SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

   X  Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
------
      1934 for the fiscal year ended: December 31, 1996 
                                      -----------------

______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:   $13,976,000
 State the aggregate market value of the voting stock held by non-affiliates of
    the registrant: $14,688,366 based on the closing price on February 28, 1997.

 Indicate the number of shares outstanding of each of the issuer's classes of
    common equity: Common Stock, par value $.01 per share --
                   5,528,230 as of February 28, 1997.

                  DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Proxy  Statement  for the 1996 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,  1996,  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, 1996


Part I                                                                Page No.

Item 1     Business...............................................         3

Item 2     Properties.............................................        11

Item 3     Legal Proceedings......................................        11

Item 4     Submission of Matters to a Vote of Security Holders....        11

Item 4(a)  Directors and Executive Officers of the Registrant.....        11


Part II

Item 5     Market for Registrant's Common Equity and Related
           Stockholder's Matters..................................        14

Item 6     Management's Discussion and Analysis of Financial Condition
           and Results of Operations..............................        15

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.................................        21

Item 11    Security Ownership of Certain  Beneficial Owners and
           Management.............................................        21

Item 12    Certain Relationships and Related Transactions.........        21


Part IV

Item 13    Exhibits and Reports on Form 8-K ......................        22


                                       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;  and provides  professional  translation  services
through  the  Globalink   Translation   Services   Division  and  the  Globalink
Translation Alliance. 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 preferred  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 key  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,  most
translations are still performed by humans.  However, demand for translations is
already  beginning  to outpace  supply,  and as more  information  is  digitally
created and  transmitted,  alternative  translation  methods  will play a larger
role.

The introduction of powerful new personal  computers and workstations has helped
this trend,  by allowing  the  development  of  PC-based MT  functions  that had
previously been mainframe dependent. The widespread acceptance of these powerful
new personal computers,  and their increasing use as communication  devices, has
rapidly increased demand for low-cost, PC-based MT software.


                                       3
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Machine Translation (MT) Technology

MT is an early  application  of  natural-language  processing  research.  Unlike
software  that  merely  looks  up  words  in  a  dictionary,   MT   applications
grammatically  analyze the  original  language  text (the Source  Language)  and
automatically generate corresponding text in the Target Language (the translated
text). The input to the software application is the text of the Source Language.
The output is the text of the Target Language which may be displayed  on-screen,
printed (with or without the  corresponding  Source  Language  text),  e-mailed,
posted on a Web site, etc.


Globalink's Products -- Core Technology

Globalink  translation  software  products  (The  Globalink  Language  Assistant
Series(TM), Globalink Power Translator(R), 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 will create  acceptable  draft  translations of
scientific, technical, or commercial texts. The texts must be clearly written in
the Source Language and use grammatically correct,  declarative  sentences.  The
Company's  software is not intended  for use in  translating  literary  works or
poetry.

The  Globalink  approach  is  based  fundamentally  on  linguistic  and  machine
translation algorithms.  The language the user is translating from is the Source
Language.  The language the user is translating into is the Target Language. For
example, if one has a German text to be translated into English, German would be
the Source Language and English the Target Language.

The translation  dictionaries  are lexical  databases,  or "lexicons." They list
terms in the Source  Language with their  appropriate  translation in the Target
Language.

The translation program translates the original text into the selected language,
utilizing the machine translation  dictionaries as lexical databases.  Users can
translate entire documents with a single command,  or translate  selections from
the document or single  sentences.  Documents  can be created using the built-in
editor of the program,  or can be imported  from most  popular word  processors,
using import filters that retain formatting. In addition, The Language Assistant
Series,  Power Translator  (version 6) and Power Translator Pro allow you to use
the program from within your word processor (Word for Windows).  Similarly,  Web
Translator  lets you translate Web pages from within the browser as you surf the
Internet.  In  addition,  with  the  Translation  Utility  (a  feature  of Power
Translator 6 and Power  Translator  Pro), it's easy to translate e-mail messages
in popular e-mail packages (such as Microsoft Mail).

All  Globalink  translation  programs  are designed to be  user-friendly  and to
generate  quality  draft  translations.  End  users  can  add new  terms  to the
dictionaries  or modify  existing  terms.  They can also create special  Subject
Dictionaries or purchase them from Globalink. The texts are displayed in a split
screen, facilitating review of the source text and the target text. The built in
editor,  with special features for accented and foreign character entry, make it
easy to edit translations on-screen.  During the editing process, end users have
access to alternative translations for terms that have been translated or access
to synonyms for terms in the Source  Language that would result in more accurate
translations.

Special Translation Algorithms will perform multiple translations of a word in a
sentence based on parts of speech (noun,  verb,  adjective).  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.


                                       4
<PAGE>

The software  products  also  contain a special  reference  component  that will
display parts of speech,  translations and other grammatical information for any
term in the dictionary.


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 and word processors) and  affordability,  thus
creating mass marketing potential.

Current Globalink  products and others under development are available on a wide
variety of computer  platforms  including IBM PCs and compatibles  under Windows
and  Macintosh(R)   operating  systems.  The  products  are  designed  for  high
productivity translation or for rapid draft translations. The Company's products
are priced for high-end professional users as well as for general consumers. The
Company  plans to continue to broaden its product  offerings  with more language
pairs and enhancements to its existing products.

The  Company  sells  its  products  and  services  primarily  through  worldwide
non-exclusive  distributor/dealer  channels.  All  distributors  have  agreed 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,   original
equipment manufacturer agreements (OEM) and extensive promotional programs.


Products

     Current Products

          Globalink Power  Translator(R) 6.0 - Globalink Power Translator 6.0 is
          the Company's newest product for US and Canadian  markets,  and raises
          the bar  significantly  by offering  tremendous value at an aggressive
          price.  The product creates draft  translations of documents,  e-mail,
          Web pages and more. With four languages in one  box--Spanish,  French,
          German and  Italian--it is easy to translate text to and from English.
          Globalink  Power  Translator  6  customers  can create new  documents,
          import  files from other  applications,  or install it to work  within
          Microsoft Word.  Globalink Power Translator 6 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   6  is  based  on   Globalink
          Barcelona(TM) technology and runs on Windows 95 or NT systems.

          Globalink  Power  Translator  5.1 - Is a similar  product to Globalink
          Power  Translator  6.0 (above),  but is for Windows 3.1  systems.  The
          product  includes  three language  pairs--English  to and from French,
          German and Italian.


 
                                      5
<PAGE>

          Globalink Web Translator(TM) - The only browser add-on for translating
          French, German and Spanish Web sites into English.  Users can research
          companies and markets,  plan a vacation,  broaden their  horizons,  or
          just have fun. The product applies the Company's core MT technology to
          business tasks such as finding and 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
          all  hotlinks,   graphics,  and  formatting  of  the  original  pages.
          Globalink  Web  Translator  works  with  Netscape  Navigator  2.0  and
          Microsoft  Internet Explorer 3.0 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 also
          available. Runs on Windows 3.1, Windows 95 or Windows NT.

