UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 20-F

[_]  REGISTRATION  STATEMENT  PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
     EXCHANGE  ACT  OF  1934
                                       OR
[X]  ANNUAL  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT  OF  1934
     For  the  fiscal  year  ended  June  30,  2005
                                    ---------------
                                       OR
[_]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF THE SECURITIES
     EXCHANGE  ACT  OF  1934
                                       OR
[_]  SHELL  COMPANY  REPORT  PURSUANT  TO  SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE  ACT  OF  1934

                        Commission file number 000-29228
                                               ---------

                            PROGEN INDUSTRIES LIMITED
             (Exact name of Registrant as specified in its charter)

                                 Not Applicable
                                 --------------
                 (Translation of Registrant's Name into English)

                                    Australia
                                    ---------
                 (Jurisdiction of incorporation or organization)

              2806 Ipswich Road, Darra, Queensland 4076, Australia
              ----------------------------------------------------
                    (Address of Principal Executive Offices)

                                 +61 7 3273 9100
                                 ---------------
         (Registrant's telephone number including country and area code)

 Securities registered or to be registered pursuant to Section 12(b) of the Act.
        Title of each Class     Name of each Exchange on which Registered
        -------------------     -----------------------------------------
               None                                None

 Securities registered or to be registered pursuant to Section 12(g) of the Act,
                                 Ordinary Shares
                                 ---------------
                                (Title of Class)

  Securities for which there is a reporting obligation pursuant to Section 15(d)
                                   of the Act.
                                      None
                                      ----
                                (Title of Class)

Indicate  the  number  of  outstanding shares of each of the issuer's classes of
capital  or  common  stock  as  of the close of the period covered by the annual
report:  40,556,793  (as  of  June  30,  2005)
         -------------------------------------

Indicate by checkmark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes        No   X
    ---        ---

If  this report is an annual or transition report, indicate by check mark if the
registrant  is  not  required to file reports pursuant to Section 13 or 15(d) of
the  Securities  Exchange  Act  of  1934.


<PAGE>
Yes        No  X
    ---       ---

Indicate  by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.
Yes  X     No
    ---        ---

Indicate by check mark which financial statement item the registrant has elected
to  follow.
Item  17     Item  18  X
        ---           ---

If  this is an annual report, indicate by check mark whether the registrant is a
shell  company  (as  defined  in  Rule  12b-2  of  the  Exchange  Act).
Yes        No   X
    ---        ---


<PAGE>
<TABLE>
<CAPTION>
                                     TABLE OF CONTENTS
                                     -----------------

                                                                                      Page
                                                                                      ----
<S>              <C>                                                                  <C>

ITEM 1.          IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS . . . . . . . .   6

ITEM 2.          OFFER STATISTICS AND EXPECTED TIMETABLE . . . . . . . . . . . . . . .   6

ITEM 3.          KEY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .   7

    ITEM 3.A       SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . .   7
    ITEM 3.D.      RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . .   8

ITEM 4.          INFORMATION ON THE COMPANY. . . . . . . . . . . . . . . . . . . . . .  21

    ITEM 4.A.      HISTORY AND DEVELOPMENT OF THE COMPANY. . . . . . . . . . . . . . .  21
    ITEM 4.B.      BUSINESS OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . .  22
    ITEM 4.D.      PROPERTY, PLANTS AND EQUIPMENT. . . . . . . . . . . . . . . . . . .  42

ITEM 5.          OPERATING AND FINANCIAL REVIEW AND PROSPECTS. . . . . . . . . . . . .  44

    ITEM 5.A.      OPERATING RESULTS . . . . . . . . . . . . . . . . . . . . . . . . .  46
    ITEM 5.B.      LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . .  51
    ITEM 5.E.      OFF-BALANCE SHEET ARRANGEMENTS. . . . . . . . . . . . . . . . . . .  52
    ITEM 5.F.      TABULAR DISCLOSURE OF AGGREGATE CONTRACTUAL OBLIGATIONS . . . . . .  53

