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

                                                    Form 10-KSB
(Mark One)
[X] Annual  Report Under  Section 13 or 15(d) of the  Securities
                  Exchange  Act of 1934 For the fiscal year ended
                      December  31, 1996

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

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

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

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

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



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

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

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

State issuer's revenues for its most recent fiscal year. $1,330,635.

The   approximate   aggregate   market   value  of  the  voting  stock  held  by
non-affiliates  computed by  reference to the price at which the stock was sold,
or the average bid and asked  prices of such stock,  as of February 28, 1997 was
$7,561,630.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:  17,243,044 common shares outstanding
as of February 28, 1997.




<PAGE>



                                                   GLYKO BIOMEDICAL LTD.

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

Item 1.   Description of Business

Glyko   Biomedical  Ltd.  was   incorporated  by  Certificate  and  Articles  of
Incorporation  under the laws of Canada on June 26, 1992 ("Glyko").  On December
21, 1992, simultaneously with an initial public offering of the Company's Common
Shares on The Toronto Stock  Exchange,  Glyko acquired 100 percent of the shares
of Glyko, Inc. a corporation  incorporated under the laws of Delaware on October
15, 1990 upon an exchange of shares with the  stockholders  of Glyko,  Inc.  The
registered  office of Glyko is Scotia  Plaza,  Suite 2100,  40 King Street West,
Toronto,  Canada M5H 3C2. The registered and principal office of Glyko,  Inc. is
11 Pimentel Court, Novato, California.  BioMarin Pharmaceutical,  Inc., a wholly
owned  subsidiary of Glyko  Biomedical Ltd. was  incorporated  under the laws of
Delaware on October 25, 1996. In this Statement,  unless otherwise indicated,  a
reference  to  "Glyko"  or to the  "Company"  means  Glyko and its  wholly-owned
subsidiaries Glyko, Inc. and BioMarin Pharmaceutical, Inc.

Glyko, Inc. was established in 1990 under a joint venture agreement, ("the Joint
Venture  Agreement"),  dated  December  18,  1990  among  Millipore  Corporation
("Millipore"),   Glycomed   Incorporated   ("Glycomed"),   Gwynn   R.   Williams
("Williams"), and John C. Klock, M.D. (collectively, the "Founders"), Astroscan,
Ltd. and Astromed, Ltd., corporations controlled by Williams, and Glyko, Inc. to
conduct  original  scientific  research  aimed at developing  novel analytic and
research  instrumentation  for  carbohydrate  research  and  for  human  medical
diagnosis.  The Company's principal activities are the sale of chemical kits and
equipment   incorporating  its  proprietary   carbohydrate  technology  and  the
development of commercial applications based on complex carbohydrates.

The Company is developing new techniques to analyze and manipulate carbohydrates
for  research  and  diagnostic  purposes.   The  Company  may  develop  business
opportunities  in multiple  areas such as research  laboratory  instrumentation,
human diagnostics,  and the pharmaceutical  industry.  BioMarin  Pharmaceutical,
Inc. was formed to exploit  opportunities in the pharmaceutical  area. There can
be no assurance that the Company will successfully  develop any of such business
opportunities.

The Company's  scientific and business strategies are based on a product line of
laboratory  instrumentation and chemical kits, referred to as analytic products,
which are used in carbohydrate  testing  including  detection,  separation,  and
sequencing.    The    Company's    technology    is    called    "FACE(R)"    or
Fluorophore-Assisted-Carbohydrate-Electrophoresis.

As of December 31, 1996 the Company had 13 employees including four Ph.D.s/M.D.s
with specialized training in carbohydrate biotechnology.

Analytic Products

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

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

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


                                                                      1


<PAGE>


Diagnostic Products

Background

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

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

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

Lysosomal storage diseases

Lysosomal storage diseases are a class of inherited  metabolic  diseases.  There
are at least 25 different  individual  diseases,  including  Tay-Sachs  disease,
Gaucher's  disease and lesser known  classes such as the  mucopolysaccharidoses.
Currently,  only a small  fraction  of patients  are tested for these  diseases,
usually those in high-risk groups (i.e. Ashkenazi Jews for Tay-Sachs disease) or
those with clinical symptoms such as physical  deformity or mental  retardation.
In November 1995, The Company received  approval from the United States Food and
Drug Administration to market its Urinary  Carbohydrate  Analysis Test Kit. This
test is capable of detecting more than two dozen  conditions in this group.  The
Company  is  planning  to  market  the test kit to  pediatricians  as a  primary
screening test for these conditions.

Thrombosis

Heparin,  a major  anticoagulant  drug, is a carbohydrate.  The Company believes
there is currently no satisfactory  direct analytic method for measuring heparin
which is approved for use. A test that would accurately  measure serum levels of
heparin would enable  physicians to more directly measure the  effectiveness and
potential  toxicity of this widely  used drug.  The Company has used  FACE(R) to
develop  methods  which  could be used to  measure  the levels of heparin in the
blood of patients The Company's  current  studies in testing for heparin need to
be followed by additional  clinical  studies  before FDA approval can be sought.
There is no assurance that such testing studies will be successful.

Osteoporosis

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


                                                     2

<PAGE>



Patents and Trade Secrets

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

Competition

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

Government Regulation

The manufacture and sale of analytic products do not require government approval
in the United States or Canada.  The manufacture and sale of medical  diagnostic
products in the United States are controlled by the Food and Drug Administration
("FDA"),  and the  manufacture  and sale of  analytic  products  in  Canada  are
controlled by the Health  Protection  Branch  ("HPB").  The laws of each country
require the licensing of manufacturing  facilities  located in its jurisdiction,
and carefully  controlled  clinical  trials in humans and  extensive  testing of
products.  The  manufacturer  must  establish  the  safety and  efficacy  of its
products,  good  manufacturing  practices and control over marketing  activities
before it will be  allowed  to market  and sell its  products.  The  safety  and
efficacy of a new  diagnostic  product  must be  demonstrated  through  clinical
trials  carried out under  procedures  acceptable  to the FDA or the HPB, as the
case may be.

In order to be able to market and sell its diagnostic products, the Company must
successfully  complete  clinical  trials.  The sales  program  is  initiated  by
applying  to the  FDA  or the  HPB,  as the  case  may  be,  for  permission  to
manufacture and market products. The Company must submit specific information on
the  results  of  carefully  controlled  clinical  trials  using  blood or other
specimens  obtained  from  humans.  In  addition,   manufacturing   methods  and
standards,  and the  stability  of the product  components  must be presented to
enable the regulatory agency to conclude that the product that may eventually be
sold to the public has the same  composition  and performance as that determined
to be effective in clinical trials.  The controls on a new diagnostic product do
not cease once it is on the market and  continued  reporting of its  performance
must be submitted by the manufacturer to the FDA or the HPB, as the case may be.
This is required  to keep the  product on the  market.  The Company is unable to
predict  whether  future  regulatory  developments  will  affect  the  Company's
products under development.

                                                       3

<PAGE>


                                 RISK FACTORS

Future Capital Requirements - Uncertainty of Future Funding

The  Company  believes  that its  available  cash will allow it to fund  planned
operations  through  the  second  quarter  of  1997.  The  Company's  Report  of
Independent  Public  Accountants  for the year ended December 31, 1996 indicates
that there is  substantial  doubt about the  Company's  ability to continue as a
going  concern  reflecting  both the  necessity  and the  uncertainty  of future
funding.   Such  funding  may  come  individually  or  collectively  from  stock
issuances,  licensing and  marketing  agreements  or by  collaborative  research
agreements  with strategic  partners.  No assurance can be given that additional
financing  will be  available  or,  if  available,  that  it  will  be on  terms
acceptable  to the  Company  or its  stockholders.  If  adequate  funding is not
obtained,  operations may be adversely affected. These factors raise substantial
doubt about the Company's  ability to continue as a going  concern.  The Company
will delay or  eliminate  expenditures  in respect  of  certain  products  under
development such as additional analytical kits and diagnostic tests in the event
sufficient funding is unavailable.  See "Management's Discussion and Analysis of
Financial   Condition   and  Results  of  Operations  -  Liquidity  and  Capital
Resources".

History of Operating Losses - Uncertainty of Future Profitability

The  Company  commenced  its  research  activities  in  December  1990 and first
recorded  revenues in December 1992. While sales increased in 1994 and 1995, the
Company has not yet made a net annual  operating  profit.  There is no assurance
that sales will  increase  in future  quarters.  See "Note 10" to the  financial
statements.  The accumulated  deficit as of December 31, 1996 was  approximately
$13.0 million.  The Company anticipates that operating losses may continue.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."


Diagnostic Products - No Prior Commercial Manufacturing or Marketing

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

Early Stage of Diagnostic Product Development

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

                                                       4

<PAGE>


Technology and Competition

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

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

Patents and Proprietary Technology

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

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

Product Liability and Lack of Insurance

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

Uncertainty of Regulatory Approval

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


                                                  5

<PAGE>


Dependence on Key Personnel

The Company's  success will depend in large part upon its ability to attract and
retain highly qualified scientific and management  personnel.  The Company faces
competition  for such personnel  from other  companies,  academic  institutions,
government  entities  and other  organizations.  The Company  depends on its key
management,  including John Klock and  Christopher  Starr,  and the departure of
either person could have a material adverse effect on the Company.

Employees

At  February  28,  1997 the  Company  had 12  employees.  All  employees
are full time and 11  employees  work in  Novato, California.

Item 2.  Description of Property

The Company  moved to an 11,000  square foot  facility in Novato,  California in
February,  1997. The new facility  includes  approximately  3,000 square feet of
laboratory space, a 2,000 square foot manufacturing  facility,  and 6,000 square
feet of office  space.  Minimum  lease  payments  for this  facility in 1997 are
$98,902 and are subject to annual increases based upon the Consumer Price Index.
The terms of the lease extend through March 31, 2000. The Company  believes that
its  facility  is  adequate  to meet  its  current  and  reasonably  foreseeable
requirements  for the conduct of its business,  including the  manufacturing  of
analytic  products.  See "Certain  Relationships  and Related  Transactions" and
"Legal Proceedings."

Item 3.  Legal Proceedings.

