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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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FORM 10-Q



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



For the quarterly period ended June 30, 2005.



| ̈ | 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



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GLYCOGENESYS, INC.

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



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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.



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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 12, 2005 was 12,884,054 shares.



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##### Table of Contents

GLYCOGENESYS, INC.



INDEX



|                              |  |                                                                                                           |  |      
|----------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | -----
|                              |  |                                                                                                           |  | Page 
|Part I Financial Information |  |                                                                                                          
|                              |  | Item 1.
Financial Statements (Unaudited)                                                                  |  |      
|                              |  | Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004                           |  | 3-4  
|                              |  | Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004 |  | 5    
|                              |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004           |  | 6    
|                              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                            |  | 7-11 
|                              |  | Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations             |  | 12-15
|                              |  | Item 3.
Quantitative and Qualitative Disclosures About Market Risk                                        |  | 15-23
|                              |  | Item 4.
Disclosure Controls and Procedures                                                                |  | 23   
|Part II Other Information    |  |                                                                                                          
|                              |  | Item 1.
Legal Proceedings                                                                                 |  | 24   
|                              |  | Item 4.
Submission of Matters to a Vote of Security Holders                                               |  | 24   
|                              |  | Item 6.
Exhibits                                                                                          |  | 24   
|Signatures                    |  | 25                                                                                                       



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##### Table of Contents

PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)



GLYCOGENESYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS



ASSETS



(Unaudited)



|                                          |  |              |           |   |                   |   |           |  
|----------------------------------------- |  | ------------ | --------- | - | ----------------- | - | --------- | -
|                                          |  | June 30,2005 |           |   | December 31, 2004 |  
|Current assets:                           |  |              |           |   |                   |   |           |  
|Cash and cash equivalents                 |  | $            | 4,139,577 |   |                   | $ | 2,245,790 |  
|Prepaid expenses and other current assets |  |              | 387,035   |   |                   |   | 341,981   |  
|                                          |  |              |           |   |                   |   |           |  
|Total current assets                      |  |              | 4,526,612 |   |                   |   | 2,587,771 |  
|                                          |  |              |           |   |                   |   |           |  
|Property and equipment, at cost:          |  |              |           |   |                   |   |           |  
|Computer, office and laboratory equipment |  |              | 877,137   |   |                   |   | 860,744   |  
|Furniture and fixtures                    |  |              | 294,291   |   |                   |   | 294,291   |  
|                                          |  |              |           |   |                   |   |           |  
|                                          |  |              | 1,171,428 |   |                   |   | 1,155,035 |  
|Less accumulated depreciation             |  |              | (851,620  | ) |                   |   | (797,428  | )
|                                          |  |              |           |   |                   |   |           |  
|Property and equipment, net               |  |              | 319,808   |   |                   |   | 357,607   |  
|                                          |  |              |           |   |                   |   |           |  
|Other assets:                             |  |              |           |   |                   |   |           |  
|Restricted cash                           |  |              | 148,128   |   |                   |   | 148,128   |  
|Other                                     |  |              | 11,670    |   |                   |   | 11,670    |  
|                                          |  |              |           |   |                   |   |           |  
|Total other assets                        |  |              | 159,798   |   |                   |   | 159,798   |  
|                                          |  |              |           |   |                   |   |           |  
|Total assets                              |  | $            | 5,006,218 |   |                   | $ | 3,105,176 |  
|                                          |  |              |           |   |                   |   |           |  



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



3



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##### Table of Contents

GLYCOGENESYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS



LIABILITIES AND STOCKHOLDERS EQUITY



(Unaudited)



|                                                                                                                                                                              |  |               |             |   |                   |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                                              |  | June 30, 2005 |             |   | December 31, 2004 |  
|Current liabilities:                                                                                                                                                          |  |               |             |   |                   |   |             |  
|Accounts payable                                                                                                                                                              |  | $             | 1,480,707   |   |                   | $ | 1,313,196   |  
|Accrued liabilities                                                                                                                                                           |  |               | 817,757     |   |                   |   | 445,970     |  
|                                                                                                                                                                              |  |               |             |   |                   |   |             |  
|Total current liabilities                                                                                                                                                     |  |               | 2,298,464   |   |                   |   | 1,759,166   |  
|                                                                                                                                                                              |  |               |             |   |                   |   |             |  
|Commitments and contingencies                                                                                                                                                 |  |               |             |   |                   |   |             |  
|Stockholders equity:                                                                                                                                                         |  |               |             |   |                   |   |             |  
|Preferred stock, $0.01 par value (liquidation value $27,131,685 and $21,929,692 as of June 30, 2005 and December 31, 2004,
respectively)                                      |  |               | 145         |   |                   |   | 97          |  
|Common stock, $0.01 par value; Authorized  75,000,000 shares; Issued and outstanding  11,711,753 and 10,084,354 shares at June 30,
2005 and December 31, 2004, respectively |  |               | 117,118     |   |                   |   | 100,844     |  
|Additional paid-in capital                                                                                                                                                    |  |               | 101,732,649 |   |                   |   | 95,794,745  |  
|Accumulated deficit                                                                                                                                                           |  |               | (99,142,158 | ) |                   |   | (94,549,676 | )
|                                                                                                                                                                              |  |               |             |   |                   |   |             |  
|Total stockholders equity                                                                                                                                                    |  |               | 2,707,754   |   |                   |   | 1,346,010   |  
|                                                                                                                                                                              |  |               |             |   |                   |   |             |  
|Total liabilities and stockholders equity                                                                                                                                    |  | $             | 5,006,218   |   |                   | $ | 3,105,176   |  
|                                                                                                                                                                              |  |               |             |   |                   |   |             |  



