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, 1997

[  ]     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: $2,036,634.

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, 1998 was
$26,068,815.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:  21,930,057 common shares outstanding
as of February 28, 1998.




<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"  or the
"Company"). On December 21, 1992, simultaneously with an initial public offering
of the  Company's  Common  Shares on The  Toronto  Stock  Exchange,  the Company
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 the Company 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
94949.  On October 25, 1996, the Company formed  BioMarin  Pharmaceutical,  Inc.
("BioMarin"),  a corporation  incorporated under the laws of Delaware to develop
the Company's pharmaceutical products.  BioMarin first issued stock on March 21,
1997, (inception) when it issued 1,500,000 shares of common stock to the Company
for $1.5 million.  Beginning in October 1997, BioMarin raised capital from third
parties  with the result that at December  31,  1997,  the  Company's  ownership
interest in BioMarin had been reduced to 41 percent.  In this Statement,  unless
otherwise indicated,  a reference to "Glyko" or to the "Company" means Glyko and
its wholly-owned subsidiary Glyko, 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, the development
of commercial  applications based on complex carbohydrates,  and the development
of pharmaceutical  products. 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
was formed to exploit  opportunities in the  pharmaceutical  area. 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.  There  can  be no  assurance
that the Company will successfully develop any of such business opportunities.

The  Company  incurred  research  and  development   expenses  of  $606,000  and
$1,015,000  for the years  ended  December  31,  1997,  and 1996,  respectively.
Funding  received from research grants and  collaboration  fees to fund research
and development  expenses were $232,000 and $67,000 for the years ended December
31, 1997, and 1996, respectively.

As of December 31, 1997 the Company had 14 employees  including two 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

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Diagnostic Products

Background

Currently, there are only a few carbohydrate-chemistry  based 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,  acquired metabolic diseases,  and therapeutic drug monitoring.  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 markets the test kit to  pediatricians  as a primary  screening test for
these  conditions.  The  Company  received  an SBIR II  Grant in the  amount  of
$279,866  for the period from June 1, 1997,  to May 31, 1998 to develop a second
generation  confirmatory test of individual enzyme defects. The Company plans to
have the second generation tests out to clinical evaluation sites later in 1998.
A third year SBIR II Grant in the amount of $290,234 for the period from June 1,
1998,  to May 31, 1999,  is  currently  in the approval  process by the National
Institutes of Health.

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 its technology
to develop  methods  which could be used to measure the levels of heparin in the
blood of patients.  In 1997,  the Company  entered into a development  agreement
with  Array  Medical  (Array)  in which  Array  will fund the  development  of a
point-of-care test system which includes an instrument platform and reagents and
the Company will provide its expertise in heparin assay development.  Array will
market the device on a  world-wide  basis for use during  surgical  and  medical
procedures  including  open heart  surgery,  coronary and vascular  angioplasty,
kidney dialysis and critical care. The Company's  collaboration  with Array must
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>



Pharmaceutical Products

Through its  partially  owned  subsidiary,  BioMarin,  the Company is  currently
developing   pharmaceutical   products  through  research  grants  with  various
universities.  BioMarin  has  initiated  definitive  trials  of its lead  enzyme
replacement  product for  Mucopolysaccharidosis  (MPS) I, a crippling  and fatal
disease that affects young children.  A Phase I pivotal trial is being conducted
under a Company  Investigational New Drug (IND) application which will encompass
10 patients with  intermediate  severity of MPS I. BioMarin received orphan drug
designation  for its enzyme  replacement  therapy in  September  1997,  allowing
BioMarin to market the product  exclusively  for seven years  following Food and
Drug Administration  clearance.  BioMarin focuses on the development of products
in five therapeutic areas: genetic diseases,  fungal infections,  burn and wound
care,  male  pro-fertility  compounds and  psoriasis.  Such studies will require
funding and BioMarin plans on raising  additional  cash to fund these  projects.
There is no assurance  that such funds will be  available  nor that such testing
studies will be successful.

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 research 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,
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
                                    3

<PAGE>



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.

                                     4

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                             RISK FACTORS

Future Capital Requirements - Uncertainty of Future Funding

Since its inception,  the Company has incurred  cumulative losses of $14,990,000
and expects to continue to incur losses during 1998 due to the ongoing  research
and development of pharmaceutical products by BioMarin. Management believes that
Glyko, Inc. has sufficient cash to sustain planned operations through the end of
1998 due to  increased  revenues and  decreased  expenditures.  Management  also
believes that BioMarin has sufficient cash to sustain planned operations through
the end of 1998 due to additional  capital raised from outside  shareholders  at
the end of 1997. In order to continue  operations  beyond 1998,  Glyko, Inc. and
BioMarin would need to obtain additional funding in the form of stock issuances,
licensing and marketing agreements and/or collaborative research agreements with
strategic partners.  If adequate funding is not obtained,  long-term  operations
may be adversely  affected.  Glyko,  Inc.  and BioMarin  will delay or eliminate
expenditures in respect of certain products under development such as additional
analytical kits, diagnostic testing equipment and pharmaceutical products in the
event  sufficient  funding  is  unavailable.   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 the
second  quarter of 1995,  the second  quarter of 1996,  and the first quarter of
1997,  and by using cash flow from  operations  from Glyko,  Inc.  BioMarin  has
maintained  liquidity by utilizing proceeds from three private equity placements
during 1997. 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 revenues  increased in 1996 and 1997,
the Company's  research products and diagnostics  business has made a net annual
operating profit only in the current year. However, the Company's pro rata share
of  BioMarin's  net  loss  resulted  in the  Company  reporting  a net  loss  of
$2,056,000  for the year.  There is no  assurance  that sales will  increase  in
future years and with the continuing research and development  expenses incurred
by BioMarin,  the Company  anticipates net losses may continue.  The accumulated
deficit  as  of  December  31,  1997,  was  approximately  $15.0  million.   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 effectively,  the Company will need
to expand its production and marketing  efforts  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 increase  marketing  efforts 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."

                                5

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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.

In 1997,  revenues  (including  licensing and technology  fees) from three major
customers were 29 percent, 14 percent and 8 percent of total revenues.

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" and "Description
of Business-Diagnostic Products-Lysosomal Storage Diseases."

                                     6

<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.  Pursuant to
employment  contract  signed  effective July 1, 1997, 30% of Dr. Klock's and Dr.
Starr's  time will be  committed  to Glyko,  Inc.  and 70% will be  committed to
BioMarin.

Employees

At February 28, 1998 the Company had 14 employees.  Thirteen  employees are full
time and 13 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 1998 are
$109,000  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

In April,  1997,  Millipore  Corporation filed suit in the Marin County Superior
Court against the Company to recover unpaid rent and related  facilities charges
of  approximately  $366,000 for the  Company's  former  leased  facility plus an
additional  $90,000 for alleged equipment and property damage resulting from the
abandonment of the premises.  Additionally,  the Company has a counter claim for
$300,000  representing  sales  royalties due from the lessor to the Company plus
the cost of building  repairs  paid by the Company on behalf of the lessor.  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.  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 of $365,880 has been accrued and is reflected
on the balance sheet at December 31, 1997.  While the original  lease  agreement
extends through December 31, 1998,  management does not believe the Company will
be held responsible for continuing lease obligations and, as such, no additional
amounts  have  been  accrued   beyond   January  1997.  The  facility  has  been
subsequently leased.

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

                                 7

<PAGE>



                                                          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 OTC 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.

                                                         Prices
                                                      (In Canadian
                                                        Dollars)*
 Year                       Period                     High             Low

 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
 1997         First Quarter                            $0.70           $0.40
 1997         Second Quarter                           $0.96           $0.60
 1997         Third Quarter                            $1.05           $0.65
 1997         Fourth Quarter                           $1.40           $0.75

*As of December 31, 1997, the Canadian dollar to U.S. dollar exchange
  rate was $0.7215.

Holders

As of  February  28,  1998,  there  were 179  holders  of record  of  21,930,057
outstanding Common Shares of the Company.

Outstanding Options

As of February 28, 1998,  options to acquire  2,459,261 of the Company's  Common
Shares had been granted and were outstanding.

Outstanding Warrants

As of February 28, 1998,  warrants to acquire 10,923,422 of the Company's Common
Shares 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.
                                   8

<PAGE>



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

The Company does not  anticipate  the payment of  dividends  in the  foreseeable
future.  At present,  the  Company'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,  the  Company's  earnings,   capital
requirements and operating and financial condition.

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 holding company that owns all of the capital
stock of Glyko,  Inc. and 41% of the capital  stock of BioMarin  Pharmaceutical,
Inc. at December 31, 1997. In this Statement,  unless  otherwise  indicated,  as
reference  to  "Glyko"  or to the  "Company"  means  Glyko and its  wholly-owned
subsidiary Glyko, Inc. Glyko, Inc. and BioMarin Pharmaceutical,  Inc. (BioMarin)
are operating  companies based in California.  The following  discussion and the
accompanying  consolidated  financial  statements  include the accounts of Glyko
Biomedical Ltd. and Glyko, Inc.  presented on a consolidated basis plus BioMarin
presented  on the equity  method of  accounting .  Numerical  references  in the
following discussion are rounded to the nearest thousand. Since its inception in
October  1990,  the  Company  has engaged in  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 that include an imaging  system,  analysis
software  and  chemical  analysis  kits.  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 March 1997, the Company raised
Cdn.$2.0  million  (USD$1.4  million) to fund the start-up of BioMarin which was
formed to develop the Company's  pharmaceutical  products.  Although Glyko, Inc.
(the  Company's  research  products and  diagnostics  business) has recorded its
first year of annual net  operating  profit in the amount of $385,000  for 1997,
the  Company's  pro rata share of  BioMarin's  net loss  resulted in the Company
reporting a net loss of  $2,056,000  for the year.  There is no  assurance  that
sales  will  increase  in future  years  and with the  continuing  research  and
development  expenses incurred by BioMarin,  the Company  anticipates net losses
may  continue  at least  through  1998.  For the period  from its  inception  to
December 31, 1997, the Company has incurred cumulative losses of $14,990,000.