          Globalink  Language  Assistant - This product is targeted at consumers
          purchasing  software  through   traditional  (e.g.   superstores)  and
          emerging (such as mass merchants) retail outlets.  The low price point
          and  appealing  feature  set make the product  perfect  for  students,
          travelers,  pen pals,  and home  computer  users.  Globalink  Language
          Assistant is useful to translate letters,  articles,  recipes,  travel
          brochures,  bulletins  and more. A complete  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.  There are also bilingual  dictionaries which can
          easily 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. And with the Deluxe CD-ROM editions, users
          can play back  sentences,  paragraphs,  or entire  documents in either
          language  supported by each Globalink  Language  Assistant.  Languages
          available are English to and from French,  German, Italian or Spanish.
          Runs on Windows 3.1, Windows 95, Windows NT or Macintosh.

          Globalink  Talk to Me(TM) - In response to market  demand and customer
          requests for language learning titles,  Globalink released Talk to Me.
          Just as MT software helps customers to overcome  language  barriers by
          producing draft  translations,  language learning software helps users
          bridge  the  language  gap  by  developing  foreign  language  skills.
          Globalink  Talk to Me is  published in  conjunction  with  Auralog,  a
          privately   held  French   company.   The  program  was  developed  in
          conjunction with leading educational institutions in Europe, including
          the Sorbonne, the University of Bristol and the Goethe Institute.

          Speaking a foreign language like a native is one thing.  Understanding
          what native speakers are saying is quite another. Globalink Talk to Me
          is the one  interactive  language  learning  program  that does  both:
          teaches  users  how  to  listen  and  to  talk.  Using  unique  speech
          recognition  technology,  Globalink Talk to Me lets users actually see
          voiceprints of native speakers,  then record a voiceprint of their own
          pronunciation. Through imitation, repetition and comparison, users can
          perfect their  pronunciation.  At the same time,  the program helps to
          train  the  ear  to  hear  subtle  nuances  and   differences  in  the
          pronunciation of phrases, words and even syllables.  Globalink Talk to
          Me  includes  adjustable  self-paced  challenge  levels,   interactive
          dialogues involving real-life situations,  and language learning games
          that  help  reinforce  vocabulary,   spelling  and  listening  skills.
          Languages available:  English,  French,  German, and Spanish.  Runs on
          Windows 3.1 and Windows 95.

          For the Macintosh  platform,  Globalink  offers versions of several of
          its product lines, including Language Assistant,  Power Translator and
          Power Translator Professional.


                                       6
<PAGE>

          Translate  Direct  Management  System  - The  Company  has  introduced
          Translate Direct  Management  System which will give  corporations and
          other organizations the ability to manage their own translation bureau
          for maximum efficiency. Using a dedicated on-site server and Globalink
          software,  they can manage their own translation bureau through direct
          on-line access to their  translators  and gain  unprecedented  control
          over all translation activities.


    New Products

          During  1997,  Globalink  has  scheduled  an array of new products and
          services for both the general market as well as specific market areas.
          Products under development for release in 1997 currently include:

          Globalink  Power  Translator Pro - Power  Translator Pro will be quite
          similar to Power  Translator  6.0 (above),  but will be localized  for
          international  markets in Europe and Latin  America.  The product will
          also contain the  functionality  of the Power  Translator 5.1 domestic
          product,  thereby offering a single solution for customers  regardless
          of Windows  version  (Windows  3.1,  Windows 95 or Windows NT).  Power
          Translator  Pro will be  available  in  localized  versions in French,
          German, Italian, Spanish and Portuguese.

          Globalink  Web  Translator  Portuguese  - This  product  is the newest
          addition to the Globalink Web  Translator  family and will be marketed
          heavily in Brazil and  Portugal.  The product is based on  Globalink's
          Barcelona technology and runs on Windows 95 and Windows NT.

          New language pairs - The Company sees a significant market opportunity
          in producing new language pairs for its products, such as a version of
          Globalink Power Translator Pro that translates French text to and from
          German. In 1997 the Company plans to devote  significant  resources to
          capitalizing  on the investment  made in its Barcelona  technology for
          such new language pair development.

         More than two years in  development,  Barcelona marks a breakthrough in
         translation software. This open system allows linguists and translators
         to add to the rule sets without any knowledge of software  programming.
         The  result is a new degree of  precision  previously  unattainable  in
         machine  translation  software systems.  The technology also makes it a
         good platform for future growth, allowing for development to improve on
         a rapid basis in coming years.


Sales,  Marketing and Distribution

The Company markets and sells its software  products in much the same fashion as
other PC software  manufacturers who rely on the retail channel for the majority
of their  business.  This  includes  sales to  distributors  who in turn 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 not only an experienced  internal retail and distribution sales team but
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.

Promotional  cost is the single largest expense of software  product  marketing.
Furthermore,  product promotion is a continuing  business activity and increases
proportionally  with  increases  in  revenue.  Consequently,  the success of the
Company's  promotional  programs  are  directly  related  to the  success of the
Company.


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<PAGE>

Promotion and Advertising

The  Company's  success  to date has been a result of  careful  expenditures  on
advertising  and promotion  controlled by limited  budgets.  With the successful
IPO,  subsequent warrant redemption,  and recent private equity placements,  the
Company has been able to continue investing in aggressive  advertising campaigns
and promotions.  This has included expanded public relations programs,  extended
advertising in general business  publications,  as well as known 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 run where ads appear in trade magazines, such as
        PC Magazine,  as well as several cross industry  publications.  Regional
        promotions  use  advertising  vehicles such as The Miami  Herald,  while
        campaigns  focusing on business  travelers run in airline  publications.
        Promotions  targeting specific demographic sectors are also run, such as
        an infomercial on Spanish  language  television  (Telemundo and others).
        Catalog advertising continues at a high rate in known industry and trade
        catalogs.

        Direct Mail - The Company is investing  more in direct mail  programs to
        increase  sales  and  exposure  for the  product  lines.  This  includes
        programs by industry and by demographic profiles of known 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.

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


Distributors

The  Company  currently  has a number of  worldwide  distributors  who are major
players  typical  of the  type  engaged  by  the  world's  significant  software
manufacturers.  These  include  the larger  international  distributors  such as
Ingram Micro,  Merisel and TechData.  In less  developed  parts of the world the
Company  uses  regional  or local  distributors.  In parts of  Europe  and South
America the Company uses agents to represent its interests.


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.


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<PAGE>

The  Company  currently  has a staff of  seventeen  (17)  development  personnel
located in the Research and Development facility in San Diego,  California.  The
Company  is  focusing  its  development  efforts  in two  areas:  first,  in the
development of algorithms to improve the translation  quality and second, in the
development  of new  language  pairs to  expand  current  markets  or enter  new
markets.


Competition

Competition  in the PC software  industry in general is intense and includes not
only competition between similar product companies but all PC software companies
for retail shelf space in general.  Thus the Company's  competitors  include not
only other  companies who produce and market  machine  translation  products but
virtually  all  software  companies  who  compete  for shelf  space in  computer
software retailers.

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 who market machine  translation
software products that compete either in the mini computer marketplace or in the
PC marketplace on a limited language basis (i.e. Spanish-English only).

Globalink  holds the  dominant  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 can continue to do
so as long as it continues to generate new and advanced products.

In order to be  successful  in the future,  the Company must continue to respond
promptly and  effectively  to all  challenges  of  technological  and  marketing
capabilities any competitor may offer.  The Company's  performance will continue
to 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  the most  capable  and  experienced  staff in order to
maintain its competitive superiority.


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 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.