Millipore  Corporation has filed suit against the Company to recover unpaid rent
and related  facilities  charges of  approximately  $270,000  for the  Company's
former leased facility.  The Company does not believe that Millipore's  claim is
valid and does not agree with the amount claimed by Millipore. Additionally, the
Company  believes  Millipore has an  outstanding  royalty  obligation due to the
Company  from  1993 and 1994  which  could be  $50,000  or more.  The  Company's
management  is currently  negotiating  a  settlement  of this legal action. To
the best of the Company's  knowledge,  there were no other pending legal
proceedings against the Company or its property.

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

                                                          PART II

Item 5.  Market For Common Equity and Related Stockholder Matters

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

<CAPTION>
                                                            Prices
                                                     (In Canadian Dollars)

          Year         Period                       High              Low
<S>       <C>          <C>                         <C>                <C>

          1993         Fourth Quarter               $3.25             $2.60
          1994         First Quarter                $2.80             $1.40
          1994         Second Quarter               $1.50             $0.90
          1994         Third Quarter                $1.00             $0.80
          1994         Fourth Quarter               $1.00             $0.60
          1995         First Quarter                $1.00             $0.72
          1995         Second Quarter               $1.00             $0.80
          1995         Third Quarter                $0.90             $0.79
          1995         Fourth Quarter               $1.15             $0.60
          1996         First Quarter                $1.65             $0.61
          1996         Second Quarter               $1.05             $0.55
          1996         Third Quarter                $0.80             $0.53
          1996         Fourth Quarter               $0.70             $0.40
</TABLE>

                                                       6

<PAGE>


Holders

As of  February  28,  1997,  there  were 170  holders  of record  of  17,243,044
outstanding Common Shares of the Company.

Outstanding Options

As of February 28, 1997,  options to acquire  2,168,077 of the Company's  Common
Shares had been granted and were outstanding.

Certain Canadian Federal Income Tax Considerations

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

This summary is based on the current  provisions  of the  Convention  and of the
Canadian Tax Act and the regulations thereunder, all specific proposals to amend
the  Canadian Tax Act and the  regulations  announced by the Minister of Finance
(Canada) prior to the date hereof (the "Proposed  Amendments") and the published
administrative  practices of Revenue Canada,  Taxation. This summary assumes the
Proposed Amendments will be enacted in the form currently proposed. This summary
does not take into account or anticipate any changes in the governing law, other
than the Proposed  Amendments,  whether by federal,  governmental or legislative
decision  or  action,  nor does it take  into  account  the tax  legislation  or
considerations of any province, territory or foreign jurisdiction.

This  summary  is of a  general  nature  only  and is  not,  and  should  not be
interpreted  as, legal or tax advice to any particular  United States holder and
no  representation  is made with respect to the Canadian income tax consequences
to any  particular  person.  Accordingly,  United States  holders are advised to
consult their own tax advisors with respect to their particular circumstances.

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

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

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

Dividend Policy

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

                                             7

<PAGE>


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

Overview

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

Glyko Biomedical Ltd. is a Canadian company which holds all of the capital stock
of Glyko, Inc. and BioMarin  Pharmaceutical,  Inc. The following  discussion and
the accompanying consolidated financial statements include the accounts of Glyko
Biomedical Ltd., Glyko, Inc. and Biomarin  Pharmaceutical,  Inc.  presented on a
consolidated  basis. Since its inception in October 1990, Glyko has been engaged
in the research and  development  of new  techniques  to analyze and  manipulate
carbohydrates for research,  diagnostic and pharmaceutical purposes. The Company
has  developed  a line of analytic  instrumentation  laboratory  products  which
include an imaging  system,  analysis  software and chemical  analysis kits. The
first  commercial  shipments of these  analytic  products were late in 1992. The
Company is  continuing  to  develop  additional  chemical  kits for use with the
imaging  system,  and is  also  developing  a line  of  carbohydrate  diagnostic
products. In November 1995, the Company received approval from the United States
Food and Drug Administration to market its first diagnostic product, the Urinary
Carbohydrate  Analysis  Test Kit.  The Company  has  incurred a net loss in each
period  since its  inception  and expects to continue to incur  losses.  For the
period  from its  inception  to December  31,  1996,  the  Company has  incurred
cumulative losses of $12,933,837.

Results of Operations

Revenues in 1996 were  $1,330,635  and consisted  primarily of sales of chemical
analysis  kits,  sales of imaging  equipment and custom  analytical  service fee
revenues.  Revenues in 1995 were $1,568,810 and consisted  primarily of sales of
imaging  equipment,  sales of chemical  analysis  kits,  licensing and grant fee
revenues and  analytical  service fee  revenues.  Sales of imaging  systems were
responsible for slightly less than half of total revenue in 1995.

The  decrease  in revenues in 1996  compared  to 1995 was due  primarily  to the
effect of  distributor  licensing  fees earned in 1995 but not in 1996 and lower
sales volumes of imaging  systems to  distributors  for resale.  The effect upon
total revenue of the factors noted above was partially offset by increased sales
volumes of chemical  analysis  kits and higher  analytical  service  revenues in
1996. Prices for products and services in 1996 were slightly higher than in 1995
but did not have a material effect upon total revenues.

Gross  margin on sales of products  and  services  was 60 percent in 1996 and 62
percent in 1995.  As the Company is still in the early  stages of product  sales
and production, management expects that margins will fluctuate for some time and
that current margins are not necessarily indicative of future margins.

Research and development expenses in 1996 were $1,014,966 compared to $1,063,054
in 1995,  a  decrease  of  $48,088.  In 1996,  analytical  service  work  volume
increased  considerably.  Relative  to  1995,  research  and  development  staff
resources  were directed more towards  analytical  service work and less towards
research projects.  As a result,  departmental  expense allocated to the cost of
analytical  service  revenue  was higher in 1996 and  research  and  development
expense  was lower.  This was the  principal  reason for the  decrease  in total
research and development  expense in 1996. The overall  decrease in research and
development  expense  was  partially  offset by  consultancy  expenses  incurred
towards development of a new generation imaging system.

Selling,  general and administrative  expense was $1,425,484 in 1996, a decrease
of $236,420 from 1995 expense of $1,661,904.  Marketing and promotion costs were
lower in 1996,  chiefly due to reduced  advertising  media  placements.  Payroll
costs were lower in 1996 principally due to the effect of layoffs announced late
in the third  quarter.  Travel  costs  were also lower in 1996,  primarily  as a
result  of  the  layoffs.  Rent expense in 1996 was offset by a write-off of
the deferred rent balance of $62,538 at December 31, 1996 related to a lease
abandonment (see Note 6 of the financial statements). Expenses related to
the  formation  of  BioMarin Pharmaceutical,  Inc. were  approximately  $120,000
in 1996 and partially offset the reduction of total selling, general and
administrative expense caused by the factors noted above.

Interest  income earned in 1996 and 1995 reflected  earnings on cash invested in
short term  interest  bearing  accounts.  Interest  expense in 1996 and 1995 was
immaterial.

                                                  8

<PAGE>


Liquidity and Capital Resources

During the second quarter of 1995, the Company closed a private equity placement
offering (the Q295  Financing).  Investors  participating  in the Q295 Financing
purchased  approximately  4.786 million  "units" that  consisted of one share of
common stock and one five year  warrant to purchase  one share of common  stock.
The Company  issued  units in exchange  for cash,  and also in exchange  for the
settlement  of  certain  outstanding  liabilities.  The  units  were  priced  at
Cdn.$0.80 with an exercise price on the warrant of Cdn.$0.90. The Q295 Financing
raised approximately $2.78 million, consisting of approximately $2.36 million in
cash and  $420,000 for the  settlement  of a  stockholder/director  bridge loan,
common stock issued for financing service and certain other liabilities.

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

The Company's net cash position decreased by $409,728 in 1996. Net cash proceeds
of $1.054  million from the Q296 Financing were offset by cash used in operating
activities of  $1,389,172.  Cash used in operating  activities in 1996 reflected
the operating  loss of $1,575,859  partially  offset by  collections of accounts
receivable and deferral of payments for facilities costs.  Capital  expenditures
in 1996 were  higher  than in 1995 but were still  relatively  insignificant  at
$61,061.

The  Company's net cash  position  increased by $541,426 in 1995.  Cash proceeds
from the Q295  Financing  were offset by cash used in  operating  activities  of
$1,698,164.  Cash used in operating  activities in 1995  reflected the operating
loss of  $1,648,682.  The cash effect of payments of deferred  liabilities  upon
completion  of the Q295  Financing  was  offset by the  receipt,  in the  fourth
quarter, of an advance upon future sales received from a foreign distributor.
Capital expenditures in 1995 were not material.

Management  believes the proceeds of the Q296  Financing  plus the financing and
the one-time distribution agreement fee earned in the first quarter of 1997 will
allow the Company to maintain  liquidity through the second quarter of 1997. See
"Note 10" to the financial  statements.  To maintain  liquidity beyond that time
the Company  will have to maintain its current  level of sales.  There can be no
assurance that the Company will be successful in maintaining liquidity.  Late in
the third quarter of 1996, the Company  announced layoffs and other cost cutting
measures.  The Company will continue to seek additional  funding through various
means  including  but not limited to stock  issuances,  licensing  and marketing
agreements  and  collaborative  research  agreements  with  strategic  partners.
However, there can be no assurance that such agreements will be reached and that
additional funding will be obtained.  The Company's Report of Independent Public
Accountants  for the year  ended  December  31,  1996  indicates  that  there is
substantial  doubt about the  Company's  ability to continue as a going  concern
reflecting both the necessity and the  uncertainty of future funding.  See "Risk
Factors Future Capital Requirements."

In 1997,  management  expects spending to increase due to the start-up costs and
program expenses for BioMarin of approximately $3.0 million.  These expenditures
will be  funded  by the  Q297  financing  and the  anticipated  subsequent  1997
financings for BioMarin. See "Note 10" to the financial statements.  The Company
is not committed to make any significant capital expenditures.

Item 7.  Financial Statements

The  information  required to be filed in this item appears on pages F.2 to F.13
and is incorporated herein by reference.

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

Not applicable.