In October 1997, BioMarin raised net proceeds of $3,647,000  (including $880,000
of bridge loans  received in the third  quarter of 1997 which were  converted to
common stock) from outside investors in exchange for 4,039,000 shares (including
                                9

<PAGE>



shares issued to the placement agent for the financing).  Concurrently, BioMarin
issued 2,500,000 shares of Common Stock to three executive officers of BioMarin,
two of whom  are  also  executive  officers  of  Glyko  Biomedical  Ltd.  for an
aggregate  of  $2,500,000  in notes  due on July 31,  2000.  In  December  1997,
BioMarin  raised net proceeds of $5,016,000  from outside  investors in exchange
for 5,527,500  shares  (including  shares issued to the placement  agent for the
financing).  As a  result  of such  share  issuances,  Glyko  Biomedical  Ltd.'s
ownership in BioMarin was reduced to 41% of BioMarin's outstanding Common Stock.
Future  fundraising  efforts of BioMarin could result in a further  reduction of
Glyko Biomedical Ltd.'s ownership percentage.

BioMarin and Glyko  Biomedical Ltd. have entered into a License  Agreement dated
June 26,  1997,  pursuant to which Glyko  Biomedical  Ltd.  granted  BioMarin an
exclusive, worldwide, perpetual, irrevocable,  royalty-free right and license to
all current and future worldwide  patents,  trade secrets,  copyrights and other
proprietary  rights to all know-how,  processes,  formulae,  concepts,  data and
other such intellectual property,  whether patented or not, owned or licensed by
Glyko  Biomedical  Ltd.  and its  subsidiaries  as of the  date  of the  License
Agreement.  Under the same License Agreement,  BioMarin granted Glyko Biomedical
Ltd. a cross-license,  similar in scope, to all  improvements  BioMarin may make
upon the licensed  intellectual  property.  As  consideration  for this license,
BioMarin issued Glyko Biomedical Ltd. 7,000,000 shares of BioMarin common stock.

Results of Operations

Revenues in 1997 were $2,037,000 and consisted of sales of products and services
of  $1,176,000  and other  revenues  representing  development,  technology  and
licensing fees of $704,000 and grant revenues of $157,000. Sales of products and
services  consisted of sales of chemical analysis kits, fees for custom analytic
services  and sales of imaging  systems.  Revenues in 1996 were  $1,331,000  and
consisted  of sales of products and services of  $1,272,000  and other  revenues
(primarily grant fees and equipment rental revenues) of $59,000.  The decline in
product  revenues in 1997 was due principally to the relocation of the Company's
California  facilities  in February  which caused  approximately  eight weeks of
delays in fulfilling  orders.  The increase in other  revenues was due to new or
revised development, technology and licensing agreements negotiated in 1997.

Gross  margin on sales of products  and  services  was 59 percent in 1997 and 60
percent in 1996.  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 1997 were $606,000  compared to $1,015,000
in 1996,  a decrease of  $409,000.  The  decrease is due to the  shifting of lab
personnel  in 1997 to  BioMarin's  payroll  including  the  reduction  of salary
allocated to Glyko, Inc. for Dr.Christopher Starr,Vice President of Research and
Development,  whose time allocated to Glyko,  Inc. went from 100% in 1996 to 30%
in 1997. One other full-time  Ph.D. was shifted 100% to BioMarin in 1997.  Also,
in  October  1996,  the  Company  effected  lay-offs  in  an  effort  to  reduce
expenditures, which included one full-time lab technician.

Selling,  general and administrative expense was $563,000 in 1997, a decrease of
$862,000 from 1996 expense of  $1,425,000.  Marketing and  promotional  expenses
were lower in 1997 due to the cut-back of two full-time  marketing  positions in
the October 1996 layoffs.  General and administrative  expenses were reduced due
to the reduction of rent expense  resulting  from the Company's  relocation to a
smaller  facility in 1997 and due to the sublease rental income from BioMarin in
1997.  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).  General and administrative  expenses were also
reduced due to the  cut-back of  administrative  staff in October  1996 plus the
reduction  of salary  allocated to Glyko,  Inc.  for Dr. John Klock,  President,
whose time allocated to Glyko, Inc. went from 100% in 1996 to 30% in 1997.

Interest  income earned in 1997 and 1996 reflected  earnings on cash invested in
short term  interest  bearing  accounts.  Interest  expense in 1997 and 1996 was
immaterial.

Liquidity and Capital Resources

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 together
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 all the warrants  issued in the Q296  Financing at
approximately $156,000.
                                   10

<PAGE>



On March 21, 1997,  the Company  closed a Cdn.$2.0  million  financing (the Q197
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 4.0 million 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.  An additional  280,000  units and 280,000  warrants
together  valued at  approximately  $161,000 were  distributed to the brokers in
exchange  for  services  rendered in  connection  with the Q197  Financing.  The
Company utilized the Black-Scholes model to value all the warrants issued in the
Q197 Financing at approximately $496,000.

In October 1997, BioMarin sold 3,740,000 shares of common stock for net proceeds
of $3,647,000  (including $880,000 of bridge loans received in the third quarter
of 1997 which were converted to common  stock).  Additionally,  BioMarin  issued
299,000 common shares and 299,000 warrants to purchase common shares exercisable
at $1.00  per share  and  valued  under  the  Black  Scholes  model at  $48,000.
Concurrently,  BioMarin  issued  2,500,000  shares  of  Common  Stock  to  three
executive officers of BioMarin, two of whom are also executive officers of Glyko
Biomedical Ltd. for an aggregate of $2,500,000 in notes due on July 31, 2000.

In December  1997,  BioMarin  raised net  proceeds of  $5,016,000  from outside
investors in exchange for 5,527,500 shares  (including  502,500 shares issued to
the placement  agent for the  financing).  Additionally,  BioMarin issued to the
placement agent 502,500 warrants to purchase common shares  exercisable at $1.00
per share and valued under the Black  Scholes  model at $80,000.  As a result of
such share issuances,  Glyko Biomedical Ltd.'s ownership in BioMarin was reduced
to 41% of BioMarin's  outstanding Common Stock.  Future  fundraising  efforts of
BioMarin  could  result  in a  further  reduction  of  Glyko  Biomedical  Ltd.'s
ownership percentage.

The Company's net cash position increased by $317,000 in 1997. Net cash proceeds
from  the Q197  Financing  of  $1,424,000  and net cash  provided  by  operating
activities of $441,000 were offset by the Company's cash  investment in BioMarin
of $1,500,000 and purchases of property and equipment of $71,000.

The Company's net cash position decreased by $410,000 in 1996. Net cash proceeds
of $1.054  million from the Q296 Financing were offset by cash used in operating
activities of  $1,389,000.  Cash used in operating  activities in 1996 reflected
the operating  loss of $1,576,000  partially  offset by  collections of accounts
receivable and deferral of payments for facilities costs.

Since its  inception,  the  Company  has  incurred  cumulative
losses of $14,990,000 and expects to continue to incur losses during 1998 due to
the ongoing  research and  development of  pharmaceutical  products by BioMarin.
Management  believes that Glyko,  Inc. has  sufficient  cash to sustain  planned
operations  through  the end of 1998 due to  increased  revenues  and  decreased
expenditures.  Management  also believes that  BioMarin has  sufficient  cash to
sustain  planned  operations  through the end of 1998 due to additional  capital
raised from  outside  shareholders  at the end of 1997.  To  maintain  liquidity
beyond the end of 1998, BioMarin will have to raise additional  capital,  reduce
expenses   considerably,   generate  significant   revenues,   or  realize  some
combination of the above. To maintain  liquidity beyond the end of 1998,  Glyko,
Inc. will have to reduce expenses considerably, increase sales significantly, or
realize some  combination of the above.  There can be no assurance that BioMarin
nor Glyko,  Inc. will be successful in  maintaining  liquidity.  Management  may
consider  selling  certain  assets  or  technology  rights  to raise  additional
capital.  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.  See  "Risk  Factors  -  Future  Capital
Requirements."

The Company is currently  reviewing  its  computer  systems in
order to evaluate  necessary  modifications  for the year 2000. The Company does
not currently  anticipate  that it will incur material  expenditures to complete
any such modifications.

Item 7.  Financial Statements
The  information  required to be filed in this item appears on pages F.2 to F.25
and is incorporated herein by reference.

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

Not applicable.

                                11

<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                                             1992
    John H. Craig                                50     Secretary and Director                               1992
    John S. Glass                                61     Director                                             1994
    John C. Klock, M.D. (1)                      53     President, Chief Executive Officer and               1990
                                                          Director
    Christopher M. Starr, Ph.D.                  45     Vice-President, Research and Development             1991
    Gwynn R. Williams(1)(2)                      64     Director                                             1990
    Mark I. Young                                42     Assistant Secretary and Director                     1997

<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. Since 1997, he has
been Vice  President,  Finance  and Chief  Financial  Officer at Fusion  Medical
Technologies,  Inc., a surgical  sealant  company.  He held the same position at
Fidus  Medical  Technology,  Inc.,  a developer of  microwave  cardiac  ablation
equipment  from 1996 to 1997.  From 1994 to 1996 Mr.  Anderson was a Director at
Recombinant  Capital,  a consulting firm specializing in strategic  alliances in
the  biotechnology  industry.  From  1989 to 1994 he  served  as  Vice-President
Finance and Chief  Financial  Officer at Glycomed  Incorporated,  a  therapeutic
pharmaceutical  company based on complex  carbohydrates.  Mr. Anderson also held
financial  positions as chief  financial  officer at Chiron  Corporation  and as
controller  and as  director  of  financial  planning  and  analysis  at  Syntex
Laboratories. 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
oronto 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.
                                12

<PAGE>



Mr.  Gwynn R.  Williams is a founder of Glyko  (established  1990).  He was also
founder and owner of Astromed and  Astroscan,  UK  manufacturers  of  scientific
equipment  established  in 1984,  which are now both  merged  into Life  Science
Research  Ltd., a UK company.  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).

