##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



---



FORM 10-Q



---



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



For the quarterly period ended June 30, 2004.



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



For the transition period from  to



Commission file number 0-26476



---



GLYCOGENESYS, INC.

(Exact name of Registrant as specified in its charter.)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 33-0231238                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



Park Square Building

31 St. James Avenue, 8th Floor

Boston, Massachusetts 02116

(Address of principal executive offices, including zip code.)



(617) 422-0674

Registrants telephone number, including area code.



---



Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by the 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 ̈



Indicate
by checkmark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



The number of shares outstanding of the Registrants common stock, $.01 par value per share, at August 13, 2004 was 60,504,577shares.



---



---

##### Table of Contents

GLYCOGENESYS, INC.



INDEX



|                              |  |         |  |                                                                                                 |  |      
|----------------------------- |  | ------- |  | ----------------------------------------------------------------------------------------------- |  | -----
|                              |  |         |  |                                                                                                 |  | Page 
|Part I
Financial Information |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Financial Statements (Unaudited)                                                                |  |      
|                              |  |         | 
|                              |  |         |  | Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003                           |  | 3-4  
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003 |  | 5    
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003           |  | 6    
|                              |  |         | 
|                              |  |         |  | Notes to Unaudited Consolidated Financial Statements                                            |  | 7-12 
|                              |  |         | 
|                              |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations           |  | 13-16
|                              |  |         | 
|                              |  | Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                      |  | 16-24
|                              |  |         | 
|                              |  | Item 4. |  | Controls and Procedures                                                                         |  | 24   
|                              | 
|Part II
Other Information    |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Legal Proceedings                                                                               |  | 24   
|                              |  |         | 
|                              |  | Item 2. |  | Changes in Securities and Use of Proceeds                                                       |  | 24   
|                              |  |         | 
|                              |  | Item 4. |  | Submission of Matters to a Vote of Security Holders                                             |  | 25   
|                              |  |         | 
|                              |  | Item 6. |  | Exhibits and Reports on Form 8-K                                                                |  | 25   
|                              | 
|Signatures                    |  | 26     



2



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS (UNAUDITED)



GLYCOGENESYS, INC.

CONSOLIDATED BALANCE SHEETS



ASSETS



(Unaudited)



|                                          |  |               |           |   |                   |   |           |  
|----------------------------------------- |  | ------------- | --------- | - | ----------------- | - | --------- | -
|                                          |  | June 30, 2004 |           |   | December 31, 2003 |  
|Current assets:                           |  |               |           |   |                   |   |           |  
|Cash and cash equivalents                 |  | $             | 2,468,264 |   |                   | $ | 3,193,575 |  
|Prepaid expenses and other current assets |  |               | 211,730   |   |                   |   | 301,657   |  
|                                          |  |               |           |   |                   |   |           |  
|Total current assets                      |  |               | 2,679,994 |   |                   |   | 3,495,232 |  
|                                          |  |               |           |   |                   |   |           |  
|Property and equipment, at cost:          |  |               |           |   |                   |   |           |  
|Computer, office and laboratory equipment |  |               | 830,555   |   |                   |   | 683,975   |  
|Furniture and fixtures                    |  |               | 294,291   |   |                   |   | 294,291   |  
|Motor vehicles                            |  |               |          |   |                   |   | 25,026    |  
|                                          |  |               |           |   |                   |   |           |  
|                                          |  |               | 1,124,846 |   |                   |   | 1,003,292 |  
|Less accumulated depreciation             |  |               | (729,596  | ) |                   |   | (693,569  | )
|                                          |  |               |           |   |                   |   |           |  
|Property and equipment, net               |  |               | 395,250   |   |                   |   | 309,723   |  
|                                          |  |               |           |   |                   |   |           |  
|Other assets:                             |  |               |           |   |                   |   |           |  
|Restricted cash                           |  |               | 148,128   |   |                   |   | 148,128   |  
|Other                                     |  |               | 11,670    |   |                   |   | 11,670    |  
|                                          |  |               |           |   |                   |   |           |  
|Total other assets                        |  |               | 159,798   |   |                   |   | 159,798   |  
|                                          |  |               |           |   |                   |   |           |  
|Total assets                              |  | $             | 3,235,042 |   |                   | $ | 3,964,753 |  
|                                          |  |               |           |   |                   |   |           |  



The accompanying notes
are an integral part of these consolidated financial statements.



3



---

##### Table of Contents

GLYCOGENESYS, INC.

CONSOLIDATED BALANCE SHEETS



LIABILITIES AND STOCKHOLDERS EQUITY



(Unaudited)



|                                                                                                                                                                               |  |               |             |   |                   |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                                               |  | June 30, 2004 |             |   | December 31, 2003 |  
|Current liabilities:                                                                                                                                                           |  |               |             |   |                   |   |             |  
|Accounts payable                                                                                                                                                               |  | $             | 1,081,801   |   |                   | $ | 813,032     |  
|Accrued liabilities                                                                                                                                                            |  |               | 474,091     |   |                   |   | 493,717     |  
|Net liabilities of discontinued operations                                                                                                                                     |  |               | 13,241      |   |                   |   | 57,698      |  
|                                                                                                                                                                               |  |               |             |   |                   |   |             |  
|Total current liabilities                                                                                                                                                      |  |               | 1,569,133   |   |                   |   | 1,364,447   |  
|                                                                                                                                                                               |  |               |             |   |                   |   |             |  
|Commitments and contingencies                                                                                                                                                  |  |               |             |   |                   |   |             |  
|Stockholders equity:                                                                                                                                                          |  |               |             |   |                   |   |             |  
|Preferred stock, $0.01 par value (liquidation value $21,699,639 and $21,472,097 as of June 30, 2004 and December 31, 2003,
respectively)                                       |  |               | 96          |   |                   |   | 108         |  
|Common stock, $0.01 par value; Authorized  200,000,000 shares; Issued and outstanding  50,504,577 and 46,032,096 shares at June
30, 2004 and December 31, 2003, respectively |  |               | 507,546     |   |                   |   | 460,321     |  
|Additional paid-in capital                                                                                                                                                     |  |               | 91,029,955  |   |                   |   | 89,254,349  |  
|Note receivable from former officer                                                                                                                                            |  |               |            |   |                   |   | (2,675,000  | )
|Deferred compensation                                                                                                                                                          |  |               | (15,724     | ) |                   |   | (14,513     | )
|Treasury stock                                                                                                                                                                 |  |               | (170,000    | ) |                   |   |            |  
|Accumulated deficit                                                                                                                                                            |  |               | (89,685,964 | ) |                   |   | (84,424,959 | )
|                                                                                                                                                                               |  |               |             |   |                   |   |             |  
|Total stockholders equity                                                                                                                                                     |  |               | 1,665,909   |   |                   |   | 2,600,306   |  
|                                                                                                                                                                               |  |               |             |   |                   |   |             |  
|Total liabilities and stockholders equity                                                                                                                                     |  | $             | 3,235,042   |   |                   | $ | 3,964,753   |  
|                                                                                                                                                                               |  |               |             |   |                   |   |             |  



The accompanying notes
are an integral part of these consolidated financial statements.



4



---

##### Table of Contents

GLYCOGENESYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)



|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|---------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                     |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|                                                     |  | 2004                        |            |   | 2003                      |   |            | 2004 |  |   | 2003       |  
|Operating expenses:                                  |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Research and development                             |  | $                           | 1,217,217  |   |                           | $ | 655,858    |      |  | $ | 2,596,692  |   |  | $ | 1,497,284  |  
|General and administrative                           |  |                             | 1,453,592  |   |                           |   | 904,076    |      |  |   | 2,735,443  |   |  |   | 1,880,919  |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                             |  |                             | 2,670,809  |   |                           |   | 1,559,934  |      |  |   | 5,332,135  |   |  |   | 3,378,203  |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Operating loss                                       |  |                             | (2,670,809 | ) |                           |   | (1,559,934 | )    |  |   | (5,332,135 | ) |  |   | (3,378,203 | )
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Other income:                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Interest income                                      |  |                             | 6,234      |   |                           |   | 6,856      |      |  |   | 13,710     |   |  |   | 16,173     |  
|Other income                                         |  |                             | 54,524     |   |                           |   | 1,404      |      |  |   | 57,420     |   |  |   | 2,742      |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total other income                                   |  |                             | 60,758     |   |                           |   | 8,260      |      |  |   | 71,130     |   |  |   | 18,915     |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net loss                                             |  |                             | (2,610,051 | ) |                           |   | (1,551,674 | )    |  |   | (5,261,005 | ) |  |   | (3,359,288 | )
|Accretion of preferred stock dividends               |  |                             | (113,771   | ) |                           |   | (103,426   | )    |  |   | (227,542   | ) |  |   | (205,715   | )
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net loss applicable to common stock                  |  | $                           | (2,723,822 | ) |                           | $ | (1,655,100 | )    |  | $ | (5,488,547 | ) |  | $ | (3,565,003 | )
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted net loss per common stock          |  | $                           | (0.05      | ) |                           | $ | (0.04      | )    |  | $ | (0.11      | ) |  | $ | (0.10      | )
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Weighted average number of common shares outstanding |  |                             | 50,671,244 |   |                           |   | 37,511,805 |      |  |   | 50,154,004 |   |  |   | 37,384,381 |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  



The accompanying notes
are an integral part of these consolidated financial statements.