                                             9

<PAGE>



                                                         PART III

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

Directors and Executive Officers

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

                                                                    
<CAPTION>
                                                                     Year Joined
       Name                      Age          Position                 Company


<S>                             <C>    <C>                                 <C>
R. William Anderson(1)(2)        56     Director                           1991
John H. Craig                    49     Secretary and Director             1992
John S. Glass                    60     Director                           1994
John C. Klock, M.D. (1)          52     President, Chief Executive
                                              Officer and Director         1990
Christopher M. Starr, Ph.D.      44     Vice-President, Research
                                              and Development              1991
Gwynn R. Williams(1)             63     Director                           1990

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

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

Mr. R.  William  Anderson  has  served  as a  Director  since  1992 and is Chief
Financial Officer at Fidus Corporation in Fremont, California. From 1994 to 1996
he  was  an   independent   consultant.   From   1989  to  1994  he   served  as
Vice-President-Finance  and Chief  Financial  Officer at Glycomed  Incorporated.
From  July  1985 to April  1989 he  served  as Vice  President  of  Finance  and
Administration   and  Chief  Financial   Officer  for  Chiron   Corporation,   a
biotechnology company. Prior to Chiron, Mr. Anderson was Controller and Director
of Financial  Planning and Analysis at Syntex  Laboratories,  Inc., the domestic
pharmaceutical subsidiary of Syntex Corporation.  Mr. Anderson holds an MBA from
the Harvard Business School.

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

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

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

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

                                                  10

<PAGE>



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

Effective October, 1996 John Hamilton, Chief Financial Officer, and John Dorson,
Vice President and General  Business  Manager of the  Analytical  Business Unit,
were laid-off by the Company.

Compliance with Section 16(a) of the Exchange Act

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

To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company or written  representations  that no other reports were
required,  during the  fiscal  year  ended  December  31,  1996,  all  officers,
directors,  and ten percent stockholders  complied with all Section 16(a) filing
requirements except that the Forms 5 for all officers, directors, and 10 percent
stockholders were filed late.

Item 10.  Executive Compensation

Summary Compensation Table

The  following  table sets forth the total  compensation  that was  awarded  to,
earned by or paid to the Company's  Chief  Executive  officer and the other most
highly  compensated  officers other than the Chief Executive  Officer who earned
more than  $100,000 and who were serving as executive  officers as of the end of
the  fiscal  years  ended  December  31,  1996 and 1995,  (together,  "the Named
Officers").  No other executive officer of the Company earned more than $100,000
during the years ended December 31, 1996 and 1995.
<TABLE>
                                                                                                           
<CAPTION>
                                                                              Long - Term
                                                        Annual Compensation  Compensation
         Name and Principal Position             Year         Salary         Option grants


<S>                                              <C>         <C>               <C>
John C. Klock, M.D.                              1996        $ 187,297            -
President, Chief Executive Officer & Director    1995        $ 192,500         128,318

Christopher M. Starr, Ph.D.                      1996        $ 126,528            -
Vice-President, Research and Development         1995        $ 130,000          80,249

John Dorson, Ph.D. (terminated October 1996)     1996        $128,885             -
Vice-President & General Manager,  Analytic      1995        $141,100           73,933
  Business Unit

John F. Hamilton (terminated October 1996)       1996        $115,759             -
Vice-President, Finance and Administration       1995        $113,000           64,762
  & Chief Financial Officer

</TABLE>

                                                       11

<PAGE>



                  Aggregated Fiscal Year End Option Values

There  were no option  exercises  in  fiscal  1996 by the  Named  Officers.  The
following  table provides  information  with respect to the value of unexercised
options  held by the Named  Officers at the close of  business  on December  31,
1996.
<TABLE>

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

<S>                                <C>                <C>              <C>                   <C>
John C. Klock, M.D.                481,949            128,599          $ --                  $ --
Christopher M. Starr, Ph.D.        237,458                451          $ --                  $ --

<FN>
(1) The market value of  underlying  securities is based on the closing price of
the  Company's  common shares on December 31, 1996 of $0.2920 minus the exercise
price.  The  closing  price of $0.2920  was  calculated  by  applying a Canadian
dollar/US  dollar  exchange rate of $0.7301 to the closing price at December 31,
1996 of Canadian $ 0.40.
</FN>
</TABLE>


Director Compensation

During the  fiscal  year ended  December  31,  1996,  the  Company's  directors,
including non-employee directors,  were not compensated for services provided as
directors.

Employment Agreement

In connection  with the Joint Venture  Agreement,  Glyko,  Inc.  entered into an
employment  agreement (the "Employment  Agreement") with Dr. John C. Klock, M.D.
(Klock) dated December 20, 1990. The Board of Directors ("the Board") approved a
renewal  of the  Employment  Agreement  for an  additional  two years  effective
January 1, 1994 retaining  Klock as the Company's  president.  Under the renewed
Employment  Agreement,  the Board  annually  reviews  Klock's  salary  and makes
adjustments  which the Board in its discretion  deems to be appropriate.  Glyko,
Inc. is obligated to continue  paying Klock's  compensation  for a period of six
months  following  Klock's  mental or physical  incapacity or his death.  Absent
notification  of intention  not to renew by Klock or the Board,  the  Employment
Agreement renews for subsequent periods,  subject to agreement by the parties on
Klock's  compensation  for the renewal terms.  The  Employment  Agreement may be
terminated  by Klock  upon three  months'  notice  and by Glyko,  Inc.  upon six
months' notice or immediately upon a breach of Klock's duties required under the
Employment Agreement.  By its terms, the Employment Agreement does not terminate
upon a  merger,  consolidation  or sale of  substantially  all of the  Company's
assets, and the obligations under the Employment Agreement shall be delegated to
the successor entity in such a situation.

Stock Option Plan

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

Incentive stock options  granted under the Plan terminate  within 90 days of the
termination of an optionee's employment. Non-statutory options granted under the
Plan  terminate  within  a  period  of time  following  the  termination  of the
optionee's  employment,  consulting or officer or director relationship which is
determined by the board of directors. Options also terminate within 12 months of
the death or total and permanent  disability of the  optionee.  Options  granted
under the Plan are not transferable.  As of February 28, 1997, 2,168,077 options
(net of exercised options) had been approved by the board of directors.

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


                                                  12

<PAGE>



Item 11.  Security Ownership of Certain Beneficial Owners and Management

The following table lists certain information  regarding beneficial ownership of
the Glyko's  Common Shares as of February 28, 1997, by (i) those persons who own
more than 5 percent of the  Company's  common stock,  (ii) the  Company's  Chief
Executive  Officer,  (iii) each of the Company's  directors,  and (iv) the total
amount of Common Shares held by the Company's officers and directors as a group.
<TABLE>

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

<S>                                                     <C>                     <C>
Common Shares      Millipore Corporation (1)            2,461,177               12.8%
                     80 Ashby Road
                     Bedford, MA 01730
Common Shares      Gwynn R. Williams (2)                2,947,393               15.3%
                     c/o Astroscan Ltd.
                     Ballabeg House
                     Cronkbourne Village
                     Bradden, Isle of Mann
                     British Isles, United Kingdom

Common Shares      New York Life Insurance Company      2,436,250               12.7%

Common Shares      Glycomed Corporation                 1,326,654                6.9%
                     860 Atlantic Avenue
                     Alameda, CA 94501

Common Shares      John C. Klock, M.D. (3)              1,144,348                6.0%
                     c/o Glyko, Inc.
                     11 Pimentel Court
                     Novato, CA 94949

Common Shares      Christopher M. Starr  (4)              245,325                1.3%
                     c/o Glyko, Inc.
                     11 Pimentel Court
                     Novato, CA 94949

 Common Shares     R. William Anderson (5)                 70,420                  *

Common Shares      John H. Craig (5)                       71,421                  *

Common Shares      John Glass (6)                          68,000                  *

Common Shares      All Officers and Directors (7)       4,526,907               23.7%

<FN>
*     Less than 1%.
(1)   Does not reflect pending issuance of 500,000 shares in exchange for
      termination of marketing rights.
(2)   Includes 70,420 Common Shares issuable upon exercise of options within
      60 days of February 28, 1997.
(3)   Includes 521,303 Common Shares issuable upon exercise of options within
      60 days of February 28, 1997.
(4)   Includes 237,553 Common Shares issuable upon exercise of options within
      60 days of February 28, 1997.
(5)   Includes 70,420 Common Shares issuable upon exercise of options within
      60 days of February 28, 1997.
(6)   Includes 68,000 Common Shares issuable upon exercise of options within
      60 days of February 28, 1997.
(7)   Includes 1,038,116 Common Shares issuable upon exercise of options within
      60 days of February 28, 1997, excludes shares held by Millipore
      and Glycomed.
</FN>
</TABLE>

                                                   13

<PAGE>



Item 12.  Certain Relationships and Related Transactions

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

In October 1994,  the Company  entered into a bridge  financing  agreement  with
Gwynn Williams providing the Company with a $250,000 convertible working capital
credit facility to support  operations  pending  completion of equity  financing
efforts.  In the fourth  quarter of 1994 the Company  drew upon this bridge loan
facility in the amount of $250,000.  On April 5, 1995, in  conjunction  with the
successful completion of private equity financing efforts, that note and accrued
interest  thereupon of $7,808 were converted into 400,748 shares of common stock
and warrants to purchase an equal number of shares of common stock.

The Company rented  facilities  from Millipore in 1996 and 1995,  incurring
rental and facilities  expense of $274,284 and $260,232 respectively.

Millipore

In 1992 Glyko, Inc. granted Millipore  exclusive  worldwide rights to market and
sell Glyko,  Inc.'s analytic  products to the laboratory  research market,  (the
"Distribution  Agreement").  The Distribution  Agreement had a term of six years
commencing  on October 1, 1992. In September,  1993,  the Company  negotiated an
amendment to the Distribution  Agreement  pursuant to which the Company received
the  non-exclusive  right to market and  distribute  its  analytic  products  in
certain markets,  principally the United States.  In April 1994, the Company and
Millipore  agreed to  terminate  the  Distribution  Agreement.  In exchange  for
relinquishing marketing rights to Glyko products, Millipore will receive 500,000
shares of Glyko common stock pending regulatory  approval.  In the third quarter
of 1994,  the  Company  recorded a charge of $219,811  for costs  related to the
termination of the Distribution Agreement.  This amount represents the estimated
fair market value, at April 1994, of stock to be issued to Millipore as a result
of the termination of the Distribution Agreement. The Toronto Stock Exchange has
turned down the issuance of the 500,000 shares due to an  arms-length  issue and
requires that an  independent  valuation be performed in order to reconsider the
issuance of these shares. No such valuation has been performed to date.