Mr. Mark I. Young has served a Director of the Corporation  since March,  1997
and has been the Assistant  Secretary of the Corporation  since 1992.  Mr. Young
is a solicitor and partner with Cassels Brock and Blackwell  practicing in the
areas of corporate  commercial and  securities  law. Mr. Young is an officer or
director of a number of public  companies  listed on The Toronto Stock Exchange.

Section 16(a) Beneficial Ownership Reporting Compliance

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,  1997,  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,  1997 and 1996,  (together,  "the Named
Officers").  No other executive officer of the Company earned more than $100,000
during the years ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                                                             Long-term
                                                                               Annual Compensation         Compensation

               Name and Principal Position                Year                       Salary               Option grants


<S>                                                       <C>                  <C>                        <C>
    John C. Klock, M.D.                                   1997                      $ 244,140                 64,740
    President, Chief Executive Officer & Director         1996                      $ 187,297                    -

    Christopher M. Starr, Ph.D.                           1997                      $ 149,666                 40,350
    Vice-President, Research and Development              1996                      $ 126,528                    -
</TABLE>


<TABLE>
                                           Option/SAR Grants In Last Fiscal Year

<CAPTION>
                                                                     % of Total
                                                                      Options
                   Name and Principal                      # of      Granted to      Exercise
                        Position                        Options     Employees in     Price of        Expiration Date of
                                                         Granted         1997         Options              Options
<S>                                                       <C>            <C>         <C>             <C>
    John C. Klock, M.D.
    President, Chief Executive Officer & Director         64,740         27%          Cdn$0.65        December 31, 2001

    Christopher M. Starr, Ph.D.
    Vice-President, Research and Development              40,350         17%          Cdn$0.65        December 31, 2001
</TABLE>

                                  13


<PAGE>



                                    Aggregated Fiscal Year End Option Values

There  were no option  exercises  in  fiscal  1997 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,
1997. <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.                              675,288             10,536        $ 87,971              $ 86,071
     Christopher M. Starr, Ph.D.                      278,259                166        $ 73,484              $ 73,454

<FN>
(1) The market value of  underlying  securities is based on the closing price of
the  Company's  common shares on December 31, 1997 of $0.9019 minus the exercise
price.  The  closing  price of $0.9019  was  calculated  by  applying a Canadian
dollar/US  dollar  exchange rate of $0.7215 to the closing price at December 31,
1997 of Canadian $ 1.25. </FN> </TABLE>


Director Compensation

During the  fiscal  year ended  December  31,  1997,  the  Company's  directors,
including  non-employee  directors,  were  granted  stock  options  in  lieu  of
compensation for services provided as directors for 1997 and 1996.

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, 1996 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.

Effective July 1, 1997, Drs. Klock and Starr signed an employment agreement with
BioMarin committing 70% of their efforts to BioMarin and 30% to Glyko, Inc.

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.
                                     14

<PAGE>


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, 1998, 2,459,261 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 the  Company may become
listed.

                                 15
<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, 1998, 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>                     <C>
    Common Shares            Millipore Corporation (1)                        2,461,177               11.2%
                               80 Ashby Road
                               Bedford, MA 01730

    Common Shares            Gwynn R. Williams (2)                            3,464,968               15.4%
                               c/o Life Science Research, Ltd.
                               3rd Floor Salisbury House
                              15 Victoria Street
                              Douglas, Isle of Man IM1 2LW
                              British Isles

    Common Shares            New York Life Insurance Company (3)              4,528,750               18.9%
                               51 Madison Avenue
                               New York, NY 10010

    Common Shares            Trianon Opus One, Inc. (4)                       3,528,000               14.9%
                               P.O. Box 31106 SMB
                               Grand Cayman, Cayman Islands

    Common Shares            Glycomed Inc.                                    1,326,654               6.1%
                               10275 Science Center Drive
                               San Diego, CA   92121

    Common Shares            John C. Klock, M.D. (5)                          1,049,769               4.6%
                               c/o Glyko, Inc.
                               11 Pimentel Court
                               Novato, CA 94949

    Common Shares            Christopher M. Starr  (6)                         297,592                1.3%
                               c/o Glyko, Inc.
                               11 Pimentel Court
                               Novato, CA 94949

    Common Shares            R. William Anderson (7)                           102,300                  *
                               c/o 1804 North Shoreline Blvd.
                               Mountain View, CA  94043

    Common Shares            John H. Craig (7)                                 103,301                  *
                               c/o Scotia Plaza, Suite 2100
                               40 King Street West
                               Toronto, Canada M5H 3C2

    Common Shares            John Glass (8)                                    99,000                   *
                               c/o 48 Main Street
                               Boxford, MA  01921

                                     16

<PAGE>





                                       Name and Address of              Amount and Nature of         Percent
         Title of Class                 Beneficial Owner                  Beneficial Owner          of Class

    Common Shares            Mark I. Young (9)                                 31,000                   *
                               c/o Scotia Plaza, Suite 2100
                               40 King Street West
                               Toronto, Canada M5H 3C2

    Common Shares            All Officers and Directors (10)                  5,147,930               21.7%

<FN>
       * Less than 1%.
(1) Does not  reflect  pending  issuance  of  500,000  shares  in  exchange  for
    termination of marketing rights.
(2) Includes  102,300 Common Shares  issuable upon exercise of options within 60
    days of February 28, 1998, and 416,758 Common Shares  issuable upon exercise
    of common stock warrants.
(3) Includes  2,092,500  Common  Shares  issuable  upon exercise of common stock
    warrants.
(4) Includes  1,764,000  Common  Shares  issuable  upon exercise of common stock
    warrants.
 (5) Includes  676,417 Common Shares issuable upon exercise of options within 60
     days of February 28, 1998, and 20,207 Common Shares  issuable upon exercise
     of common stock warrants.
(6)  Includes  281,648 Common Shares issuable upon exercise of options within 60
     days of February 28, 1998,  and 7,772 Common Shares  issuable upon exercise
     of common stock warrants.
(7) Includes  102,300 Common Shares  issuable upon exercise of options within 60
    days of February 28, 1998.
(8) Includes  99,000 Common Shares  issuable upon exercise of options  within 60
    days of February 28, 1998.
(9) Includes  31,000 Common Shares  issuable upon exercise of options  within 60
    days of February 28, 1998.
10) Includes  1,394,965  Common Shares issuable
    upon exercise of options within 60 days of February 28, 1998,
    and 444,747  Common Shares  issuable  upon exercise of common stock warrants
    excludes shares held by Millipore , New York Life, Trianon Opus One, Inc.
    and Glycomed.
</FN>
</TABLE>


                               17

<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:

The Company rented facilities from Millipore in 1997 and 1996,  incurring rental
and facilities expense of $20,060 and $274,284 respectively.

On March 21, 1997,  the Company  closed a Cdn.$2.0  million  financing (the Q197
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 4.0 million 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.  An additional  280,000  units and 280,000  warrants
together  valued at  approximately  $161,000 were  distributed to the brokers in
exchange  for  services  rendered in  connection  with the Q197  Financing.  The
Company utilized the Black-Scholes model to value all the warrants issued in the
Q197 Financing at approximately $496,000. As a result of additional funds raised
by BioMarin  during 1997 (see  Footnote 6 to Glyko  Biomedical,  Ltd.  Financial
Statements),  the  Company's  ownership  in  BioMarin  was  reduced  to  41%  of
BioMarin's  outstanding  common stock at December 31, 1997.  Future  fundraising
efforts of BioMarin could result in a further reduction the Company's  ownership
percentage.

BioMarin and the Company have  entered into a License  Agreement  dated June 26,
1997,  pursuant to which the Company granted  BioMarin an exclusive,  worldwide,
perpetual, irrevocable, royalty-free right and license to all current and future
worldwide patents, trade secrets, copyrights and other proprietary rights to all
know-how,  processes,  formulae,  concepts,  data and  other  such  intellectual
property,  whether  patented or not,  owned or licensed by the Company.  and its
subsidiaries  as of the date of the License  Agreement.  Under the same  License
Agreement,  BioMarin granted the Company. a cross-license,  similar in scope, to
all improvements BioMarin may make upon the licensed  intellectual  property. As
consideration for this license,  BioMarin issued the Company 7,000,000 shares of
BioMarin common stock.

The Company subleases office and lab space, certain  administrative and research
and development functions to BioMarin. BioMarin reimburses the Company for rent,
salaries  and related  benefits and other  administrative  costs and the Company
reimburses  BioMarin for salaries and related benefits.  The Company  reimbursed
BioMarin  $133,000  during  the year  ended  December  31,  1997,  and  BioMarin
reimbursed  the Company $ 373,848  during the year ended  December 31, 1997. The
Company  also  provided  analytical  services  and products to BioMarin at a 27%
discount in 1997.  Total  receipts to the Company  from sales to BioMarin  total
$39,301 during 1997.

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
not permitted 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
                                        18

<PAGE>



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 and as of
December 31, 1997, no shares remained in escrow.


                               19
<PAGE>


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

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

      Exhibit
      Number                           Description

       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).
       3.2     Restated Certificate of Incorporation of BioMarin Pharmaceutical,
               Inc. (filed as exhibit 3.1 to Form
               10-QSB dated September 30, 1997, and incorporated herein by
               reference).
       3.3     Bylaws of BioMarin Pharmaceutical,  inc. (filed as exhibit 3.2 to
               Form 10-QSB dated September 30, 1997, and incorporated  herein by
               reference).
       4.1     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).
               Restated    Certificate   of   Incorporation   of   BioMarin
               Pharmaceutical,  Inc.  (filed as exhibit  3.1 to Form 10-QSB
               dated  September  30,  1997,  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
                                      20

<PAGE>



      Exhibit
      Number                               Description

     10.16     Toyobo Distribution  Agreement  (confidential portions of exhibit
               have  been  omitted   pursuant  to  a  request  for  confidential
               treatment and filed  separately  with the  Commission).  Filed as
               exhibit  10.1  to  Form  10-QSB   dated  March  31,   1997,   and
               incorporated herein by reference.
     10.17     First   Amendment  to  Bio-Rad   Laboratories,   Inc.   Agreement
               (confidential portions of exhibit have been omitted pursuant to a
               request for confidential  treatment and filed separately with the
               Commission).  Filed as exhibit 10.1 to Form 10-QSB dated June 30,
               1997, and incorporated herein by reference.
     10.18     Array Medical  License and  Development  Agreement  (confidential
               portions of exhibit have been  omitted  pursuant to a request for
               confidential treatment and filed separately with the Commission).
               Filed as exhibit  10.2 to Form 10-QSB  dated June 30,  1997,  and
               incorporated herein by reference.
     10.19     License Agreement between Glyko Biomedical Ltd. and BioMarin
               Pharmaceutical, Inc. (filed as
               exhibit 10 to Form 10-QSB dated September 30, 1997, and
               incorporated herein by reference.)
      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).
      24.1     Power of Attorney (see Power of Attorney  hereto attached at page
               22).
      27.1     Financial Data Schedule (see Financial Data Schedule hereto
               attached at page 49)



(b)      Reports on Form 8-K

   No reports were filed on Form 8-K during the quarter ended December 31, 1997.