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<PAGE>

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 its
"Power  Translator"  trademark in the United  States for  computer  software for
foreign language  translation and its "Globalink the Translation  Company" mark,
together  with its oval logo,  in the United  States for  computer  hardware and
software  for language  translation.  The Company has  applications  pending for
federal  registration  of the marks  "Telegraph",  "Translate  Direct"  and "Web
Translator".  The Company is in the process of registering the mark "Globalink",
together  with its flag logo, in addition to the mark "Web  Translator",  in the
United  States,  Canada,  the European  Community and other major  international
markets in Asia and South America,  for language  translation  services rendered
via electronic  means and computer  software for foreign  language  translation.
Applications  for "Internet  Translator" and "Web Translator" have been filed as
Community Trademarks  applications for the European Union countries  (Australia,
Belgium,  Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands,  Portugal,  Spain,  Sweden  and the  United  Kingdom).  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,  1996,  the  Company had  seventy-four  (74)  full-time  and
part-time employees including  seventeen (17) in product  development,  nineteen
(19) in marketing and sales,  twenty-three (23) in finance,  administration  and
shipping,  four (4) in customer support,  and eleven (11) in language  services.
The Company's future success will depend on, in part, its ability to continue to
attract,   retain  and  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.


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<PAGE>

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 September 6, 1997. This
space is primarily utilized as the Research and Development center.



ITEM 3     LEGAL PROCEEDINGS

The  Company is a party to various  legal  proceedings  arising in the  ordinary
course of its business. Management 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.



ITEM 4     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On December  13,  1996,  a Special  Meeting  was held in which the  stockholders
approved an amendment to the Company's Certificate of Incorporation to authorize
two hundred and fifty thousand  (250,000)  shares of Preferred  Stock with a par
value of $.01 per share. No other matters were submitted to the  stockholders of
the Company during the quarter ended December 31, 1996.



ITEM 4(a)  DIRECTORS AND EXECUTIVE OFFICERS OF THE  REGISTRANT


    The Directors, Executive Officers and Key Employees are as follows:

    Name                             Age            Position

    Harry E. Hagerty, Jr.  (1)(2)    56    Chairman, Chief Executive Officer,
                                           President
    John  F. McCarthy, III (1)(2)    51    Director, Secretary, Vice President
    William E. Kimberly    (1)       63    Director
    Michael J. Murphy      (2)       46    Director
    W. Braun Jones, Jr.    (1)       51    Director
    Thomas W. Patterson              37    Director
    Ronald W. Johnston               50    Chief Operating Officer
    Mark A. Paiewonsky               34    Chief Financial & Accounting Officer
    Philippe J. Kuperman             53    Executive  Vice  President of Sales &
                                           Marketing



         (1) Members of the Audit Committee
         (2) Members of the Compensation Committee


                                       11
<PAGE>

Biographical Information


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

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 director
of several emerging companies.

Mr. Michael J. Murphy, a director of Globalink since 1992, has been Chairman and
Chief Executive Officer of Environmental  Strategies  Corporation  ("ESC") since
1986, an environmental  consulting firm. Mr. Murphy has extensive  experience in
environmental   consulting   and   senior   corporate   management   related  to
environmental  programs.  He is  also  Chief  Executive  Officer  of  Industrial
Recovery  Capital  Company  ("IRCC"),  a property  acquisition,  remediation and
redevelopment  company. He has considerable  experience advising  multi-national
corporations on international environmental issues.

Mr.  John F.  McCarthy,  III, a  director  of  Globalink  since  1993,  was Vice
President and General  Counsel for Computone  Corporation,  which was engaged in
the development of computer peripheral products. Prior to joining Computone, Mr.
McCarthy was the managing partner of the Washington, DC, offices of the law firm
of Burnham, Connolly, Osterle and Henry. Mr. McCarthy joined Globalink in August
1995 as Chief Legal Counsel and is responsible  for resolving all  international
and domestic legal issues for the Company.

Mr. W. Braun Jones,  Jr.,  was  appointed as a director of Globalink in February
1996 and has over twenty years experience in the information technology industry
beginning  as an IBM  sales  representative  and then as a  successful  founding
entrepreneur  of several  computer  hardware and software  companies.  Mr. Jones
founded Carlyn  Computer  Systems Inc., and served as President of Dexel Systems
Corporation,  of which he was the majority stockholder and founder. Presently he
is the acting Vice President of Strategic Ventures for University Online,  Inc.,
an education software publisher.

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.  Formerly the Information
Security Director for  MicroElectronics  and Computer  Technology Corp. ("MCC"),
Mr.  Patterson  is a leader in driving  industry  toward  reasonable  use of the
Internet.  He recently  joined IBM  Corporation  as their Chief  Strategist  for
Electronic Commerce.


                                       12
<PAGE>

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 and is responsible  for  coordinating  the efforts of various
departments and managing daily business operations.

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.  Prior to
joining Globalink,  he was the Corporate  Controller for Best Programs,  Inc., a
software development company offering solutions to the accounting, tax and human
resources  software markets.  While with the Small Business  Enterprise group at
Arthur  Andersen & Co.,  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, to lead the expansion of the Company's software business overseas
through channel and OEM distribution.  Mr. Kuperman is fluent in 6 languages and
has over 25 years of  experience in  international  markets,  including  Europe,
Latin America and Asia,  with companies such as SOFTWARE AG,  Sterling  Software
and PEGASUS  International.  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.


                                       13
<PAGE>

                                  PART II


ITEM 5     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
           STOCKHOLDERS' 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.

<TABLE>
<CAPTION>

    Calendar year 1995                   High                 Low
<S>                                      <C>                 <C>
    First Quarter..................      16.125               9.625
    Second Quarter.................      16.625              10.875
    Third Quarter..................      15.375               9.875
    Fourth Quarter.................      10.750               6.000

<CAPTION>

    Calendar year 1996                   High                 Low
<S>                                       <C>                 <C> 
    First Quarter..................       8.000               5.000
    Second Quarter.................       9.375               5.875
    Third Quarter..................       7.375               5.125
    Fourth Quarter.................       5.750               2.750

</TABLE>

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 28, 1997, there were  approximately  190 holders of record of the
Company's  Common  Stock.  The Company  believes that at such date there were in
excess of 2,400 beneficial owners of the Company's Common Stock.


                                       14
<PAGE>

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

<TABLE>
<CAPTION>

Revenues



                                      Year Ended      Year Ended     Increase
                                       12/31/96        12/31/95          %
                                     -----------     -----------    ---------
<S>                                   <C>             <C>                <C>
Product Sales (net of returns)...     12,429,000      16,835,000         -26%
Translation Services ............      1,547,000         770,000         101%
                                     -----------     -----------    ---------
Total Sales .....................     13,976,000      17,605,000         -21%
                                     -----------     ------------   ---------
</TABLE>

Globalink's total sales decreased 21% to $13,976,000 for the year ended December
31, 1996, from $17,605,000 for the year ended December 31, 1995. The decrease in
sales was primarily  attributable  to a reallocation of resources from marketing
that  historically   supported  the  distribution  and  retail  channels  to  an
investment in a new revenue  endeavor of corporate  direct sales and  marketing.
This new  direction  proved not to meet the Company's  expectations  and further
investment  was  suspended  in the fourth  quarter of 1996.  The Company did not
recognize  any revenue from this  business  opportunity  during  fiscal 1996. In
addition,  growth of personal computer sales in Western Europe declined in 1996,
resulting in decreased  international product sales for the Company.  Additional
revenue  pressures  resulted  from the Company's  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, 1996,  decreased 26% or $4,406,000
to  $12,429,000  from  $16,835,000  for the year ended  December 31, 1995.  U.S.
distributor channel sales declined 27% to $6,894,000 for the year ended December
31, 1996,  from  $9,386,000  in the prior year due to the  Company's  increasing
efforts  to reduce  inventory  and align  sell-through  campaigns  with sales of
products  into the  channels.  The  Company  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
Web Translator and Telegraph in March 1996,  Power  Translator 6.0 in June 1996,
and  Talk-to-Me in December  1996, all of which have also been well accepted and
contributed to sales in 1996.