Share Transfer Restrictions

Millipore,  Glycomed  and Williams  (the  "Corporate  Partners")  have agreed to
certain restrictions  relating to their shares in Glyko. The Corporate Partners'
shares in Glyko may not be  transferred  except  to Glyko or Glyko,  Inc.,  when
transferred to an 80 percent or more owned  subsidiary of the Corporate  Partner
that agrees to be bound by the share transfer restrictions,  in a transaction in
which at least 65 percent of the voting  power of Glyko is  acquired  by a party
other than a Corporate Partner, in a transaction  (including a public offering),
in which no more than 5 percent of Glyko's  voting stock is  transferred  to any
single person or group,  pursuant to Rule 144 of the 1933 Act (when applicable),
in response to a tender  offer made by or on behalf of, or not opposed by, Glyko
and the  offeror  agrees to be bound by the sale of business  provisions  of the
Joint Venture Agreement and the Distribution Agreement. In addition, a Corporate
Partner may sell shares in the case of a tender offer for at least 40 percent of
Glyko's  shares;  provided  that Glyko shall have an  assignable  right of first
refusal with respect to the Corporate Partner's shares in such situation.

Pursuant to an agreement (the "Escrow  Agreement") dated December 10, 1992 among
the  Founders,  Montreal  Trust  Company of Canada  (the  "Trustee")  and Glyko,
6,030,428  Common  Shares  (the  "Escrowed  Shares")  were  placed on closing on
deposit  with the Trustee.  The Trustee will release the Escrowed  Shares to the
Founders as follows:  (a) 10 percent on September  10,  1993;  (b) 20 percent on
September 10, 1994, September 10, 1995 and September 10, 1996, respectively; and
(c) the  remaining  30 percent on September  10, 1997.  As of December 31, 1996,
1,809,124 of the escrowed shares remained on deposit with a trustee.

                                                  14

<PAGE>


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

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

<CAPTION>
Exhibit
Number                         Description

<S>      <C>
 3.1     Registrant's Articles of Incorporation and Bylaws (filed as exhibit
         3.1 to Form 10-SB Registration Statement No. 0-21994  dated
         August 6, 1993 and incorporated herein by reference).
10.1     Registrant's Stock Option Plan (filed as exhibit 10.1 to Form 10-SB
         Registration Statement No. 0-21994  dated  August 6, 1993 and
         incorporated herein by reference).
10.2     Joint Venture Agreement between: Registrant; Millipore Corporation;
         Glycomed Incorporated; Gwynn R. Williams; Astroscan, Ltd.; and
         Astromed, Ltd. dated December 18, 1990 (filed as exhibit 10.2  to
         Form 10-SB Registration Statement No. 0-21994  dated  August 6, 1993
         and incorporated herein by reference).
10.3     Distribution  Agreement  between  Registrant  and  Millipore
         Corporation  dated  December 18, 1990 (filed as exhibit 10.3
         to Form  10-SB  Registration  Statement  No.  0-21994  dated
         August 6, 1993 and incorporated herein by reference).
10.4     License Agreement between Registrant, and Astroscan, Ltd. and
         Astromed, Ltd. (filed as exhibit 10.4 to Form 10-SB Registration
         Statement No. 0-21994  dated  August 6, 1993 and incorporated herein by
         reference).
10.5     License   Agreement   between    Registrant   and   Glycomed
         Incorporated   (filed  as   exhibit   10.5  to  Form   10-SB
         Registration  Statement No. 0-21994 dated August 6, 1993 and
         incorporated herein by reference).
10.6     Loan Agreement between Registrant, and Millipore Corporation
         and Gwynn R. Williams,  dated April 9, 1992(filed as exhibit
         10.6 to Form 10-SB Registration  Statement No. 0-21994 dated
         August 6, 1993 and incorporated herein by reference).
10.7     Employment Agreement between Registrant and John C. Klock, M.D., dated
         December 20, 1990 (filed as exhibit 10.7 to Form 10-SB Registration
         Statement No. 0-21994  dated  August 6, 1993 and incorporated herein
         by reference).
10.8     Exchange  Agreements between  Registrant,  and the share and
         option  holders of Glyko,  Inc.,  dated  December  10,  1992
         (filed as exhibit 10.8 to Form 10-SB Registration  Statement
         No. 0-21994 dated August 6, 1993 and incorporated  herein by
         reference).
10.9     Amendment  Number Two to Exclusive  Distribution  and Supply
         Agreement between Registrant and Millipore Corporation dated
         September  22,  1993  (filed as exhibit  10.4 to Form 10-KSB
         Statement dated December 31, 1993 and incorporated herein by
         reference).
10.10    Amendment Number Two to Joint Venture Agreement between: Registrant;
         Millipore Corporation; Glycomed Incorporated; Gwynn R. Williams;
         Astroscan, Ltd.; and Astromed, Ltd. dated April 28, 1994 (filed as
         exhibit 10.1 to Form 10-QSB dated March 31, 1994 and incorporated
         herein by reference).
10.11    Employment  Agreement between  Registrant and John C. Klock,
         M.D.,  dated  January 1, 1994 (filed as exhibit 10.2 to Form
         10-QSB  dated  March  31,  1994 and  incorporated  herein by
         reference).
10.12    Glyko Biomedical Share Option Plan - 1994  (filed as exhibit 10.1 to
         Form 10-QSB dated June 30, 1994 and incorporated herein by reference).
10.13    Development  and Supply  Agreement  between  Registrant  and
         Bio-Rad  Laboratories,  Inc., dated February 16, 1995 (filed
         as exhibit  10.1 to Form  10-KSB  dated  March 31,  1996 and
         incorporated herein by reference).
10.14    International Distribution Agreement between Registrant and
         Toyobo Co., Ltd. and MC Medical. Inc. dated September 12, 1995 (filed
         as exhibit 10.2 to Form 10-KSB dated March 31, 1996 and incorporated
         herein by reference).
10.15    Commercial  Lease  between  Registrant  and  Douglas R. Kaye
         dated  December 23, 1996  (confidential  treatment  has been
         requested for a portion of this exhibit).
21.1     List of Registrant's Subsidiaries (filed as exhibit 22.1 to Form 10-SB
         Registration Statement No. 0-021994  dated  August 6, 1993 and
         incorporated herein by reference).
</TABLE>

                                                  15


<PAGE>



(b)      Reports on Form 8-K

         No reports were filed on Form 8-K during the quarter ended December 31,
1996.



                                                        SIGNATURES

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

Dated: March 25, 1997                               By:  \s\ John C. Klock, M.D.
---------------------------------------             ----------------------------
                                                    John C. Klock, M.D.
                                                    President and
                                                    Chief Executive Officer

                                POWER OF ATTORNEY

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

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



           Signature           Title                              Date


\s\ John C. Klock, M.D                                        March 25, 1997
----------------------                                     --------------------
John C. Klock, M.D.         President, Chief Executive Officer, Director
                             and Chief Accounting Officer

\s\Christopher M. Starr, Ph.D.                                 March 25, 1997
-----------------------------                              --------------------
Christopher M. Starr, Ph.D. Vice-President Research and Development

\s\ R. William Anderson                                        March 25, 1997
-----------------------                                    --------------------
R. William Anderson         Director

\s\ John S. Craig                                              March 25, 1997
-----------------                                          --------------------
John H. Craig               Secretary and Director

\s\ John S. Glass                                              March 25, 1997
-----------------                                          --------------------
John S. Glass               Director

\s\ Gwynn R. Williams                                          March 25, 1997
---------------------                                      --------------------
Gwynn R. Williams           Director




                                                  16

<PAGE>







                    Index to Financial Statements



Report of Independent Public Accountants                              F.2
Consolidated Balance Sheets                                           F.3
Consolidated Statements of Operations                                 F.4
Consolidated Statements of Stockholders' Equity (Deficit)             F.5
Consolidated Statements of Cash Flows                                 F.6
Notes to Consolidated Financial Statements                         F.7 to F.13



















                                                            F.1

<PAGE>



                            Report of Independent Public Accountants



       To the Stockholders of Glyko Biomedical Ltd.:



       We have audited the  accompanying  consolidated  balance  sheets of Glyko
       Biomedical  Ltd. and  subsidiaries  (the Company) as of December 31, 1996
       and  1995  and  the  related   consolidated   statements  of  operations,
       stockholders'  equity  (deficit) and cash flows for the years then ended.
       These  financial  statements  are  the  responsibility  of the  Company's
       management.  Our  responsibility  is  to  express  an  opinion  on  these
       financial statements based on our audits.

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

       In our  opinion,  the  financial  statements  referred  to above  present
       fairly,  in all  material  respects,  the  financial  position  of  Glyko
       Biomedical  Ltd. and  subsidiaries  as of December 31, 1996 and 1995, and
       the results of their  operations  and their cash flows for the years then
       ended in conformity with generally accepted accounting principles.

       The  accompanying  consolidated  financial  statements have been prepared
       assuming that the Company will continue as a going concern.  As discussed
       in Note 1 to the  consolidated  financial  statements,  the  Company  has
       incurred  significant  recurring losses and does not have  sufficient
       cash to fund planned 1997  operations.  These factors  raise  substantial
       doubt  about  the  Company's  ability  to  continue  as a going  concern.
       Management's  plans in regard to these matters are also discussed in Note
       1. The financial  statements do not include any  adjustments  relating to
       the  recoverability  and  classification of asset carrying amounts or the
       amount and  classification  of  liabilities  that might result should the
       Company be unable to continue as a going concern.




       Oakland, California                       Arthur Andersen LLP
       January 17, 1997

                                     F.2

<PAGE>


                                                    PART I.


ITEM 1.  Financial Statements


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




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

Assets
Current assets:
     Cash                                    $   210,992           $  620,720
     Trade receivables                           156,176              356,806
     Inventories                                  68,452              108,518
     Other current assets                         26,025                5,132
                                            ----------------     ---------------
        Total current assets                     461,645            1,091,176
Property, plant and equipment, net               108,045              112,169
Other assets                                       2,200                2,239
                                            ----------------     ---------------
        Total assets                         $   571,890           $1,205,584
                                            ================     ===============

Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
     Accounts payable                       $    174,732           $  122,375
     Accrued liabilities                         204,504              221,424
     Deferred revenue                                  -              174,386
     Payable to stockholder                      219,811              219,811
     Deferred rent and related costs             269,718                    -
                                            ----------------     ---------------
        Total current liabilities                868,765              737,996

Deferred rent and related costs                        -              166,535
Deferred rent                                          -               76,590
                                            ----------------     ---------------
        Total liabilities                        868,765              981,121

Stockholders' equity (deficit):
     Common stock, no par value, unlimited shares
        authorized, 17,243,044 shares issued and
        outstanding (14,567,944 in 1995)      12,203,065           11,304,356
     Common stock warrants                       433,897              278,085
     Accumulated deficit                     (12,933,837)         (11,357,978)
                                            ----------------     ---------------
        Total stockholders' equity (deficit)    (296,875)             224,463
                                            ----------------     ---------------
        Total liabilities and stockholders'
           equity (deficit)                 $    571,890           $1,205,584
                                            ================     ===============


                                              See accompanying notes.