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



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##### Table of Contents

GLYCOGENESYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)



|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|---------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                     |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|                                                     |  | 2005                        |            |   | 2004                      |   |            | 2005 |  |   | 2004       |  
|Operating expenses:                                  |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Research and development                             |  | $                           | 873,646    |   |                           | $ | 1,217,217  |      |  | $ | 2,393,750  |   |  | $ | 2,596,692  |  
|General and administrative                           |  |                             | 1,222,757  |   |                           |   | 1,453,592  |      |  |   | 2,218,186  |   |  |   | 2,735,443  |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                             |  |                             | 2,096,403  |   |                           |   | 2,670,809  |      |  |   | 4,611,936  |   |  |   | 5,332,135  |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Operating loss                                       |  |                             | (2,096,403 | ) |                           |   | (2,670,809 | )    |  |   | (4,611,936 | ) |  |   | (5,332,135 | )
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Other income:                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Interest income                                      |  |                             | 12,790     |   |                           |   | 6,234      |      |  |   | 18,205     |   |  |   | 13,710     |  
|Other income                                         |  |                             | 99         |   |                           |   | 54,524     |      |  |   | 1,249      |   |  |   | 57,420     |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total other income                                   |  |                             | 12,889     |   |                           |   | 60,758     |      |  |   | 19,454     |   |  |   | 71,130     |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net loss                                             |  |                             | (2,083,514 | ) |                           |   | (2,610,051 | )    |  |   | (4,592,482 | ) |  |   | (5,261,005 | )
|Preferred stock dividends accreted or accrued        |  |                             | (208,940   | ) |                           |   | (113,771   | )    |  |   | (329,359   | ) |  |   | (227,542   | )
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net loss applicable to common stock                  |  | $                           | (2,292,454 | ) |                           | $ | (2,723,822 | )$   |  |   | (4,921,841 | ) |  | $ | (5,488,547 | )
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted net loss per common stock          |  | $                           | (0.22      | ) |                           | $ | (0.32      | )$   |  |   | (0.48      | ) |  | $ | (0.66      | )
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Weighted average number of common shares outstanding |  |                             | 10,626,841 |   |                           |   | 8,445,207  |      |  |   | 10,355,612 |   |  |   | 8,359,001  |  
|                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  



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



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GLYCOGENESYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)



|                                                                                             |  |                           |            |   |      |   |            |  
|-------------------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                             |  | Six Months Ended June 30, |           
|                                                                                             |  | 2005                      |            |   | 2004 |  
|Cash flows from operating activities:                                                        |  |                           |            |   |      |   |            |  
|Net loss                                                                                     |  | $                         | (4,592,482 | ) |      | $ | (5,261,005 | )
|Adjustments to reconcile net loss to net cash used in operating and discontinued activities: |  |                           |            |   |      |   |            |  
|Stock-based compensation expense to non-employees                                            |  |                           | 9,992      |   |      |   | 11,071     |  
|Depreciation and amortization                                                                |  |                           | 54,192     |   |      |   | 61,053     |  
|Changes in assets and liabilities:                                                           |  |                           |            |   |      |   |            |  
|Prepaid expenses and other current assets                                                    |  |                           | (45,054    | ) |      |   | 89,927     |  
|Accounts payable                                                                             |  |                           | 167,511    |   |      |   | 268,769    |  
|Accrued liabilities                                                                          |  |                           | 371,787    |   |      |   | (19,627    | )
|Net liabilities of discontinued operations                                                   |  |                           |           |   |      |   | (44,457    | )
|                                                                                             |  |                           |            |   |      |   |            |  
|Net cash used in operating and discontinued activities                                       |  |                           | (4,034,054 | ) |      |   | (4,894,269 | )
|                                                                                             |  |                           |            |   |      |   |            |  
|Cash flows from investing activities:                                                        |  |                           |            |   |      |   |            |  
|Purchase of property and equipment                                                           |  |                           | (16,393    | ) |      |   | (146,580   | )
|                                                                                             |  |                           |            |   |      |   |            |  
|Net cash used in investing activities                                                        |  |                           | (16,393    | ) |      |   | (146,580   | )
|                                                                                             |  |                           |            |   |      |   |            |  
|Cash flows from financing activities:                                                        |  |                           |            |   |      |   |            |  
|Proceeds from sale of securities, net of issuance costs                                      |  |                           | 5,944,234  |   |      |   | 4,309,198  |  
|Proceeds from exercise of warrants and stock options                                         |  |                           |           |   |      |   | 6,340      |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Net cash provided by financing activities                                                    |  |                           | 5,944,234  |   |      |   | 4,315,538  |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Net increase (decrease) in cash and cash equivalents                                         |  |                           | 1,893,787  |   |      |   | (725,311   | )
|Cash and cash equivalents, beginning balance                                                 |  |                           | 2,245,790  |   |      |   | 3,193,575  |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Cash and cash equivalents, ending balance                                                    |  | $                         | 4,139,577  |   |      | $ | 2,468,264  |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Supplemental disclosure of non-cash financing activities:                                    |  |                           |            |   |      |   |            |  
|Conversion of Series C preferred stock to common stock                                       |  | $                         |           |   |      | $ | 1,861      |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Conversion of Series D preferred stock to common stock                                       |  |                           | 16,050     |   |      |   |           |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Conversion of Series D prefererd stock dividends to common stock                             |  |                           | 224        |   |      |   |           |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Dividends accreted on Series B preferred stock                                               |  | $                         | 242,176    |   |      | $ | 227,542    |  
|                                                                                             |  |                           |            |   |      |   |            |  
|Dividends accrued on Series D preferred stock                                                |  | $                         | 87,183     |   |      |   |           |  
|                                                                                             |  |                           |            |   |      |   |            |  



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



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##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2005



(1) Basis of Presentation



The accompanying unaudited condensed 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, 2004, 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, 2005, the
Company had an accumulated deficit of $99,142,158. Despite this accumulated deficit, the Company had a net working capital position (current assets less current liabilities) of $2,228,148 at June 30, 2005. The Company believes that its existing
funds and commitments will be sufficient to fund its operating expenses and capital requirements through the third quarter of 2005, allowing the Company to continue its current Phase I solid tumor dose escalation trial and its Phase I/II multiple
myeloma trial and to initiate a Phase I/II trial in chronic lymphocytic leukemia with GCS-100LE, a low ethanol formulation of GCS-100. The Company intends to raise additional capital through equity financings or partnering with a large biotechnology
or pharmaceutical company to support its current and planned clinical trials and continued operations. 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, 2005, the Company has been successful in raising $82.7 million from the sales of equity securities.