5



---

##### Table of Contents

GLYCOGENESYS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)



|                                                                                             |  |                           |            |   |      |   |            |  
|-------------------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                             |  | Six Months Ended June 30, |           
|                                                                                             |  | 2004                      |            |   | 2003 |  
|Cash flows from operating activities:                                                        |  |                           |            |   |      |   |            |  
|Net loss                                                                                     |  | $                         | (5,261,005 | ) |      | $ | (3,359,288 | )
|Adjustments to reconcile net loss to net cash used in operating and discontinued activities: |  |                           |            |   |      |   |            |  
|Amortization of value of options issued for compensation                                     |  |                           | 11,071     |   |      |   |           |  
|Depreciation and amortization                                                                |  |                           | 61,053     |   |      |   | 74,237     |  
|Changes in assets and liabilities:                                                           |  |                           |            |   |      |   |            |  
|Prepaid expenses and other current assets                                                    |  |                           | 89,927     |   |      |   | 138,891    |  
|Accounts payable                                                                             |  |                           | 268,769    |   |      |   | 38,248     |  
|Accrued liabilities                                                                          |  |                           | (19,627    | ) |      |   | 38,633     |  
|Net liabilities of discontinued operations                                                   |  |                           | (44,457    | ) |      |   | (44,457    | )
|                                                                                             |  |                           |            |   |      |   |            |  
|Net cash used in operating and discontinued activities                                       |  |                           | (4,894,269 | ) |      |   | (3,113,736 | )
|                                                                                             |  |                           |            |   |      |   |            |  
|Cash flows from investing activities:                                                        |  |                           |            |   |      |   |            |  
|Purchase of property and equipment                                                           |  |                           | (146,580   | ) |      |   | (149,801   | )
|Other                                                                                        |  |                           |           |   |      |   | 175        |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Net cash used in investing activities                                                        |  |                           | (146,580   | ) |      |   | (149,626   | )
|                                                                                             |  |                           |            |   |      |   |            |  
|Cash flows from financing activities:                                                        |  |                           |            |   |      |   |            |  
|Proceeds from sale of common stock, net of issuance costs                                    |  |                           | 4,309,198  |   |      |   |           |  
|Proceeds from exercise of warrants and stock options                                         |  |                           | 6,340      |   |      |   | 4,295      |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Net cash provided by financing activities                                                    |  |                           | 4,315,538  |   |      |   | 4,295      |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Net decrease in cash and cash equivalents                                                    |  |                           | (725,311   | ) |      |   | (3,259,067 | )
|Cash and cash equivalents, beginning balance                                                 |  |                           | 3,193,575  |   |      |   | 6,299,006  |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Cash and cash equivalents, ending balance                                                    |  | $                         | 2,468,264  |   |      | $ | 3,039,939  |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Supplemental disclosure of non-cash financing activities:                                    |  |                           |            |   |      |   |            |  
|Conversion Series C preferred stock to common stock                                          |  | $                         | 1,463,000  |   |      |   |           |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Dividends accreted on Series B preferred stock                                               |  | $                         | 227,542    |   |      | $ | 205,715    |  
|                                                                                             |  |                           |            |   |      |   |            |  



The accompanying notes
are an integral part of these consolidated financial statements.



6



---

##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004



(1) Basis of Presentation



The accompanying unaudited consolidated financial statements of GlycoGenesys, Inc. (together with its subsidiaries, the Company), have been prepared by the
Company in accordance with accounting principles generally accepted in the United States of America applicable to interim periods, and with the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such
financial statements reflect all adjustments, consisting of only normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented. The results of operations for the interim periods shown in
this report are not necessarily indicative of results expected for the full year. These financial statements do not include disclosures associated with the annual financial statements and, accordingly, should be read in conjunction with the
Managements Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and footnotes for the year ended December 31, 2003, included in the Companys Annual Report on Form 10-K.



The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
operating expenses during the period. Actual results could differ from those estimates.



(2) Operations



As of June 30, 2004, the
Company had an accumulated deficit of $89,685,964. Despite this accumulated deficit, the Company had a net working capital position (current assets less current liabilities) of $1,110,861 at June 30, 2004. The Company believes that its existing
funds and commitments will be sufficient to fund its operating expenses and capital requirements into the first quarter of 2005, allowing the Company to continue its current Phase I dose escalation trial and to initiate its Phase I/II multiple
myeloma trial as well as continue preparations for its planned filing to request Fast Track designation for GCS-100LE. The Company intends to raise additional capital through equity financings to support its current and planned clinical trials and
continued operations. To the extent the Company is unable to raise sufficient funding for its clinical trial program, it will need to accelerate its efforts to repartnering with a large biotechnology or pharmaceutical company. Since inception, the
Company has funded its operations primarily through the proceeds from the sale of equity securities. From the inception of the Company through June 30, 2004, the Company has been successful in raising $71.7 million from the sales of equity
securities.



In July 2004, the Company completed a financing in which it raised
$5.0 million in gross proceeds from the sale of equity securities.



The
Companys future is dependent upon its ability to obtain financing to fund its operations. As of August 13, 2004, the Company has not obtained commitments from existing or potential investors to provide additional financing. The Company will
need to raise significant additional funding. The Company expects to incur substantial additional operating costs, including costs related to ongoing research and development activities, preclinical studies and clinical trials. To the extent that
the Company is unable to raise additional capital on a timely basis, management plans to slow down research activity to conserve cash. In the event additional financing is not obtained, the Company may be required to significantly reduce or curtail
operations.



During the quarter ended June 30, 2004, the Company sold its
agricultural product line, Elexa® for consideration
of $50,000 in cash with future royalty and licensing fees payable to the Company.



In its Annual Report on Form 10-K for the year ended December 31, 2003, the Company reported that there is substantial doubt that the Company will have the ability to continue as a going concern and, therefore, may be unable to realize its
assets and discharge its liabilities in the normal course of business. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classification
of liabilities that may be necessary should the Company be unable to continue as a going concern.



Principal risks to the Company include the need to obtain adequate financing to fund future operations, the successful development and marketing of pharmaceutical products, dependence on collaborative partners, United
States Food and Drug Administration approval, dependence on key individuals and competition from substitute products and larger companies.



7



---

##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004



(3) Net Loss Per Common Stock



Basic loss per share is computed using the weighted-average number of common shares
outstanding. The dilutive effect of the potential common shares consisting of outstanding stock options and warrants is determined using the treasury stock method. Diluted weighted average shares outstanding for the three month and six month periods
ended June 30, 2004 and 2003 excluded the potential common shares from convertible preferred stock, warrants and stock options because their inclusion would be anti-dilutive. At June 30, 2004 and 2003, there were 13,205,326 and 10,792,457 warrants
outstanding, respectively, and 1,849,500 and 1,711,115 stock options outstanding, respectively, which were omitted from the net loss per common stock calculations, and 10,122,104 and 11,105,046 shares, respectively, issuable upon conversion of
outstanding shares of preferred stock which were also omitted.



(4) Equity



(a) Issuance of Common Stock



In the three months and six months ended June 30, 2004, the Company issued 290 and
154,591 shares of common stock in connection with the exercise of warrants for consideration of $3 and $6,046, respectively.



In the three months ended June 30, 2004, the Company issued 1,116,790 shares of common stock upon conversion of 1,116.79 shares of the Companys Series C Preferred
Stock.



In the six months ended June 30, 2004, the Company issued (i) 3,450,000
shares of common stock in connection with a private placement for gross consideration of $4,312,500 and (ii) 1,100 shares of common stock in connection with an option exercised for $297.



(b) Note Receivable from Former Officer



On June 15, 1999, the Company entered into a transaction whereby Mr. Salter, its former executive vice president, relinquished an option to
purchase 100,000 shares of common stock for a price of $0.01 per share which would have vested on January 1, 2000 and, in exchange, the Company issued to him a stock option for 250,000 shares of common stock at an exercise price of $10.70 per share,
the estimated fair market value of the common stock on the date of the transaction. The option was exercised immediately. The Company loaned Mr. Salter an amount representing the entire exercise price. The principal balance of this note was
$2,675,000, and accrued interest at a fixed rate of 4.92% per annum. Mr. Salter pledged the 250,000 shares of common stock as collateral. The loan was non-recourse and was secured by the pledged shares. All outstanding principal, together with
accrued interest in the unpaid principal balance of this note, was due on June 15, 2004. The principal balance outstanding prior to June 15, 2004 was $2,675,000 and was reported as a reduction of stockholders equity in the Companys
consolidated balance sheet.



On June 15, 2004, all of Mr. Salters 250,000
shares were returned to the Company and the non-recourse note was cancelled. The Company has accounted for the note cancellation within stockholders equity (deficit) by reversing the note to additional paid-in capital.



(c) Stock, Stock Options, and Warrants



The Company has authorized 5,000,000 shares of preferred stock, $0.01 par value. Such
preferred stock consists of:



| | Series A convertible preferred stock, 7,500 shares authorized; 6,153.51 shares issued and outstanding as of June 30, 2004 and December 31, 2003 (liquidation value $14,953,041).
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Series B convertible preferred stock, 6,000 authorized; 3,471.15 shares issued and outstanding as of June 30, 2004 and December 31, 2003 (liquidation value $6,746,598 and
$6,519,056, respectively).
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Series C convertible preferred stock, 1,117 authorized; 0 and 1,116.79 shares issued and outstanding as of June 30, 2004 and December 31, 2003, respectively.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



8



---

##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004



The Company has entered into agreements with various employees and consultants for the grant
of stock options and shares of common stock at prices determined by the Compensation Committee of the Companys Board of Directors. No shares of common stock were issued as compensation for services rendered or for licensing fees during the six
months ended June 30, 2004.



During the three months ended June 30, 2004 and
2003, the Company granted options to purchase 50,600 and 40,000 shares of common stock, respectively, at a weighted average exercise price of $0.76 and $0.40, respectively, per share to employees and others. Options to purchase 20,000 and 50,000
shares of common stock at a weighted average exercise price of $1.025 and $1.91 expired and were cancelled during the three months ended June 30, 2004 and 2003, respectively.



During the six months ended June 30, 2004 and 2003, the Company granted options to purchase 314,400 and 344,000 shares of common stock,
respectively, at a weighted average exercise price of $1.32 and $0.29, respectively, per share to employees and others. Options to purchase 1,100 shares of common stock were exercised during the six months ended June 30, 2004. No options were
exercised during the six months ended June 30, 2003. Options to purchase 20,000 and 50,000 shares of common stock at a weighted average exercise price of $1.03 and $1.91 expired and were cancelled during the six months ended June 30, 2004 and 2003.