For the year ended  December  31,  1996,  international  sales  decreased  5% to
$7,079,000 from $7,448,000 in the prior year.  International  sales  represented
51% of total sales in 1996 as compared to 42% in 1995. The primary  exports have
been to Europe,  Canada, and Latin America.  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.  In 1995,  export  sales  to  Germany  were
approximately  $2,073,000 or 12% of total sales.  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
Latin 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 are better able to promote and sell its  products
into the retail channel of their respective geographical locations.


                                       15
<PAGE>

Translation  Services  experienced  revenue growth of 101% to $1,547,000 for the
year ended  December 31,  1996,  from  $770,000 for the year ended  December 31,
1995.   The  growth  in  revenues  for  this  group   resulted  from   increased
revenue-generating  efforts by the  department's  personnel who were  previously
concentrating  on the  translation  of localized  versions of the  Company's new
products.  In addition,  the  department  has  increased  its focus on obtaining
larger jobs and establishing long term projects with its customers.

Throughout 1996, the Company placed increasing  emphasis on developing  multiple
channels  of  distribution,  including  distributors,   resellers,  value  added
resellers (VARs), and Original Equipment  Manufacturers  (OEMs).  Globalink also
continued to develop a telesales group which has proven to be successful.

Sales returns and allowances  increased to $4,665,000 in fiscal 1996 compared to
$3,537,000  for the prior  year.  The  increased  return on sales was due to the
decline in growth of personal computer sales in Western Europe during 1996 which
resulted in stock balancing requests from certain major distributors  located in
the United Kingdom and Germany.  Additionally,  the Company continued 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.

<TABLE>
<CAPTION>
                                             Year Ended          Year Ended
                                              12/31/96            12/31/95
                                           -------------       -------------
<S>                                          <C>                 <C>
        Gross Product Sales......            17,094,000          20,372,000
        Returns..................            (4,665,000)         (3,537,000)
                                           -------------       -------------
        Net Sales................            12,429,000          16,835,000
                                           -------------       -------------
<CAPTION>

Costs and Expenses

                                         Year Ended     Year Ended      Change
                                          12/31/96       12/31/95          %
                                        -----------    -----------     --------
<S>                                      <C>            <C>               <C>
Cost of product sold...................   1,766,000      2,844,000        -38%
Direct labor & fringes.................     799,000        493,000         62%
Amortization of capitalized software...     570,000        331,000         72%
Product development....................   1,452,000      1,555,000         -7%
Selling, marketing & other.............   8,245,000     10,519,000        -22%
General & administrative...............   3,357,000      3,065,000         10%
                                        -----------    -----------     --------
Total costs and expenses...............  16,189,000     18,807,000        -14%
                                        -----------    -----------     --------
</TABLE>

Cost of products sold  decreased  38% in fiscal 1996 to  $1,766,000  compared to
$2,844,000  in the  prior  year.  The  decrease  in cost of  products  sold  was
primarily due to decreased  product sales along with decreased  costs of certain
packaging components and a shift in the mixture of products sold. This shift was
both to an increase in sales of the CD-ROM editions of the Power  Translator and
the Language  Assistant  Series product lines and additional OEM contracts which
contribute  higher  margins  along  with a  decrease  in sales  of the  Language
Computers  which  carried lower  margins.  Gross profit margin was 87% in fiscal
1996 compared to 84% in the prior year.  The increase in gross profit margin was
directly attributable to the decrease in cost of products sold.


                                       16
<PAGE>

Direct labor & fringes,  which  principally  include charges for independent and
in-house  translators  within the  translation  services  group,  increased  62%
compared to 1995 as a result of the increased  revenues in 1996.  These expenses
decreased from 64% to 52% as a percentage of Translation Services revenues. This
decrease 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.  During
1996,  the  Company  experienced  an increase in the number of larger jobs being
performed, which carry a higher gross margin.

Amortization  of  capitalized  software for the period ended  December 31, 1996,
increased 72% to $570,000 from $331,000 for the prior year. The increase was due
to the release of new products in 1996 for which previously capitalized software
development costs began to be amortized.

Product   development   expenses,   which   consist  of  the  current   cost  of
non-capitalizable   development  expenses,   decreased  7%  to  $1,452,000  from
$1,555,000  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  22% or $2,274,000  to  $8,245,000  for the period ended  December 31,
1996,  from  $10,519,000  for  the  prior  year.  This  decrease  was  primarily
attributable  to the  decrease in revenues  along with the  Company's  increased
focus of fiscal resources on more effective promotion and advertising  programs,
particularly  in print  media and retail  store  promotions.  In  addition,  the
Company was  increasing  its sales force and  instituting  new  incentive  plans
during 1995 as it was expanding  internationally into Europe, Canada, Mexico and
Latin  America.  Other costs within this  category,  such as sales  commissions,
travel  and other  similar  expenses,  are  generally  related to  revenues  and
decreased accordingly.

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, 1996, general and administrative expenses increased 10% or $292,000 from the
prior year.  The increases  occurred in the areas of payroll,  travel,  business
taxes,  insurance  costs and  depreciation  as a result of  additional  expenses
incurred to support the anticipated growth of the Company.

Other Income/Expense

Interest  expense was $32,000 for the fiscal year ended  December 31,  1996,  as
compared  to interest  income of  $108,000  in the prior  year.  This was due to
interest  expense  incurred  during  1996 as a result of draws on the  Company's
revolving  and  equipment  lines of credit.  The  previous  interest  income was
attributable to short-term  investments  made by the Company after receiving the
proceeds of the redemption of warrants in May 1994.

Income Tax Expense

No provision for income taxes was required for the years ended December 31, 1996
and 1995, due to the Company's net operating loss  carryforwards.  Approximately
$9,084,000 of net operating loss ("NOL")  carryforwards  existed at December 31,
1996. The use of the NOL is limited to future taxable earnings of the Company.


                                       17
<PAGE>

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 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 products sales can cause  significant  variations in
operating results from period to period.


Liquidity and Financial Resources

The Company has secured a  $2,000,000  revolving  short-term  line of credit,  a
$2,000,000  revolving  intermediate line of credit and a $750,000 equipment line
of credit with First Union National  Bank. As of December 31, 1996,  there was a
$1,000,000 loan balance outstanding under the revolving intermediate line, which
is being used to finance  accounts  receivable and other working  capital needs.
The Company  also had  $495,000  outstanding  at December  31,  1996,  under the
equipment line which was used to finance furniture and equipment purchases.  The
Company  expects to renew its  revolving  line of credit prior to June 1997 when
the existing facility expires by its terms.