The Companys future is dependent upon its ability to obtain financing to fund its operations. As of August 15, 2005, 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.



In its Annual Report on Form 10-K for the year ended December 31, 2004, 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.



(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, 2005 and 2004 excluded the potential common shares from convertible preferred stock, warrants and stock options because their inclusion would be anti-dilutive. At June 30, 2005 and 2004, there were 10,249,320 and 2,200,975 warrants
outstanding, respectively, and 678,377 and 316,629 stock options outstanding, respectively, which were omitted from the net loss per common stock calculations, and 6,693,133 and 1,687,019 shares, respectively, issuable upon conversion of outstanding
shares of preferred stock which were also omitted.



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##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2005



(4) Equity



(a) Issuance of Preferred Stock



In the three months ended June 30, 2005, the Company issued 4,500 shares of Series D convertible preferred stock in connection with a two-part financing for gross
consideration of $4,500,000. In the six months ended June 30, 2005, the Company issued 6,500 shares of Series D convertible preferred stock (which consisted of 2,000 shares issued in March 2005 and 4,500 shares issued in May 2005) for gross
consideration of $6,500,000.



(b) Issuance of Common Stock



During the three and six months ended June 30, 2005, the Company issued
1,627,369 shares of common stock upon the conversion of 1,605 shares of Series D preferred stock, including 22,369 shares of common stock issued as payment of dividends on such converted Series D preferred stock.



(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, 2005 and December 31, 2004 (liquidation value $14,953,030).
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Series B convertible preferred stock, 6,000 authorized; 3,471.15 shares issued and outstanding as of June 30, 2005 and December 31, 2004 (liquidation value $7,218,838 and
$6,976,662, respectively).
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Series C convertible preferred stock, 1,117 authorized; no shares issued and outstanding as of June 30, 2005 and December 31, 2004.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  | Series D convertible preferred stock, 10,000 authorized; 4,895 shares issued and outstanding as of June 30, 2005 (liquidation value $4,959,817.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------



The Company has authorized 75,000,000 shares of common stock, $0.01 par value. At June 30,
2005 and December 31, 2004, there were 11,711,753 and 10,084,354 shares issued and outstanding, respectively.



During the three and six months ended June 30, 2005, the Company issued 1,627,369 shares of common stock upon the conversion of 1,605 shares of Series D preferred stock, including 22,369 shares of common stock issued
as payment of dividends on such converted Series D preferred stock.



During the
three months ended June 30, 2005 and 2004, the Company granted options to purchase 3,667 and 8,434 shares of common stock, respectively, at a weighted average exercise price of $0.92 and $4.55, respectively, per share to employees and others. No
options were exercised during the three months ended June 30, 2005 or 2004. During the three months ended June 30, 2005 and 2004, 3,038 and 3,334 options to purchase common stock expired.



During the six months ended June 30, 2005 and 2004, the Company granted options to purchase 361,814 and 61,685 shares of common stock,
respectively, at a weighted average exercise price of $1.04 and $7.69, respectively, per share to employees and others. No options were exercised during the six months ended June 30, 2005. During the six months ended June 30, 2004, 183 options were
exercised at $1.62 per share for consideration of $297. During the six months ended June 30, 2005 and 2004, 4,233 and 3,334 options to purchase common stock expired.



During the three months ended June 30, 2005, the Company issued warrants to purchase 4,635,000 at a weighted average exercise price of $1.23
per share. During the three months ended June 30, 2004, the Company issued no warrants. No warrants were exercised during the three months ended June 30, 2005. Warrants to purchase 48 shares for consideration of $3 were exercised during the three
months ended June 30, 2004. During the three months ended June 30, 2004, 286,671 warrants expired. No warrants expired during the three months ended June 30, 2005.



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##### Table of Contents

GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2005



During the six months ended June 30, 2005 and 2004, the Company issued warrants to purchase
6,695,000 and 447,092 shares, respectively, at a weighted average exercise price of $1.23 and $10.79 per share. During the six months ended June 30, 2004, warrants to purchase 25,765 shares were exercised for consideration of $6,046. No warrants
were exercised during the six month period ended June 30, 2005. During the periods ended June 30, 2004 and 2005, warrants to purchase 286,671 and 40,992 shares expired, 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, 2005 and 2004 amounted to $9,992 and $11,071, respectively.



(d) Stock-based compensation plans



The
Company has stock-based employee compensation plans that are described more fully in Note 4 to the Companys consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2004. 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.



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, |  
|                                                                                                        |  | 2005                        |            |   | 2004                      |   |            | 2005 |  |   | 2004       |  
|Net loss applicable to common stock, as reported                                                        |  | $                           | (2,292,454 | ) |                           | $ | (2,723,822 | )    |  | $ | (4,921,841 | ) |  | $ | (5,488,547 | )
|Less: stock-based employee compensation expense determined under fair value based method for all awards |  |                             | (48,360    | ) |                           |   | (106,741   | )    |  |   | (134,988   | ) |  |   | (304,590   | )
|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Pro forma net loss applicable to common stock                                                           |  | $                           | (2,340,814 | ) |                           | $ | (2,830,563 | )    |  | $ | (5,056,829 | ) |  | $ | (5,793,137 | )
|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted net loss per common stock, as reported                                                |  | $                           | (0.22      | ) |                           | $ | (0.32      | )    |  | $ | (0.48      | ) |  | $ | (0.66      | )
|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Pro forma basic and diluted net loss per common stock                                                   |  | $                           | (0.22      | ) |                           | $ | (0.34      | )    |  | $ | (0.49      | ) |  | $ | (0.69      | )
|                                                                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  



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, 2005 and 2004, respectively: (1) risk-free interest rates of 4.33% and 4.94%, respectively; (2)
dividend yields of 0.0%; (3) expected lives of 6.86 and 7.3 years; and (4) volatility of 64.8% and 102.8%, respectively. The weighted average fair value of options granted during the three months ended June 30, 2005 and 2004 was $0.92 and $4.55,
respectively. The following assumptions were used for options granted during the six months ended June 30, 2005 and 2004, respectively: (1) risk-free interest rates of 4.26% and 4.64%, respectively; (2) dividend yields of 0.0%; (3) expected lives of
6.86 and 7.3 years; and (4) volatility of 74.8% and 85.4%, respectively. The weighted average fair value of options granted during the six months ended June 30, 2005 and 2004 was $1.04 and $7.70, respectively. Results may vary depending on the
assumptions applied within the model.