During the three months ended June 30, 2004 and 2003, warrants to purchase 290
and 413,067 shares, respectively, were exercised at a price of $0.01 per share. No warrants were issued or expired during the three months ended June 30, 2004 and 2003.



During the six months ended June 30, 2004, the Company issued warrants to purchase 2,682,500 shares of common stock at a weighted average
exercise price of $1.80 of which warrants to purchase 1,720,000 at an average exercise price of $1.29 expired on April 5, 2004. No warrants were issued during the six months ended June 30, 2003. Warrants to purchase 154,591 and 429,567 shares were
exercised at a price of $0.04 and $0.01 per share during the period ended June 30, 2004 and 2003, respectively.



Total non-cash expense related to stock, stock option and warrant grants recorded in the accompanying consolidated statements of operations for the six months ended June
30, 2004 and 2003 amounted to $11,071 and $0, respectively.



(d) Stock-based compensation plans



The
Company has stock-based employee compensation plans that are described more fully in Note 5 to the Companys consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2003. The Company accounts
for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in the Consolidated
Statements of Operations, as all options granted under these plans had an exercise price equal to or greater than the market value of the underlying common stock on the dates of grant. The following table illustrates the effect on net loss and net
loss per common share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation to stock-based employee compensation.



9



---

##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004



Had the compensation cost for the plans been determined based on the fair value at the grant
dates for awards under the plans consistent with the method described in SFAS No. 123, the Companys net loss and basic and diluted net loss per common share on a pro forma basis would have been:



|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |            |  
|------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | ---------- | -
|                                                                                                        |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|                                                                                                        |  | 2004                        |            |   | 2003                      |   |            | 2004 |  |   | 2003        |  
|Net loss applicable to common stock, as reported                                                        |  | $                           | (2,723,822 | ) |                           | $ | (1,655,100 | )    |  | $ | (5,488,547  | ) |  | $ | (3,565,003 | )
|Add: stock-based compensation expense reported in net loss applicable to common stock                   |  |                             | 6,827      |   |                           |   |           |      |  |   | 11,071      |   |  |   |           |  
|Less: stock-based employee compensation expense determined under fair value based method for all awards |  |                             | (113,568   | ) |                           |   | (146,078   | )    |  |   | (315,661    | ) |  |   | (281,987   | )
|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |            |  
|Pro forma net loss applicable to common stock                                                           |  | $                           | (2,830,563 | ) |                           | $ | (1,801,178 | )    |  | $ | (5,793,1378 | ) |  | $ | (3,846,990 | )
|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |            |  
|Basic and diluted net loss per common stock, as reported                                                |  | $                           | (0.05      | ) |                           | $ | (0.04      | )    |  | $ | (0.11       | ) |  | $ | (0.10      | )
|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |            |  
|Pro forma basic and diluted net loss per common stock                                                   |  | $                           | (0.06      | ) |                           | $ | (0.05      | )    |  | $ | (0.11       | ) |  | $ | (0.10      | )
|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |            |  



The preceding pro forma results were
calculated using the Black-Scholes option-pricing model. The following assumptions were used for options granted during the three months ended June 30, 2004 and 2003, respectively: (1) risk-free interest rates of 5.1% and 3.6%, respectively; (2)
dividend yields of 0.0%; (3) expected lives of 10 years; and (4) volatility of 101.5% and 135.3%, respectively. The weighted average fair value of options granted during the three months ended June 30, 2004 and 2003 was $0.93 and $0.40,
respectively. The following assumptions were used for options granted during the six months ended June 30, 2004 and 2003, respectively: (1) risk-free interest rates of 4.8% and 3.8%, respectively; (2) dividend yields of 0.0%; (3) expected lives of
10 years; and (4) volatility of 92.8% and 145.8%, respectively. The weighted average fair value of options granted during the six months ended June 30, 2004 and 2003 was $1.33 and $0.29, respectively. Results may vary depending on the assumptions
applied within the model.



Stock or other equity-based compensation for
non-employees is accounted for under the fair value-based method as required by SFAS No. 123 and Emerging Issues Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services and other related interpretations. Under this method, the equity-based instrument is valued at either the fair value of the consideration received or the equity instrument issued on
the date of grant. The resulting compensation cost is recognized and charged to operations over the service period, which is usually the vesting period.



(5) Legal Proceedings



Platt LicenseOn January 13, 2004, the Company notified David Platt of its intention to seek arbitration regarding his alleged breaches of the Companys
license agreement with him dated January 7, 1994, as amended (the License Agreement). In particular, the Company sought to enforce its rights under the License Agreement to control the prosecution of the patent applications subject to
the License Agreement. On February 18, 2004, the Company received a letter from David Platt alleging breaches of its obligations under the License Agreement, specifically failure to: (i) take necessary steps to perfect U.S. Patent Application Serial
No. 08/024,487 (the 487 Application), (ii) use its best efforts to commercialize the 487 Application and (iii) provide royalty reports. The letter further notified the Company of his intention to terminate the License
Agreement if such alleged breaches are not cured within 60 days from the date of the letter.



10



---

##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004



On February 23, 2004, the Company provided the royalty reports requested by the February 18th
letter, which showed no royalties due for any of the periods covered. The Company believes the other breaches alleged by David Platt are wholly without merit.



On February 23, 2004, the Company formally initiated arbitration to enforce its rights under the License Agreement to control the prosecution of the licensed patent
applications. Platt answered on March 17, 2004, in connection with the arbitration, with counterclaims, including a claim seeking termination of the License Agreement.



On March 15, 2004, the Company filed for a court order requiring Platt to return control of the licensed applications, pursuant to the
License Agreement, to the Company to permit the Company to respond to office actions issued by the U.S. Patent and Trademark Office. Platt responded with a counterclaim to terminate the License Agreement. On March 29, 2004, a court order was issued
requiring Platt, until such time as an arbitrator was appointed, to advise the Company in writing of any significant action he planned to take with respect to the licensed applications, and give the Company 48 hours to respond in writing to his
intended actions. In the event that the Company opposed the proposed action, it had the right to seek review of the action by the court prior to any action by Platt. Similarly, the court granted the Company the right to recommend to Platt that he
take certain actions and he was required to respond to the Companys requests within 48 hours. In the event he refused to take the proposed action, the Company had the right to seek review by the court.



On April 26, 2004, the arbitrator in this matter ordered an expedited schedule for the
arbitration in order to make a final ruling rather than issuing injunctive relief requested by the Company requiring David Platt to return control of the licensed applications to the Company on an interim basis.



Discovery is proceeding in this matter and the hearing in which the arbitrator will make a
final ruling is currently scheduled to begin in late August 2004.



Platt
LitigationOn January 29, 2004, David Platt commenced suit against the Company and certain current and former directors of the Company in the Massachusetts Superior Court, Suffolk County. In his Complaint, Platt seeks damages for alleged
breach of his severance agreement with the Company, including the failure to pay approximately $180,000 in severance benefits and alleged breaches in connection with maintenance by the Company of certain restrictions on Platts sale of stock.
The Complaint further asserts claims against certain current and former directors of the Company for alleged breaches of fiduciary duty in failing to assist in the removal of restrictive legends on David Platts shares. Platt also purports to
state claims for double or treble damages, as well as attorney fees, under General Laws Chapter 93A, Section 11, the Massachusetts Unfair Trade Practice Act. The case has been assigned under case number 04-0398 and will be heard in the Business
Litigation Session of the Suffolk County Superior Court. The Company believes these claims are without merit.



On February 23 2004, the Company filed its answer and counterclaimed against David Platt for breach of his severance agreement, against Pro-Pharmaceuticals, Inc. for tortious interference with the severance agreement,
and against Platt and Pro-Pharmaceuticals, Inc. for misappropriation of proprietary rights and for unfair and deceptive acts. The Company seeks monetary damages and injunctive relief to prevent David Platt and Pro-Pharmaceuticals from engaging in
certain competitive activities relating to the use of polysaccharides to treat cancer and further seeks the assignment by David Platt and Pro-Pharmaceuticals of certain intellectual property, including Davanat®, to the Company. Under the counterclaim for unfair and deceptive acts, the Company is seeking treble damages as well as attorneys fees.



On June 21, 2004, the Company added a supplemental counterclaim against David Platt and
Pro-Pharmaceuticals for injurious falsehood, unfair competition and unfair and deceptive acts relating to statements made by Pro-Pharmaceutical regarding certain patent applications the Company discontinued prosecuting and contractually returned to
David Platt. The Company seeks injunctive relief and monetary damages.



Discovery is proceeding in this matter. A trial is not expected until mid-2005 at the earliest.



While the Company believes that the ultimate outcome of any of these proceedings will not have a material adverse effect on our financial position, results of operations, or cash flows, legal proceedings are subject
to inherent uncertainty. An adverse resolution of one or more of the above proceedings could have a material impact on our financial position, results of operations or cash flows. Legal proceedings consume both cash and management attention.



11



---

##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004



(6) Subsequent Event



Financing



In July 2004, the Company completed a private placement of securities to institutions and accredited investors in which the Company issued a total of 10,000,000 shares of
common stock and warrants to purchase 8,000,000 shares of common stock at an exercise price of $1.00 per share for gross consideration of $5,000,000. The warrants are exercisable for a period of five years, commencing six months from their date of
issuance.



12



---

##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion should be read in conjunction with the consolidated financial statements and the notes thereto.



The following contains certain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. All forward-looking statements involve risks and uncertainty.
Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in
this report will prove to be accurate. Our actual results may differ materially from the results anticipated in the forward-looking statements. Any statements contained in this Quarterly Report on Form 10-Q that relate to future plans, events or
performance are forward-looking statements that involve risks and uncertainties, including but not limited to, risks of product development (such as failure to demonstrate efficacy or safety), risk related to FDA and other regulatory procedures,
market acceptance risks, the impact of competitive products and pricing, the results of current and future licensing, joint ventures and other collaborative relationships, the results of financing efforts, developments regarding intellectual
property rights and litigation, and other risks identified in the section titled Quantitative and Qualitative Disclosures about Market RiskCertain Factors that May Affect Future Results included herein which discuss factors that
could contribute to such material differences. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.