ITEM 6.          DIRECTORS, SENIOR MANAGMENT AND EMPLOYEES . . . . . . . . . . . . . .  54

    ITEM 6.A.      DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . .  54
    ITEM 6.B.      COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .  56
    ITEM 6.C.      BOARD PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . .  57
    ITEM 6.D.      EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
    ITEM 6.E.      SHARE OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . .  59

ITEM 7.          MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS . . . . . . . . . .  62

    ITEMS 7.A.     MAJOR SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . .  62
    ITEM 7.B.      RELATED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . . . .  62

ITEM 8.          FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .  63

    ITEM 8.A.      FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION. . . . . . . .  63
    ITEM 8.B.      SIGNIFICANT CHANGES . . . . . . . . . . . . . . . . . . . . . . . .  63

ITEM 9.          THE OFFER AND LISTING . . . . . . . . . . . . . . . . . . . . . . . .  64

    ITEM 9.C.      MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64

ITEM 10.         ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .  66

    ITEM 10.B.     MEMORANDUM AND ARTICLES OF ASSOCIATION. . . . . . . . . . . . . . .  66
    ITEM 10.C.     MATERIAL CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . .  67
    ITEMS 10.D.    EXCHANGE CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . .  67
    ITEM 10.E.     TAXATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67

ITEM 11.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . . . . .  74

ITEM 12.         DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. . . . . . . .  75

ITEM 13.         DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES. . . . . . . . . . . .  76

ITEM 14.         MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
                 PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76


                                        3
<PAGE>
ITEM 15.         CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . .  76

ITEM 16.         [RESERVED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77

ITEM 16A.          AUDIT COMMITTEE FINANCIAL EXPERT. . . . . . . . . . . . . . . . . .  77

ITEM 16B.          CODE OF ETHICS. . . . . . . . . . . . . . . . . . . . . . . . . . .  78

ITEM 16C.          PRINCIPAL ACCOUNTANT FEES AND SERVICES. . . . . . . . . . . . . . .  78

ITEM 16D.          EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. . . . .  78

ITEM 16E.          PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
                   PURCHASERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  79

ITEM 17.         FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . .  79

ITEM 18.         FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . .  79

ITEM 19.         EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  79
</TABLE>


     References  in  this  annual report to "Progen," "we," "our", "us" and "the
Company"  refer  to  Progen  Industries  Limited.

     All  references to dollars or $ are to the currency of the United States of
America;  and  references  to  Australian  dollars  or A$ are to the currency of
Australia.


                                        4
<PAGE>
              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This  annual  report contains forward-looking statements that involve risks
and  uncertainties.  Forward-looking  statements  relate to future events or our
future  financial performance and include information concerning our possible or
assumed  future  results  of  operations,  business strategies, financing plans,
competitive  position, industry environment, potential growth opportunities, the
effect of future regulation and the effects of competition. These statements are
based  on  our current expectations, beliefs and assumptions, and on information
currently  available  to  our  management.  In  some  cases,  you  can  identify
forward-looking  statements  by the use of words such as "anticipate," "expect,"
"intend,"  "plan," "seek," "may," "will," "should," "could," "would," "believe,"
"estimate,"  "project,"  "predict,"  "potential," "continue," or the negative of
such  terms  or  similar  expressions. These forward-looking statements are only
predictions and involve known and unknown risks, uncertainties and other factors
which  may cause our actual results, levels of activities, performance and other
factors  to  be  materially  different  from  those  anticipated  in  such
forward-looking  statements.  Factors  that might cause such differences include
the  risks  discussed  in  "Item  3.  Key  Information - Risk Factors", "Item 4.
Information  on  the  Company"  and  "Item 5. Operating and Financial Review and
Prospects,"  as  well  as  those  discussed  elsewhere  in  this  annual report.