During  1996 and  1995 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 is  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 may
be  converted  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
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 is  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 option of the Company.  The offering resulted in net proceeds to the Company
of approximately $1,335,000.

During 1996,  approximately  $1,860,000 was used to finance accounts receivable,
$437,000  was used to finance  capitalized  software,  and  $271,000 was used to
purchase fixed assets. During 1995, approximately $1,023,000 was used to finance
accounts  receivable,  $555,000 was used to finance  capitalized  software,  and
$485,000 was used to purchase  fixed assets.  The  remaining  proceeds have been
invested  in short  term  repurchase  agreements  collateralized  by  government
securities.

For the year ended December 31, 1996,  the Company's cash and cash  equivalents,
invested cash and marketable  securities decreased to $1,606,000 from $2,399,000
as a result  of the loss  incurred  for the year  along  with the  financing  of
accounts  receivable,  capitalized software and fixed assets. As of December 31,
1996,  the  Company  had  $7,600,000  in working  capital.  The  Company  has no
significant capital asset commitments.


                                       18
<PAGE>

For  the  year  ended  December  31,  1996,  accounts  receivable  increased  to
$9,040,000 from  $7,180,000.  This increase of $1,860,000  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,  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
Europe late in the second and third  quarters  of 1996.  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 1996.

For the years  ended  December  31,  1996 and 1995,  net cash used in  operating
activities  was  approximately  $3,009,000  and  $1,665,000,  respectively,  due
primarily to net losses from  operations  and financing of accounts  receivable,
inventory and prepaid expenses.

For the years ended  December 31, 1996 and 1995,  net cash provided by investing
activities was approximately $871,000 and $1,042,000,  respectively. In 1996 and
1995,  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, 1996 and 1995,  capital  expenditures  totaled
$271,000 and $485,000, respectively. Capital expenditures have remained high for
the past two years 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,  1996 and 1995,  cash  provided by  financing
activities was approximately $2,924,000 and $940,000, respectively. For the year
ended  December  31,  1996,  financing  activities  consisted  primarily  of the
issuance of warrants and  preferred  stock along with the issuance and repayment
of debt  under the  Company's  revolving  intermediate  and  equipment  lines of
credit.  For the year ended December 31, 1995,  financing  activities  consisted
primarily of the issuance and  repayment of debt under the  Company's  revolving
intermediate 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 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 1997.  In addition,  the Company has received and is
considering a number of offers for an equity placement to raise up to $4,000,000
in additional capital to be used for the funding of marketing and sales programs
directed at the introduction of the Company's new products.  It is the intent of
the Company to launch these new product  marketing and sales programs  beginning
in the second quarter of fiscal 1997.

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  European  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.  The Company  presently has a revolving
intermediate  line of credit to finance  receivables and believes that such line
will be sufficient to meet cash requirements when needed.

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, 1996 and 1995                                F-2

    Statements of Operations for the years
      ended December 31, 1996 and 1995                          F-3

    Statements of Stockholders' Equity for the years
      ended December 31, 1996 and 1995                          F-4

    Statements of Cash Flows for the years
      ended December 31, 1996 and 1995                          F-5

    Notes to the Financial Statements                       F-6 to F-19




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


Except for the information  disclosed in Item 4(a) of this Annual Report on Form
10-KSB, the information required by this item will be contained in the Company's
Proxy Statement for its 1996 Annual  Stockholders'  Meeting to be filed with the
Securities and Exchange  Commission within 120 days after December 31, 1996, 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  1996  Annual  Stockholders'  Meeting  to be  filed  with the
Securities and Exchange  Commission within 120 days after December 31, 1996, and
is incorporated herein by reference.



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  1996  Annual  Stockholders'  Meeting  to be  filed  with the
Securities and Exchange  Commission within 120 days after December 31, 1996, and
is incorporated herein by reference.



ITEM 12    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


The  information  required by this item will be contained in the Company's Proxy
Statement  for its  1996  Annual  Stockholders'  Meeting  to be  filed  with the
Securities and Exchange  Commission within 120 days after December 31, 1996, and
is incorporated herein by reference.


                                       21
<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

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

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

         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

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

         10.2                     Employment Agreement between the
                                    Company and Harry E. Hagerty, Jr.


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

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


(B) Reports on Form 8-K

    None.


                                       22
<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 19th day of March, 1997.


                                       GLOBALINK, INC.

                                       By: /s/Harry E. Hagerty, Jr.
                                           ---------------------------
                                              Harry E. Hagerty, Jr.
                                                   President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the 19th day of March, 1997.


         Signature                                    Title                  


 /s/Harry E. Hagerty, Jr.              Chairman, Chief Executive Officer
---------------------------              and President
    Harry E. Hagerty, Jr.              

 /s/John F. McCarthy, III              Director, Secretary and Vice President
---------------------------               
    John F. McCarthy, III        

 /s/Michael J. Murphy                  Director
---------------------------
    Michael J. Murphy

 /s/William E. Kimberly                Director
---------------------------
    William E. Kimberly

 /s/W. Braun Jones, Jr.                Director
---------------------------
    W. Braun Jones, Jr.

 /s/Thomas W. Patterson                Director
---------------------------
    Thomas W. Patterson

 /s/Ronald W. Johnston                 Chief Operating Officer
---------------------------
    Ronald W. Johnston

 /s/Mark A. Paiewonsky                 Chief Financial & Accounting Officer
---------------------------               
    Mark A. Paiewonsky                    

 /s/Philippe J. Kuperman               Executive Vice President of Sales &
---------------------------              Marketing 
    Philippe J. Kuperman                  


                                       23
<PAGE>






Report of Independent Certified Public Accountants


Board of Directors
Globalink, Inc., and Subsidiary


We have audited the accompanying consolidated balance sheets of Globalink, Inc.,
and  Subsidiary as of December 31, 1996 and 1995,  and the related  consolidated
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 consolidated  financial position of Globalink,  Inc.,
and Subsidiary as of December 31, 1996 and 1995, and the consolidated results of
their  operations  and their cash  flows for the years then ended in  conformity
with generally accepted accounting principles.


/S/Grant Thornton LLP


Vienna, Virginia
February 24, 1997

                                                                             F-1


<PAGE>
<TABLE>
<CAPTION>

Globalink, Inc., and Subsidiary

Consolidated Balance Sheets

 
December 31,                                               1996          1995
--------------------------------------------------------------------------------


Assets
<S>                                                   <C>            <C> 
Current Assets
  Cash and cash equivalents                          $    406,088  $    819,846
  Invested cash                                         1,200,000            -
  Marketable securities                                        -      1,579,237
  Accounts receivable, net                              9,040,297     7,180,600
  Inventories, net                                        818,294       585,350
  Prepaid expenses and deposits                           108,745       263,051
  Other receivables                                       126,894        93,252
                                                     ---------------------------

Total Current Assets                                   11,700,318    10,521,336

Equipment and Furniture, net                              879,753       979,534

Capitalized Software                                      817,988       951,324
                                                     ---------------------------

                                                     $ 13,398,059  $ 12,452,194
                                                     ===========================

Liabilities and Stockholders' Equity

Current Liabilities
  Accounts payable--trade                            $  2,057,002  $  1,793,705
  Accrued and other liabilities                           763,948       795,749
  Line of credit                                        1,279,000       740,000
                                                     ---------------------------