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GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2005



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.



In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123R, Share-Based Payment (SFAS No. 123R). This Statement is
a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS
No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The Statement requires entities to recognize stock compensation expense for awards of equity instruments to
employees based on the grant-date fair value of those awards (with limited exceptions). SFAS No. 123R is effective for the Company on January 1, 2006.



The Company is evaluating the two methods of adoption allowed by SFAS No. 123R; the modified-prospective transition method and the modified-retrospective transition
method.



(5) Legal Proceedings and Contingencies



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 the second half of 2006.



Re-examination.On January 28, 2005, the Company was informed that
Pro-Pharmaceuticals made a request to the U.S. Patent and Trademark Office, or USPTO, to reexamine the Companys U.S. Patent 6,680,306 Method for Enhancing the Effectiveness of Cancer Therapies (the 306 Patent)
issued in January 2004 to challenge the claims of that patent. On April 12, 2005, the USPTO issued an office action in connection with the reexamination with questions regarding the validity of the claims. The Company responded to the issues raised
in the office action on June 13, 2005 amending the claims so that they cover modified citrus pectin and other polymeric carbohydrates that bind to galectins. On July 13, 2005, Pro-Pharmaceuticals filed a counter response to the Companys
response as is their right. This reexamination does not affect the Companys plans for development or commercialization of GCS-100, regardless of its outcome, as the Company has additional patents and patent applications that it believes would
cover the use of GCS-100 when combined with other therapies.



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GLYCOGENESYS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2005



Re-examinations can be requested by any party and are frequently requested by
parties who believe their ability to commercialize a product may be adversely affected by an issued patent and who wish to challenge claims in the patent. The 306 Patent, as amended, broadly claims the use of polymeric carbohydrates with side
chains that bind to galectins, including GCS-100, prior to or in combination with chemotherapy or surgery for the treatment of cancer. Pro-Pharmaceuticals, Inc. has publicly stated that its lead drug candidate, Davanat®, which is a polymeric carbohydrate with side chains, binds to galectins and is
used in combination with chemotherapy.



Nasdaq Listing -On April 20, 2005, the Company received a letter from Nasdaq indicating that the bid price of its common stock had been below $1.00 for 30 consecutive business days and that it had a 180-day grace period, until October 17, 2005, to achieve a bid
price of at least $1.00 for a period of at least 10 consecutive business days or face delisting. On June 30, 2005, the Company received a letter from Nasdaq indicating that it had regained compliance by maintaining a closing bid price above $1.00
for at least 10 consecutive days and the matter is now closed.



On April 7, 2005, the Company received a letter from Nasdaq indicating that as of December 31, 2004, it did not comply with Nasdaq Marketplace Rule 4310(c)(2)(B), which requires listed companies to have (i) a minimum of $2,500,000 in
stockholders equity, (ii) $35,000,000 or more in market value of listed securities or (iii) $500,000 of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years.
In the letter, Nasdaq indicated it is reviewing the Companys eligibility for continued listing and requested that the Company provide its specific plan to achieve and sustain compliance with Nasdaq SmallCap Market listing requirements. Based
on the review of the plan submitted by the Company, Nasdaq believes the Company provided a definitive plan evidencing its ability to achieve and sustain such compliance. On May 23, 2005, the Company closed the second tranche of a financing in which
it raised $4.2 million in net proceeds through the sale of Series D preferred stock and warrants. As of June 30, 2005, it had $2.7 million in stockholders equity. The Companys market capitalization was $13.7 million on June 30, 2005 and
was $14.2 million on August 12, 2005. Nasdaq will continue to monitor the Companys ongoing compliance with the listing requirements and if the Company does not meet these requirements, it could become subject to delisting.



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



The following discussion should be read in conjunction with the unaudited condensed 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, has completed Phase II(a) clinical trials for colorectal and pancreatic cancer using a 20 mg/m2dose of the former high ethanol formulation.



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-100LE, a low-ethanol formulation of GCS-100, and to secure the
necessary financial resources to conduct such trials, through raising funds in the capital market and repartnering with a large biotechnology or pharmaceutical company.



In pursing these objectives, in May 2004, the Company initiated a Phase I dose escalation trial in multiple solid tumor indications
evaluating GCS-100LE which is being conducted at Sharp Memorial Hospital, Clinical Oncology Research in San Diego and the University of Arizona Cancer Center at Tucson and at Scottsdale, AZ. The Company continues to enroll patients in this trial. To
date, the Company has enrolled 22 patients and has not reached a maximum tolerated dose. The Company is now enrolling patients in the sixth dose level which is 200mg/m2. In addition, a Phase I/II trial testing GCS-100LE in multiple myeloma at Dana-Farber Cancer Institute, Boston, MA was initiated in March 2005; a Phase II
trial in multiple myeloma is expected to begin in the third quarter of 2006. The Company plans to begin a Phase I/II trial testing GCS-100LE in chronic lymphocytic leukemia (CLL) in the third quarter 2005 and to initiate a Phase II/III pivotal trial
in CLL in the fourth quarter of 2006. A Phase II solid tumor trial with GCS-100LE is planned to begin in the second quarter of 2006, which will likely test GCS-100LE in combination with an approved cancer therapy.



The Company continues to pursue its goal of consummating a strategic funding through a
partnership with a biotechnology or pharmaceutical company or a relationship with fundamental, long term investors in order to provide long-term funding.



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 research laboratory is located in Cambridge, MA. The Companys home page is located on
the World Wide Web at http://www.glycogenesys.com.