     Certain  statements contained in this report may not be based on historical
facts  and are "forward-looking statements" within the meaning of Section 27A of
the  Securities  Act  of  1933,  as  amended,  and Section 21E of the Securities
Exchange  Act  of  1934,  as amended. In particular, certain statements included
herein  under  "Item  3.  Key  Information" and "Item 5. Operating and Financial
Review  and  Prospects,"  including  without  limitation,  those  concerning the
Company's  strategy  and  competitive  strengths, the Company's expectations and
plans,  the  Company's  collaborative  revenues,  research  and  development and
general  and administrative expenses, contain certain forward-looking statements
concerning  the  Company's operations, performance and financial condition. Such
statements  may  generally,  but not always, be identified by their use of words
such  as  "anticipates," "expects," or "believes." Although the Company believes
that  the  expectations  reflected  in  such  forward-looking  statements  are
reasonable,  no  assurance  can  be  given  that such expectations will prove in
hindsight  correct.  Many important factors could cause actual results to differ
materially  from  such  expectations including, among others, those set forth in
"Item  3.  Key  Information-Risk  Factors"  and  "Item  4.  Information  on  the
Company-Australian  Government  Regulation  and  U.S.  Government  Regulation"
(collectively,  the  "Risk  Factors").  All  subsequent  written  and  oral
forward-looking  statements attributable to the Company or persons acting on its
behalf  are expressly qualified by the Risk Factors. Other relevant risks may be
detailed  from time to time in the Company's press releases and filings with the
Securities  and  Exchange Commission. We undertake no obligation to update these
forward-looking  statements  to reflect events or circumstances that occur after
the  date  of  this  report.


                                        5
<PAGE>
                                     PART I


ITEM 1.  IDENTITY  OF  DIRECTORS,  SENIOR  MANAGEMENT  AND  ADVISERS

     Not  applicable.


ITEM 2.  OFFER  STATISTICS  AND  EXPECTED  TIMETABLE

     Not  applicable.


                                        6
<PAGE>
ITEM 3.  KEY  INFORMATION

ITEM 3.A  SELECTED  FINANCIAL  DATA

     The  following  selected  financial  data for the five years ended June 30,
2005  should be read in conjunction with "Item 5. Operating and Financial Review
and  Prospects"  below  and our financial statements and related notes contained
elsewhere in this annual report. Our financial statements and related notes have
been  prepared  in  accordance  with  U.S.  GAAP.

     The  balance  sheet  information  as  at  June  30,  2004  and 2005 and the
statement of operations data for fiscal 2003, 2004 and 2005 are derived from our
audited  financial  statements  included  in  this  annual report. Balance sheet
information  as  of  June  30,  2001,  2002 and 2003 and statement of operations
information  for  fiscal  2001  and  2002 are derived from our audited financial
statements  which  are  not  included  in  this  annual  report.

<TABLE>
<CAPTION>
                                                           For the Years Ended June 30,
                                    -----------------------------------------------------------------------
                                        2001           2002           2003           2004          2005
-----------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>            <C>            <C>           <C>
STATEMENT OF OPERATIONS DATA:

Revenue From Operations             $    198,331   $    704,044   $  1,051,695   $ 1,394,589   $ 1,076,308

Cost of Operations:

    Research and development           2,374,319      2,088,001      2,371,704     3,061,120     2,757,081
    Selling, general and
    administrative costs                 862,031      1,311,836      2,022,547     2,616,728     2,953,886

Total Cost of Operations               3,757,915      4,104,544      5,018,983     6,299,231     6,628,603
                                    -------------  -------------  -------------  ------------  ------------

Gross Loss                            (3,716,051)    (3,601,294)    (4,391,353)   (5,277,908)   (5,805,571)

Total Other Income (Expenses)            402,528        417,658        537,991     1,078,787     1,257,257
                                    -------------  -------------  -------------  ------------  ------------

Net Loss from continuing
operations                          $ (3,313,523)  $ (3,183,636)  $ (3,853,362)  $(4,199,121)  $(4,548,314)

Discontinued operations                   41,341        104,421        288,213       654,666             -
                                    -------------  -------------  -------------  ------------  ------------

Net Loss                             ($3,272,182)   ($3,079,215)   ($3,565,149)  $(3,544,455)  $(4,548,314)
                                    =============  =============  =============  ============  ============