Total Current Liabilities                               4,099,950     3,329,454

Long-Term Notes Payable                                   216,356       388,889

Deferred Rent                                              65,706        83,579

Commitments and Contingencies                                  -             -

Stockholders' Equity
  Preferred stock, $.01 par value, 250,000 shares
    authorized; 40,224 and -0- shares issued
    and outstanding in 1996 and 1995, respectively      1,154,658            -
  Common stock, $.01 par value, 20,000,000 shares
    authorized; 5,341,352 and 5,304,017 shares issued
    and outstanding in 1996 and 1995, respectively         53,413        53,040
  Additional paid-in capital--common stock             18,702,013    17,246,384
  Accumulated deficit                                 (10,894,037)   (8,649,152)
                                                     ---------------------------

                                                        9,016,047     8,650,272
                                                     ---------------------------

                                                     $ 13,398,059  $ 12,452,194
                                                     ===========================


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

                                                                             F-2
</FN>
<PAGE>
<CAPTION>

Globalink, Inc., and Subsidiary

Consolidated Statements of Operations


Year ended December 31,                                    1996          1995
--------------------------------------------------------------------------------

<S>                                                    <C>           <C>
Product Sales, net of returns and allowances of
  $4,664,942 and $3,536,940 in 1996 and 1995,
  respectively                                       $ 12,429,362  $ 16,835,003
Translation Service Revenue                             1,546,672       770,498
                                                     ---------------------------



                                                       13,976,034    17,605,501

Costs and Expenses
    Cost of products sold                               1,765,951     2,843,995
    Direct labor and fringes                              799,206       492,825
    Amortization of capitalized software                  570,247       331,080
    Development                                         1,451,687     1,555,061
    Selling, marketing and other                        8,244,992    10,519,380
    Administrative                                      3,356,443     3,065,020
                                                     ---------------------------



                                                       16,188,526    18,807,361
                                                     ---------------------------



Loss from Operations                                   (2,212,492)   (1,201,860)

Interest (Expense) Income, net                            (32,393)      108,190
                                                     ---------------------------



Loss Before Income Taxes                               (2,244,885)   (1,093,670)

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



Net Loss                                             $ (2,244,885) $ (1,093,670)
                                                     ===========================



Loss per Common Share                                $       (.42) $       (.21)
                                                     ===========================


Weighted Average Number of Common Shares
    Outstanding During the Year                         5,333,852     5,293,197
                                                     ===========================

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

                                                                             F-3
</FN>
<PAGE>
<CAPTION>

Globalink, Inc., and Subsidiary

Consolidated Statements of Stockholders' Equity

Years ended December 31, 1996 and 1995
------------------------------------------------------------------------------------------------------------------------------------

                                                                  Additional
                                                                   Paid-in
                                                                   Capital-
                                            Common       Common     Common     Preferred    Preferred    Accumulated
                                            Shares       Stock      Stock       Shares        Stock        Deficit         Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>       <C>           <C>        <C>          <C>             <C>
Balance at January 1, 1995                5,256,454  $   52,565  $ 17,063,310         -  $          -  $  (7,555,482)  $  9,560,393

Exercise of Stock Warrants                   13,748         137        46,223         -             -              -         46,360

Exercise of Stock Options                    30,500         305       114,508         -             -              -        114,813

Common Stock Issued in Payment of Debt        3,315          33        22,343         -             -              -         22,376

Net Loss for the Year                             -           -             -         -             -     (1,093,670)    (1,093,670)
                                          ------------------------------------------------------------------------------------------

Balance at December 31, 1995              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
------------------------------------------------------------------------------------------------------------------------------------



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

                                                                             F-4

</FN>
<PAGE>
<CAPTION>

Globalink, Inc., and Subsidiary

Consolidated Statements of Cash Flows


Year ended December 31,                                    1996          1995
--------------------------------------------------------------------------------

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

Cash Flows from Operating Activities
  Net loss                                           $ (2,244,885) $ (1,093,670)
                                                     ---------------------------
  Adjustments to reconcile net loss to net cash
    used in operating activities
      Amortization of capitalized software                570,247       331,080
      Depreciation                                        370,852       268,810
      Reserve for obsolete inventories                    100,000      (314,118)
      Changes in assets and liabilities
        Increase in accounts receivable                (1,859,697)   (1,023,376)
        Increase in other receivables                     (33,642)       (3,119)
        (Increase) decrease in inventories               (332,944)      427,557
        Decrease in long-term accounts receivable              -         50,000
        Decrease (increase) in prepaid expenses
          and deposits                                    154,306      (122,161)
        Increase (decrease) in accounts payable--trade    316,017      (271,965)
        (Decrease) increase in accrued and other
          liabilities                                     (31,801)       92,611
        Decrease in deferred rent                         (17,873)       (7,145)
                                                     ---------------------------

Total Adjustments                                        (764,535)     (571,826)
                                                     ---------------------------

Net Cash Used in Operating Activities                  (3,009,420)   (1,665,496)
                                                     ---------------------------

Cash Flows from Investing Activities
  Purchase of marketable securities                    (2,778,279)   (5,159,702)
  Proceeds from sales of marketable securities          4,357,516     7,242,435
  Increase in capitalized software                       (436,911)     (555,339)
  Capital expenditures for equipment and furniture       (271,071)     (485,481)
                                                     ---------------------------

Net Cash Provided by Investing Activities                 871,255     1,041,913
                                                     ---------------------------

Cash Flows from Financing Activities
  Sale of common stock                                    110,000       114,813
  Exercise of stock warrants                                   -         46,360
  Sale of preferred stock                               1,154,658            -
  Sale of stock warrants                                1,293,282            -
  Repayment of debt                                      (253,000)     (441,111)
  Proceeds from issuance of debt                          619,467     1,220,000
                                                     ---------------------------

Net Cash Provided by Financing Activities               2,924,407       940,062
                                                     ---------------------------

Net Increase in Cash and Cash Equivalents                 786,242       316,479

Cash and Cash Equivalents and Invested Cash at
    Beginning of Year                                     819,846       503,367
                                                     ---------------------------
Cash and Cash Equivalents and Invested Cash at
    End of Year                                      $  1,606,088  $    819,846
                                                     ===========================


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

                                                                             F-5

</FN>
</TABLE>
<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements

December 31, 1996 and 1995


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.

    Principles of Consolidation

    The consolidated  financial  statements  include the accounts of the Company
    and its  wholly-owned  subsidiary.  All material  intercompany  accounts and
    transactions have been eliminated.

    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.

    Marketable Securities

    Marketable  securities  include  government  debt  securities  which  mature
    within one year. The Company  has adopted Statement of Financial  Accounting
    Standards  (SFAS) No. 115 for the fiscal  year  beginning  January 1,  1995.
    SFAS No. 115 requires the  Company to record  investments  which are held to
    maturity  as  held-to-maturity  securities.  Net unrealized  gains or losses
    from  held-to-maturity  securities are not included in  the determination of
    net income, but are disclosed in the footnotes (see Note D).
             
                                                                             F-6


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


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


    Inventories

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

    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 18 months to three years.  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 1996 and 1995 was  $436,911 and
    $555,339,  respectively.  Amortization of software development costs charged
    to costs and expenses  during the years ended 1996 and 1995 was $570,247 and
    $331,080, 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, 1996 and 1995, 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.

                                                                             F-7


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


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


    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.