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



GCS-100 is a complex carbohydrate intended to fight bloodborne and solid tumor cancers and
their metastases, either as a monotherapy or in combination with approved chemotherapies. In addition to the intellectual property the Company owns relating to GCS-100, it has exclusive licenses from David Platt and Wayne State University and the
Barbara Ann Karmanos Cancer Institute relating to GCS-100.



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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, 2004. The accounting policies used in preparing our interim unaudited condensed consolidated financial statements for the six months ended June 30, 2005 are the
same as those described in our Annual Report on Form 10-K.



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.



Results of Operations: Three Months Ended June 30, 2005
versus June 30, 2004



We had a net loss before accretion and accrual
of preferred stock dividends of $2,083,514 for the three months ended June 30, 2005 versus $2,610,051for the three months ended June 30, 2004.



Research and Development Expenses Developing carbohydrate-based therapeutic compounds is our primary business focus and to a lesser extent, we previously
developed agricultural products. The explanations of the changes in these research and development areas from quarter-to-quarter are described in this section.



Our research and development expenses for the three months ended June 30, 2005 and 2004 were reported in the following financial statement captions:



|                                      |  |                             |         |   |      |   |          
|------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ---------
|                                      |  | Three Months Ended June 30,
|                                      |  | 2005                        |         |   | 2004
|GCS-100 - R&D                         |  | $                           | 877,486 |   |      | $ | 1,190,244
|                                      |  |                             |         |   |      |   |          
|Other Products  R&D                  |  |                             | (3,840  | ) |      |   | 26,973   
|                                      |  |                             |         |   |      |   |          
|Total Research & Development expenses |  | $                           | 873,646 |   |      | $ | 1,217,217
|                                      |  |                             |         |   |      |   |          



Total research and development
expenses of $873,646 for the three months ended June 30, 2005 decreased $343,571, or 28%, from $1,217,217 of expenses for the three months ended June 30, 2004.



Total GCS-100 development expenses of $877,486 for the three months ended June 30, 2005 decreased $312,758, or 26%, from $1,190,244 of expenses for the three months
ended June 30, 2004. This decrease is primarily due to decreased (i) GCS-100 production costs of $323,000, (ii) analytical method expenses of $71,000 and (iii) $37,000 in decreased preclinical expenses. The decreases were partially offset by
increases of (i) $51,000 in payroll expenses, (ii) $26,000 in laboratory operation expenses and (iii) consulting expenses of $57,000.



Research and development expenses for our previously developed agricultural compounds, which consisted primarily of registration and license fees, were reduced as the
Companys agricultural products have either been sold or are no longer being developed.



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 $2,500,000-$3,000,000 during the next twelve months, but could vary significantly based on the actual product candidates and availability of funds.



General and administrative expenses decreased to $1,222,757 for the three months ended June 30, 2005 from $1,453,592 for the three months
ended June 30, 2004, a decrease of $230,835, or 16%. This decrease is primarily attributable to decreased (i) legal expenses of $183,000, (ii) payroll expenses of $53,000, (iii) $40,000 in public relation expenses, (iv) rent expense of $23,000, (v)
travel expenses of $23,000, and (vi) insurance expenses of $18,000. These decreases were partially offset by increases of (i) $73,000 in expenses related to the special shareholder meeting and (ii) $44,000 in consulting expenses.



Interest income increased to $12,790 for the three months ended June 30, 2005 from $6,234 for
the three months ended June 30, 2004, an increase of $6,556, or 105%. This increase is attributable to an increase in cash available for investment with higher rates of return on those investments.



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Other income decreased to $99 for the three months ended June 30, 2005 from $54,524 for the three months ended June 30,
2004, a decrease of $54,425. This decrease is primarily attributable to the non-recurring income of $50,000 related to the sale of the Companys Elexa product line in June 2004.



Results of Operations: Six Months Ended June 30, 2005 versus June 30, 2004



We had a net loss before accretion and accrual of preferred stock dividends of $4,592,482 for the six months ended June 30, 2005 versus
$5,261,005 for the six months ended June 30, 2004.



Research and
Development Expenses 



Our research and development expenses for the
six months ended June 30, 2005 and 2004 were reported in the following financial statement captions:



|                                      |  |                           |           |   |      |   |          
|------------------------------------- |  | ------------------------- | --------- | - | ---- | - | ---------
|                                      |  | Six Months Ended June 30,
|                                      |  | 2005                      |           |   | 2004
|GCS-100  R&D                         |  | $                         | 2,415,402 |   |      | $ | 2,554,152
|Other Products  R&D                  |  |                           | (21,652   | ) |      |   | 42,540   
|                                      |  |                           |           |   |      |   |          
|Total Research & Development expenses |  | $                         | 2,393,750 |   |      | $ | 2,596,692
|                                      |  |                           |           |   |      |   |          



Total research and development
expenses of $2,393,750 for the six months ended June 30, 2005 decreased $202,942, or 8%, from $2,596,692 of expenses for the six months ended June 30, 2004.



Total GCS-100 development expenses of $2,415,402 for the six months ended June 30, 2005 decreased $138,750, or 5%, from $2,554,152 of expenses for the six months ended
June 30, 2004. This decrease is primarily due to decreased (i) production costs of $554,000, (ii) CRO expenses of $52,000, (iii) regulatory expenses of $46,000 and (iv) $36,000 in decreased recruitment expenses. The decreases were partially offset
by increases of (i) $159,000 in clinical site expenses, (ii) $103,000 in payroll expenses, (iii) $93,000 in consulting expenses, (iv) $81,000 in laboratory operation expenses, (v) analytical method expenses of $44,000, (vi) $35,000 in expenses
related to our scientific advisory board and (vii) $30,000 in patent fees.



Research and development expenses for our previously developed agricultural compounds, which consisted primarily of registration and license fees, were offset by the cancellation of an accrued license fee of $25,000, resulting in a decrease
in expenses of $64,192, or 151%, to $(21,652) for the six months ended June 30, 2005 from $42,540 for the six months ended June 30, 2004. The Companys agricultural products have either been sold or are no longer being developed.