Profit/(Loss) Per Ordinary Share
                                    =============  =============  =============  ============  ============

    Continuing operations           $      (0.14)  $      (0.13)  $      (0.16)  $     (0.13)  $     (0.13)
                                    =============  =============  =============  ============  ============

    Discontinued operations                    -              -   $       0.01   $      0.02             -
                                    =============  =============  =============  ============  ============

    Net loss per ordinary share     $      (0.14)  $      (0.13)  $      (0.15)  $     (0.11)  $     (0.13)
                                    =============  =============  =============  ============  ============

    Weighted Average Number of
      Ordinary Shares Outstanding     23,404,883     24,391,869     24,391,869    32,675,867    35,709,343
</TABLE>


                                        7
<PAGE>
<TABLE>
<CAPTION>
                                                   For the Years Ended June 30,
                            -------------------------------------------------------------------------
                                2001           2002           2003           2004           2005
-----------------------------------------------------------------------------------------------------
<S>                         <C>            <C>            <C>            <C>            <C>
BALANCE SHEET DATA:

Cash and Cash Equivalents   $  8,391,775   $  6,430,377   $  8,001,842   $  9,885,656   $ 17,851,895

Working Capital                9,517,072      7,174,683      7,379,033      9,107,687     16,990,609

Total Assets                  11,649,736      9,865,368     10,230,017     11,208,140     18,768,255

Long-Term Debt                         -              -              -              -              -

Capital Stock                 41,800,156     41,800,156     44,153,011     48,869,981     59,907,735

Accumulated Deficit          (28,771,296)   (31,850,511)   (35,415,660)   (38,960,115)   (43,508,429)

Total Stockholders' Equity  $ 10,823,825   $  8,523,149   $  8,504,942   $  9,934,555   $ 17,522,624
</TABLE>


ITEM 3.D.  RISK  FACTORS

     The  risks  and uncertainties described below are not the only ones that we
face.  Additional  risks  and uncertainties not presently known to us or that we
currently  believe  to  be immaterial may also adversely affect our business. If
any  of  the  following  risks and uncertainties develop into actual events, our
business,  financial condition and results of operations could be materially and
adversely  affected, and the trading price of our ordinary shares could decline.

     WE  ARE AT AN EARLY STAGE IN THE DEVELOPMENT OF PHARMACEUTICAL PRODUCTS AND
     OUR  SUCCESS  IS  UNCERTAIN

     Although  we  are  presently  generating revenues from the sale of contract
manufacturing services, we have not sufficiently advanced the development of our
lead  product  candidates,  PI-88  and PI-166 to enable their registration, and,
accordingly,  have  not  begun  to  market  or  generate  revenues  from  their
commercialization.  PI-88,  PI-166  and future pharmaceutical product candidates
will  require  significant  additional  investment  in research and development,
preclinical testing and clinical trials, drug manufacture and supply, regulatory
and  sales  and  marketing  activities,  and  regulatory  approval  prior to any
commercial sales.  We cannot make any assurances that PI-88, PI-166 or any other
product  candidates,  if  successfully  developed,  will  generate sufficient or
sustainable  revenues  to  enable  us  to  be  profitable.

     THERE  IS  A  SIGNIFICANT  RISK  THAT  WE  MAY  NOT BE ABLE TO COMPLETE THE
     DEVELOPMENT  OF  PI-88  OR PI-166, OR DEVELOP OTHER PHARMACEUTICAL PRODUCTS

     We cannot make any assurances that we will be able to develop PI-88, PI-166
or any future pharmaceutical product candidates adequately to attract a suitable
collaborative  partner,  or  that  our  research  will  lead to the discovery of
additional  product  candidates,  or  that any of our current and future product
candidates  will  be successfully developed, prove to be safe and efficacious in
clinical  trials,  meet  applicable  regulatory standards and receive regulatory
approval,  be  capable  of  being


                                        8
<PAGE>
produced  in  commercial  quantities  at reasonable costs, or be successfully or
profitably  marketed,  either  by  us or a collaborative partner. We also cannot
make  any  assurances that the products we develop will be able to penetrate the
potential  market  for  a  particular  therapy  or  indication  or  gain  market
acceptance  among  health  care  providers,  patients and third-party payors. We
cannot  predict  if  or  when  PI-88, PI-166, or any of our other pharmaceutical
products  under  development  will  be  commercialized.