                                                         F.3

<PAGE>




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



                                              Twelve Months Ended
                                                   December 31,
                                     ---------------------------------
                                          1996                1995
                                     ---------------   ---------------

Revenues:
Sales of products and services         $ 1,271,933        $ 1,342,406
Other revenues                              58,702            226,404
                                     ---------------   ---------------
       Total revenues:                   1,330,635          1,568,810

Expenses:
     Cost of products and services         509,248             511,654
     Research and development            1,014,966           1,063,054
     Selling, general and administrative 1,425,484           1,661,904
                                     ----------------  ----------------
                                         2,949,698           3,236,612
                                     ----------------  ----------------
Loss from operations                    (1,619,063)         (1,667,802)
Interest income                             18,367              29,802
Other income and expense                    24,837             (10,682)
                                     ----------------  ----------------
Net loss                               $(1,575,859)        $(1,648,682)
                                     ================  ================

Net loss per common share                  $ (0.10)            $ (0.12)
                                     ================  ================

Weighted average number of shares
     used in computing per
      share amounts                      16,058,994         13,255,616
                                     ================  ================







                                        See accompanying notes.

                                                F.4


<PAGE>





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

<TABLE>


<CAPTION>
                                      Common Stock
                              --------------------------  Common Stock  Accumulated
                                  Shares       Amount       Warrants      Deficit         Total
                               -------------  -----------  ------------- ------------ ------------

<S>                              <C>          <C>           <C>          <C>           <C>                    
Balance at December 31, 1994     9,781,522    $ 9,000,711   $       -    $ (9,709,296) $  (708,585)

Net loss for the year                                                      (1,648,682)  (1,648,682)

Private placement financing,
 net of issuance costs
 of $201,722                     4,786,422      2,303,645      278,085              -    2,581,730
                               ------------  -------------  ------------- ------------ -----------
Balance at December 31, 1995    14,567,944    $11,304,356    $ 278,085    $(11,357,978) $  224,463

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

Exercise of stock options              100             48            -               -          48

Private placement financing,
 net of issuance costs
 of $152,156                     2,675,000        898,661      155,812               -   1,054,473
                               ------------  -------------  ------------- ------------- ----------
Balance at December 31, 1996    17,243,044    $12,203,065    $ 433,897    $(12,933,837)  $(296,875)
                               ============  =============  ============= ============= ==========

</TABLE>





                               See accompanying notes.
                                      
                                         F.5


<PAGE>



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



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

Cash flows from operating activities:
   Net loss                                      $(1,575,859)      $(1,648,682)

   Adjustments to reconcile net loss
      to net cash used in operating activities:
   Depreciation and amortization                      61,139            88,533
   Loss on disposal of property and equipment          4,046                 -
   Gain on lease abandonment                         (62,538)                -
   Interest accrued on bridge loan                         -             4,777
   Change in assets and liabilities:
      Trade receivables                              200,630           (52,747)
      Inventories                                     40,066           (69,854)
      Other assets                                   (20,854)            4,025
      Accounts payable                                52,357          (105,221)
      Accrued liabilities and deferred rent          (16,956)           52,049
      Deferred revenue                              (174,386)          174,386
      Deferred compensation                                -           (81,083)
      Deferred rent and related costs                103,183           (64,347)
                                                ---------------   --------------
   Total adjustments                                 186,687           (49,482)
                                                ---------------   --------------
      Net cash used in operating activities       (1,389,172)       (1,698,164)

Cash flows from investing activities:
   Purchase of property and equipment                (61,061)          (22,187)
                                                ---------------   --------------
      Net cash used in investing activities          (61,061)          (22,187)

Cash flows from financing activities:
   Exercise of stock options                              48                 -
   Net proceeds from issuance of common stock
      and warrants                                 1,054,473         2,280,622
   Repayments on capital lease obligation            (14,016)          (18,845)
                                                ---------------   --------------
      Net cash provided by financing activities    1,040,505         2,261,777
                                                ---------------   --------------
Net increase (decrease) in cash                     (409,728)          541,426
Cash and cash equivalents, beginning of period       620,720            79,294
                                                ---------------   --------------
Cash and cash equivalents, end of period         $   210,992        $  620,720
                                                ===============   ==============

Supplemental disclosure of noncash financing activities:
   Conversion of deferred compensation to
     common stock and warrants                   $         -        $   33,000
   Conversion of accounts payable to
     common stock and warrants                             -            10,300
   Conversion of bridge loan to
     common stock and warrants                             -           257,808
   Common stock and common stock warrants
      issued in exchange for financing services      129,539           118,403


                                      See accompanying notes.
                                              
                                                F.6

<PAGE>


                                         GLYKO BIOMEDICAL LTD.
                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.      The Company and Description of the Business

       Glyko  Biomedical  Ltd.  (the  Company) is a Canadian  company  which was
       established  in 1992 to acquire all of the  outstanding  capital stock of
       Glyko,   Inc.,  a  Delaware   corporation.   The  Company,   through  its
       wholly-owned  subsidiary  Glyko,  Inc., is developing  new  techniques to
       analyze  and  manipulate  carbohydrates  for  research,   diagnostic  and
       pharmaceutical  purposes.  The  Company has  developed a product  line of
       laboratory  instruments  and  chemical  kits,  referred  to  as  analytic
       products,  which are used in  carbohydrate  analysis.  Shipments of these
       products began in December 1992. The Company is also  developing  certain
       carbohydrate  diagnostic products.  In October,  1996, the Company formed
       BioMarin  Pharmaceutical,  Inc., a Delaware  corporation,  to develop the
       Company's pharmaceutical products.

        Since its  inception,  the Company  has  incurred  cumulative  losses of
        $12,933,837  and expects to continue to incur  losses.  The Company does
        not have sufficient cash to fund planned 1997 operations.  These factors
        raise  substantial  doubt about the  Company's  ability to continue as a
        going concern. In December 1992, the Company  successfully  completed an
        initial public offering on the Toronto Stock Exchange.  Since that time,
        the Company has  maintained  liquidity by utilizing the proceeds of that
        offering, by utilizing the proceeds of private equity placements in both
        the second quarter of 1995 and the second quarter of 1996, by using cash
        flow  from  operations,  and  by  drawing  upon  a  bridge  loan  from a
        stockholder.  To continue as a going  concern the Company must  maintain
        its current sales level and seek  additional  funding.  Such funding may
        come  individually or collectively  from stock issuances,  licensing and
        marketing  agreements  or  by  collaborative  research  agreements  with
        strategic partners. On March 21, 1997, the Company closed a $2.0 million
        (Canadian)   financing   offering  to  fund  the  start-up  of  BioMarin
        Pharmaceutical,  Inc. (see Footnote 10).  There can be no assurance that
        additional  funding  will  be  obtained.  If  adequate  funding  is  not
        obtained, operations may be adversely affected.

2.      Summary of Significant Accounting Policies

        The accompanying consolidated financial statements and related footnotes
        have been prepared in conformity with U.S. generally accepted accounting
        principles using U.S.  dollars.  The consolidated  financial  statements
        include the  accounts of the  Company  and its wholly  owned  subsidiary
        Glyko, Inc. All significant  intercompany accounts and transactions have
        been  eliminated.   Certain  balances  in  the  prior  years  have  been
        reclassified to conform with the current year presentation.

        Use of Estimates:

        The preparation of the Company's financial statements in conformity with
        generally accepted  accounting  principles  requires  management to make
        certain  estimates  and  assumptions.  Actual  results could differ from
        those estimates.

        Cash and Cash Equivalents:

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

       Inventories:

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



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

       Raw materials               $62,925          $41,768
       Finished products             5,527           66,750
                             ----------------- ----------------
                                   $68,452         $108,518
                             ================= ================


                                          F.7
<PAGE>


                                    GLYKO BIOMEDICAL LTD.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


        Property, Plant and Equipment:

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

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


       Depreciation  relating  to  equipment  used in research  and  development
       activities  is  included  in  research  and  development  expense  in the
       consolidated statements of operations.

       Foreign Exchange:

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

       Product Sales:

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

       At times,  the Company has received payment in advance for future product
       shipments.  Such  payments  are  classified  as  deferred  revenue on the
       accompanying  Balance  Sheet.  Upon  shipment  of  products,  revenue  is
       recognized and the corresponding liability (deferred revenue) is reduced.

       Total  revenues of  $1,330,635 in 1996 and  $1,568,810 in 1995  consisted
       entirely  of direct  product  sales,  sales to  distributors  for resale,
       analytical service fees and other revenues.

       In 1996,  revenues to three major customers  (including two distributors)
       were  14  percent,   14  percent,   and  13  percent  of  total  revenues
       respectively.  In 1995, net revenues (including sales and licensing fees)
       to one distributor were 30 percent of total revenues.

       In 1990, the Company entered into an agreement (the  "Agreement")  giving
       one of its  stockholders the exclusive right to market and distribute the
       Company's  analytic  products for an initial period of six years from the
       time the Company  developed a  commercially  marketable  product.  During
       1993,  the Agreement  was amended to grant the Company the  non-exclusive
       right to market and  distribute  the Company's  analytic  products in the
       United States (direct product sales).  In April 1994, the stockholder and
       the  Company  agreed  to  terminate  the   Agreement.   In  exchange  for
       relinquishing  its  rights  under the  Agreement,  the  stockholder  will
       receive 500,000 shares of common stock,  subject to regulatory  approval.
       In the third quarter of 1994 the Company  recorded a charge to operations
       of $219,811 for costs related to the  termination of the Agreement.  This
       amount  represents  the estimated fair market value of stock to be issued
       as a result  of the  termination  of the  Agreement.  The  Toronto  Stock
       Exchange  has turned down the  issuance  of the 500,000  shares due to an
       arms-length issue and requires that an independent valuation be performed
       in order to reconsider  the issuance of these shares.  No such  valuation
       has been performed to date.