                                    21


<PAGE>


                                                        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 30, 1998                     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. <TABLE>


<CAPTION>
    Signature                       Title                                                     Date

<S>                                                                                            <C>
\s\ John C. Klock, M.D.           <C>                                                          March 30, 1998
---------------------------------                                                              --------------------
John C. Klock, M.D.               President, Chief Executive Officer, Director
                                   and Chief Accounting Officer

\s\Christopher M. Starr, Ph.D.                                                                 March 30, 1998
---------------------------------                                                              --------------------
Christopher M. Starr, Ph.D.       Vice-President Research and Development

\s\ R. William Anderson                                                                        March 30, 1998
---------------------------------                                                              --------------------
R. William Anderson               Director

\s\ John S. Craig                                                                              March 30, 1998
---------------------------------                                                              --------------------
John H. Craig                     Secretary and Director

\s\ John S. Glass                                                                              March 30, 1998
---------------------------------                                                              --------------------
John S. Glass                     Director

\s\ Gwynn R. Williams                                                                          March 30, 1998
---------------------------------                                                              --------------------
Gwynn R. Williams                 Director

\s\ Mark I. Young                                                                              March 30, 1998
---------------------------------                                                              --------------------
Mark I Young                      Assistant Secretary and Director
</TABLE>

                                                   22


<PAGE>





                        Index to Financial Statements


  Glyko  Biomedical,   Ltd.'s  Consolidated   Financial   Statements
       Report  of Independent  Public  Accountants                  F.2
       Consolidated  Balance  Sheets at December 31, 1997 and 1996  F.3
       Consolidated  Statements  of Operations for the  years
        ended  December  31,  1997 and  1996                        F.4
       Consolidated Statements  of  Stockholders'  Equity
        (Deficit)  for the  years  ended December 31, 1997 and 1996 F.5
       Consolidated  Statements  of Cash Flows
         for  the  years  ended   December  31,  1997  and  1996    F.6
        Notes  to Consolidated Financial Statements                 F.7 to F.14
  BioMarin Pharmaceutical, Inc.'s Financial Statements
         Report of Independent Public Accountants                  F.15
         Balance Sheet at December 31, 1997                        F.16
         Statement of Operations for the period from
          March 21, 1997  (inception)  to December  31,  1997      F.17
         Statement  of Stockholders'  Equity for the period from
          March 21,  1997(inception) to December  31,  1997        F.18
         Statement  of Cash Flows for the period  from
          March 21, 1997 (inception) to December 31, 1997          F.19
         Notes to Financial Statements                             F.20 to F.25

                                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, 1997
       and  1996  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, 1997 and 1996, and
       the results of their  operations  and their cash flows for the years then
       ended in conformity with generally accepted accounting principles.






       San Francisco, California                   \s\Arthur Andersen LLP
       February 20 , 1998                          Arthur Andersen LLP

                                     F.2
<PAGE>


                                                  PART I.


ITEM 1.  Financial Statements


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

<TABLE>

<CAPTION>
                                                               December 31,              December 31,
                                                                   1997                      1996
                                                           ---------------------     ----------------------
<S>                                                        <C>                       <C>
Assets
Current assets:
   Cash                                                               $ 528,280                  $ 210,992
   Trade receivables                                                    141,743                    156,176
   Inventories                                                           95,210                     68,452
   Other current assets                                                  15,179                     26,025
                                                           ---------------------     ----------------------
      Total current assets                                              780,412                    461,645
Investment in BioMarin Pharmaceutical, Inc.                           3,025,990                          -
Property, plant and equipment, net                                      118,910                    108,045
Other assets                                                              2,206                      2,200
                                                           ---------------------     ----------------------
      Total assets                                                  $ 3,927,518                  $ 571,890
                                                           =====================     ======================

Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
   Accounts payable                                                    $ 38,916                  $ 174,732
   Accrued liabilities                                                  173,597                    204,504
   Deferred rent and related costs                                      365,880                    269,718
   Payable to stockholder                                               219,811                    219,811
                                                           ---------------------     ----------------------
      Total current liabilities                                         798,204                    868,765

                                                           ---------------------     ----------------------
      Total liabilities                                                 798,204                    868,765

Stockholders' equity (deficit):
   Common stock, no par value, unlimited shares
      authorized, 21,573,044 and 17,243,044 shares
      issued and outstanding at December 31, 1997 and
      December 31, 1996, respectively                                13,154,224                 12,203,065
   Additional Paid In Capital                                         4,068,564                          -
   Common stock warrants and options                                    929,585                    433,897
   Deferred compensation                                                (33,364)                         -
   Accumulated deficit                                              (14,989,695)               (12,933,837)
                                                           ---------------------     ----------------------
      Total stockholders' equity (deficit)                            3,129,314                   (296,875)
                                                           ---------------------     ----------------------
      Total liabilities and stockholders' equity (deficit)          $ 3,927,518                  $ 571,890
                                                           =====================     ======================
</TABLE>

The accompanying notes are an integral art of these statements.
                           F.3

<PAGE>


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

<TABLE>


<CAPTION>
                                                               Year Ended December 31,
                                                       ---------------------------------------
                                                            1997                 1996
                                                       ----------------   --------------------
<S>                                                    <C>                <C>
Revenues:
     Sales of products and services                        $ 1,175,699            $ 1,271,933
     Other revenues                                            860,935                 58,702
                                                       ----------------   --------------------
       Total revenues:                                       2,036,634              1,330,635

Expenses:
     Cost of products and services                             482,770                509,248
     Research and development                                  605,803              1,014,966
     Selling, general and administrative                       562,888              1,425,484
                                                       ----------------   --------------------
       Total expenses:                                       1,651,461              2,949,698
                                                       ----------------   --------------------
Income (loss) from operations                                  385,173             (1,619,063)
Equity in loss of BioMarin Pharmaceutical, Inc.             (2,452,422)                     -
Interest income                                                 12,610                 18,367
Other income (loss)                                             (1,219)                24,837
                                                       ----------------   --------------------
Net loss                                                  $ (2,055,858)          $ (1,575,859)
                                                       ================   ====================

Net loss per common share, basic and diluted                   $ (0.10)               $ (0.10)
                                                       ================   ====================

Weighted average number of shares
     used in computing per share amounts                    20,536,058             16,058,994
                                                       ================   ====================
</TABLE>

The accompanying notes are an integral art of these statements.
                           F.4




<PAGE>



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

<TABLE>
<CAPTION>

                                 Common Stock               Additional   Common Stock    Deferred    Accumulated
                            ------------------------------    Paid In
                                   Shares            Amount   Capital      Warrants     Compensation   Deficit           Total
                            ---------------- -------------- ------------ ------------- ------------- ------------ ----------------

<S>                         <C>              <C>            <C>          <C>           <C>          <C>           <C>
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

Issuance of common stock and
warrants in a 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)

Net loss for the year                -              -                           -                     (2,055,858)      (2,055,858)

Exercise of stock options           50,000         22,976                       -                            -             22,976

Grant of options to consultants                                    90,152               (33,364)                           56,788

Issuance of common stock and
warrants in a private placement
financing, net of issuance
costs of $160,881                4,280,000        928,183                    495,688                                    1,423,871

Additional paid in capital
resulting from                                                  3,978,412                                               3,978,412
the sale of common stock by
BioMarin Pharmaceutical, Inc.

                             --------------  ---------------- ------------- ------------ ---------- -------------- ----------------
Balance at December 31, 1997    21,573,044     $ 13,154,224   $ 4,068,564   $ 929,585    $ (33,364)  $(14,989,695)     $ 3,129,314
                             =============== ================ ============= ============ ========== ============== ================
</TABLE>


The accompanying notes are an integral art of these statements.
                           F.5

<PAGE>

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



<TABLE>

<CAPTION>
                               Year ended December
                                                                   ------------------------------------
                                                                        1997                 1996
                                                                   ----------------     ---------------

<S>                                                                 <C>                 <C>
Net loss                                                              $ (2,055,858)       $ (1,575,859)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization                                              115,481              61,139
Equity in the loss of BioMarin Pharmaceutical, Inc.                      2,452,422                   -
Loss on disposal of property and equipment                                   1,452               4,046
Gain on lease abandonment                                                        -             (62,538)
Change in assets and liabilities:
   Trade receivables                                                        14,433             200,630
   Inventories                                                             (26,758)             40,066
   Other assets                                                             10,840             (20,854)
   Accounts payable                                                       (135,816)             52,357
   Accrued liabilities                                                     (30,907)            (16,956)
   Deferred revenue                                                              -            (174,386)
   Deferred rent and related costs                                          96,162             103,183
                                                                   ----------------     ---------------
Total adjustments                                                        2,497,309             186,687
                                                                   ----------------     ---------------
   Net cash provided by (used in) operating activities                     441,451          (1,389,172)


Investment in BioMarin Pharmaceutical, Inc.                             (1,500,000)                  -
Purchases of property and equipment                                        (71,010)            (61,061)
                                                                   ----------------     ---------------
   Net cash used in investing activities                                (1,571,010)            (61,061)


Net proceeds from the issuance of common stock and warrants
   in private placement financings                                       1,423,871           1,054,521
Proceeds from exercise of stock options                                     22,976                   -
Repayments on capital lease obligations                                          -             (14,016)
                                                                   ----------------     ---------------
   Net cash provided by financing activities                             1,446,847           1,040,505

                                                                   ----------------     ---------------
Net increase (decrease) in cash                                            317,288            (409,728)
Cash and cash equivalents, beginning of period                             210,992             620,720
                                                                   ----------------     ---------------
Cash and cash equivalents, end of period                                 $ 528,280           $ 210,992
                                                                   ================     ===============


Common stock and common stock warrants issued
in exchange for financing services                                       $ 160,881           $ 129,539
Stock options issued in exchange for consulting services                  $ 90,152                   -
</TABLE>

The accompanying notes are an integral art of these statements.
                           F.6

<PAGE>

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. (BioMarin),  a Delaware  corporation,  to
       develop the  Company's  pharmaceutical  products.  BioMarin  first issued
       stock on March 21, 1997  (inception)  when it issued  1,500,000 shares of
       common stock to the Company for $1.5 million.  Beginning in October 1997,
       BioMarin  raised  capital  from third  parties  with the  result  that at
       December 31, 1997, the Company's  ownership interest in BioMarin had been
       reduced to 41%.