     THE  RESULTS  OF  CLINICAL  TRIALS OF PI-88 AND PI-166 ARE UNCERTAIN AND WE
     WILL NOT BE ABLE TO COMMERCIALIZE PI-88, PI-166 OR ANY OF OUR OTHER PRODUCT
     CANDIDATES  IF WE FAIL TO ADEQUATELY DEMONSTRATE THEIR SAFETY, EFFICACY AND
     SUPERIORITY  OVER  EXISTING  THERAPIES

     Before obtaining regulatory approvals for the commercial sale of any of our
pharmaceutical  products,  we  must  demonstrate through preclinical testing and
clinical  studies  that our product candidates are safe and effective for use in
humans  for  each target indication. Conducting preclinical testing and clinical
studies is an expensive, protracted and time-consuming process. Furthermore, the
results  of  preclinical  in vitro (within an artificial environment) and animal
studies  may not necessarily be predictive of results obtained in human clinical
testing.  Likewise,  results from early clinical trials may not be predictive of
results obtained in large-scale, later-stage clinical testing. In addition, even
though  a  potential  drug  product  shows promising results in clinical trials,
regulatory  authorities may not grant the necessary approvals without sufficient
safety  and  efficacy  data.

     We  are  currently  conducting  four  Phase  II clinical trials of PI-88 in
cancer  patients  in  the  United  States, Taiwan and Australia and have planned
further  trials.  We  also  are conducting a Phase I clinical trial of PI-166 in
Australia  and,  depending  on the results of this trial, may conduct additional
clinical  trials.  We  plan  to  enter  into  collaborative  arrangements with a
suitable  pharmaceutical  or biotechnology company(s) to commercialize PI-88 and
PI-166.  We  cannot  make any assurances that we will be able either to complete
the  current  clinical  trials  of  PI-88  and  PI-166  successfully,  commence
additional  clinical  trials of PI-88 or PI-166 as anticipated, or at all, or to
demonstrate  the  safety  and  efficacy  or  superiority of PI-88 or PI-166 over
existing  therapies or enter into any collaborative arrangement to commercialize
PI-88  and  PI-166  on terms acceptable to us, or at all. Clinical trial results
that  show insufficient safety and efficacy could have a material adverse effect
on  our  business,  financial  condition  and  results  of  operations.

     Clinical  trials  may  take  up to several years to complete. The length of
time  varies  substantially  according to the type, complexity, novelty, patient
recruitment  into  and intended use of the product candidate. We cannot make any
assurances that, when Phase II clinical trials are completed, we will be able to
enter  into  a  collaborative  arrangement  with  a  suitable  pharmaceutical or
biotechnology  company to complete the development of, or commercialize PI-88 or
PI-166.  Nor  can we make any assurances that once clinical trials are completed
by  us  or  a  collaborative  partner,  we will be able to submit as scheduled a
marketing  approval  request to the Australian Therapeutic Good Administration's
(TGA)  Drug  Safety and Evaluation Branch, the U.S. Food and Drug Administration
(FDA)  or  any  other  authority,  or, that such request and application will be
reviewed  and  cleared  by  any of these authorities, as applicable, in a timely
manner,  or  at  all.

     During  the course of clinical trials and toxicology studies, PI-88, PI-166
and  our  other  product  candidates  may  exhibit  unforeseen  and unacceptable
drug-related  toxicities or side effects. If any unacceptable toxicities or side
effects  were  to  occur,  we  may,  or  regulatory  authorities  may


                                        9
<PAGE>
require us to, interrupt, limit, delay or abort the development of our potential
products.  In  addition,  unacceptable  toxicities  could ultimately prevent the
clearance  of  our  product  candidates  by  the  TGA  or the FDA for any or all
targeted indications. Even after being cleared by the TGA or the FDA, any of our
products  may  later  be shown to be unsafe or not to have its purported effect,
thereby  preventing  widespread  use or requiring withdrawal from the market. We
cannot  make  any  assurances  that  PI-88,  PI-166  or any of our other product
candidates  will  be  safe  or  effective  when  administered  to  patients.