Overview



GlycoGenesys, Inc. (together with
its subsidiaries, as the context requires, the Company) is a biotechnology company developing novel drug candidates primarily based on carbohydrate compounds and related technologies. The Companys lead drug candidate GCS-100®, a potential treatment for multiple forms of solid
tumors and bloodborne cancers, completed a Phase II(a) clinical trial for pancreatic cancer the results of which were announced in October 2002 and completed a Phase II(a) clinical trial for colorectal cancer the results of which were announced in
March 2001. We announced the results of a Phase I dose escalation trial in October 2003, dosing in patients at levels up to 80 mg/m2. In April 2004, the Company initiated a Phase I dose escalation trial dosing patients with GCS-100LE, a low ethanol
formulation of GCS-100.



The Companys near-term objectives are to
continue to proceed through the various phases of United States Food and Drug Administration (FDA) clinical trials for GCS-100, and to secure the necessary financial resources to conduct such trials, either through repartnering with a
large biotechnology or pharmaceutical company or raising funds in the capital market or a combination of both. In March 2004, we opened a laboratory in Cambridge, Massachusetts. In addition, the Company sold its Elexa® agricultural product line in June 2004 and plans to divest its Bb447 product
line. The Company does not expect material upfront payments in connection with the divesture of Bb447.



The Companys business was founded in 1992 as IGG International, Inc. to pursue carbohydrate-based pharmaceutical research for cancer therapeutics. In 1995, the Company merged with Alvarada Inc., a
publicly-traded corporation having no active operations. In 1998 the Company changed its name to SafeScience, Inc. and in October 2001 the Company changed its name to GlycoGenesys, Inc. The Companys principal executive offices are located at
31 St. James Avenue, 8th Floor, Boston, MA 02116 and the telephone number is (617) 422-0674. The Companys home page is located on the worldwide web at http://www.glycogenesys.com.



GlycoGenesys has three wholly-owned subsidiaries, International Gene Group, Inc. (IGG), and SafeScience Products, Inc.
(SafeScience Products) and SafeScience Newco, Ltd. (SafeScience Newco). These subsidiaries are currently non-operating subsidiaries.



GlycoGenesys develops human therapeutics, primarily GCS-100, which it exclusively licenses from Dr. David Platt and Wayne State University and the Barbara Ann Karmanos
Cancer Institute. Historically, SafeScience Products, Inc. developed agriculture products and developed, marketed, and distributed chemically-safe consumer and commercial products.



Critical Accounting Policies



Our significant accounting policies are described in the Notes to the Consolidated Financial Statements included in our Annual Report on
Form 10-K for the year ended December 31, 2003. The accounting policies used in preparing our interim consolidated financial statements for the six months ended June 30, 2004 are the same as those described in our Annual Report on Form 10-K.



13



---

##### Table of Contents

The Companys critical accounting policies are those that are important to the portrayal of the Companys
financial condition and operating results and require managements most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company believes
that its most critical accounting policy relates to the accounting for its accrued liabilities, specifically clinical research organization costs. While the Company bases its judgments and estimates on historical experience and other assumptions
that management believes are appropriate and reasonable under current circumstances, actual results may differ from those estimates.



Accrued liabilities, specifically clinical research organization costs The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amount of assets and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reported period. Specifically, management must make
estimates of costs incurred to date but not yet invoiced in relation to external clinical research organization, or CRO, costs. Management analyzes the progress of clinical trials, invoices received and budgeted costs when evaluating the adequacy of
the accrued liability. Significant management judgments and estimates must be made and used in connection with the accrued balance in any accounting period. Material differences may result in the amount and timing of the accrued balance for any
period if management made different judgments or utilized different estimates.



Results of Operations: Three Months Ended June 30, 2004 versus June 30, 2003



We had a net loss of $2,610,051 for the three months ended June 30, 2004 versus $1,551,674 for the three months ended June 30, 2003.



Research and Development Expenses Developing carbohydrate-based therapeutic compounds is our primary business focus, which is
in the research and development phase. To a lesser extent, we have developed nontoxic agricultural products. We sold our Elexa agricultural product line in June 2004 and plan to divest our Bb447 product line. Explanations of the changes in both
areas from quarter-to-quarter are described in this section.



Our research and
development expenses for the three months ended June 30, 2004 and 2003 were reported in the following financial statement captions:



|                                      |  |                             |           |      |   |        
|------------------------------------- |  | --------------------------- | --------- | ---- | - | -------
|                                      |  | Three Months Ended June 30,
|                                      |  | 2004                        |           | 2003
|GCS-100 - R&D                         |  | $                           | 1,190,244 |      | $ | 599,912
|                                      |  |                             |           |      |   |        
|Other Products  R&D                  |  |                             | 26,973    |      |   | 55,946 
|                                      |  |                             |           |      |   |        
|Total Research & Development expenses |  | $                           | 1,217,217 |      | $ | 655,858
|                                      |  |                             |           |      |   |        



Total research and development
expenses of $1,217,217 for the three months ended June 30, 2004 increased $561,359, or 86%, from $655,858 of expenses for the three months ended June 30, 2003.



Total GCS-100 development expenses of $1,190,244 for the three months ended June 30, 2004 increased $590,332, or 98%, from $599,912 of expenses for the three months
ended June 30, 2003. This increase is primarily due to increases in expenses of approximately (i) $361,000 in GCS-100 production costs, (ii) $83,000 in staffing-related costs, (iii) $76,000 in consulting fees, (iv) $41,000 for laboratory costs, and
(v) $30,000 for royalties. These reductions were partially offset by decreases in clinical research organization expenses of $15,000.



Research and development expenses for Elexa-4 and Bb-447, our agricultural compounds, which consisted primarily of wages, consulting, registration and license fees,
decreased approximately $29,000, or 52%, to approximately $27,000 for the three months ended June 30, 2004 from approximately $56,000 for the three months ended June 30, 2003. The decrease reflects decreased payroll and licensing expenses, partially
offset by increased consulting fees. We sold our Elexa product line in June 2004 and plan to divest our Bb447 product line.



We may seek to expand our drug compound pipeline under development. Any new product candidates will either be developed jointly or licensed by us. The cost related to the
development of new product candidates is projected to be in the range of $100,000-$300,000 during the next twelve months, but could vary significantly based on the actual product candidates.



14



---

##### Table of Contents

General and administrative expenses increased to $1,453,592 for the three months ended June 30, 2004 from $904,076 for
the three months ended June 30, 2003, an increase of $549,516, or 61%. This increase is primarily attributable to increases of approximately (i) $212,000 in legal fees, (ii) $133,000 in payroll-related expenses, (iii) $113,000 in investor relation
expenses, (iv) $45,000 in consulting expenses and (v) $31,000 in travel expenses.



Interest income decreased to $6,234 for the three months ended June 30, 2004 from $6,856 for the three months ended June 30, 2003, a decrease of $622, or 9%. This decrease is attributable to a reduction in cash available for investment and
lower rates of return on those investments.



Results of Operations: Six Months
Ended June 30, 2004 versus June 30, 2003



We had a net loss of $5,261,005 for
the six months ended June 30, 2004 versus $3,359,288 for the six months ended June 30, 2003.



Research and Development Expenses 



Our research and development expenses for the six months ended June 30, 2004 and 2003 were reported in the following financial statement captions:



|                                      |  |                           |           |      |   |          
|------------------------------------- |  | ------------------------- | --------- | ---- | - | ---------
|                                      |  | Six Months Ended June 30,
|                                      |  | 2004                      |           | 2003
|GCS-100  R&D                         |  | $                         | 2,554,152 |      | $ | 1,371,895
|Other Products  R&D                  |  |                           | 42,540    |      |   | 125,389  
|                                      |  |                           |           |      |   |          
|Total Research & Development expenses |  | $                         | 2,596,692 |      | $ | 1,497,284
|                                      |  |                           |           |      |   |          



Total research and development
expenses of $2,596,692 for the six months ended June 30, 2004 increased $1,099,408, or 73%, from $1,497,284 of expenses for the six months ended June 30, 2003.



Total GCS-100 development expenses of $2,554,152 for the six months ended June 30, 2004 increased $1,182,257, or 86%, from $1,371,895 of expenses for the six months
ended June 30, 2003. This increase is primarily due to increases in expenses of approximately (i) $595,000 in GCS-100 production and development costs, (ii) $283,000 for payroll related costs, (iii) $203,000 for consulting, (iv) $111,000 for
laboratory costs, (v) $60,000 in license fees paid to Wayne State University and the Barbara Ann Karmanos Cancer Institute and(vi) $21,000 for pre-clincal studies. These reductions were partially offset by a decrease in contract research
organization costs of $128,000.



Research and development expenses for Elexa-4
and Bb-447, our agricultural compounds, which consisted primarily of wages, consulting, registration and license fees, decreased approximately $83,000, or 66%, to approximately $43,000 for the six months ended June 30, 2004 from approximately
$125,000 for the six months ended June 30, 2003. The decrease reflects reduced payroll, licensing and consulting expense. We sold our Elexa product line in June 2004 and plan to divest our Bb447 product line.



General and administrative expenses increased to $2,735,443 for the six months ended June 30,
2004 from $1,880,919 for the six months ended June 30, 2003, an increase of $854,524, or 45%. This increase is primarily attributable to increases of approximately (i) $426,000 in legal fees, (ii) $158,000 in consulting expenses, (iii) $130,000 in
payroll-related costs, (iv) $38,000 in travel expenses, (v) $38,000 in investor relations expenses, (vi) $28,000 in insurance costs and (vii) $12,000 in office expenses, partially offset by a decrease in depreciation of $20,000.



Interest income decreased to $13,710 for the six months ended June 30, 2004 from $16,173 for
the six months ended June 30, 2003, a decrease of $2,463, or 15%. This decrease is attributable to a reduction in cash available for investment and lower rates of return on those investments.