                                          F.8


<PAGE>



                                            GLYKO BIOMEDICAL LTD.
                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       Income Taxes:

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

       Net Loss Per Common Share:

       Net loss per  common  share is  computed  based on the  weighted  average
       number of shares outstanding during each period.

       Adoption of Accounting Pronouncements:

       The Company  adopted SFAS No. 121, "  Accounting  for the  Impairment  of
       Long-Lived  Assets  and for the  Long-Lived  Assets  to be  Disposed  of"
       beginning  January  1, 1996.  The  Company  also  adopted  SFAS No.  123,
       "Accounting for Stock-Based  Compensation" beginning January 1, 1996. The
       adoption of these  pronouncements  did not have a material  impact on the
       financial statements of the Company taken as a whole.

3.     Property, Plant and Equipment

       Property,  plant and equipment at December 31, 1996 and 1995 consisted of
       the following:



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

              Lab equipment                   $282,468         $242,349
              Computer equipment               212,330          195,672
              Production equipment              42,095           42,095
              Office furniture                  18,069           18,069
              Leasehold improvement              8,554            8,554
                                         ---------------- ----------------
                                               563,516          506,739
                                         ---------------- ----------------
              Less accumulated
                depreciation                   455,471          394,570
                                         ---------------- ----------------
              Property, plant and
               equipment, net                 $108,045         $112,169
                                         ================ ================










                                               F.9


<PAGE>



                                             GLYKO BIOMEDICAL LTD.
                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.    Income Taxes

       The Company's deferred tax asset at December 31, 1996 and 1995 is:



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

        Net operating loss carryovers      $     5,167,000   $    4,313,000
        Research and development expenses
         capitalized for tax purposes              151,000          205,000
        Research and development
         credit carryovers                         524,000          490,000
        Issue cost carryovers                      152,000          216,000
        Other temporary differences               (258,000)        (248,000)
                                            ---------------- ----------------
                                                 5,736,000        4,976,000
        Valuation allowance                     (5,736,000)      (4,976,000)
                                            ---------------- ----------------
        Net deferred tax asset              $           --   $           --
                                            ================ ================


       Total U.S.  federal and state net tax operating loss  carryforwards as of
       December  31,  1996  are   approximately   $12,293,000   and  $5,430,000,
       respectively.  Federal operating loss  carryforwards  expire from 2006 to
       2011 and state operating loss carryforwards expire from 1997 to 2001. The
       Company  also has  federal  and state  research  and  development  credit
       carryovers  of  $524,000  which  expire from 2007 to 2010.  For  Canadian
       income tax purposes,  the Company has net operating loss carryforwards of
       approximately  $1,084,000  which expire from 1999 to 2002.  Under current
       U.S.  tax law,  future  changes in ownership of the Company may limit the
       utilization of U.S. net operating loss and credit carryforwards.


5.     Bridge Loan

       In the  fourth  quarter  of 1994 the  Company  drew  upon a  bridge  loan
       facility  from one of its  stockholders  in the amount of $250,000.  This
       bridge loan and accrued interest  incurred  thereupon were converted into
       400,748 units, consisting of one share of common stock and one warrant to
       purchase one share of common stock, in the second quarter of 1995.

6.     Commitments

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

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

       In October, 1996, the company notified the lessor that the lease would be
       abandoned in January,  1997.  Subsequent to year-end,  the lessor claimed
       $269,718 in deferred  rent and related  costs related to the period prior
       to  December  31,  1996.  While the  Company  does not  believe  that the
       lessor's claim is valid and does not agree with the amount claimed by the
       lessor, the amount has been accrued and is reflected on the balance sheet
       at December  31,  1996.  Management  does not believe the Company will be
       held  responsible  for  continuing  lease  obligations  and, as such,  no
       additional amounts have been accrued as of December 31, 1996.

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

                                        F.10

<PAGE>



                                           GLYKO BIOMEDICAL LTD.
                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



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


              1997                                            $105,802
              1998                                             115,692
              1999                                             125,582
              2000                                              34,559
              2001 and thereafter                                   --
                                                       ---------------
                                                              $381,635
                                                       ===============


        Rent expense was $274,284 in 1996 and $226,668 in 1995.

7.     Stockholders' Equity

       In December  1992, the Company  completed an initial  public  offering of
       2,881,601  shares of its common stock on the Toronto Stock  Exchange.  In
       connection  with  that  offering,  6,030,428  common  shares  held by the
       founders of the Company were placed on deposit with a trustee.

       The trustee will release the escrowed  shares to the founders as follows:
       a) 10 percent  immediately  after nine months  following  the date of the
       public  offering;  b) 20  percent  immediately  after  each of the first,
       second  and  third  anniversary  dates  following  the date of the  first
       release of shares and c) the remaining 30 percent  immediately  after the
       fourth anniversary date thereafter.  As of December 31, 1996 1,809,124 of
       the escrowed shares remained on deposit with a trustee.

       In the  second  quarter  of 1995,  the  Company  closed a private  equity
       placement offering (the Q295 Financing).  Investors  participating in the
       Q295  Financing  purchased  units which  consisted of one share of common
       stock and one warrant to purchase one share of common stock.  The Company
       issued  units  in  exchange  for  cash,  and  also  in  exchange  for the
       settlement of certain outstanding  liabilities.  The units were priced at
       Cdn.  $0.80 with an  exercise  price on the  warrant of Cdn.  $0.90.  The
       Company  established a balance sheet value for the 4,786,422 common stock
       warrants  issued in the Q295 Financing by subtracting the discounted fair
       market value for one share of the  Company's  common stock from the price
       of one unit.  The common stock  warrants  expire in 2000.  The  Financing
       raised  approximately  $2.78 million,  consisting of approximately  $2.36
       million in cash and $420,000 for the settlement of a stockholder/director
       bridge loan, common stock issued for financing services and certain other
       liabilities.

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

                                        F.11

<PAGE>



                                              GLYKO BIOMEDICAL LTD.
                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.        Stock Option Plan

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

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

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



                                           1996               1995


       Net loss       As reported      $(1,575,859)       $(1,648,682)
                      Pro forma        $(1,644,687)       $(1,674,068)

       Net loss per   As reported        $(0.10)            $(0.12)
        common share  Pro forma          $(0.10)            $(0.13)

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

       A summary of the status of the Company  stock option plan at December 31,
       1996 and 1995 and changes during the years then ended is presented in the
       table and narrative below:
<TABLE>

<CAPTION>
                                          1996                            1995
                                 -------------------------       --------------------------
                                  Shares         Wtd avg ex         Shares        Wtd avg ex
                                                  price (2)                         price
<S>    <C>                        <C>          <C>                  <C>         <C>
       Outstanding beginning
         of year                  2,204,879    Cdn. $ 1.39          1,434,300   Cdn. $1.79
       Granted (1)                  118,000    Cdn. $ 0.55            839,109   Cdn. $0.76
       Exercised                       (100)   Cdn. $ 0.60                ---      ---
       Canceled                     (68,182)   Cdn. $ 0.88            (68,530)  Cdn. $2.09
       Outstanding at end of      ----------                        ---------
         year                      2,254,597   Cdn. $1.36           2,204,879   Cdn. $1.39
       Exercisable at end of year  1,965,086                        1,210,797
       Weighted average fair
         value of options granted Cdn. $0.22                        Cdn. $0.36

<FN>
       (1)  In 1996, includes 100,000 options issued to a consultant with a
             fair value of $0.26 per option excluded from pro forma net loss
             and pro forma net loss per common share.

       (2)   The US$ equivalent of Canadian $1.00 at December 31, 1996 was
              approximately $0.7329.
</FN>
</TABLE>

      There are 745,303  options  available for grant under the plan at
      December 31, 1996.

                                             F.12

<PAGE>



                                              GLYKO BIOMEDICAL LTD.
                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The fair value of each option  granted is  estimated  on the date of grant
      using  the   Black-Scholes   option   pricing  model  with  the  following
      weighted-average   assumptions   used  for   grants   in  1996  and  1995,
      respectively:  risk-free  weighted  average  interest rates of 5.3 and 5.8
      percent; expected dividend yield of zero percent; expected life of 4 years
      for the Plans' options; expected volatility of 87 percent.

9.     Related Party Transactions

       The Company has entered into certain  transactions  with its stockholders
       since its inception.  These transactions include the purchase of supplies
       and  equipment  and rental of the  Company's  facilities.  Total costs of
       these  transactions  for the years ended  December 31, 1996 and 1995 were
       approximately $274,284 and, $260,232, respectively. By agreement with its
       stockholder  the Company  has  deferred  payments  on certain  facilities
       charges.  Deferred  facilities charges were $269,718 at December 31, 1996
       and $166,535 at December 31, 1995.

   10.    Subsequent Events

      On February 17, 1997, the Company  entered into a diagnostic  distribution
      agreement which generated a one-time fee of $250,000  received on February
      21,  1997.  This  agreement  will  increase  the  sales  territory  of the
      Company's products.

      On March 21, 1997, the Company closed a $2.0 million (Canadian)  financing
      to fund the start-up of BioMarin Pharmaceutical,  Inc. which was formed to
      develop  the  Company's  pharmaceutical  products.  As a  result  of  this
      financing, the Company issued 4,000,000 units at Cdn. $0.50 per unit, each
      unit consisting of one common share and one common share purchase warrant.
      Each warrant can be exercised for one share of common stock at Cdn.  $1.00
      per share, expiring on March 21, 1999.