     WE MAY EXPERIENCE DELAYS IN OUR CLINICAL TRIALS THAT COULD ADVERSELY AFFECT
     OUR  BUSINESS  AND  OPERATIONS

     We  do  not  know  whether  planned  clinical  trials will begin on time or
whether  we  will complete any of our clinical trials on schedule or at all. Our
ability to commence and complete clinical trials may be delayed by many factors,
including:

     -    Government  or  regulatory  delays,  including  delays  in  obtaining
          approvals  from  applicable  hospital  ethics  committees and internal
          review  boards;

     -    Slower  than  expected  patient  recruitment;

     -    Our  inability  to  manufacture  or prepare, as applicable, sufficient
          quantities  of  PI-88,  PI-166 or any of our other product candidates;

     -    Unforeseen  safety  issues;  and

     -    Lack  of  efficacy  during  the  clinical  trials.

     Patient  enrollment  is  a function of, amongst other things, the nature of
the  clinical trial protocol, the existence of competing protocols, the size and
longevity of the target patient population, and the availability of patients who
comply  with  the eligibility criteria for the clinical trial. Delays in planned
patient  enrollment  may  result  in  increased  costs, delays or termination of
clinical  trials.  Moreover,  we  have  limited  experience  in  conducting  and
managing  clinical trials and may rely on third parties to assist us in managing
and  monitoring  clinical  trials. Any failure by these third parties to perform
under their agreements with us may cause the trials to be delayed or result in a
failure  to  complete  the  trials.

     Product  development  costs to our collaborators and us will increase if we
have  delays  in  testing  or  approvals or if we need to perform more or larger
clinical  trials  than planned. Significant delays could have a material adverse
effect  on  the commercial prospects of our product candidates and our business,
financial  condition  and  results  of  operations.


                                       10
<PAGE>
     WE  HAVE  LIMITED  MANUFACTURING  EXPERIENCE,  AND  DELAYS IN MANUFACTURING
     SUFFICIENT  QUANTITIES  OF  PI-88  AND  PI-166 FOR PRECLINICAL AND CLINICAL
     TRIALS  MAY  NEGATIVELY  IMPACT  OUR  BUSINESS  AND  OPERATIONS

     We  believe  that  we  have the capability to manufacture PI-88 and prepare
PI-166  for  preclinical studies and early stage (Phase I and Phase II) clinical
trials.  We  cannot,  however,  make  any  assurances  that  we  will be able to
manufacture or prepare, as applicable, sufficient quantities of PI-88, PI-166 or
any  of  our  other product candidates in a cost-effective or timely manner. Any
delays in production would delay our preclinical and clinical trials which could
have  a material adverse effect on our business, financial condition and results
of  operations.

     We  may  be  required  to  enter  into  contracting arrangements with third
parties  to  manufacture  or prepare, as applicable, PI-88, PI-166 and our other
product  candidates for large-scale, later-stage clinical trials. We cannot make
any  assurances  that  we  will  be  able  to  make the transition to commercial
production.  We  may  need  to develop additional manufacturing resources, enter
into  collaborative  arrangements  with  other  parties  who  have  established
manufacturing  capabilities,  or  have  third parties manufacture or prepare our
products  on  a  contract basis. We cannot make any assurances that we will have
access on acceptable terms to the necessary and substantial financing that would
be  required  to  scale-up  production  and  develop  effective  commercial
manufacturing  processes  and  technologies.  We also cannot make any assurances
that  we will be able to enter into collaborative or contracting arrangements on
acceptable  terms  with  parties  that  will  meet our requirements for quality,
quantity  and  timeliness.