    Earnings per Common Share

    Earnings  per  common  share  for 1996 and 1995 do not  include  the  common
    equivalent  shares because the effect of such inclusion would be to decrease
    loss  per  share.  The  weighted  average  numbers  of  shares  used  in the
    computations were 5,333,852 and 5,293,197 in 1996 and 1995, respectively.

    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.

    Employee Stock Options

    In October 1995,  the  Financial  Accounting  Standards  Board (FASB) issued
    Statement of Financial  Accounting Standards (SFAS) No. 123, "Accounting for
    Stock-Based Compensation," which is effective for 1996 financial statements.
    SFAS No. 123 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 I to the financial
    statements.

                                                                             F-8


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


NOTE B--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS


    Cash and Cash Equivalents

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

    The Company  maintains  cash balances in two financial  institutions.  These
    balances  are insured by the Federal  Deposit  Insurance  Corporation  up to
    $100,000 per institution.  At December 31, 1996,  uninsured  amounts held at
    one bank totaled $148,300.

    Invested Cash

    The  Company has  invested  excess cash in  repurchase  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, 1996, invested cash totaled  $1,200,000,  which
    is collateralized by government securities held by the Company's bank.

    Accounts Receivable

    Accounts receivable consist of the following at December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                    <C>           <C>
         Trade                                       $ 12,044,950  $ 10,287,601
         Allowance for returns and uncollectible
         accounts                                      (1,863,653)   (1,764,074)
         Allowance for advertising and other credits   (1,141,000)   (1,342,927)
                                                     ---------------------------

                                                     $  9,040,297  $  7,180,600
                                                     ---------------------------
</TABLE>
    Inventories

    Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                      <C>            <C>
         Finished goods                              $    649,495  $    449,098
         Allowance                                       (150,000)      (50,000)
                                                     ---------------------------

                                                          499,495       399,098

         Work-in-process                                  318,799       186,252
                                                     ---------------------------

                                                     $    818,294  $    585,350
                                                     ---------------------------
</TABLE>
                                                                             F-9


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


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


    Prepaid Expenses and Deposits

    Prepaid expenses and deposits consist of the following at December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                       <C>           <C>
         Prepaid advertising and brochures           $     47,671  $    144,639
         Other prepaid amounts                             61,074       118,412
                                                     ---------------------------

                                                     $    108,745  $    263,051
                                                     ---------------------------
</TABLE>
    Equipment and Furniture

    Equipment and furniture consist of the following at December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                     <C>           <C>
         Office and other equipment                  $  1,532,574  $  1,325,086
         Furniture and fixtures                           115,808        95,797
                                                     ---------------------------

                                                        1,648,382     1,420,883
         Accumulated depreciation                        (768,629)     (441,349)
                                                     ---------------------------

                                                     $    879,753  $    979,534
                                                     ---------------------------
</TABLE>
    Capitalized Software

    Capitalized software consists of the following at December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                    <C>           <C>
         Capitalized software                        $  5,468,185  $  5,031,274
         Accumulated amortization                      (4,650,197)   (4,079,950)
                                                     ---------------------------

                                                     $    817,988  $    951,324
                                                     ---------------------------
</TABLE>


                                                                            F-10


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


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


    Accrued and Other Liabilities

    Accrued and other liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                       <C>           <C>
         Accrued salaries, taxes and fringe benefits $    623,958  $    599,903
         Accrued royalties                                 89,990       145,846
         Other accrued liabilities                         50,000        50,000
                                                     ---------------------------

                                                     $    763,948  $    795,749
                                                     ---------------------------
</TABLE>

NOTE C--FINANCIAL INSTRUMENTS


    The financial statements include various estimated fair value information as
    of  December  31, 1996 and 1995,  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, 1996 and 1995, the carrying
    amount/estimated  fair value of these assets is  approximately  $406,000 and
    $820,000, respectively.

    Invested Cash

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

    Loans Receivable

    Outstanding loans receivable included in other receivables  represent short-
    term 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  short-term  maturity  of the loans.  At  December  31,  1996  and 1995,
    the  carrying  amount/estimated  fair value of these assets is approximately
    $95,000 and $57,000, respectively.

                                                                            F-11


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


NOTE C--FINANCIAL INSTRUMENTS--Continued


    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,
    1996 and 1995,  the  carrying  amount/estimated  fair  value of this debt is
    approximately  $1,495,000  and  $1,129,000,   respectively,  recorded  as  a
    short-term  line of credit,  and  long-term  notes  payable in the financial
    statements.


NOTE D--INVESTMENTS


    The Company classifies debt securities as held-to-maturity. Held-to-maturity
    securities are carried at amortized cost.

    As of December 31, 1995, the Company held  approximately  $1,579,000 in U.S.
    Government  debt securities that matured within one year. As of December 31,
    1995, amortized cost of these securities equaled estimated fair value.


NOTE E--LINE OF CREDIT


    At December  31,  1996 and 1995,  the  Company  had  available 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),  both at the lower of the  bank's  prime  rate or LIBOR rate plus
    2.5%.  Also at December 31, 1996 and 1995,  the Company had a $750,000 fixed
    asset  line of  credit  at the  bank's  prime  rate plus  1/4%.  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 bank's prime rate and LIBOR rate at December  31,  1996,  were 8.25% and
    5.53%,  respectively.  The borrowing  base and cash flow  facilities and the
    unused  portion of the fixed asset line of credit expire June 30, 1997.  The
    Company expects to renew these credit facilities before their expiration.

    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,
    with principal payments as follows:

                                                                            F-12


<PAGE>
 
Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


NOTE E--LINE OF CREDIT--Continued
<TABLE>
<CAPTION>

         Year ending December 31,
         ------------------------
<S>                                                     <C>
              1997                                   $  1,279,000
              1998                                        216,356
                                                     ------------

                                                     $  1,495,356
                                                     ------------
</TABLE>
    At  December  31,  1995,  $500,000  and  $628,889  were  outstanding  on the
    intermediate-term   working  capital  and  fixed  assets  lines  of  credit,
    respectively.  The bank's  prime rate at December 31,  1995,  was 8.5%.  The
    lines of credit were renewed by the Company before their  expiration on June
    30, 1996.


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.

    Minimum annual rental and lease commitments for leases with a remaining term
    of one year or more at December 31, 1996, are as follows:
<TABLE>
<CAPTION>
         Year ending December 31,
         ------------------------
<S>                                                     <C>
              1997                                   $    555,000
              1998                                        491,000
              1999                                        345,000
              2000                                         23,000
                                                     ------------

              Net minimum lease payments             $  1,414,000
                                                     ------------
</TABLE>
    Rent expense was $628,000 and $611,000 for the years ended December 31, 1996
    and 1995, respectively.

                                                                            F-13


<PAGE>


Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


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 is payable on demand. A
    second officer was loaned $70,000 at an interest rate of 8%, in two separate
    promissory notes. Both notes are payable on or before December 1, 1997, with
    interest.  In January  1997,  the second  officer  was loaned an  additional
    $110,000 at an interest rate of prime plus 1% which is due on demand.

    During  1993,  the Company  loaned  $50,000 at an interest  rate of 5% to an
    individual  who at the time was an officer.  The note was paid in July 1996.
    During 1994, the Company  loaned  approximately  $45,000 to an officer.  The
    note was paid in May 1995.


