under the agreements during the succeeding  two-year
    period,   exclusive  of  contingent   incentive   compensation   and  salary
    adjustments, are as follows:

         Year ending December 31,

              1998                                   $    310,000
              1999                                         83,000
                                                     -------------

                                                     $    393,000
                                                     -------------


NOTE I--WARRANTS, OPTIONS AND OTHER STOCK ISSUED


    Stock Options Issued

    The  Company  issues  options  to  employees  and  members  of its  Board of
    Directors  based on merit.  The Company has  accounted for its options under
    APB Opinion No. 25 and related  interpretations.  The options,  which have a
    term of five years when issued, are granted at various times during the year
    and vest based upon individual grant  specifications.  The exercise price of
    each option equals or exceeds the market price of the Company's stock on the
    date of grant. During 1997, 584,975 options granted previously were revalued
    to a lower exercise  price.  No  compensation  cost has been  recognized for
    employee  options.  Had compensation cost for the plan been determined based
    on the fair value of the  options at the grant  dates,  consistent  with the
    method in  Statement  of  Financial  Accounting  Standards  (SFAS) No.  123,
    "Accounting for Stock-Based Compensation," the Company's net loss would have
    been increased to the pro forma amounts indicated below:

                                                          1997           1996
                                                     ---------------------------

    Net loss--as reported                           $ (1,615,804)  $ (2,244,885)
    Net loss--pro forma                               (2,229,997)    (2,996,947)

    Net loss per share--as reported                        (0.25)         (0.42)
    Net loss per share--pro forma                          (0.34)         (0.56)

    The fair value of each option grant is estimated  on the date of grant using
    the Black-Scholes options-pricing method with the following weighted-average
    assumptions used for grants in 1997 and 1996, respectively: expected
    volatility of 42% and 40%;  risk-free  interest rate of 5.9% and 6.2% and
    expected lives of 2.9 and 2.7 years.

                                        
                                                                            F-16

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE I--WARRANTS, OPTIONS AND OTHER STOCK ISSUED--Continued


    The following  tables depict activity in the plan for the years ended
    December 31, 1997 and 1996:

                                                                       Weighted-
                                                                        Average
                                                                        Exercise
    1997                                                  Shares          Price
    ----------------------------------------------------------------------------

    Options outstanding at beginning of year              943,516         $8.57
        Granted                                           906,000          3.64
        Exercised                                              -             -
        Forfeited                                         (95,867)        (8.73)
        Expired                                           (20,000)        (4.00)
                                                     -------------

    Outstanding at end of year                          1,733,649         $4.18
                                                     -------------

    Options exercisable at year-end                     1,132,816         $4.52
                                                     -------------


    Weighted-average fair value per share
        of options granted during the year                                $0.53

                                                                       Weighted-
                                                                        Average
                                                                        Exercise
    1996                                                  Shares          Price
    ----------------------------------------------------------------------------


    Options outstanding at beginning of year              801,800         $9.35
        Granted                                           387,050          7.05
        Exercised                                         (30,000)        (3.67)
        Forfeited                                        (215,334)        (9.44)
                                                     -------------

    Outstanding at end of year                            943,516         $8.57
                                                     -------------

    Options exercisable at year-end                       526,714         $8.41
                                                     -------------


    Weighted-average fair value per share
        of options granted during the year                                $2.22


                                                                            F-17

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE I--WARRANTS, OPTIONS AND OTHER STOCK ISSUED--Continued


  The following applies to options outstanding at December 31, 1997:

        Number outstanding                                             1,254,000
        Range of exercise prices                                $ 3.13 to $ 3.75
        Weighted-average exercise price                                     3.44
        Weighted-average remaining contractual life                   5.92 years

        Number outstanding                                               437,249
        Range of exercise prices                                $ 3.76 to $ 8.50
        Weighted-average exercise price                                   $ 5.67
        Weighted-average remaining contractual life                   2.96 years

        Number outstanding                                                42,400
        Range of exercise prices                               $ 8.51 to $ 14.88
        Weighted-average exercise price                                  $ 10.88
        Weighted-average remaining contractual life                   1.64 years

    Prepaid Warrants Issued

    During 1996,  the Company sold three  prepaid  warrants to a private fund in
    the  amount of  $500,000  each for a total of  $1,500,000.  Each  warrant is
    convertible  into shares of common stock at the lower of $5.25 per share, or
    85% of the arithmetic average of the prior five days closing prices. As part
    of the  agreement,  the Company  also issued  33,613  options at an exercise
    price of $5.25 per share to the private  fund.  The  options  have a term of
    four years.  In addition,  the Company  issued 20,000 options at an exercise
    price  of $5.25  per  share  to both  Tanner  Unman  Securities,  Inc.,  and
    Prudential  Securities,  Inc., both of which  facilitated the agreement with
    the  private  fund.  These  options  also have a term of four  years.  As of
    December 31, 1997, the private fund had converted the prepaid  warrants into
    526,832 shares of common stock.