15



---

##### Table of Contents

Liquidity and Capital Resources



For the six months ended June 30, 2004, our operations utilized cash of $4,894,269 primarily
to fund our operating loss, partially offset by an increase in accounts payable. We also invested $146,580 in purchases of property and equipment. We intend to raise additional funds through sales of our securities and possibly through partnering
arrangements with pharmaceutical or mature biotechnology companies.



As of June
30, 2004, our accumulated deficit was $89,685,964 and as of August 13, 2004, our cash balances were $5,771,306. In July 2004 we raised approximately $5,000,000 in gross proceeds from the sale of common stock and warrants to purchase common stock.



We believe that our existing funds and commitments will be sufficient to fund
our operating expenses and capital into the first quarter of 2005, allowing us to continue our current Phase I dose escalation monotherapy trial and to initiate our Phase I/II multiple myeloma trial as well as continue preparations for our planned
filing to request Fast Track designation for GCS-100LE. We intend to raise additional capital through equity financings to support our planned clinical trials and continued operations. To the extent we are unable to raise sufficient funding for
clinical trials, we will need to accelerate our efforts to repartner with a large biotechnology or pharmaceutical company. Since inception, we have funded our operations primarily through the proceeds from the sale of equity securities; however,
there can be no assurance that additional equity financing will be available.



Our future is dependent upon our ability to obtain financing to fund our operations. As of August 13, 2004, we have not obtained commitments from existing or potential investors to provide additional financing. We will need to raise
significant additional funding. We expect to incur substantial additional operating costs, including costs related to ongoing research and development activities, preclinical studies and clinical trials. To the extent that we are unable to raise
additional capital on a timely basis, management plans to prioritize research activities to conserve cash. In the event additional financing is not obtained, we may be required to significantly reduce, curtail or cease operations.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Market Risk



We are not exposed to significant market risk related to changes in currency exchange rates as measured against the U.S. dollar. As of June 30, 2004, we have evaluated
our risk and determined that any exposure to currency exchange is not significant to our overall consolidated financial results. There can be no assurance that our exposure will remain at these levels, especially in the event of significant and
sudden fluctuations in the value of local currencies. We do not use derivative financial instruments for speculative or trading purposes.



Interest Rate Sensitivity



We maintain short-term investments in an overnight money market account comprised of U.S. treasury bills. If market interest rates were to increase immediately and uniformly by 10% from levels that existed at June 30,
2004, the fair value of the portfolio would change by an immaterial amount.



Certain Factors That May Affect Future Results



You should carefully
consider the risks described below before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. In such case, the trading
price of our common stock could decline, and you may lose all or part of your investment.



WE HAVE EXPERIENCED SIGNIFICANT LOSSES THROUGHOUT OUR HISTORY, WE EXPECT THESE LOSSES TO CONTINUE AND WE MAY NOT ACHIEVE PROFITABILITY IN THE FUTURE.



We began operations in 1993 and have not generated revenue from human therapeutic products. We do not expect to generate
product revenue for several years, if at all. We will not generate significant funds unless we receive payments in connection with any potential licensing, marketing or other partnering arrangement with other pharmaceutical or biotechnology
companies, or we bring pharmaceutical products to market. Excluding dividends accreted to preferred stock, we have incurred approximately $89.7 million of losses since our inception, including approximately $7.6 million for the year ended December
31, 2003 and $5.3 million in the first six months of 2004. Extensive losses can be expected to continue for the foreseeable future.



16



---

##### Table of Contents

We also expect to continue to incur significant operating expenses and capital expenditures and
anticipate that our expenses will increase substantially in the foreseeable future as we:



| |  | conduct clinical trials;
| | - | ------------------------



| |  | conduct research and development on existing and new product candidates;
| | - | ------------------------------------------------------------------------



| |  | make milestone and royalty payments;
| | - | ------------------------------------



| |  | seek regulatory approvals for our product candidates;
| | - | -----------------------------------------------------



| |  | commercialize our product candidates, if approved;
| | - | --------------------------------------------------



| |  | prosecute and maintain existing and future patent applications and patents;
| | - | ---------------------------------------------------------------------------



| |  | hire additional clinical, scientific and management personnel;
| | - | --------------------------------------------------------------



| |  | add operational, financial and management information systems and personnel; and
| | - | --------------------------------------------------------------------------------



| |  | identify and potentially in-license additional compounds or product candidates.
| | - | -------------------------------------------------------------------------------



WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FUNDING, WHICH COULD REDUCE OUR ABILITY TO FUND, EXPAND OR CONTINUE OPERATIONS.



We believe that our existing funds will be sufficient to fund our operating
expenses and capital requirements into the first quarter of 2005 allowing us to continue the current Phase I dose escalation solid tumor monotherapy trial and began a Phase I/II trial in multiple myeloma, with GCS-100LE, a low ethanol formulation of
GCS-100. We intend to raise additional capital through the sale of equity securities to support our additional planned clinical trials and continued operations. To the extent we are unable to raise sufficient funding for additional clinical trials
in the capital markets, we will need to accelerate our efforts to repartner with a large biotechnology or pharmaceutical company and/or curtail our development efforts.



Our future is dependent on our ability to obtain additional financing to fund our operations. We expect to incur substantial
additional operating costs, including costs related to ongoing research and development activities, manufacturing, preclinical studies and clinical trials. Additional equity financing may result in dilution to our stockholders. At our current stock
price or if the market price of our common stock declines, some potential investors may either refuse to offer us any financing or will offer financing at unacceptable rates or on unfavorable terms. If we are unable to obtain financing necessary to
fund our operations, we may have to sell or liquidate GlycoGenesys or significantly reduce, curtail or cease our operations.



WE HAVE RECEIVED A GOING CONCERN OPINION FROM OUR INDEPENDENT AUDITORS.



Our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2003 have been prepared on the assumption
that we will continue as a going concern. Deloitte & Touche LLP issued a report dated March 26, 2004 that includes an explanatory paragraph stating that our recurring losses from operations, accumulated deficit of $84.4 million as of December
31, 2003, and our expectation that we will incur substantial additional operating costs, including costs related to ongoing research and development activities, preclinical studies and clinical trials, among other things, raise substantial doubt
about our ability to continue as a going concern.



OUR FUTURE PROSPECTS ARE
HEAVILY DEPENDENT ON THE RESULTS OF GCS-100.



While we seek to
increase our portfolio of potential products, currently we are not developing a wide array of products. Nearly all of our attention and resources are directed to the development of GCS-100. If GCS-100 is ultimately ineffective in treating cancer,
does not receive the necessary regulatory approvals or does not obtain commercial acceptance, we will be materially harmed.



WE ARE DEPENDENT ON THE SUCCESSFUL OUTCOME OF CLINICAL TRIALS FOR GCS-100.



GCS-100 is not currently approved for sale by the FDA or by any other regulatory agency in the world, and GCS-100 may never receive approval for sale or
become commercially viable. Before obtaining regulatory approval for sale, GCS-100 or another product candidate will be subjected to extensive preclinical and clinical testing to demonstrate safety and efficacy for a particular indication for humans
in addition to meeting other regulatory standards. Our success will depend on the successful outcome of our clinical trials with GCS-100.



There are a number of difficulties and risks associated with clinical trials. The possibility exists that:



| |  | we may discover that GCS-100 or another product candidate may cause, alone or in combination with another therapy, harmful side effects;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



17



---

##### Table of Contents

| |  | we may discover that GCS-100 or another product candidate, alone or in combination with another therapy, does not exhibit the expected therapeutic results in humans;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | results from early trials may not be statistically significant or predictive of results that will be obtained from large-scale, advanced clinical trials;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | we, the FDA or an institutional review board may suspend the clinical trials of GCS-100 or another product candidate;
| | - | ---------------------------------------------------------------------------------------------------------------------

| |  | patient recruitment may be slower than expected;
| | - | ------------------------------------------------

| |  | patients may drop out of our clinical trials; and
| | - | -------------------------------------------------

| |  | we may be unable to timely produce sufficient supplies of GCS-100 or another product candidate for clinical trials.
| | - | -------------------------------------------------------------------------------------------------------------------



Given the uncertainty surrounding the regulatory and clinical trial process,
we may not be able to develop safety, efficacy or manufacturing data necessary for approval of GCS-100 or another product candidate. In addition, even if we receive approval, such approval may be limited in scope and hurt the commercial viability of
such product. If we are unable to successfully obtain approval of and commercialize any product candidate, this would materially harm our business, impair our ability to generate revenues and adversely impact our stock price.



OUR ABILITY TO DEVELOP GCS-100 MAY BE HARMED IF WE ARE UNABLE TO FIND A NEW DEVELOPMENT
PARTNER.



On December 18, 2002, we and Elan International
Services, Ltd. (EIS) mutually terminated our joint venture and we acquired all of the outstanding capital stock of SafeScience Newco. SafeScience Newco received a total of approximately $7.3 million of research funds over the course of
our joint venture with EIS for the development of GCS-100. We must either fund the development of GCS-100 ourselves or with a new development partner. If we are unable to find a development partner, our ability to develop and commercialize GCS-100,
and our prospects as a whole, could be materially harmed.



OUR FAILURE TO
PROTECT OUR INTELLECTUAL PROPERTY OR OUR INFRINGEMENT ON THE PROPERTY RIGHTS OF OTHERS MAY IMPEDE OUR ABILITY TO OPERATE FREELY.



We rely significantly upon proprietary technology and protect our intellectual property through patents, copyrights, trademarks and contractual agreements
as appropriate. We own or exclusively license 10 issued U.S. patents having expiration dates ranging from 2013 to 2022. Five of these 10 issued patents relate to GCS-100. We own or exclusively license six foreign patents having expiration dates
ranging from 2015 to 2017. Three of these six foreign patents relate to GCS-100. We own or exclusively license 11 pending U.S. patent applications, of which 10 relate to GCS-100 and 47 pending foreign patent applications, of which 38 relate to
GCS-100. As we develop GCS-100, we may discover more about its characteristics and manufacturing which will require additional patent prosecution. Thus, we continually evaluate our technology to determine whether to make further patent
filings.