        Since its  inception,  the Company  has  incurred  cumulative  losses of
        $14,989,695  and expects to continue to incur losses  during 1998 due to
        the ongoing  research  and  development  of  pharmaceutical  products by
        BioMarin.  Management  believes that Glyko,  Inc. has sufficient cash to
        sustain  planned  operations  through  the end of 1998 due to  increased
        revenues and  decreased  expenditures.  Management  also  believes  that
        BioMarin has sufficient cash to sustain planned  operations  through the
        end of 1998 due to additional  capital raised from outside  shareholders
        at the end of 1997. In order to continue  operations beyond 1998, Glyko,
        Inc. and BioMarin would need to obtain additional funding in the form of
        stock issuances, licensing and marketing agreements and/or collaborative
        research agreements with strategic partners.  If adequate funding is not
        obtained,  long-term  operations may be adversely affected.  Glyko, Inc.
        and BioMarin will delay or eliminate  expenditures in respect of certain
        products  under   development   such  as  additional   analytical  kits,
        diagnostic  testing equipment and  pharmaceutical  products in the event
        sufficient  funding  is  unavailable.  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 the second  quarter of 1995,  the second
        quarter of 1996,  and the first quarter of 1997,  and by using cash flow
        from operations from Glyko,  Inc.  BioMarin has maintained  liquidity by
        utilizing proceeds from three private equity placements during 1997.

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.  At December 31, 1996, the consolidated
        financial  statements include the accounts of the Company and its wholly
        owned subsidiary  Glyko,  Inc. As of December 31, 1997, the Company owns
        41 percent of BioMarin  and, as such,  BioMarin's  activities  have been
        reported  in the  Company's  financial  statements  for the  year  ended
        December  31, 1997,  based on the equity  method of  accounting.  To the
        extent that the issuance of stock by BioMarin to third  parties  results
        in an  increase in or decrease  in the  Company's  ownership  of the net
        assets of BioMarin,  the Company  reflects  this increase or decrease as
        paid-in  capital  as  reflected  in  the   Consolidated   Statements  of
        Stockholders' Equity (Deficit).  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  consolidated  financial  statements in
        conformity  with  generally  accepted  accounting   principles  requires
        management  to make certain  estimates and  assumptions  that effect the
        reported  amounts of assets and liabilities and disclosure of contingent
        assets  and  liabilities  at the  dates  of the  consolidated  financial
        statements and the reported amounts of
        revenues and expenses during the reporting periods. Actual results could
        differ from those  estimates.  Significant  estimates made by management
        include allowance
                                        F.7
<PAGE>


        for doubtful accounts receivable, and certain other reserves,  including
        an accrual for deferred rent (see Footnote 5).

        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,
                                                  1997             1996
                                            ----------------- ----------------
   Raw materials                                   $90,647          $62,925
   Finished products                                 4,563            5,527
                                            ----------------- ----------------
                                                   $95,210          $68,452
                                            ================= ================

        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


       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,  except for intercompany  accounts that are considered
       permanent in nature, 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 payments in advance for future product
       shipments or hardware  maintenance and service  contracts.  Such payments
       are  classified  as  deferred  revenue on the  accompanying  consolidated
       balance sheets. Upon shipment of products,  revenue is recognized and the
       corresponding  liability  (deferred  revenue) is reduced.  Revenues  from
       maintenance  and service  contracts are recognized  monthly pro rata over
       the period of the  contract  and the  corresponding  liability  (deferred
       revenue) is reduced.

                                            F.8




<PAGE>





       Total  revenues of  $2,036,634 in 1997 and  $1,330,635 in 1996  consisted
       entirely  of direct  product  sales,  sales to  distributors  for resale,
       analytical  service  fees,  technology  and  licensing  fees,  and  grant
       revenues.  In 1997,  revenues  (including  licensing and technology fees)
       from three major  customers were 29 percent,  14 percent and 8 percent of
       total revenues. Grant revenues in 1997 represented eight percent of total
       revenues.  In 1996,  revenues from three major customers were 14 percent,
       14 percent and 13 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 not permitted the issuance of the 500,000 shares because the
       transaction  is not  considered  arms length.  The Toronto Stock Exchange
       requires  that  an  independent   valuation  be  performed  in  order  to
       reconsider  the  issuance of these  shares.  No such  valuation  has been
       performed to date.

       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 Share:

       Net loss per  share is based on the  weighted  average  number  of common
       shares  outstanding  during each  period,  presented in  accordance  with
       Statement  of  Financial  Accounting  Standards  No. 128 (SFAS No.  128),
       "Earnings Per Share".

       Potentially  dilutive  securities  include 2,424,402 and 2,254,597 common
       stock  options and 10.9  million and 6.4 million  common  stock  warrants
       outstanding at December 31, 1997 and 1996, respectively. These securities
       were not considered in the computation of dilutive loss per share because
       their effect would be anti-dilutive for the years ended December 31, 1997
       and 1996.














                                      F.9

<PAGE>


3.     Property, Plant and Equipment

       Property,  plant and equipment at December 31, 1997 and 1996 consisted of
the following:

                                                 December 31,
                                            1997             1996
                                     ---------------- ----------------
  Lab equipment                            $229,701         $282,468
  Computer equipment                         94,712          212,330
  Production equipment                       37,164           42,095
  Office furniture                           13,510           18,069
  Leasehold improvements                     68,343            8,554
                                     ---------------- ----------------
                                            443,430          563,516
  Less accumulated depreciation            (324,520)        (455,471)
                                     ---------------- ----------------
  Property, plant and equipment, net       $118,910         $108,045
                                     ================ ================



4.    Income Taxes

       The Company's deferred tax asset at December 31, 1997 and 1996 is:

                                                  December 31,
                                            1997             1996
                                       ---------------- ----------------
  Net  operating loss carryovers            $5,153,000    $   5,167,000
  Research and development expenses
   capitalized for tax purposes                 62,000          151,000
  Research and development
   credit carryovers                           593,000          524,000
  Issue cost carryovers                        137,000          152,000
  Other temporary differences                 (255,000)        (258,000)
                                        ---------------- ----------------
                                             5,690,000        5,736,000
  Valuation allowance                       (5,690,000)      (5,736,000)
                                        ---------------- ----------------
  Net deferred tax asset                    $     --       $      --
                                        ================ ================


















                                        F.10

<PAGE>



       The reconciliation of the effective tax rate is as follows:
<TABLE>

<CAPTION>
                                                            December 31,
                                                1997                            1996
                                      Amount              %          Amount                %
                                      ----------------- ------------ ------------------- ------------
<S>                                   <C>               <C>          <C>                 <C>
U.S. Statutory tax rate                $(699,000)        (34)%          $(536,000)        (34)%
State taxes, net of federal
income tax benefit                      (123,000)         (6)%            (95,000)         (6)%
Effects of international
losses and loss in equity of
subsidiary                                933,000         45 %              48,000          3 %
Research and development tax
credit                                   (56,000)         (2)%            (22,000)         (1)%
Loss carryforward utilized              (105,000)         (5)%                   -            -
Other                                       4,000            -           (155,000)        (10)%
Change in valuation allowance
                                           46,000          2 %             760,000         48 %
                                      ----------------- ------------ ------------------- ------------
Provision for income taxes              $      --          0 %       $       --             0 %
                                      ================= ============ =================== ============
</TABLE>

       Total U.S.  federal and state net tax operating loss  carryforwards as of
       December  31, 1997 are  approximately  $11.9  million  and $5.9  million,
       respectively.  Federal operating loss  carryforwards  expire from 2006 to
       2012 and state operating loss carryforwards expire from 1997 to 2001. The
       Company  also has  federal  and state  research  and  development  credit
       carryovers  of  $593,000  which  expire from 2007 to 2011.  For  Canadian
       income tax purposes,  the Company has net operating loss carryforwards of
       approximately  $1.3 million which expire from 1999 to 2003. 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.      Commitments and Contingencies

       Leases
       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  through
       January,  1997.  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.  In 1997,  the lessor  claimed  $365,880 in
       deferred  rent and related  costs for part of 1995 through  January 1997.
       The lessor also claimed an  additional  $90,000 of equipment and property
       damage resulting from the abandonment of the premises.  The Company has a
       counter  claim for $300,000  representing  sales  royalties  due from the
       lessor  to the  Company  plus the cost of  building  repairs  paid by the
       Company on behalf of the lessor.  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 of $365,880  has been accrued and is reflected on
       the  balance  sheet at  December  31,  1997.  While  the  original  lease
       agreement extends through December 31, 1998,  management does not believe
       the Company will be held  responsible  for continuing  lease  obligations
       and, as such,  no  additional  amounts have been accrued  beyond  January
       1997. The facility has been subsequently leased.