                                        F.13


<PAGE>

                                       EXHIBIT INDEX





   Exhibit No.      Description                       Location in Form 10-KSB


      10.1          Commercial Lease Agreement between
                        Registrant and Douglas Kaye
                           dated December 23, 1996           Page 33

      27.1          Financial Data Schedules at
                         December 31, 1996




<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

                      COMMERCIAL LEASE AND DEPOSIT RECEIPT
RECEIVED FROM Glyko, Inc., A California Corporation,  hereinafter referred to as
LESSEE, the sum of $XXX (XXX dollars),  evidenced by a check, as a deposit which
shall belong to Lessor and shall be applied as follows: Rent for the period from
2/1/97 to 2/28/97 $XXX,  Security  deposit (not  applicable  toward last month's
rent) $XXX. TOTAL RECEIVED $XXX. In the event this Lessee is not accepted by the
Lessor within 5 days, the total deposit received will be refunded. Lessee offers
to lease  from  Lessor the  premises  situated  in he City of Novato,  County of
Marin, State of CA, described as 11 Pimental Ct. (XXX sf office) and 13 Pimental
Ct. (XXX sf whse.) upon the following terms and conditions:  TERM: The term will
commence on February 1, 1997, and end on March 31, 2000. RENT: The XXX rent will
be $XXX,  payable as follows:  XXX. All rents will be paid to Lessor, or his/her
agent,  at the  following  address:  XXX,  or at  such  other  places  as may be
designated  by Lessor from time to time. In the event rent is not paid within 10
days after due date, Lessee agrees to pay a late charge of $XXX plus interest at
XXX% per annum on the delinquent  amount.  Lessee further agrees to pay $XXX for
each  dishonored bank check.  The late charge period is not a grace period,  and
Lessor is  entitled  to make  written  demand for any rent if not paid when due.
USE: The premises are to be used for the operation of Biomedical  Laboratory and
associated  office use, and for no other purpose,  without prior written consent
of Lessor.  Lessee will not commit any waste upon the premises,  or any nuisance
or act which may disturb the quiet enjoyment of any tenant in the building. USES
PROHIBITED:  Lessee will not use any portion of the premises for purposes  other
than  those  specified.  No use will be made or  permitted  to be made  upon the
premises, nor acts done, which will increase the existing rate of insurance upon
the property, or cause cancellation of insurance policies covering the property.
Lessee  will  not  conduct  or  permit  any  sale by  auction  on the  premises.
ASSIGNMENT  AND  SUBLETTING:  Lessee  will not  assign  this Lease or sublet any
portion of the premises without prior written consent of the Lessor,  which will
not be unreasonably  withheld. Any such assignment or subletting without consent
will be void and,  at the  option of the  Lessor,  will  terminate  this  Lease.
ORDINANCES AND STATUTES: Lessee will comply with all statutes,  ordinances,  and
requirements  of all municipal,  state and federal  authorities now in force, or
which may later be in force, regarding the use of the premises. The commencement
or pendency of any state or federal court abatement proceeding affecting the use
of the  premises  will,  at the option of the lessor,  be deemed a breach of the
Lease. MAINTENANCE,  REPAIRS,  ALTERATIONS:  Unless otherwise indicated,  Lessee
acknowledges  that the premises are in good order and repair.  Lessee shall,  at
his/her  own  expense,  maintain  the  premises  in a good and  safe  condition,
including  plate  glass,   electrical  wiring,  plumbing  and  heating  and  air
conditioning installations, and any other system or equipment. The premises will
be  surrendered,  at termination of the Lease, in as good condition as received,
normal  wear and tear  excepted.  Lessee  will be  responsible  for all  repairs
required,  except the  following  which  will be  maintained  by  Lessor:  roof,
exterior walls,  structural  foundations (including any retrofitting required by
governmental  authorities)  and:  Parking  lot and  driveways.  Lessor will also
maintain in good condition the landscaping  subject to 100%  reimbursement  from
Lessee.  No  improvement  or alteration of the premises will be made without the
prior written consent of the Lessor.  Prior the  commencement of any substantial
repair,  improvement,  or  alteration,  Lessee will give lessor at least two (2)
days written notice in order that Lessor may post  appropriate  notices to avoid
any  liability  for liens.  ENTRY AND  INSPECTION:  Lessee will permit Lessor or
Lessor's  agents to enter the premises at reasonable  times and upon  reasonable
notice for the purpose of inspecting the premises,  and will permit  Lessor,  at
any time within sixty (60) days prior to the  expiration of the Lease,  to place
upon the premises any usual "For Lease" signs,  and permit  persons  desiring to
lease the premises to inspect the premises at reasonable times.  INDEMNIFICATION
OF LESSOR:  Lessor will not be liable for any damage or injury to Lessee, or any
other person,  or to any property,  occurring on the premises.  Lessee agrees to
hold Lessor  harmless from any claims for damages arising out of Lessee's use of
the  premises,  and to  indemnify  Lessor for any expense  incurred by lessor in
defending any such claims. POSSESSION: If Lessor is unable to deliver possession
of the premises at the  commencement  date set forth  above,  Lessor will not be
liable  for any  damage  caused by the  delay,  nor will  this  Lease be void or
voidable,  but  Lessee  will not be  liable  for any rent  until  possession  is
delivered. Lessee may terminate this Lease if possession is not delivered within
30 days of the  commencement  term in item 1.  LESSEE'S  INSURANCE:  Lessee,  at
his/her expense will maintain plate glass, public liability, and property damage
insurance  insuring  Lessee and lessor with  minimum  coverage as follows:  XXX.
Lessee will provide  Lessor with a Certificate  of Insurance  showing  Lessor as
additional  insured.  The policy will require ten (10) day's  written  notice to
Lessor prior to cancellation or material change of coverage. LESSOR'S INSURANCE:
Lessor will maintain hazard insurance covering one hundred percent (100%) actual
cash value of the  improvements  throughout the Lease term.  Lessor's  insurance
will not insure Lessee's personal  property,  leasehold  improvements,  or trade
fixtures.  SUBROGATION:  To the maximum extent  permitted by insurance  policies
which may be owned by the parties, Lessor and Lessee waive any and all rights of
subrogation  which might otherwise exist.  UTILITIES:  Lessee agrees that he/she
will be responsible  for the payment of all  utilities,  including  water,  gas,
electricity,  heat and other services delivered to the premises.  SIGNS:  Lessee
will not place,  maintain,  nor permit any sign or awning on any exterior  door,
wall, or window of the premises  without the express  written consent of Lessor,
which will not be unreasonably  withheld.  ABANDONMENT OF PREMISES:  Lessee will
not vacate or abandon the premises at any time during the term of this Lease. If
Lessee does abandon or vacate the  premises,  or is  dispossessed  by process of
law,  or  otherwise,  any  personal  property  belonging  to Lessee  left on the
premises will be deemed to be abandoned, at the option of Lessor.  CONDEMNATION:
If any part of the  premises is  condemned  for public use,  and a part  remains
which is  susceptible  of occupation by Lessee,  this Lease will, as to the part
taken,  terminate as of the date the condemnor acquires possession.  Lessee will
be required to pay such


<PAGE>


                           CONFIDENTIAL TREATMENT REQUESTED
 proportion  of the rent for the  remaining  term as the  value of the  premises
remaining bears to the total value of the premises at the date of  condemnation;
provided, however, that Lessor may at his/her option, terminate this Lease as of
the date the condemnor acquires  possession.  In the event that the premises are
condemned in whole,  or the remainder is not  susceptible for use by the Lessee,
this Lease will  terminate  upon the date which the Lessee  will be  entitled to
retain  any amount  awarded to him/her  for  his/her  trade  fixtures  or moving
expenses.  TRADE FIXTURES:  Any and all improvements made to the premises during
the term will belong to the Lessor,  except trade fixtures of the Lessee. Lessee
may, upon termination,  remove all his/her trade fixtures,  but will pay for all
costs necessary to repair any damage to the premises  occasioned by the removal.
DESTRUCTION OF PREMISES:  In the event of a partial  destruction of the premises
during the term,  from any cause,  Lessor  will  promptly  repair the  premises,
provided that such repairs can be reasonably  made within sixty (60) days.  Such
partial  destruction  will not terminate this Lease,  except that Lessee will be
entitled to a proportionate reduction of rent while such repairs are being made,
based upon the extent to which the making of such  repairs  interferes  with the
business of Lessee on the premises.  If the repairs  cannot be made within sixty
(60) days,  This Lease may be terminated at the option of either party by giving
written  notice to the other party  within the sixty (60) day period.  HAZARDOUS
MATERIALS:  Lessee will not use, store,  or dispose of any hazardous  substances
upon the  premises,  except  the use and  storage  of such  substances  that are
customarily  used  in  Lessee's  business,   and  are  in  compliance  with  all
environmental laws. Hazardous substances means any hazardous waste, substance or
toxic materials regulated under any environmental laws or regulations applicable
to the property. Lessee will be responsible for the cost of removal of any toxic
contamination cased by lessee's use of the premises. INSOLVENCY: The appointment
of a receiver,  an assignment for the benefits of creditors,  or the filing of a
petition in bankruptcy  by or against  Lessee,  will  constitute a breach of the
Lease by  Lessee.  DEFAULT:  In the event of any breach of this Lease by Lessee,
Lessor may, at his/her option,  terminate the Lease and recover from Lessee: (a)
the worth at the time of award of the unpaid  rent which had been  earned at the
time of  termination;  (b) the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
the award  exceeds the amount of such rental loss that the Lessee  proves  could
have  been  reasonably  avoided:  (C) the  worth at the time of the award of the
amount by which the  unpaid  rent for the  balance of the term after the time of
award  exceeds the amount of such rental  loss that the Lessee  proves  could be
reasonably avoided:  and (d) any other amount necessary to compensate Lessor for
all the detriment  proximately caused by the Lessee's failure to perform his/her
obligations  under the Lease or which in the ordinary  course of things would be
likely to result therefrom.
         Lessor may, in the alternative,  continue this Lease in effect, as long
as Lessor  does not  terminate  Lessee's  right to  possession,  and  Lessor may
enforce all of Lessor's rights and remedies under the Lease, including the right
to recover the rent as it becomes  due under the Lease.  If said breach of Lease
continues, Lessor may, at any time thereafter, elect to terminate the Lease.
         These  provisions  will not limit any other  rights or  remedies  which
Lessor may have.
SECURITY: The security deposit will secure the performance of the Lessee's
obligations.  Lessor may, but will not be obligated to, apply all or portions
of the deposit on account of Lessee's obligations.  Any balance remaining upon 
termination will be returned to Lessee.  Lessee
will not have the right to apply the  security  deposit  in  payment of the last
month's  rent.  DEPOSIT  REFUNDS:  The balance of all deposits  will be refunded
within three weeks (or as otherwise  required by law),  from date  possession is
delivered  to lessor or his/her  authorized  agent,  together  with a  statement
showing any charges made against the deposits by Lessor.  ATTORNEY  FEES: In any
action or proceeding  involving a dispute  between Lessor and Lessee arising out
of the Lease, the prevailing party will be entitled to reasonable attorney fees.
WAIVER:  No failure of Lessor to enforce any term of the Lease will be deemed to
be a waiver.  NOTICES: Any notice which either party may or is required to give,
will be given by mailing the notice, postage prepaid, to Lessee at the premises,
or to Lessor at the address  shown in Item 2, or at such other  places as may be
designated in writing by the parties from time to time. Notice will be effective
five  days  after  mailing,  or  on  personal  delivery,   or  when  receipt  is
acknowledged in writing.  HOLDING OVER: Any holding over after the expiration of
this Lease, with the consent of the Owner, will be a month-to-month tenancy at a
monthly rent of $XXX,  payable in advance and otherwise  subject to the terms of
this Lease,  as  applicable,  until either party will  terminate  the tenancy by
giving the other party thirty (30) days  written  notice.  TIME:  Time is of the
essence of the Lease. HEIRS, ASSIGNS, SUCCESSORS: This Lease is binding upon and
inures to the benefit of the heirs,  assigns, and successors of the parties. TAX
INCREASE:  In the event there is any increase during any year of the term of the
Lease in real estate taxes over and above the amount of such taxes  assessed for
the tax year during  which the term of the Lease  commences,  Lessee will pay to
Lessor  an  amount  equal to 100% of the  increase  in  taxes  upon the land and
building in which the leased premises are situated. In the event that such taxes
are  assessed  for a tax  year  extending  beyond  the  term of the  Lease,  the
obligation of Lessee will be prorated.  Lessee will not be  responsible  for any
tax increase  occasioned solely by a sale or transfer of the premises by Lessor.
COST OF  LIVING  INCREASE:  The  rent  provided  for in Item 2 will bi  adjusted
effective upon the first day of the month  immediately  following the expiration
of 12 months from date of  commencement  of the term, and upon the expiration of
each 12 months thereafter, in accordance with changes in the U.S. Consumer Price
Index for All Urban Consumers  (1982-84=100)  ("CPI").  The monthly rent will be
increased to an amount equal to the monthly rent set forth in Item 2, multiplied
by a fraction the  numerator of which is the CPI for the second  calendar  month
immediately  preceding the adjustment  date, and the denominator or which is the
CPA for the second calendar month preceding the  commencement of the Lease term;
provided,  however,  that the monthly  rent will not be less than the amount set
forth in Item 2. AMERICANS WITH DISABILITIES ACT: The parties are alerted to the
existence of the  Americans  With  Disabilities  Act,  which may require  costly
structural modifications. The parties are advised to consult with a professional
familiar with the requirements of the Act. LESSOR'S LIABILITY: In the event of a
transfer of Lessor's  title or interest to the  property  during the term of the
Lease,  Lessee  agrees  that  the  grantee  of such  title or  interest  will be
substituted  as the Lessor  under this Lease,  and the  original  Lessor will be
released  of  all  further  liability;  provided,  that  all  deposits  will  be
transferred to the grantee.