To the extent aspects of our technology may be
unpatentable, we may determine to maintain such technology as trade secrets or we may protect such unpatented technology by contractual agreements. Our unpatented technology or similar technology could be independently developed by others. In
addition, the contractual agreements by which we protect our unpatented technology and trade secrets may be breached. If technology similar to ours is independently developed or our contractual agreements are breached, our technology will be less
valuable and our business will be harmed.



There is always a
risk that issued patents may be subsequently invalidated, either in whole or in part, and this could diminish or extinguish our patent protection for key elements of our technology. We are not involved in any such litigation or proceedings, nor are
we aware of any basis for such litigation or proceedings. We cannot be certain as to the scope of patent protection, if any, which may be granted on our patent applications.



The patents we exclusively license from Wayne State University and the Barbara Ann Karmanos Cancer Institute and the patent
applications we exclusively license from David Platt could become subject to a proceeding at the U.S. Patent and Trademark Office to determine priority between them.



Our potential products or business activities could be determined to infringe intellectual rights of third parties despite
our issued patents. Any claims against us or any purchaser or user of our potential products, including GCS-100, asserting that such product or process infringes intellectual property rights of third parties, if determined adversely to us, could
have a material effect on our business, financial condition or future operations. Any asserted claims of infringement, with or without merit, could be time consuming, result in costly litigation, divert the efforts of our technical and management
personnel, or require us to enter into royalty or licensing agreements, any of which could materially adversely affect our operating



18



---

##### Table of Contents

results. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us, if at all. In
the event a claim is successful against us and we cannot obtain a license to the relevant technology on acceptable terms, license a substitute technology or redesign our products to avoid infringement, our business, financial condition and operating
results would be materially adversely affected.



WE DEPEND ON TECHNOLOGY
LICENSED TO US BY THIRD PARTIES AND IF WE ARE UNABLE TO CONTINUE LICENSING THIS TECHNOLOGY OUR FUTURE PROSPECTS MAY BE MATERIALLY ADVERSELY AFFECTED.



We license technology, including technology related to GCS-100, from third parties. We anticipate that we will continue to license technology from third
parties in the future. To maintain our license with David Platt we must pay an annual license fee equal to the greater of $50,000 or 2% of product sales. To maintain our license with Wayne State University and the Barbara Ann Karmanos Cancer
Institute we must, among other things, pay Wayne State University and the Barbara Ann Karmanos Cancer Institute up to $3 million in milestone payments, $10,000 per month until FDA approval (which payments are offset against future royalties), 2%
royalties on product sales and receive FDA or equivalent agency approval to sell GCS-100 by January 1, 2008.



In February 2004, we received a letter from David Platt alleging breach of our license with him and providing 60 days to cure such alleged breaches. This
matter is currently in arbitration. We believe the breaches alleged by David Platt are without merit or have been cured; however, if David Platt were to succeed in terminating this agreement, we would be materially adversely affected. See
Legal Proceedings-Platt License for more information.



The technology we license from third parties would be difficult to replace. The loss of any of these technology licenses would result in delays in the development of our products until equivalent technology, if
available, is identified, licensed and integrated and could materially adversely affect our future prospects. The use of replacement technology from other third parties would require us to enter into license agreements with these third parties,
which could result in higher royalty payments and a loss of product differentiation, or alternatively may not be available.



WE EXPECT TO REMAIN DEPENDENT ON THIRD PARTIES FOR RESEARCH AND DEVELOPMENT ACTIVITIES NECESSARY TO COMMERCIALIZE OUR PRODUCTS.



In addition, we utilize the services of several scientific and technical
consultants to oversee various aspects of our protocol design, clinical trial oversight and other research and development functions. However, we contract out most of our research and development operations for GCS-100, utilizing third-party
contract manufacturers such as Hollister-Stier Laboratories LLC and Sigma-Aldrich, Inc. to manufacture GCS-100, Incell Corporation, LLC, and PPD Development, LP for assay and other development work and third-party contract research organizations,
such as Glenmere Clinical Research and Medidata Solutions, Inc. in connection with pre-clinical and/or clinical studies in accordance with our designed protocols, as well as conducting research at medical and academic centers, such as the University
of Arizona, St. Bartholomews and the Royal London School of Medicine, Northeastern University, and the Dana Farber Cancer Institute.



Because we rely on third parties for much of our research and development work, we have less direct control over our research and development. We face
risks that these third parties may not be appropriately responsive to our timeframes and development needs and could devote resources to other customers. In addition, certain of these third parties may have to comply with FDA regulations or other
regulatory requirements in the conduct of this research and development work, which they may fail to do.



IF THE THIRD PARTIES WE RELY ON FOR MANUFACTURING ARE UNABLE TO PRODUCE THE NECESSARY AMOUNTS OF GCS-100, DO NOT MEET OUR QUALITY NEEDS OR TERMINATE THEIR RELATIONSHIPS WITH US, OUR BUSINESS WILL SUFFER.



We do not presently have our own manufacturing operations, nor do we
intend to establish any unless and until, in the opinion of management, the size and scope of our business so warrants. While we have established a manufacturing relationship with Hollister-Stier Laboratories LLC and Sigma-Aldrich, Inc. to provide
us with GCS-100 that we believe will provide the capability to meet our anticipated requirements for the foreseeable future, we have not entered into any long-term arrangements for manufacturing and such arrangements may not be obtained on desirable
terms. For the foreseeable future, we will be dependent upon third parties to manufacture GCS-100.



Our reliance on independent manufacturers involves a number of risks, including the absence of adequate capacity, the unavailability of, or interruptions
in, access to necessary manufacturing processes and reduced control over delivery schedules. Because our manufacturing process is still in a development stage, any changes made to a final commercial manufacturing process may present technical
problems to an independent manufacturer. Third-party manufacturers may not comply with FDA regulations, or other regulatory requirements relating to the manufacturing of GCS-100, including compliance with good manufacturing practice, or GMP. We do
not have control over, other than through contract, third-party manufacturers compliance with these regulations and standards. If our manufacturers are unable or unwilling to continue manufacturing GCS-100 in



19



---

##### Table of Contents

required volumes, we will have to identify acceptable alternative manufacturers. If we need to change manufacturers, the
FDA and corresponding foreign regulatory agencies must have approved these manufacturers. The use of a new manufacturer may cause significant expense and interruptions in supply if the new manufacturer has difficulty manufacturing GCS-100 to our
specifications. Further, the introduction of a new manufacturer may increase the variation in the quality of GCS-100.



MANY OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES THAN WE DO AND MAY BE ABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS THAT MAKE OUR POTENTIAL PRODUCTS
NON-COMPETITIVE.



We face significant competition from
firms currently engaged in the pharmaceutical and biotechnology industries. GCS-100, our lead drug candidate, being developed for the treatment of various forms of cancer, addresses large markets, which are already populated with several
biotechnology and large pharmaceutical companies. These companies utilize different drug discovery platforms, including but not limited to small molecules, protein-based drugs, liposome technology, and genomics. The drug development industry is
intensely competitive. According to industry surveys, there are approximately over 400 new drug candidates in development to treat various types of cancer, many of them for multiple indications. According to the PhRMA, approximately 170
pharmaceutical and biotechnology companies and the National Cancer Institute are conducting these efforts. It is estimated that 100 biotechnology companies have more than 100 drug candidates in later stages of clinical development than GCS-100 for
acute, life threatening disease, and late stage disease, and that over forty percent of these drug candidates are being developed to treat various types of cancer. Many of our actual or potential competitors have significantly greater financial
resources and/or drug development experience than we have. There is no assurance that other carbohydrate-based or non-carbohydrate-based drugs with similar clinical effects to GCS-100 may not already be in development by other companies or that
other companies may not successfully develop such drugs in the future.



A biotechnology company such as ours must keep pace with rapid technological change and faces intense competition. We compete with biotechnology and pharmaceutical companies for funding, access to new technology, research personnel and in
product research and development. Many of these companies have greater financial resources and more experience than we do in developing drugs, obtaining regulatory approvals, manufacturing and marketing. We also face competition from academic and
research institutions and government agencies pursuing alternatives to our products and technologies. We expect that GCS-100 and other product candidates will face intense competition from existing or future drugs. In addition, our product
candidates may face increasing competition from generic formulations or existing drugs whose active components are no longer covered by patents. These generic formulations or drugs would present lower-priced competition.



In the two cancer types in which we have conducted Phase II(a) clinical
trials, pancreatic and colorectal, there are many drugs being developed. We believe, based on industry studies there are, including GCS-100, approximately 7 drugs in Phase I, 15 drugs in Phase II, 6 drugs in Phase III or pre-registration for
treatment of pancreatic cancer. In addition, GCS-100, if it receives FDA approval for pancreatic cancer, will face competition from existing drugs approved or used to treat pancreatic cancer. These drugs are fluorouracil (5-FU), Eli Lillys
gemcitabine (Gemzar) and Supergens Mitozytrex. Combination studies utilizing new drug candidates and Gemzar are ongoing and combination therapies of new drug candidates and Gemzar may present future competition. Aphtons G17DT is
currently being evaluated in combination with Gemzar in a double blinded Phase III clinical trial.



We believe, based on industry studies, there are, including GCS-100, approximately 12 drugs in Phase I, 24 drugs in Phase II, and 10 drugs in Phase III or
in pre-registration for treatment of colorectal cancer. In addition, GCS-100, if it receives FDA approval for colorectal cancer, will face competition from existing drugs approved or used to treat colorectal cancer. These drugs include
Genenetechs Avastin, Roche Pharmaceuticals capecitabine (Xeloda), fluorouracil (Adrucil or 5-FU), leucovorin in combination with 5-FU, Janssens levamisole (Ergamisol) in combination with 5-FU, Pharmacias irinotecan
(Camptosar) and Imclones Erbitux.