    Preferred Stock Issued

    During 1996, the Company's Board of Directors  approved a private  placement
    of Series A-2 8%  convertible,  redeemable  preferred  stock and  associated
    stock warrants.  Dividends on the preferred stock are cumulative and payable
    annually in arrears, beginning January 1, 1998, in either cash or additional
    shares of preferred  stock,  at the option of the  Company.  The dividend is
    calculated  as 8% of the book  value  of the  stock,  based on its  original
    trading price.  The preferred stock is convertible into ten shares of common
    stock any time  after 30 days  from the date of  issuance.  Any  unconverted
    preferred  stock  remaining  at  January  1,  2002,  will  automatically  be
    converted into ten shares of common stock per preferred  share at that time.
    Each share of preferred stock was also issued with one warrant entitling the
    holder to  purchase  ten  shares of common  stock  each at $4.18 per  share.
    During 1997, 17,644 shares of Series A-2 preferred stock were converted into
    176,440  shares of common stock.  At December 31, 1997 and 1996, the Company
    has  outstanding  26,771 and 40,224  shares of Series A-2  preferred  stock,
    respectively, and 44,415 and 40,224 associated stock warrants, respectively.

                                                            
                                                                            F-18

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE I--WARRANTS, OPTIONS AND OTHER STOCK ISSUED--Continued


    In March 1997, the Company's Board of Directors approved a private placement
    of Series A-3, convertible,  redeemable preferred stock and associated stock
    warrants.  The Company sold 2,502 shares of Series A-3 preferred  stock to a
    private  fund for a total of  $2,502,000.  Each  share is  convertible  into
    shares  of  common  stock at the  lower of $3.44  per  share,  or 85% of the
    arithmetic  average of the prior five days  closing  prices.  As part of the
    agreement,  the Company also issued 85,568  options at an exercise  price of
    $4.30 per share to the private fund.  The options have a term of four years.
    In addition, the Company issued 25,020 options at an exercise price of $3.44
    per share to  Tanner  Unman  Securities,  Inc.,  and  20,000  options  at an
    exercise price of $4.30 per share to Prudential  Securities,  Inc.,  both of
    which  facilitated  the agreement with the private fund.  These options also
    have a term of four years.  As of December  31,  1997,  the private fund had
    converted the Series A-3  preferred  stock into  2,382,268  shares of common
    stock.

    Common Stock Issued

    In  October  1997,  the  Company's  Board of  Directors  approved  a private
    placement of common stock units.  The Company sold 727,274 units for a total
    of  $1,000,000.  Each unit  consisted  of one share of common  stock and one
    warrant  which  entitles the holder to purchase one share of common stock at
    an exercise price of $1.75 per share. As part of the agreement,  the Company
    also  issued  purchase  options for 72,727  additional  units at an exercise
    price  of  $1.51  per  unit to M. H.  Meyerson  & Co.  which  served  as the
    placement agent. These purchase options have a term of five years.


NOTE J--INCOME TAXES


    Deferred tax assets (liabilities) consist of the following at December 31:

                                                          1997           1996
                                                     ---------------------------

         Capitalized software                        $  (243,635)  $   (310,508)
         Fixed assets                                     (5,241)       (38,687)
         Inventory capitalization                         (6,439)        (8,270)
         Inventory reserves                               56,940         56,940
         Receivable reserves                           1,022,576      1,140,566
         Deferred rent and other                          15,949         24,942
         Accrued compensation                             66,772         90,756
         Loss carryforwards                            3,977,292      3,448,152
                                                     ---------------------------

            Gross deferred tax asset                   4,884,214      4,403,891

            Deferred tax asset valuation allowance    (4,884,214)    (4,403,891)
                                                     ---------------------------

                                                     $        -    $         -
                                                     ---------------------------


                                                                            F-19

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE J--INCOME TAXES--Continued


    The  differences  between  the total  income tax expense  (benefit)  and the
    income tax expense (benefit) computed using the federal income tax rate were
    as follows:

                                                          1997           1996
                                                     ---------------------------

         Pretax loss                                 $(1,615,804)  $ (2,244,885)
                                                     ---------------------------


         Computed federal income taxes at 34%        $  (549,373)  $   (763,261)

         Computed state income taxes, net of federal
           benefit                                       (63,986)       (88,897)

         Effect of recognizing stock option
           compensation for tax purposes                 133,038       (220,728)
                                                     ---------------------------

         Deferred tax benefit                           (480,321)    (1,072,886)

         Expense arising from change in deferred tax
           asset valuation allowance                     480,321      1,072,886
                                                     ---------------------------

             Income tax expense                      $        -    $         -
                                                     ---------------------------


    Approximately $10,478,000 and $9,084,000 of loss carryforwards are available
    for tax return purposes at December 31, 1997 and 1996,  respectively.  Their
    use is limited to future taxable earnings of the Company,  and subject to an
    annual limitation.  The loss carryforwards expire from December 31, 2004, to
    December 31, 2013.