NOTE H--COMMITMENTS


    Employment Agreements

    The  Company  has  entered  into  employment  agreements  with  four  of its
    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.  During 1996, one agreement was terminated by mutual
    agreement between the Company and an employee.

    The  minimum  amounts  due  under  the  agreements   during  the  succeeding
    three-year period,  exclusive of contingent incentive  compensation,  are as
    follows:
<TABLE>
<CAPTION>
         Year ending December 31,
         ------------------------
<S>                                                       <C>
              1997                                   $    580,000
              1998                                        310,000
              1999                                         83,000
                                                     ------------

                                                     $    973,000
                                                     ------------
</TABLE>
                                                                            F-14


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


NOTE I--WARRANTS, OPTIONS AND OTHER STOCK ISSUED


    Stock Options Issued

    The Company issues  options to employees,  members of its Board of Directors
    and outside  vendors  based on merit or in payment of debt.  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.  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:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                    <C>           <C>
    Net loss--as reported                            $ (2,244,885) $ (1,093,670)
    Net loss--pro forma                                (2,996,947)   (1,476,670)

    Net loss per share--as reported                         (0.42)        (0.21)
    Net loss per share--pro forma                           (0.56)        (0.28)
</TABLE>
    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 1996 and 1995, respectively: expected
    volatility of 40% and 43%;  risk-free  interest  rate  of  6.2% and 6.1% and
    expected lives of 2.7 and 3.7 years.

    The  following  tables  depict  activity  in  the plan for the  years  ended
    December 31, 1996 and 1995:
<TABLE>
<CAPTION>
                                                                        Weighted
                                                                         Average
                                                                        Exercise
    1996                                                  Shares         Price
    ----------------------------------------------------------------------------
<S>                                                      <C>              <C>
    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
</TABLE>
 
                                                                            F-15


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


NOTE I--WARRANTS, OPTIONS AND OTHER STOCK ISSUED--Continued
<TABLE>
<CAPTION>

                                                                        Weighted
                                                                         Average
                                                                        Exercise
    1995                                                  Shares         Price
    ----------------------------------------------------------------------------
<S>                                                       <C>            <C>
    Options outstanding at beginning of year              316,000  $       7.76
         Granted                                          554,300         10.18
         Exercised                                        (30,500)        (3.76)
         Forfeited                                        (38,000)       (12.67)
                                                     -------------

    Outstanding at end of year                             801,800 $       9.35
                                                     -------------

    Options exercisable at year-end                        264,466 $       8.09
                                                     -------------



    Weighted-average fair value per share
      of options granted during the year                           $       4.11
</TABLE>
    The following applies to options outstanding at December 31, 1996:

         Number outstanding                                             943,516
         Range of exercise prices                             $ 3.75 to $ 14.88
         Weighted-average exercise price                                 $ 8.41
         Weighted-average remaining contractual life                 3.48 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 whom facilitated the agreement with the
    private fund. These options also have a term of four years.

    Preferred Stock Issued

    During 1996, the Company's Board of Directors  approved a private  placement
    of 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.

    At December 31, 1996, the Company has outstanding 40,224 shares of preferred
    stock and 40,224 associated stock warrants.

                                                                            F-16


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


NOTE J--INCOME TAXES


    Deferred tax assets (liabilities) consist of the following at December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                    <C>           <C>
         Capitalized software                        $   (310,508) $   (361,123)
         Fixed assets                                     (38,687)      (48,387)
         Inventory capitalization                          (8,270)       (3,475)
         Inventory reserves                                56,940        18,980
         Receivable reserves                            1,140,566     1,179,418
         Deferred rent and other                           24,942        31,727
         Accrued compensation                              90,756        87,888
         Loss carryforwards                             3,448,152     2,425,977
                                                     ---------------------------

         Gross deferred tax asset                       4,403,891     3,331,005

         Deferred tax asset valuation allowance        (4,403,891)   (3,331,005)
                                                     ---------------------------

                                                     $         -   $         -
                                                     ---------------------------
</TABLE>
    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:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                    <C>           <C>
         Pretax loss                                 $ (2,244,885) $ (1,093,670)
                                                     ---------------------------

         Computed federal income taxes at 34%        $   (763,261) $   (371,848)

         Computed state income taxes, net of federal
           benefit                                        (88,897)      (43,309)

         Effect of recognizing stock option
           compensation for tax purposes                 (220,728)       96,949
                                                     ---------------------------

          Deferred tax benefit                         (1,072,886)     (318,208)

          Expense arising from change in deferred tax
            asset valuation allowance                   1,072,886       318,208
                                                     ---------------------------

          Income tax expense                         $         -   $         -
                                                     ---------------------------
</TABLE>


                                                                            F-17


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


NOTE J--INCOME TAXES--Continued


    Approximately  $9,084,000 and $6,683,000 of loss carryforwards are available
    for tax return purposes at December 31, 1996 and 1995,  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, 2012.


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 year ended December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                       <C>            <C>
         Interest                                    $    103,169  $     66,389
                                                     ---------------------------

         Income taxes                                $         -   $         -
                                                     ---------------------------
</TABLE>
    Supplemental Schedule of Non-Cash Investing and Financing Activities

    Set forth below are amounts of common stock and additional  paid-in  capital
    recorded in non-cash transactions during the years ended December 31:
<TABLE>
<CAPTION>
                                                           1996          1995
                                                     ---------------------------
<S>                                                        <C>           <C>
         Common stock, at par                        $         73  $         33
         Additional paid-in capital                        52,647        22,343
                                                     ---------------------------

                                                     $     52,720  $     22,376
                                                     ---------------------------
</TABLE>



                                                                            F-18


<PAGE>

Globalink, Inc., and Subsidiary

Notes to Consolidated Financial Statements--Continued

December 31, 1996 and 1995


NOTE L--EXPORT SALES


    The Company sells software abroad through  distributors,  dealers,  and mail
    orders. In 1996,  export sales to Germany and France totaled  $1,495,000 and
    $2,126,000,  respectively,  or approximately 11% and 15%,  respectively,  of
    total  sales.  In 1995,  export  sales to  Germany  totaled  $2,073,000,  or
    approximately  12% of total  sales.  Total  export sales for the years ended
    December 31, 1996 and 1995,  were  approximately  $7,079,000 and $7,448,000,
    respectively.


NOTE M--RETIREMENT PLAN


    The  Company  has a  profit-sharing  retirement  plan which  conforms to the
    provisions of Section  401(k) 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, 1996 or 1995.


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
    1996, there were three customers that accounted for 10% or more of net sales
    each (in aggregate  representing 37% of net sales).  During 1995, there were
    no customers  that  accounted  for 10% or more of net sales;  however,  five
    customers accounted for approximately 37% of net sales.  Accounts receivable
    at  December  31,  1996  and  1995,  include  approximately  $3,981,000  and
    $4,473,000, respectively, in amounts due from these customers.


NOTE O--GLOBALINK EUROPE LIMITED


    In  July  1995,  the  Company   established   Globalink  Europe  Limited,  a
    wholly-owned   subsidiary  in  the  United   Kingdom.   The  subsidiary  was
    established  to increase  marketing and sales  efforts in Europe.  Globalink
    Europe Limited financial activity is not material to the Company's financial
    statements.  Globalink  Europe  Limited's  office in the United  Kingdom was
    closed on December 31, 1996.

                                                                            F-19