We plan to initiate a
Phase I/II trial in multiple myeloma late in 2004. We believe, based on industry studies, there are, including GCS-100, approximately five drugs in Phase I, nine in Phase II and five in Phase III or in pre-registration for the treatment of multiple
myeloma. In addition, GCS-100, if it receives FDA approval for treatment of multiple myeloma, will face competition from existing drugs approved or used to treat multiple myeloma. These drugs include: vincristine, dexamethasone, predisone,
doxorubicin (Adriamycin), melphalan, etoposide, cytarabine, cisplatin, carmustine, cyclophosphamide and Milleniums Velcade. The majority of the drugs are used in combination therapy in a variety of regiments.



Our competitors may:



| |  | successfully identify drug candidates or develop products earlier than we do;
| | - | -----------------------------------------------------------------------------



| |  | obtain approvals from the FDA or foreign regulatory bodies more rapidly than we do;
| | - | -----------------------------------------------------------------------------------



| |  | develop products that are more effective, have fewer side effects or cost less than our products; or
| | - | ----------------------------------------------------------------------------------------------------



| |  | successfully market products that may compete with our product candidates.
| | - | --------------------------------------------------------------------------



20



---

##### Table of Contents

The success of our competitors in any of these efforts would adversely affect our ability to develop,
commercialize and market our product candidates.



OUR BUSINESSES ARE SUBJECT TO
SIGNIFICANT GOVERNMENT REGULATION AND FAILURE TO ACHIEVE REGULATORY APPROVAL OF OUR DRUG CANDIDATES WOULD SEVERELY HARM OUR BUSINESS.



The FDA regulates the development, testing, manufacture, distribution, labeling and promotion of pharmaceutical products in the United States pursuant to
the Federal Food, Drug, and Cosmetic Act and related regulations. We must receive premarket approval by the FDA prior to any commercial sale of GCS-100 or any other drug candidate. Before receiving such approval we must provide pre-clinical data and
proof in human clinical trials of the safety and efficacy of GCS-100 or any other drug candidates, which trials can take several years. In addition, we must show that we can produce GCS-100 or any other drug candidates consistently at quality levels
sufficient for administration in humans. Premarket approval is a lengthy and expensive process. We may not be able to obtain FDA approval for any commercial sale of any drug candidate. By statute and regulation, the FDA has 180 days to review an
application for approval to market a drug candidate; however, the FDA frequently exceeds the 180-day time period, at times taking up to 18 months. In addition, based on its review, the FDA may determine that additional clinical trials or
pre-clinical data are required. Except for any potential licensing or marketing arrangements with other pharmaceutical or biotechnology companies, we will not generate any revenues in connection with GCS-100 or any other drug candidates unless and
until we obtain FDA approval to sell such products in commercial quantities for human application.



REIMBURSEMENT PROCEDURES AND FUTURE HEALTHCARE REFORM MEASURES ARE UNCERTAIN AND MAY ADVERSELY IMPACT OUR ABILITY TO SUCCESSFULLY SELL OR LICENSE ANY PHARMACEUTICAL PRODUCT.



Our ability to successfully sell or license any pharmaceutical product will
depend in part on the extent to which government health administration authorities, private health insurers and other organizations will reimburse patients or providers for the costs of our future pharmaceutical products and related treatments. In
the United States, government and other third-party payers have sought to contain healthcare costs by limiting both coverage and the level of reimbursement for new pharmaceutical products approved for marketing by the FDA. In some cases, these
payers may refuse to provide any coverage for uses of approved products to treat medical conditions even though the FDA has granted marketing approval. Healthcare reform may increase these cost containment efforts. We believe that managed care
organizations and government health insurance programs may seek to restrict the use of new products, delay authorization to use new products or limit coverage and the level of reimbursement for new products. For example, the Medicare Prescription
Drug Improvement and Modernization Act of 2003 together with rule making by the Center for Medicare and Medicaid Services could affect drug coverage and payments by Medicare. Internationally, where national healthcare systems are prevalent, little
if any funding may be available for new products, and cost containment and cost reduction efforts can be more pronounced than in the United States.



IF WE ARE UNABLE TO ENTER INTO AGREEMENTS WITH THIRD PARTIES TO PROVIDE SALES, MARKETING AND DISTRIBUTION CAPABILITIES, OR TO CREATE THESE FUNCTIONS OURSELVES, WE WILL
NOT BE ABLE TO COMMERCIALIZE GCS-100 OR ANY OTHER PRODUCT CANDIDATES.



We do not have any sales, marketing or distribution capabilities. In order to commercialize GCS-100 or other product candidates, if any are approved, we must either make arrangements with third parties to provide sales, marketing and
distribution capabilities or acquire or internally develop these functions ourselves. If we obtain FDA approval for GCS-100 or any other product candidate, we intend to rely on relationships with one or more pharmaceutical or biotechnology companies
or other third parties with established distribution systems and direct sales forces to market GCS-100 or any other product candidate. If we decide to market any of our product candidates directly, we must either acquire or internally develop a
marketing and sales force with technical expertise and with supporting distribution capabilities. The acquisition or development of a sales and distribution infrastructure would require substantial resources, which may divert the attention of our
management and key personnel, and negatively impact our product development efforts. Moreover, we may not be able to establish in-house sales and distribution capabilities or relationships with third parties. To the extent we enter into co-promotion
or other licensing agreements, our product revenues are likely to be lower than if we directly marketed and sold our product candidates, and any revenue we receive will depend upon the efforts of third parties, which may not be successful.



OUR GROWTH MAY BE LIMITED IF WE ARE UNABLE TO RETAIN AND HIRE ADDITIONAL
QUALIFIED PERSONNEL AS NECESSARY.



Our success will
depend on our ability to retain key employees and our continuing ability to attract and retain highly qualified scientific, technical and managerial personnel. Under our current clinical trial and business plan, we may add over 12 employees during
the course of the next



21



---

##### Table of Contents

two years, primarily technical or scientific personnel, as needs develop. Competition for such personnel is intense and
we may not be able to retain existing personnel or attract qualified employees in the future. Our current financial position, limited drug pipeline and small size make it more difficult to compete for such personnel against larger, more diversified
companies. At present, we employ 17 full-time employees and one part-time worker. We depend upon the personal efforts and abilities of our officers and directors, including Bradley J Carver, our President, CEO and Interim Chairman of the Board and
John W. Burns, our Senior Vice President, Chief Financial Officer and a director and would be materially adversely affected if their services ceased to be available for any reason and comparable replacement personnel were not employed.



THE BIOTECHNOLOGY BUSINESS HAS A RISK OF PRODUCT LIABILITY, AND IN THE EVENT OF A SUIT
AGAINST US, OUR BUSINESS COULD BE SEVERELY HARMED.



The
testing, marketing and sale of biotechnology products entails a risk of product liability claims by patients and others. While we currently maintain product liability insurance, such insurance may not be available at reasonable cost and in the event
of a significant adverse event with a patient such insurance would likely be insufficient to cover the full amount of the liability incurred. In the event of a successful suit against us, payments and damage to our reputation could have a material
adverse effect on our business and financial condition. Even if such a suit is unsuccessful, our reputation could be damaged and litigation costs and expenditures of management time on such matters could adversely affect our business and financial
condition.



WE ARE CONTRACTUALLY OBLIGATED TO ISSUE SHARES IN THE FUTURE,
INCLUDING SHARES TO BE ISSUED UPON THE CONVERSION OF OUTSTANDING PREFERRED STOCK AND WARRANTS HELD BY EIS, WHICH WILL CAUSE SUBSTANTIAL DILUTION OF YOUR INTEREST IN US.



As of August 13, 2004, there were outstanding options to purchase 1,849,500 shares of common stock, at a weighted average
exercise price of $1.96 per share and warrants to purchase 21,571,326 shares of common stock at a weighted average exercise price of $1.68 per share. Moreover, we may in the future issue additional shares to raise capital, acquire other companies or
technologies, to pay for services, or for other corporate purposes. Any such issuances will have the effect of further diluting the interest of shareholders.



EIS owns 6,153.51 shares of our Series A preferred stock and 3,471.15 shares of our Series B preferred stock. Each share of our Series A preferred stock
and Series B preferred stock and is convertible into 1,000 shares of our common stock, subject to anti-dilution adjustments, except 1,209.07 shares of Series A preferred stock which are convertible after December 18, 2004. The Series B preferred
stock bears a 7% dividend payable in Series B preferred stock, which compounds annually. Any accrued but unissued Series B preferred stock dividends would be converted into common stock upon conversion of the Series B preferred stock. Accordingly,
EIS could acquire upon exercise of warrants held by it and the conversion into common stock of all shares of Series A and Series B preferred stock held by it, including accrued dividends as of June 30, 2004 on the Series B preferred stock but no
future dividends, a total of 10,122,104 shares of common stock. This amount of shares represents 16.7% of our common stock outstanding as of August 13, 2004. Pursuant to provisions in our agreement with EIS, if the exercise or conversion of any of
our securities held by EIS would result in EIS owning more than 9.9% of our common stock at any time, EIS may opt to receive non-voting securities instead of common stock.



WE MUST COMPLY WITH THE LISTING REQUIREMENTS OF THE NASDAQ SMALLCAP MARKET OR OUR COMMON STOCK MAY DECLINE AND THE LIQUIDITY OF AN
INVESTMENT IN OUR SECURITIES WOULD DECREASE.



Our common stock
could be delisted from The Nasdaq SmallCap Market for the following reasons, among others:



| | if the closing bid price of our common stock falls below $1.00 per share for thirty (30) consecutive business days;
|- | -------------------------------------------------------------------------------------------------------------------



| | if our market capitalization falls below $35 million and we have less than $2,500,000 in stockholders equity; or
|- | -----------------------------------------------------------------------------------------------------------------



| | if the value of our common stock held by our stockholders (other than our directors, executive officers and 10% stockholders) is less than $1,000,000.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------



There are other quantitative and qualitative criteria of the Nasdaq SmallCap
Market which if violated could lead to delisting of our common stock.