<PAGE>

                    CONFIDENTIAL TREATMENT REQUESTED

ESTOPPEL CERTIFICATE:
         (a)  On ten (10) days prior  written  notice from  Lessor,  Lessee will
              execute,  acknowledge,  and  deliver  to  Lessor  a  statement  in
              writing:  (1) certifying that this Lease is unmodified and in full
              force and effect  (or,  if  modified,  stating  the nature of such
              modification and certifying that this Lease, as so modified, is in
              full force and effect),  the amount of any security  deposit,  and
              the date to which the rent and other  charges are paid in advance,
              if any;  and (2)  acknowledging  that there are not,  to  Lessee's
              knowledge,  any  uncured  defaults  on  the  part  of  Lessor,  or
              specifying  such defaults if any are claimed.  Any such  statement
              may be  conclusively  relied  upon  by any  prospective  buyer  or
              encumbrancer of the premises.
         (b)  At Lessor's  option,  Lessee's  failure to deliver such  statement
              within  such time will be a material  breach of this Lease or will
              be  conclusive  upon Lessee;  (1) that this Lease is in full force
              and effect,  without  modification except as may be represented by
              Lessor;  (2)  that  there  are no  uncured  defaults  in  Lessor's
              performance;  and (3) that not more than one month's rent has been
              paid in advance.
         (c)  If Lessor desires to finance,  refinance, or sell the premises, or
              any part therof,  Lessee  agrees to deliver to any lender or buyer
              designated by Lessor such financial statements of Lessee as may be
              reasonably  required  by  such  lender  or  buyer.  All  financial
              statements  will be  received by the Lessor or the lender or buyer
              in confidence and will be used only for the purposes set forth.
ENTIRE AGREEMENT: The foregoing constitutes the entire agreement between the 
parties and may be modified only in writing signed by all
parties.  The following exhibits are a part of this Lease:
         Addendum to Lease
         Brokerage Disclosures

LESSEE:  GLYKO, INC., A California Corporation
By:               XXX
Its:              XXX
Date:             12/23/96

LESSOR:  XXX
By:               XXX
Date:             12/23/96



<PAGE>


                        CONFIDENTIAL TREATMENT REQUESTED

                                ADDENDUM TO LEASE
                                  BY & BETWEEN
                                       XXX
                                       AND
                               GLYKO, INC., LESSEE
                            DATED: DECEMBER 20, 1996

1.    Heating, Ventilating and Air Conditioning (HVAC)
     Pursuant to section 7 of the lease Lessee shall be  responsible to maintain
     and repair  the HVAC  system in the  Premises  pursuant  to  manufacturer's
     recommended  maintenance  schedule.  In the event the HVAC  compressors  or
     exchangers  need to be  repaired or  replaced  not due to Lessee's  lack of
     regularly scheduled HVAC maintenance,  as described herein, Lessor shall be
     responsible to repair or replace the  compressors or exchangers at Lessor's
     sole cost and expense. In the event the HVAC compressors or exchangers need
     to be repaired or replaced and Lessee has not been maintaining or repairing
     the HVAC system as described herein, or Lessee has modified the HVAC system
     without Lessor's consent,  Lessee shall be solely  responsible to repair or
     replace the  compressors  or exchangers as required,  at Lessee's sole cost
     and expense.

     Upon the commencement date of this lease,  Lessor represents to Lessee that
     the building systems, including the HVAC, electrical,  plumbing,  lighting,
     and structural elements of the building, are in good condition and repair.

     Additionally, Lessor shall repair the warehouse roof on or before the lease
     commencement date at Lessor's sole cost and expense.

2.   Letter of Credit
     This lease  agreement is  absolutely  subject to the Lessee  providing  the
     Lessor within 15 days of lease execution,  a Letter of Credit in the amount
     of XXX  naming  the  lessor  beneficiary  of the Letter of Credit if Lessee
     defaults  under the terms and conditions of this lease  agreement.  So long
     that Lessee has not been in default  under any of the terms and  conditions
     of the lease the Letter of Credit  will be reduced to XXX at the end of the
     second year of the lease term.  The Letter of Credit  shall expire upon the
     expiration  of the  lease  term so long as Lessee  has not been in  default
     under the terms and conditions of this lease.

     Upon execution of this lease agreement,  Lessee shall deposit with Lessor a
     Security  Deposit of XXX. Upon  issuance of Letter of Credit,  Lessor shall
     return the Security deposit to Lessee.

3.    Trailer
     Lessee  shall have the right to park a 10" x 20" trailer at the rear of the
     parking lot fo storage of non-hazardous materials subject to the following:
     The trailer shall conform with all codes and regulations, shall be a mobile
     trailer not attached to the Premises  and Lessee shall be  responsible  for
     any taxes,  fees or fines  relating to Lessee's  use and  occupancy  of the
     trailer.

4.    Consumer Price Index
     Pursuant to section 32 of the lease  agreement in no event shall the annual
     Consumer Price Index rental adjustment exceed 5% per adjustment period.

5.    Access to Premises
     Upon  execution  of this lease Lessee shall have access to the Premises for
     inspecting  the  Premises  with  its  contractor,  and for  installing  its
     telephone and computer system, and for construction of tenant  improvements
     in warehouse only.

6.    Subleases
     Lessee  shall have the right,  and Lessor  consents  hereto,  to sublease a
portion of the Premises to XXX.

7.    Free Rent
     So long as Lessee is not in default of any obligation of this lease, Lessee
     shall have the socond (2nd) and thirteenth  (13th) months of the lease term
     rent free.


LESSOR:  XXX                LESSEE:  GLYKO, INC., A CALIFORNIA CORPORATION


BY:     XXX                                BY:               XXX

                                           ITS:              XXX

DATE:   12/23/96                           DATE:             12/23/96


<PAGE>



                        CONFIDENTIAL TREATMENT REQUESTED


PROPERTY:         11 & 13 Pimental Court, Novato, CA

HAZARDOUS  MATERIALS WARNING:  Current and future federal,  state and local laws
and regulations may require the clean-up of such toxic, hazardous or undesirable
materials  at the expense of those  persons  who in the past,  present or future
have had any interest in the Property  including,  but not limited to,  current,
past and future owners and users of the Property.  Lessor and Lessee are advised
to consult with  independent  legal counsel of their choice or other expers,  to
determine their potential liability.

AMERICANS WITH DISABILITIES ACT: On July 26, 1991, the federal legislation known
as the Americans with Disabilities Act (ADA) was signed into law. The purpose of
the ADA is to integrate  persons with  disabilities into the economic and social
mainstream  of  American  life.  Title III of the ADA applies to  landlords  and
tenants of "places of public  accommodation"  and "commercial  facilities,"  and
requires  that places of public  accommodation  undertake  "readily  achievable"
removal of communication  and access barriers to the disables.  This requirement
of Title III of the ADA is effective  January 26, 1992. Lessor and Lessee should
seek expert  advice  regarding  the  implications  of the Act as it affects this
agreement.

LIABILITY  RELEASE:  XXX , and  its  salespeople  in  this  transaction  have no
expertise  regarding hazardous materials or the Americans with Disabilities Act.
Lessor  and  Lessee  agree  that  they  shall  indemnify  and  hold  XXX and its
salespeople harmless from any claim,  liability,  or expense regarding hazardous
materials or the ADA.

BROKER REPRESENTATION:  XXX is the real estate broker for the Lessor and the 
Lessee, and both parties consent hereto.

LESSOR:  XXX                                LESSEE:  Glyko, Inc.
                                                     By:               XXX
                                                     Title:            XXX
Date:             12/23/96                  Date:             12/23/96


<PAGE>