General and administrative expenses decreased to $2,218,186 for the six months ended June 30,
2005 from $2,735,443 for the six months ended June 30, 2004, a decrease of $517,257, or 19%. This decrease is primarily attributable to decreased (i) legal expenses of $317,000, (ii) payroll expenses of $150,000, (iii) rent expense of $44,000, (iv)
accounting expenses of $38,000, (v) insurance expenses of $37,000 and (vi) $15,000 in public relation activities. These decreases were partially offset by increases of (i) $80,000 in expenses related to the special shareholder meeting and (ii)
$24,000 in consulting expenses.



Interest income increased to $18,205 for the
six months ended June 30, 2005 from $13,710 for the six months ended June 30, 2004, an increase of $4,495, or 33%. This increase is attributable to an increase in cash available for investment with higher rates of return on those investments.



Other income decreased to $1,249 for the six months ended June 30, 2005 from
$57,420 for the six months ended June 30, 2004, a decrease of $56,171. This decrease is primarily attributable to the non-recurring income of $50,000 related to the sale of the Companys Elexa product line in June 2004.



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Liquidity and Capital Resources



For the six months ended June 30, 2005, our operations utilized cash of $4,034,054 which,
together primarily with increases in accounts payable, accrued liabilities and prepaid expenses, funded our operating losses. We intend to raise additional funds through sales of our securities and/or partnering with a larger pharmaceutical or
biotechnology company.



As of June 30, 2005, our accumulated deficit was
$99,142,158 and as of August 12, 2005, our cash balances were $2,969,820 . In March and May 2005 we raised approximately $6,500,000 in aggregate gross proceeds from the sale of preferred 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 through the third quarter of 2005, consistent with prioritizing R&D expenditures. 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 15, 2005, we have not obtained commitments from existing or potential investors to provide additional financing. We expect to incur substantial additional operating
costs, including costs related to ongoing research and development activities, preclinical studies and clinical trials. Our ability to raise additional capital may be harmed if we do not maintain our listing with Nasdaq. On April 20, 2005, we
received a letter from Nasdaq indicating that the bid price of our common stock had been below $1.00 for 30 consecutive business days and that we had until October 17, 2005 to achieve a bid price of at least $1.00 for a period of at least 10
consecutive business days or face delisting. On June 30, 2005, we received a letter from Nasdaq indicating that we had regained compliance by maintaining a closing bid price above $1.00 for at least 10 consecutive days and the matter is now closed.
On April 7, 2005, we received a letter from Nasdaq indicating that as of December 31, 2004, we did not comply with Nasdaq rules, which requires listed companies to have (i) a minimum of $2,500,000 in stockholders equity, (ii) $35,000,000 or
more in market value of listed securities or (iii) $500,000 of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years. In the letter, Nasdaq indicated it is
reviewing our eligibility for continued listing and requested that we provide specific plan to achieve and sustain compliance with Nasdaq SmallCap Market listing requirements. Based on the review of the plan submitted by us, Nasdaq believes we
provided a definitive plan evidencing our ability to achieve and sustain such compliance. Nasdaq will continue to monitor our ongoing compliance with the listing requirements and if we do not meet these requirements, we could become subject to
delisting. 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 or curtail 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, 2005, 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, 2005, 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 $99.2 million of losses since our inception, including approximately $10.1 million for the year ended December 31, 2004 and $4.6 million in the first six months of 2005. Extensive losses can be expected to continue for the foreseeable
future.



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 additional and/or larger clinical trials in the U.S. and foreign countries;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | --------------------------------------------------





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| |  |  | 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 through the third quarter of 2005, allowing us to continue the current Phase I dose escalation solid tumor monotherapy trial and Phase I/II multiple myeloma trial and to initiate a Phase I/II trial in CLL with
GCS-100LE, a low ethanol formulation of GCS-100. We intend to raise additional capital through the sale of equity securities and through partnering with another biotech or pharmaceutical company to support our additional planned clinical trials and
continued operations. To the extent we are unable to raise sufficient funding for the additional clinical trials in the capital markets or through partnering with a large biotechnology or pharmaceutical company, we will need to 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 REGISTERED PUBLIC ACCOUNTING
FIRM.



Our consolidated financial statements included in this
Annual Report on Form 10-K for the year ended December 31, 2004 have been prepared on the assumption that we will continue as a going concern. Deloitte & Touche LLP issued a report dated March 29, 2005 that includes an explanatory paragraph
stating that our recurring losses from operations, accumulated deficit of $94.5 million as of December 31, 2004, and our expectation that we will incur substantial additional operating costs for the foreseeable future, 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 DEPENDENT ON THE RESULTS OF GCS-100 AND IF WE ARE UNSUCCESSFUL IN DEVELOPING GCS-100, WE DO NOT HAVE OTHER PRODUCTS
WHICH ARE IN ACTIVE DEVELOPMENT.



While we plan to increase
our portfolio of potential products, currently 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 AND WILL NOT BE ABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE GCS-100 IF CLINICAL TRIALS ARE NOT SUCCESSFUL.



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. We may seek but not receive Fast Track Drug Designation, Accelerated Approval, or Priority Review status by the FDA. Before obtaining regulatory approval for sale, GCS-100 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 may cause, alone or in combination with another therapy, harmful side effects;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | we may discover that GCS-100, 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, other similar foreign regulatory agencies or an institutional review board may suspend the clinical trials of GCS-100;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | we may be unable to produce sufficient supplies in a timely fashion of GCS-100 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. 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 GCS-100, 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 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, may 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 14 issued U.S. patents having expiration dates ranging from 2013 to 2022. Six of these 14 issued patents relate to GCS-100. We own or exclusively license eight foreign patents having expiration dates
ranging from 2015 to 2017. Five of these eight foreign patents relate to GCS-100. We own or exclusively license 13 pending U.S. patent applications, of which 12 relate to GCS-100 and 56 pending foreign patent applications, of which 44 relate to
GCS-100. As we develop GCS-100, we may discover more about it 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 decide 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. Other than the reexamination of our U.S. Patent 6,680,306 Method for Enhancing the Effectiveness of Cancer
Therapies, 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, or which may remain intact following the reexamination of U.S. Patent 6,680,306.