       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 in 1997, the remaining  deferred rent balance at December 31,
       1996  of  $62,538   was   written-off   against   selling,   general  and
       administrative expenses.



                                               F.11

<PAGE>



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

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

              1998                                                 115,692
              1999                                                 125,582
              2000                                                  34,559
              2001 and thereafter                                    --
                                                            ---------------
                                                                  $275,833
                                                            ===============


        Rent  expense was $57,950  (net of sublease  rental  income) in 1997 and
        $274,284 in 1996.

       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.

6.     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

       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.

       On March  21,  1997,  the  Company  closed a  Cdn.$2.0  million  (USD$1.4
       million)  financing (the Q197 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 4.0 million 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.  An  additional  280,000  units and 280,000
       warrants valued at approximately $161,000 were distributed to the brokers
       in exchange for services  rendered in connection with the Q197 Financing.
       The Company  utilized the  Black-Scholes  model to value all the warrants
       issued in the Q197 Financing at approximately  $496,000. The Company used
       the proceeds of the offering and  additional  cash to purchase  1,500,000
       common shares of BioMarin for $1.5 million.

       BioMarin and the Company have entered into a License Agreement dated June
       26, 1997,  pursuant to which the Company  granted  BioMarin an exclusive,
       worldwide, perpetual, irrevocable,  royalty-free right and license to all
       current and future worldwide patents, trade secrets, copyrights and other
       proprietary rights to all know-how,  processes,  formulae, concepts, data
       and other such intellectual  property,  whether patented or not, owned or
       licensed  by the  Company.  and its  subsidiaries  as of the  date of the
       License Agreement. Under the same License Agreement, BioMarin granted the
       Company. a cross-license,  similar in scope, to all improvements BioMarin
       may make upon the licensed intellectual


                                         F.12

<PAGE>



       property.  As consideration for this license,  BioMarin issued the
       Company 7,000,000 shares of BioMarin common stock.

       In  October  1997,  BioMarin  sold  3,740,000  shares of common  stock to
       outside investors for net proceeds of $3,647,000  (including  $880,000 of
       bridge loans  received in the third quarter of 1997 which were  converted
       to common stock).  Additionally,  BioMarin  issued to the placement agent
       299,000  common  shares and 299,000  warrants to purchase  common  shares
       exercisable  at $1.00 per share and valued under the Black  Scholes model
       at $48,000.  Concurrently,  BioMarin  issued  2,500,000  shares of common
       stock to  three  executive  officers  of  BioMarin,  two of whom are also
       executive   officers  of  Glyko  Biomedical  Ltd.  for  an  aggregate  of
       $2,500,000 in notes due on July 31, 2000.

       In December 1997, BioMarin raised net proceeds of $5,016,000 from outside
       investors in exchange for  5,527,500  shares  (including  502,500  shares
       issued to the placement agent for the financing).  Additionally, BioMarin
       issued to the placement agent 502,500  warrants to purchase common shares
       exercisable  at $1.00 per share and valued under the Black  Scholes model
       at $80,000. As a result of such share issuances,  Glyko Biomedical Ltd.'s
       ownership in BioMarin was reduced to 41% of BioMarin's outstanding Common
       Stock.  Future fundraising  efforts of BioMarin could result in a further
       reduction of Glyko Biomedical Ltd.'s ownership percentage.

7.        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 granted 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,  except for options granted to
       consultants,  because,  under the Option Plan, the option  exercise price
       equals the market  value of stock on the date of grant.  In general,  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:

                                                    1997               1996
           Net loss           As reported       $(2,055,858)       $(1,575,859)
                              Pro forma         $(2,138,587)       $(1,644,687)

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

       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.









                                           F.13

<PAGE>



       A summary of the status of the Company  stock option plan at December 31,
       1997 and 1996 and changes during the years then ended is presented in the
       table and narrative below:
<TABLE>


<CAPTION>
                                                        1997                               1996
                                                Shares         Wtd avg ex         Shares        Wtd avg ex
                                                                price (2)                         price
<S>                                             <C>            <C>                <C>           <C>
             Outstanding beginning
                 of year                          2,254,597    Cdn. $ 1.36          2,204,879   Cdn. $1.39
             Granted (1)                            528,870    Cdn. $ 0.71            118,000   Cdn. $0.55
             Exercised                             (50,000)    Cdn. $ 0.65              (100)   Cdn. $0.60
             Canceled                             (309,065)    Cdn. $ 1.41           (68,182)   Cdn. $0.88
                                                  ---------                        ----------
            Outstanding at end of
                 year                             2,424,402    Cdn. $1.22           2,254,597   Cdn. $1.36
             Exercisable at end of year           2,045,312                         1,965,086
             Weighted average fair
                 value of options granted        Cdn. $0.50                        Cdn. $0.22

<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.  In 1997,  includes
                150,000 options issued to consultants with an average fair value
                of $ 0.22 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, 1997 was
                approximately $0.7215.
</FN>
</TABLE>

      There are 575,598  options  available for grant under the plan at December
      31,  1997.  The  average   remaining   contractual  life  of  the  options
      outstanding at December 31, 1997 is 2 years.

      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  1997  and  1996,
      respectively:  risk-free  weighted  average  interest rates of 6.3 and 5.3
      percent; expected dividend yield of zero percent; expected life of 4 years
      for the Plans' options; expected volatility of 92 and 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, 1997 and 1996 were
       approximately $20,060 and, $274,284, respectively (see Note 5).

       The Company subleases office and lab space,  certain  administrative  and
       research and development  functions to BioMarin.  BioMarin reimburses the
       Company for rent, salaries and related benefits and other  administrative
       costs and the  Company  reimburses  BioMarin  for  salaries  and  related
       benefits.  The Company reimbursed BioMarin $133,000 during the year ended
       December 31, 1997 and BioMarin  reimbursed  the Company $ 373,848  during
       the year ended  December 31, 1997.  The Company also provided  analytical
       services  and  products  to BioMarin  at a 27%  discount  in 1997.  Total
       receipts to the Company from sales to BioMarin total $39,301 during 1997.












                                         F.14

<PAGE>



                       REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholders of
BioMarin Pharmaceutical, Inc.:

We have audited the accompanying balance sheet of BioMarin Pharmaceutical,  Inc.
(a Delaware  corporation in the  development  stage) as of December 31, 1997 and
the related  statement of operations,  changes in stockholders'  equity and cash
flows for the period from March 21, 1997 (inception) to December 31, 1997. 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 BioMarin  Pharmaceutical,  Inc.
as of December 31, 1997 and the results of its operations and its cash flows for
the period from March 21, 1997  (inception)  to December 31, 1997 in  conformity
with generally accepted accounting principles.






San Francisco, California,             \s\Arthur Andersen
   February 20, 1998                   Arthur Andersen





















                                F.15



<PAGE>



                                                    BIOMARIN PHARMACEUTIAL, INC.
                                                   (a development-stage company)

                                                           BALANCE SHEET
                                                      AS OF DECEMBER 31, 1997

<TABLE>


<CAPTION>
                                                                                            1997
                                       ASSETS

<S>                                                                                   <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                           $   5,987,433
   Short-term investments                                                                    900,827
   Due from Glyko, Inc.                                                                        9,135
   Due from Glyko Biomedical, Ltd.                                                            79,607
   Prepaid expenses                                                                          539,445
                                                                                      -----------------

                Total current assets                                                       7,516,447

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $4,790
                                                                                             145,683
                                                                                      -----------------

                Total assets                                                           $   7,662,130
                                                                                      =================

                   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Accounts payable                                                                    $     168,062
   Accrued expenses                                                                           43,395
   Due to Glyko, Inc.                                                                         70,207
                                                                                      -----------------

                Total current liabilities                                                    281,664
                                                                                      -----------------

STOCKHOLDERS' EQUITY (DEFICIT):
   Common stock, $0.001 par value: 30,000,000  shares authorized, 20,566,500
     issued and outstanding at December 31, 1997                                              20,567
   Additional paid-in capital                                                             12,548,924
   Warrants                                                                                  128,240
   Deferred compensation                                                                     (217,000)
   Notes receivable from stockholders                                                     (2,337,500)
   Deficit accumulated during development stage                                           (2,762,765)
                                                                                      -----------------

                Total stockholders' equity                                                 7,380,466
                                                                                      -----------------

                Total liabilities and stockholders' equity                            $    7,662,130
                                                                                      =================
</TABLE>




               The accompanying notes are an integral part of these statements.

                                            F.16


<PAGE>



                           BIOMARIN PHARMACEUTICAL, INC.
                          (a development-stage company)
                             STATEMENTS OF OPERATIONS
            FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTON) TO DECEMBER 31, 1997

                                                            Period from March
                                                                 21, 1997
                                                              (inception), to
                                                            December 31, 1997
                                                            -------------------

OPERATING COSTS AND EXPENSES:
   Research and development                                 $    1,913,795
   General and administrative expenses                             914,299
                                                            -------------------

                Loss from operations                            (2,828,094)

INTEREST INCOME                                                     65,329
                                                            -------------------

                Net loss                                    $   (2,762,765)
                                                            ===================

NET LOSS PER SHARE, basic and diluted                                $(0.34)
                                                            ===================

WEIGHTED AVERAGE COMMON SHARE OUTSTANDING                         8,136,475
                                                            ===================



















                The accompanying notes are an integral part of these statements.