We may not be able to maintain our compliance with Nasdaq continued listing requirements in the future. We received a letter from Nasdaq on August 8, 2003 that the bid price of our common stock had been below $1.00 for 30 consecutive
business days and that we had a 180-day grace period, until February 4, 2004, to achieve a bid price of at least $1.00 for a period of at least 10 consecutive business days or face delisting. In



22



---

##### Table of Contents

September 2003, we received a letter from Nasdaq that we complied with the minimum bid price requirement. We have on
several previous occasions received notice from Nasdaq that we failed to meet certain of its listing requirements. We have been successful in regaining compliance on those occasions. On May 17, 2004, we received a letter from Nasdaq that the bid
price of our common stock had been below $1.00 for 30 consecutive business days and that we had a 180-day grace period, until November 15, 2004 to achieve a bid price of at least $1.00 for a period of at least 10 consecutive business days or face
delisting. If we comply with initial listing criteria (other than the minimum bid price requirement) for the Nasdaq SmallCap Market at the end of the initial 180-day grace period, we will receive an additional 180-day period in which to achieve
compliance with the minimum bid price requirement. Our stockholders equity was approximately $1.7 million as of June 30, 2004. Our market capitalization was $33.0 million on June 30, 2004 and was $24.2 million on August 13, 2004.



If Nasdaq delisted our common stock, we would likely seek to list our
common stock for quotation on a regional stock exchange. However, if we were unable to obtain listing or quotation on such market or exchange, trading of our common stock would occur in the over-the-counter market on an electronic bulletin board for
unlisted securities or in what are commonly known as the pink sheet. In addition, delisting from Nasdaq and failure to obtain listing or quotation on such market or exchange would subject our common stock to so-called penny
stock rules. These rules impose additional sales practice and market making requirements on broker-dealers who sell and/or make a market in such securities, such as disclosing offer and bid prices and compensation received from a trade to a
purchaser and sending monthly account statements to purchasers. Consequently, broker-dealers may be less willing or able to sell and/or make a market in our common stock. These rules also require that purchasers be accredited investors, which would
reduce the number of investors who could purchase our shares. Additionally, an investor would find it more difficult to dispose of, or to obtain accurate quotations for the price of, our common stock. As a result of delisting, it may become more
difficult for us to raise funds through the sale of our securities.



BECAUSE
THE CURRENT AND POTENTIAL MEMBERS OF OUR BOARD OF DIRECTORS COULD CONTROL A SIGNIFICANT PERCENTAGE OF OUR COMMON STOCK, THEY COULD EXERCISE SUBSTANTIAL CONTROL OVER US.



The holders of the common stock do not have cumulative voting rights. Our directors, two of whom are executive officers of
GlycoGenesys, own approximately 4.4% collectively of our common stock outstanding as of August 13, 2004. One of the conditions of the transactions between us, Elan and EIS required that we expand our board of directors at our 2002 annual
stockholders meeting at which time EIS could appoint one director. EIS decided not to appoint a director at our 2002 annual stockholders meeting but may choose to do so in the future as long as they own at least 10% of our common stock
(assuming exercise or conversion of convertible or exercisable securities held by EIS). If EIS appoints a director, members of the board of directors and their affiliates would own approximately 6.3% of our common stock outstanding as of August 13,
2004, assuming EIS has not converted or exercised any of our securities held by it, and the same number of shares are outstanding at such time as are currently outstanding. If EIS and our directors were to have converted or exercised all of our
securities held by them, the members of our board of directors and their affiliates would own approximately 21.5% of the common stock outstanding as of August 13, 2004, assuming the number of shares outstanding at such time equals the number of
shares currently outstanding plus the number of shares issued on exercise or conversion of securities held by EIS and our directors. This concentration of ownership would allow these stockholders to substantially influence all matters requiring
stockholder approval and could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could materially adversely affect our stock price.



OUR STOCK PRICE COULD DECLINE IF A SIGNIFICANT NUMBER OF SHARES BECOME
AVAILABLE FOR SALE.



As of August 13, 2004, approximately
19,933,868 shares of common stock presently issued and outstanding are Restricted Securities as that term is defined in Rule 144 promulgated under the Act. In general, a person (or persons whose shares are aggregated) who has satisfied a
one year holding period may sell, within any three month period, an amount of restricted securities which does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading volume during the four calendar
weeks prior to such sale. Restricted securities can be sold, under certain circumstances, without any quantity limitation, by persons who are not affiliates of GlycoGenesys and who have beneficially owned the shares for a minimum period of two
years. The sale of these restricted shares as well as the shares registered under our nine effective registration statements, shall increase the number of free-trading shares and may have a depressive effect on the price of our securities. Moreover,
such sales, if substantial, might also adversely affect our ability to raise additional equity capital.



THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES BY YOU.



The market price of our common stock, which is traded on the National Association of Securities Dealers Automated Quotation system (NasdaqSmall Cap)
has been, and may continue to be, highly volatile. During the twelve months ending July 31, 2004, our common stock has traded at prices ranging from $0.42 to $2.10 per share. Factors such as announcements of clinical trial results, financings, legal
proceedings, technological innovations or new products, either by us or by our competitors or third parties, as well as market conditions within the biotechnology and pharmaceutical industries, may have a significant impact on the market price of
our common stock.



23



---

##### Table of Contents

In addition, the stock market has from time to time, and especially in the last few years, experienced
extreme price and volume fluctuations, particularly in the biotechnology sector, which have often been unrelated to the operating performance of particular companies. Current market conditions are particularly unstable and there is a large degree of
uncertainty at this time. In general, biotechnology stocks tend to be volatile even during periods of relative market stability because of the high rates of failure and substantial funding requirements associated with biotechnology companies. Market
conditions and conditions of the biotechnology sector could negatively impact the price of our common stock.



ITEM 4. CONTROLS AND PROCEDURES



Our Chief Executive
Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this Form 10-Q that the Companys disclosure controls and procedures (as defined in the Securities Exchange Act of
1934 Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the report that the Company files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms.



PART II-OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



Platt Litigation



The Company and certain of its directors are engaged in a
lawsuit with David Platt, its former CEO and Chairman, which is described in the Companys Annual Report on Form 10-K for the year ending December 31, 2003 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2004. On June 21,
2004, the Company added a supplemental counterclaim against David Platt and Pro-Pharmaceuticals for injurious falsehood, unfair competition and unfair and deceptive acts relating to statements made by Pro-Pharmaceutical regarding certain patent
applications the Company discontinued prosecuting and contractually returned to David Platt. The Company seeks injunctive relief and monetary damages in this counterclaim.



Platt License



The Company is engaged in an arbitration with David Platt regarding a license agreement between the Company and Platt which the Company initiated in
January 2004 and which is described in the Companys Annual Report on Form 10-K for the year ending December 31, 2003 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2004. Discovery is proceeding in this matter and the hearing
in which the arbitrator will make a final ruling is currently scheduled to begin in late August 2004.



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



(c) Set forth below is information regarding the sale of unregistered shares of equity securities sold by the Company during the three months ended June 30, 2004.



| | 1. | On April 2, 2004, the Company issued 290 shares of Common Stock upon the exercise of warrants by an accredited investor for a total of $3.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------



These securities were issued in reliance upon the exemption from registration pursuant to
Section 4(2) under the Securities Act of 1933, as amended.



24



---

##### Table of Contents

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



On June 22, 2004, the Company held its Annual Meeting of Stockholders. Two items were voted upon: (1) the election of two directors and (2) the ratification of the appointment of auditors.



1. The nominees for director approved by the shareholders weres Bradley J Carver and David W.
Dube. The following table indicates the term expiration date and the number of votes cast with respect to the nominee, the number of votes in favor and the number of votes withheld:



|                 |  |                 |  |                  |  |                      |  |                     
|---------------- |  | --------------- |  | ---------------- |  | -------------------- |  | --------------------
|Nominee          |  | Term Expiration |  | Total Votes Cast |  | Total Votes in Favor |  | Total Votes Withheld
|Bradley J Carver |  | 2007            |  | 44,695,588       |  | 44,188,058           |  | 507,530             
|David W. Dube    |  | 2007            |  | 44,695,588       |  | 43,885,738           |  | 809,850             



Messrs.Burns, Hanson and Host
continued their respective terms of office as directors.



2. The appointment of
Deloitte & Touche LLP as auditors for the Company for the year ended December 31, 2004 was approved by a vote of 44,049,504 in favor, 591,229 against and 54,855 abstentions out of a total of 44,695,588 votes cast.



ITEM 6. EXHIBITS AND REPORT ON FORM 8-K.



(a)
Exhibits



|     |  |                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2003.                            
|     | 
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2003.                            
|     | 
|32.1 |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2003.



(b) Reports on Form 8-K.



|1) | Current Report on Form 8-K filed with the Securities and Exchange Commission on May 12, 2004 reporting the issuance of press releases regarding (i) the Companys intellectual
property position and (ii) the initiation of a Phase I dose escalation trial of GCS-100LE.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2) | Current Report on Form 8-K filed with the Securities and Exchange Commission on June 4, 2004 excerpting a portion of Mr. Carvers script from a conference call regarding the
Companys clinical trial plans.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3) | Current Report on Form 8-K filed with Securities and Exchange Commission on June 23, 2004 reporting the substance of a conference call held by the Company in which Kenneth Anderson,
M.D. and Dharminder Chauhan, Ph.D. of the Dana Farber Cancer Institute discussed their work on and plans with GCS-100.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



25



---

##### Table of Contents

SIGNATURES



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



Dated this 16th day of August 2004.



GLYCOGENESYS, INC.

(the Registrant)



/s/ Bradley J CarverBradley J Carver, Chief Executive Officer President and Treasurer/s/ John W. BurnsJohn W. Burns, Senior Vice President, Chief Financial Officer and Secretary/s/ Patrick J. JoycePatrick J. Joyce, Principal Accounting Officer




26