A patent we exclusively license from Wayne State University and the Barbara Ann Karmanos Cancer Institute and patent applications we exclusively license from David Platt could become subject to an interference
proceeding at the U.S. Patent and Trademark Office to determine priority between them. The U.S. Patent and Trademark Office is considering whether such a proceeding is appropriate. Under our license with David Platt, he has the right to prosecute
the patent applications covered by the license and therefore we do not have ultimate control over the scope of claims that may issue from those patent applications.



Our potential products or business activities could be determined to infringe intellectual property 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 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



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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, or 15% of certain non-royalty
or R&D payments received from sublicensees and receive FDA or equivalent agency approval to sell GCS-100 by January 1, 2008.



The technology we license from third parties would be difficult to replace and the loss of this technology would materially adversely affect our future
prospects.



WE ARE ENGAGED IN LITIGATION WITH DAVID PLATT AND
PRO-PHARMACEUTICALS, INC. AND IF WE ARE \UNSUCCESSFUL, WE MAY BE HARMED.



On January 29, 2004, David Platt commenced suit against us and certain of our current and former directors in the Massachusetts Superior Court in Suffolk County. In his Complaint, Platt seeks damages for alleged
breach of his severance agreement with us, including the failure to pay approximately $180,000 in severance benefits and alleged breaches in connection with the maintenance by us of certain restrictions on Platts sale of stock. The Complaint
further asserts claims against some of our current and former directors for alleged breaches of fiduciary duty in failing to assist in the removal of restrictive legends on David Platts shares. David Platt also purports to state claims for
double or treble damages, as well as attorney fees, under the Massachusetts Unfair Trade Practice Act.



On February 23, 2004, we filed our 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 David Platt and Pro-Pharmaceuticals for misappropriation of proprietary rights and for unfair and deceptive acts. We are seeking 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 we are further seeking the assignment by David Platt and Pro-Pharmaceuticals of certain intellectual
property to us. Under the counterclaim for unfair and deceptive acts, we are seeking treble damages as well as attorney 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-Pharmaceuticals regarding certain patent applications the Company discontinued prosecuting and contractually returned to David Platt. The Company seeks injunctive relief and monetary
damages.



If we are unsuccessful in defending against David
Platts claims or in prosecuting our counterclaims, we could be materially adversely affected.



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



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. We contract out most of our research and development operations for GCS-100, utilizing third-party contract manufacturers such as Hyaluron, Inc. and Johnson Matthey Pharma Services, Inc. to manufacture GCS-100, Fisher
Clinical Services, Inc. for drug inventory and shipping services, Incell Corporation, LLC, Cambrex Bio Science Walkersville, Inc. and PPD Development, LP for assay and other development work and third-party contract research organizations, such as
Quest Pharmaceutical Services, LLC, Veristat, Inc. and Medelis, 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, Barts and The London, Queen Marys School of Medicine, 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 time frames 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 Hyaluron, Inc. and Johnson Matthey Pharma Services, 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.



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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
current good manufacturing practice, or cGMP. 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 required volumes, we will have to identify acceptable alternative manufacturers. If we need to change manufacturers, these new manufacturers must meet FDA and foreign regulatory standards. 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 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 6 drugs in Phase I, 11 drugs in Phase II, 7 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.



We believe, based on industry studies, there are, including GCS-100, approximately 11 drugs in Phase I, 12 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 initiated a Phase I/II trial in multiple myeloma in March 2005. We
believe, based on industry studies, there are, including GCS-100, approximately 6 drugs in Phase I, 11 in Phase II and 7 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, prednisone, doxorubicin (Adriamycin), melphalan, etoposide, cytarabine, cisplatin,
carmustine, cyclophosphamide, Celgenes Thalomid and Millenniums Velcade. The majority of the drugs are used in combination therapy in a variety of regimens.



In the third quarter of 2005, we also plan to initiate a Phase I/II clinical trial in chronic lymphocytic leukemia, or CLL.
We believe based on industry studies, there are, other than GCS-100, approximately 4 drugs in Phase I, 7 drugs in Phase II and 2 drugs in Phase III or in pre-registration



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for the treatment of CLL. In addition, there are a number of clinical trials ongoing using a variety of approved chemotherapy agents in combination. If
GCS-100 gains FDA approval for the treatment of CLL, it will face competition from approved therapies. Three commonly used chemotherapeutic drugs to treat CLL are chlorambucil, fludarabine and cyclophosphamide. In addition, a number of new
approaches to treating CLL are being developed by competitors, including development of gene therapies, or DNA damage repair, tumor vaccines and monoclonal antibodies. Alemtuzumab (Campath®), a monoclonal antibody therapy, is the first of these new approaches to receive FDA
approval for the treatment of CLL patients who have failed chemotherapy. Rituximab, another monoclonal antibody approved for use in certain types of non-Hodgkins lymphoma, also shows promise to be useful in treating CLL patients. As in many cancers,
drugs to treat CLL are also being used and evaluated in combination which may provide them with a competitive advantage.



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.
| | - |  | --------------------------------------------------------------------------



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



OUR BUSINESS IS SUBJECT TO SIGNIFICANT GOVERNMENT REGULATION AND FAILURE TO
ACHIEVE REGULATORY APPROVAL OF OUR DRUG CANDIDATES WOULD 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 pre-market 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.
Pre-market 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 or other regulatory bodies 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. In order to sell GCS-100 in countries outside the U.S., similar regulatory approval as required by the FDA will be required by that countrys regulatory body.