                                          F.17

<PAGE>


                                      BIOMARIN PHARMACEUTICAL, INC.
                                       (a development stage company)
                         STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
            FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTION) TO DECEMBER 31, 1997

<TABLE>

<CAPTION>


                                                                             Additional
                                                       Common Stock           Paid-in             Warrants            Deferred
                                                 -------------------------                --------------------------
                                                    Shares       Amount       Capital       Shares        Amount    Compensation
                                                 ------------- ----------- -------------- ------------ ------------ ----------------


<S>                                              <C>           <C>          <C>           <C>          <C>          <C>
BALANCE, MARCH 21, 1997                                     -            -              -           -             -              -

   Issuance of common stock to Glyko                1,500,000        1,500      1,498,500           -            -              -
     Biomedical, Ltd. on March 21, 1997 for
     cash, $1.00 per share

   Issuance of common stock to Glyko
     Biomedical Ltd. in June 1997, in exchange      7,000,000        7,000         (7,000)          -            -              -
     for technology, $1.00 per share

   Issuance of common stock in October 1997,
     $1.00 per share (net of issuance costs         3,740,000        3,740      3,296,540          -             -              -
     of $439,720)
   Issuance of common stock at $1.00 per share        299,000          299        298,701    299,000        47,840
     and warrants in October 1997 for                                                                                           -
     brokerage services
   Issuance of common stock to employees in         2,500,000        2,500      2,497,500          -             -        (200,000)
     exchange for notes, $1.00 per share

   Issuance of common stock and warrants on                                                                                      -
     December 31,  1997,  $1.00 per share (net      5,025,000        5,026      4,427,665          -             -
     of issuance costs of $592,309)
   Issuance of common stock at $1.00 per share        502,500          502        501,998    502,500        80,400               -
     and warrants on December 31, 1997 for
     brokerage services
   Common stock options granted in exchange                                        35,020          -             -         (17,000)
     for services                                          -             -
   Interest on notes receivable                                          -              -          -             -               -
                                                           -
   Net loss for the period from March 21, 1997             -             -              -          -             -               -
     (inception) to December 31, 1997
                                                 ------------- ----------- -------------- ------------ ------------- ---------------
BALANCE, DECEMBER 31, 1997                         20,566,500   $  20,567   $ 12,548,924     801,500    $  128,240       $(217,000)
                                                 ============= =========== ============== ============ ============= ===============
</TABLE>

               The accompanying notes are an integral part of these statements.
                                              F.18

<PAGE>

                                BIOMARIN PHARMACEUTICAL, INC.
                               (a development stage company)
                       STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
            FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTION) TO DECEMBER 31, 1997
                                       (continued)

<TABLE>

<CAPTION>
                                                                           Deficit
                                                          Notes          Accumulated           Total
                                                     Receivable from       During           Stockholders'
                                                      Stockholders      Development Stage       Equity
                                                   ------------------ -------------------- ----------------


<S>                                                <C>                <C>                  <C>
BALANCE, MARCH 21, 1997                                      -                   -           $     -

   Issuance of common stock to Glyko                         -                   -             1,500,000
     Biomedical, Ltd. on March 21, 1997 for
     cash, $1.00 per share

   Issuance of common stock to Glyko
     Biomedical Ltd. in June 1997, in exchange               -                   -                 -
     for technology, $1.00 per share
   Issuance of common stock in October 1997,
     $1.00 per share (net of issuance costs                  -                   -            3,300,280
     of $439,720)
   Issuance of common stock at $1.00 per share                                                  346,840
     and warrants in October 1997 for
     brokerage services
   Issuance of common stock to employees in            (2,300,000)               -                 -
     exchange for notes, $1.00 per share

   Issuance of common stock and warrants on
     December 31,  1997,  $1.00 per share (net               -                   -            4,432,691
     of issuance costs of $592,309)
   Issuance of common stock at $1.00 per share               -                   -              582,900
     and warrants on December 31, 1997 for
     brokerage services
   Common stock options granted in exchange                  -                                   18,020
     for services                                                                -
   Interest on notes receivable                            (37,500)                             (37,500)

   Net loss for the period from March 21, 1997                -             (2,762,765)       (2,762,765)
     (inception) to December 31, 1997
                                                 -------------------- ------------------- ----------------

BALANCE, DECEMBER 31, 1997                           $  (2,337,500)      $  (2,762,765)      $7,380,466
                                                  =================== ==================== ================
</TABLE>


           The accompanying notes are an integral part of these statements.
                                            F.18


<PAGE>




                                 BIOMARIN PHARMACEUTICAL, INC.
                                 (a development-stage company)

                                 STATEMENT OF CASH FLOWS
            FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTON) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>

                                                                                        Period from
                                                                                       March 21, 1997
                                                                                         (Inception),
                                                                                         to December
                                                                                          31, 1997
                                                                                       ----------------

<S>                                                                                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                               $(2,762,765)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation                                                                               4,790
     Compensation in the form of common stock and common stock options                         18,020
   Changes in operating assets and liabilities:
     Receivables from Glyko Biomedical, Ltd. and Glyko, Inc.                                  (88,742)
     Prepaid expenses                                                                        (539,445)
     Accounts payable                                                                         168,062
     Accrued expenses                                                                          43,395
     Due to Glyko, Inc.                                                                        70,207
                                                                                        ----------------

                Net cash used in operating activities                                      (3,086,478)
                                                                                        ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                                        (150,473)
   Purchase of short-term investments                                                        (900,827)
                                                                                        ----------------

                Net cash used in investing activities                                      (1,051,300)
                                                                                        ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Bridge loan                                                                                880,000
   Accrued interest on notes receivable from stockholders                                     (37,500)
   Proceeds from sale of common stock, net of issuance costs                                9,282,711
                                                                                        ----------------

                Net cash provided by financing activities                                  10,125,211
                                                                                        ----------------

                Net increase in cash and cash equivalents                                   5,987,433

CASH AND CASH EQUIVALENTS:
   Beginning of year                                                                                -
                                                                                        ---------------

   End of year                                                                           $  5,987,433
                                                                                        ================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Noncash transactions:
     Common stock issued in exchange for notes                                           $  2,500,000
     Compensation in the form of common stock and common stock options                         18,020
     Common stock and common stock warrants issued in exchange for financing services
                                                                                              929,740
     Bridge loan retired in exchange for common stock                                         880,000
</TABLE>

           The accompanying notes are an integral part of these statements.

                                  F.19

<PAGE>




                                   BIOMARIN PHARMACEUTICAL, INC.
                                  (a development-stage company)

                                   NOTES TO FINANCIAL STATEMENTS
                                           DECEMBER 31, 1997



1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of Operations

BioMarin  Pharmaceutical,  Inc. (BioMarin or the Company) is a development-stage
pharmaceutical   company  specializing  in  the  discovery  and  development  of
proprietary,  naturally  occurring  carbohydrate-active  enzyme  therapeutics as
treatments for major human  diseases.  BioMarin was  incorporated on October 25,
1996 in the state of  Delaware.  BioMarin  first  issued stock on March 21, 1997
(inception) when it issued 1,500,000 shares of common stock to Glyko Biomedical,
Ltd. (GBL) fof $1.5 million. At inception,  the Company was wholly-owned by GBL,
which also owns 100 percent of an affiliate,  Glyko, Inc. (Glyko).  Beginning in
October  1997,  BioMarin  issued stock to outside  investors  resulting in GBL's
ownership of BioMarin being reduced to 41 percent at December 31, 1997.

Since  inception,  the Company has devoted  substantially  all of its efforts to
product  research  and  development  through a network of experts in the disease
areas being studied.

The Company is in the  development  stage,  and its products are in  early-stage
clinical  trials.  There can be no  assurance  that the  Company's  research and
development efforts will be successfully  completed or that its products will be
shown to be safe and effective. There can be no assurance that its products will
be approved for  marketing by the FDA or any foreign  government  agency or that
its products will be successfully  introduced or achieve any significant  degree
of market acceptance.

Concentration of Business Risks

BioMarin's   core   technology  is  derived  from  the  successful   cloning  of
carbohydrate-active  enzymes developed by Glyko.  Rights to this technology were
transferred  to  BioMarin by GBL in exchange  for  7,000,000  shares of BioMarin
common stock (see Note 3). Certain of the Company's products rely on proprietary
technology and patents owned by certain  universities.  These  universities also
provide  research  and  development  for  product   development.   Cessation  of
relationships with these universities could  significantly  affect the Company's
future operations.

In order to compete successfully, the Company must expand its efforts to develop
new products and uses for its current products in  pharmaceutical  applications.
The Company will also need to establish its own production  capabilities  and to
develop its own marketing  capabilities and/or establish arrangements with third
parties having the capacity for such manufacturing or marketing.

BioMarin's  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  which
could delay or preclude the Company from marketing its products. There can be no
assurance that any of BioMarin's current or future products 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.

Concentration of Credit Risk

Financial  instruments that may potentially subject the Company to concentration
of credit risk consist  principally  of cash,  cash  equivalents  and short-term
investments.  All cash,  cash  equivalents  and short-term  investments are with
financial  institutions with strong credit ratings,  which minimizes the risk of
loss due to nonpayment. The Company has not experienced any losses due to credit
impairment related to its financial instruments.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting   principles  requires  management  to  make  certain  estimates  and
assumptions  that  effect the  reported  amounts of assets and  liabilities  and
disclosure of contingent  assets and  liabilities  at the dates of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.  Significant
estimates made by management  includes  determination  of progress to date under
research and development contracts (see Footnote 6).

                                          F.20

<PAGE>




Cash

Cash and cash equivalents are stated at cost,  which  approximates  market,  and
consist of short-term highly liquid investments with original maturities of less
than three months.

Available-for-Sale Securities

The   Company's   policy   is   to   record   its   investment   securities   as
available-for-sale  because the sale of such securities may be required prior to
maturity.  The Company's short-term  investments at December 31, 1997, consisted
of U.S.  Treasury Bills stated at amortized cost, which  approximated fair value
at December 31, 1997.

Property and Equipment

Property and equipment are stated at cost.  Depreciation  is computed  using the
straight-line method.  Leasehold improvements are amortized over the life of the
asset or the term of the lease, whichever is shorter. Additions and improvements
are  capitalized,  while  repairs  and  maintenance  are  charged to expenses as
incurred.

Property and equipment consist of the following at December 31, 1997:

                                                          Estimated Useful Lives
Computer hardware and software        $   27,688                   3 years
Laboratory equipment                     119,002                   5 years
Leasehold improvements                     3,783        Shorter of life of asset
                                                              or lease term
                                   -------------
                                         150,473
Less:  Accumulated depreciation           (4,790)
                                   -------------
                                      $  145,683
                                   =============

Depreciation expense for the year ended December 31, 1997, was $4,790.