NOTE K--SUPPLEMENTAL CASH FLOWS INFORMATION


    Supplemental Disclosures of Cash Flows Information

    The Company paid the following  amounts for interest and income taxes during
    the years ended December 31:

                                                          1997           1996
                                                     ---------------------------

         Interest                                    $    110,382  $    103,169
                                                     ---------------------------

         Income taxes                                $         -   $         -
                                                     ---------------------------


                                                                            F-20

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE K--SUPPLEMENTAL CASH FLOWS INFORMATION--Continued


    Supplemental Schedule of Non-Cash Investing and Financing Activities

    The following amounts have been recorded in non-cash transactions during the
    years ended December 31, 1997 and 1996:

    As a result of the exchange  discussed in Note O, prepaid expenses and other
    deposits have been increased $600,000 and accrued and other liabilities have
    been increased $225,000.

    Series A-2  preferred  shares with a value of $497,832 were  converted  into
    common stock.  Series A-3 preferred  shares with a value of $2,283,249  were
    converted  into common stock.  Dividends owed on preferred  stock  converted
    with a value of $20,202 were paid in common stock.  Dividends  payable which
    were paid  subsequently  to December  31, 1997,  in preferred  shares with a
    value of $72,573 were accrued against additional paid-in capital.

    In 1996, stock was issued in payment to a vendor with a value of $52,720.


NOTE L--EXPORT SALES


    The Company sells software abroad through  distributors,  dealers,  and mail
    orders. In 1997, export sales to Brazil totaled  $3,159,000 or approximately
    21% of total sales. Total export sales for the years ended December 31, 1997
    and 1996, were approximately $7,589,000 and $7,079,000, respectively.


NOTE M--RETIREMENT PLAN


    The  Company  has a  profit-sharing  retirement  plan which  conforms to the
    provisions of Section  401(a) of the Internal  Revenue Code. The plan covers
    all full-time employees, and allows employees voluntarily to defer a certain
    percentage  of  their  income  through  contributions  to  the  plan.  If no
    resolution is made by the Board of Directors to the contrary, the Company is
    not required to contribute.  No Company  contribution was made for the years
    ended December 31, 1997 or 1996.


                                                                            F-21

<PAGE>

Globalink, Inc.

Notes to Financial Statements--Continued

December 31, 1997 and 1996


NOTE N--CONCENTRATION OF CREDIT RISK


    Due to the  nature  of the  Company's  business,  sales to a few  customers,
    primarily software distributors and original equipment manufacturers (OEMs),
    have accounted for a significant  percentage of the Company's sales.  During
    1997,  one  customer  accounted  for 17% of net sales.  During  1996,  three
    customers  accounted  for 10% or  more  of net  sales  each  (in  aggregate,
    representing 37% of net sales). Accounts receivable at December 31, 1997 and
    1996,  include  approximately  $1,805,000 and $3,981,000,  respectively,  in
    amounts due from the Company's significant customer(s).


NOTE O--NON-MONETARY TRANSACTION


    In December 1997, the Company entered into a non-monetary transaction with a
    publishing company which included license agreements between the parties. No
    gain or loss  was  recorded  on this  transaction,  as  there  was an  equal
    exchange between the two companies.

    The Company  became a licensee under two  agreements.  The first, a one-year
    license for the use of six "Virtual Campuses"  established by the publishing
    company,  had a value of $600,000.  At December  31,  1997,  this amount was
    capitalized  as a prepaid  license,  the balance of which will be  amortized
    over the term of the  license  agreement.  The second  license,  relating to
    "Campus  Courseware"  provided  by the  publishing  company,  had a value of
    $650,000 which was expensed in 1997.

    In  exchange,  the Company  granted a license for its  Barcelona  Technology
    Server in five languages with a value of $1,025,000  which has been included
    in income in 1997.  In  conjunction  with this  license,  the  Company  will
    provide maintenance for a period of one year from the date of the agreement.
    The value of the  maintenance  agreement is $225,000 which has been recorded
    as deferred  income at December 31, 1997,  and will be  recognized  over the
    term of the maintenance agreement.


                                                                            F-22