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



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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 15 employees during
the course of the next 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 16 full-time employees. 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 July 31, 2005, there were outstanding options to purchase 676,711 shares of common stock, at a weighted average exercise price of $5.94 per share and warrants to purchase 10,249,320 shares of common stock at a weighted average
exercise price of $4.06 per share. Certain of these warrants have weighted average or full ratchet anti-dilution provisions which may result in the lowering of their exercise prices. 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 is convertible into approximately 166.67 shares of our common stock, subject to anti-dilution adjustments. 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. As of June 30, 2005, there
were 775.22 shares of accrued but unpaid Series B preferred dividends. 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, 2005 on the Series B preferred stock but no future dividends, a total of 1,871,578 shares of common stock. This amount of shares represents 15.0% of our common stock outstanding as of July 31, 2005.
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 have 3,791.89 shares of Series D preferred
stock outstanding, which includes shares issued as dividends. The Series D preferred stock bears a cumulative 8% dividend payable quarterly in arrears in cash or shares of Series D preferred stock, at our option. Each share of Series D preferred
stock currently converts into 1,000 shares of common stock, subject to full ratchet anti-dilution protection. Under such anti-dilution protection in the event of the issuance of common stock or securities convertible into common stock at a price per
share below the Series D conversion price (currently $1.00), the Series D conversion price would automatically be lowered to the price at which such securities were issued. Certain issuances do not result in any adjustment of the Series D conversion
price, including exercise or conversion of existing securities, issuance or exercise of options from our current equity compensation plans and securities issued in connection with strategic partnering transactions.



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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 days
and that we had a 180-day grace period to achieve a bid price of at least $1.00 for a period of at least 10 consecutive business days or face delisting. In 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. We received a Nasdaq Staff Determination on November 16, 2004, that our securities are subject to delisting. On December 21, 2004, we effected a 1-for-6 reverse stock split. On January 6, 2005, we received a letter
from Nasdaq stating that we complied with the minimum bid price requirement and all other continued listing requirements. On April 20, 2005, we received a letter from Nasdaq indicating 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 October 17, 2005, to achieve a bid price of at least $1.00 for a period of at least 10 consecutive business days or face delisting. On June 30, 2005, we received a letter
from Nasdaq indicating that we had regained compliance by maintaining a closing bid price above $1.00 for at least 10 consecutive days and the matter is now closed.



On April 7, 2005, we received a letter from Nasdaq indicating that as of December 31, 2004, we did not comply with Nasdaq
Marketplace Rule 4310(c)(2)(B), which requires listed companies to have (i) a minimum of $2,500,000 in stockholders equity, (ii) $35,000,000 or more in market value of listed securities or (iii) $500,000 of net income from continuing
operations for the most recently completed fiscal year or two of the three most recently completed fiscal years. In the letter, Nasdaq indicated it is reviewing our eligibility for continued listing and requested that we provide our specific plan to
achieve and sustain compliance with Nasdaq SmallCap Market listing requirements. Based on the review of the plan submitted by the Company, Nasdaq believes we provided a definitive plan evidencing its ability to achieve and sustain such compliance.
On May 23, 2005, we closed the second tranche of a financing in which we raised $4.2 million in net proceeds through the sale of Series D preferred stock and warrants. As of June 30, 2005, we had $2.7 million in stockholders equity. Our market
capitalization was $13.7 million on June 30, 2005 and was $14.2 million on August 12, 2005. Nasdaq will continue to monitor our ongoing compliance with the listing requirements and if the Company does not meet these requirements, it could become
subject to delisting.



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.



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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 3.6% collectively of our common stock outstanding as of July 31, 2005. 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 3.6% of our common stock outstanding as of July 31, 2005, 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 17.3% of the
common stock outstanding as of July 31, 2005, 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 11, 2005, approximately 1,225,244 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 eleven 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 BEING INCURRED 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, 2005, our common stock has traded at prices ranging from $0.63 to $3.78 per share, reflecting the 1-for-6 reverse stock split we effected on December 21, 2004. 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.



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. DISCLOSURE CONTROLS AND PROCEDURES



(a) Evaluation of Disclosure Controls and Procedures



The Companys management carried out an evaluation, under the supervision and with the participation of the Companys President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2005, pursuant to Exchange Act Rule 13a-15. Based
upon that evaluation, the Companys President and Chief Executive Officer along with the Companys Senior Vice President and Chief Financial Officer concluded that the Companys disclosure controls and procedures as of June 30, 2005
are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys periodic filings under the Exchange Act.



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(b) Changes in Internal Control Over Financial Reporting



No changes in the Companys internal control over financial reporting
have come to managements attention that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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, 2004. A trial is not expected until the second half of 2006.
There have been no other material changes in the status of the suit.



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



On June 23, 2005, the Company held its Annual Meeting of Stockholders. A quorum of stockholders entitled to vote was present in person or by proxy for the meeting. Four items were voted upon: (1) the election of two
Class I directors, (2) an increase in the number of authorized shares, (3) the amendment of the 2003 Omnibus Incentive Plan and (4) the ratification of the appointment of auditors.



1. The nominees for Class I director approved by the shareholders were John W. Burns and Theodore J. Host. 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          |  | TermExpiration |  | Total VotesCast |  | Total Votesin Favor |  | Total VotesWithheld
|John W. Burns    |  | 2008           |  | 8,854,103       |  | 8,582,086           |  | 272,017            
|Theodore J. Host |  | 2008           |  | 8,854,193       |  | 8,576,925           |  | 277,268            



Messrs.Carver, Dube and Hanson
continued their respective terms of office as directors.



2. The proposal to
increase the Companys authorized common stock from 33,333,333 to 75,000,000 shares was approved by a vote of 8,021,718 in favor, 760,352 against and 72,033 abstentions out of a total of 8,854,103 votes cast.



3. The proposal to approve an amendment to the Companys 2003 Omnibus Incentive Plan to
increase the number of shares by 800,000 to 1,104,167 and increase the number of shares issuable to an individual in one calendar year from 50,000 to 100,000 was approved by a vote of 2,900,285 in favor, 751,587 against and 109,067 abstentions out
of a total of 3,760,939 votes cast.



4. The appointment of Deloitte &
Touche LLP as auditors for the Company for the year ended December 31, 2005 was approved by a vote of 8,672,418 in favor, 126,705 against and 54,980 abstentions out of a total of 8,854,103 votes cast.



ITEM 6. EXHIBITS



(a) Exhibits



|     |  |                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Certificate of Amendment to the Articles of Incorporation of the Company filed on June 24, 2005.                               
|10.1 |  | Master Services Agreement between GlycoGenesys, Inc. and Veristat, Inc. dated May 2, 2005.                                     
|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.



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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 15th day of August 2005.



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




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