Accrued Liabilities

Accrued liabilities consist of the following at December 31, 1997:

Accrued vacation                     $  25,579
Accrued legal fees                      17,816
                                    -----------

                                     $  43,395
                                    ============

Research and Development

Research  and  development  costs  include  contract  research  funding to third
parties and clinical and regulatory  costs.  Research and development  costs are
expensed as incurred.

Income Taxes

The Company  provides for income taxes under  Statement of Financial  Accounting
Standards  (SFAS) No. 109,  "Accounting  for Income  Taxes." Under SFAS No. 109,
deferred  income  taxes are recorded to reflect the tax  consequences  on future
years of differences  between the tax basis of assets and  liabilities and their
financial reporting amounts at each period-end. The Company has



                                       F.21

<PAGE>




a cumulative net operating loss carryforward  since inception,  resulting in net
deferred  tax assets.  A valuation  allowance  is placed on the net deferred tax
assets to reduce them to their net realizable values.

Net Loss per Share

Net loss per share is based on the  weighted  average  number  of common  shares
outstanding in accordance with SFAS No. 128, "Earnings per Share."

Potentially dilutive securities include 297,000 common stock options and 801,500
common stock warrants;  these  securities were not considered in the computation
of dilutive loss per share because their effect would be  anti-dilutive  for the
year ended December 31, 1997.

Adoption of Accounting Pronouncements

For the year ending  December  31, 1998,  the Company will report  Comprehensive
Income  based  upon  the  recently  issued  Statement  of  Financial  Accounting
Standards No. 130 (SFAS No. 130),  "Comprehensive  Income." The pro forma effect
of this  accounting  change on the period  from March 21,  1997  (inception)  to
December 31, 1997 is:


         Net Loss as reported                        $(2,762,765)
         Pro forma effect of SFAS No. 130                      0
         Comprehensive income pro forma              $(2,762,765)

2.  BRIDGE LOANS:

In the third quarter of 1997,  the Company drew upon a bridge loan facility from
stockholders  in the amount of  $880,000.  This bridge loan was  converted  into
880,000 shares of common stock in the fourth quarter of 1997.

3. STOCKHOLDERS' EQUITY:

Common Stock and Warrants

On March 21, 1997,  BioMarin's  parent company,  GBL, provided equity funding by
purchasing 1,500,000 shares of common stock for $1,500,000.

BioMarin  and GBL have  entered  into a License  Agreement  dated June 26, 1997,
pursuant  to which GBL  granted  BioMarin an  exclusive,  worldwide,  perpetual,
irrevocable,  royalty-free right and license to all current and future worldwide
patents, trade secrets, copyrights and other proprietary rights to all know-how,
processes,  formulae,  concepts,  data and  other  such  intellectual  property,
whether patented or not, owned or licensed by GBL and its subsidiaries as of the
date of the  License  Agreement.  Under  the same  License  Agreement,  BioMarin
granted GBL a cross-license,  similar in scope, to all improvements BioMarin may
make upon the licensed intellectual property. As consideration for this license,
BioMarin issued to GBL 7,000,000 shares of BioMarin common stock.

In October 1997,  BioMarin  closed a private  equity  placement  offering  which
raised net proceeds of $3,647,000. The Company issued 6,240,000 shares of common
stock at $1.00 per share,  including $2,500,000 in notes from stockholders at an
interest rate of six percent.  Included in the issued shares are 299,000  shares
issued to brokers in  exchange  for  services  rendered in  connection  with the
financing,  and  880,000  shares  issued to  stockholders  to retire an $880,000
bridge loan. The brokers also received for their  services  warrants to purchase
299,000 shares of common stock  exercisable at $1 per share and valued under the
Black-Scholes valuation model at $47,840. The warrants expire October 1, 2001.

On December 31, 1997, the Company issued  5,025,000 shares of common stock at $1
per share to investors for net proceeds of $5,016,000.  In addition, the Company
issued to brokers  502,500  shares and  warrants to purchase  502,500  shares of
common  stock at $1 per share in exchange for  services  rendered in  connection
with the financing.  The warrants were valued under the Black-Scholes  valuation
model at $80,400. The warrants expire on December 31, 2001.

The October 1997 and December 31, 1997  offerings  reduced  GBL's  ownership in
BioMarin to 41 percent.



                                     F.22

<PAGE>




Notes Receivable from Stockholders

Notes  receivable from  stockholders  relate to shares issued in October 1997 to
employees,  bear interest at six percent per annum and are due July 31, 2000, or
the date of the employee's termination,  whichever is earlier. Notes are secured
by the underlying stock. Interest was imputed at 9%, resulting in a discount and
related deferred compensation of $200,000.

4.  INCOME TAXES:

The  significant  components  of net deferred tax assets and  liabilities  as of
December 31, 1997, are as follows:

Net operating loss carryforwards                       $    1,054,000
Research and development credit carryforwards                 200,000
Other                                                         (30,000)
Valuation allowance                                        (1,224,000)
                                                      -----------------
Net deferred tax asset                                  $           -
                                                       =================

       The reconciliation of the effective tax rate is as follows:

                                   Period from March 21, 1997
                                         (inception) to
                                          December 31,1997
                                      Amount              %
                                      ----------------- ------------
U.S. Statutory tax rate               $ (939,000)        (34)%
State taxes, net of federal
income tax benefit                      (167,000)         (6)%
Research and development tax
credit                                  (200,000)         (7)%
Other                                      82,000          3 %
Change in valuation allowance
                                        1,224,000         44 %
                                      ----------------- ------------
Provision for income taxes            $        --          0 %
                                      ================= ============


As of December 31, 1997, net operating loss carryforwards are approximately $2.4
million  and $2.5  million  for  federal  and  California  income tax  purposes,
respectively. These federal and state carryforwards expire beginning in the year
2011 and 2004, respectively.

The Company also has research and development credits available to reduce future
federal and  California  income  taxes,  if any, of  approximately  $143,000 and
$56,000, respectively, at December 31, 1997.

The Tax Reform Act of 1986 contains  provisions that may limit the net operating
loss carryforwards and research and development  credits available to be used in
any given year should certain events occur,  including sale of equity securities
and other changes in ownership.  There can be no assurance that the Company will
be  able  to  utilize  net  operating  loss  carryforwards  and  credits  before
expiration.

5.  STOCK OPTION PLANS:

The  Company's  1997  Stock  Option  Plan (the Plan)  provides  for the grant of
incentive  common  stock  options  and  nonstatutory  common  stock  options  to
employees and consultants of the Company. The maximum aggregate number of shares
that 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, as options have been granted at an option
exercise  price equal to the market value of common stock as  determined  by the
Board of  Directors  on the date of the  grant,  except for  options  granted to
consultants.  The Company recognized compensation expense for options granted to
consultants,  pursuant to SFAS No. 123, based on a valuation as determined using
the Black-Scholes valuation model.

                                        F.23

<PAGE>






Had compensation cost for the Plan been determined  consistent with SFAS No. 123
for option grants to employees,  the effect on the Company's net loss would have
been as follows:

                                  Period from March
                                       21,1997
                                   (inception) to
                                  December 31, 1997
                                 --------------------

Net loss:
   As reported                    $(2,762,765)
   Pro forma                       (2,764,405)


A summary of the status of the Company's stock option plan is as follows:
<TABLE>
<CAPTION>

                                                                                                Weighted Average
                                                                 Weighted       Exercisable      Fair Value of
                                                 Option          Average         at End of      Options Granted
                                                   Shares     Exercise Price       Year
                                                 ----------- ----------------- -------------- ---------------------

<S>                                              <C>         <C>               <C>            <C>
Outstanding at March 21, 1997                        0            $0.00              0

   Granted                                        297,000          1.00                              $0.22
   Exercised                                         0             0.00
   Canceled                                          0             0.00
                                                 ----------- ----------------- -------------- ---------------------

Outstanding at December 31, 1997                  297,000         $1.00           232,000
                                                 =========== ================= ==============
</TABLE>

There are 2,703,000  options  available for grant under the plan at December 31,
1997.  The average  remaining  contractual  life of the options  outstanding  at
December 31, 1997 is 4 years.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions used for grants in 1997: risk-free  weighted-average  interest rates
of 6.15 percent;  expected dividend yield of 0 percent; expected life of 4 years
for the Plans' options; and expected volatility of 0 percent.

6.  COMMITMENTS AND CONTINGENCIES:

Lease Commitments

The Company leases office space for its  administrative  office and its research
and testing laboratory pursuant to a month-to-month  operating sublease from the
Company's  affiliate,  Glyko,  Inc. Lease  payments for this operating  lease is
charged to expense over the lease terms as they become payable. Rent expense for
the period from March 21, 1997 (inception) to December 31, 1997 was $34,830.

Research and Development Funding Commitments

The Company  uses  experts at  universities  and other  institutions  to perform
research and development  activities.  Funding commitments to these institutions
as of December 31, 1997, are as follows:

1998                   $    997,156
1999                        186,451
                      ---------------

                       $  1,183,607
                      ===============

                                      F.24

<PAGE>



Consulting Agreements

BioMarin has agreements  with two  consultants  whereby the consultants are paid
cash and granted  common  stock  options in exchange for  services;  options for
206,000  shares of common  stock  have been  granted in  satisfaction  for these
services. Total compensation related to these options is $35,020.


8.  RELATED-PARTY TRANSACTIONS

BioMarin  shares office space,  certain  administrative,  and research and
development  functions with Glyko,  Inc., its affiliate.
BioMarin  reimburses Glyko, Inc. for rent,  salaries and related benefits,
and other  administrative  costs. Glyko, Inc. reimburses BioMarin for salaries
and related benefits.  BioMarin  reimbursed Glyko, Inc. for $373,848 and
Glyko, Inc.  reimbursed  BioMarin for $133,000 for the period March 21, 1997
(inception) to December 31, 1997.
















































                              F.25

<PAGE>






                          EXHIBIT INDEX


Exhibit No.     Description                              Location in Form 10-KSB

27.1              Financial Data Schedule                         Page 49







                             48

<PAGE>