     IF WE ARE UNABLE TO ESTABLISH OR MANAGE STRATEGIC COLLABORATIONS TO DEVELOP
     PI-88, PI-166 OR ANY OF OUR OTHER PRODUCT CANDIDATES, WE MAY HAVE TO REDUCE
     OR  DELAY  PRODUCT  DEVELOPMENT  AND/OR  INCREASE  OUR  EXPENDITURES

     Our  strategy  for  developing  and  commercializing our product candidates
includes  entering  into  various  relationships  with  pharmaceutical  or
biotechnology  companies  to provide us with funding and/or to perform research,
clinical  development,  regulatory  clearance,  commercial  scale manufacturing,
sales, marketing or distribution activities relating to PI-88, PI-166 or some or
all  of  our  current or future product candidates. To date, we have not entered
into  any  agreements  with  third  parties capable of providing those services.
Establishing  strategic  collaborations  is  difficult  and  time-consuming. Our
discussions  with  potential  collaborators may not lead to the establishment of
collaborations  on  favorable  terms,  if  at all. If we are unable to establish
collaborative  arrangements,  we may have to reduce or delay further development
of  PI-88,  PI-166  and  our  other  product  candidates  and/or  increase  our
expenditures  and  undertake the development and commercialization activities at
our  own  expense.  If we elect to fund our research and development programs on
our  own, we will need to obtain additional financing which may not be available
on  acceptable  terms,  or  at  all.

     If  we  successfully  establish strategic collaborations, the management of
our  relationship  with  collaborators  will require significant time and effort
from  our management team, coordination of our research and development programs
with the research and development priorities of our collaborators, and effective
allocation  of  our  resources  to  multiple projects. We cannot be certain that
these  relationships  will  result  in  the  successful  development  or
commercialization  of our product candidates or the generation of sales revenue.
If  we  enter  into  strategic  collaborations  at  an  early


                                       11
<PAGE>
phase of product development, our success will in part depend on the performance
of  our  corporate  collaborators.  Factors  that  could  harm  a  successful
collaboration  include:

     -    Collaborators  may  delay  clinical trials, underfund a clinical trial
          program,  stop a clinical trial or abandon a product candidate, repeat
          or  conduct  new  clinical  trials  or  require a new formulation of a
          product  candidate  for  clinical  testing;

     -    Collaborators  could  independently  develop,  or  develop  with third
          parties,  products  that  could  compete  with  our current and future
          product  candidates;

     -    Collaborators  may  not  commit  enough resources to the marketing and
          distribution  of  our  product candidates, limiting potential revenues
          from  the  commercialization  of  a  product;

     -    Collaborators may not pursue further development and commercialization
          of  compounds  resulting  from  collaborations  or  may  elect  not to
          continue  or  renew  research  and  development  programs;

     -    The terms of our agreements with collaborators may not be favorable to
          us;

     -    Disputes  may  arise delaying or terminating the research, development
          or  commercialization  of  our  product  candidates,  resulting  in
          significant litigation or arbitration, or causing collaborators to act
          in  their  own  self-interest  and  not  in  the  interest  of  our
          shareholders;  and

     -    Collaborators  may terminate their agreements with us if, for example,
          we  fail  to meet a required milestone or observe other obligations in
          those  agreements.

     OUR  EFFORTS  TO DISCOVER, DEVELOP AND COMMERCIALIZE NEW PRODUCT CANDIDATES
     BEYOND  PI-88  AND  PI-166  ARE IN A VERY EARLY STAGE AND, THEREFORE, THESE
     EFFORTS  ARE  SUBJECT  TO  A  HIGH  RISK  OF  FAILURE

     The  process  of  successfully  developing  product candidates is very time
consuming,  expensive  and  unpredictable.  Although  we  have  a dedicated drug
discovery  group  focused on identifying and developing molecule(s) that inhibit
angiogenesis  by  disrupting  heparan  sulfate  protein  interactions as product
candidates,  we  may  not  be  successful  in  identifying,  developing  or
commercializing  any  additional  new  product  candidates.

     IF  WE CANNOT ENTER INTO NEW LICENSING ARRANGEMENTS, OUR ABILITY TO DEVELOP
     A  BROAD  PRODUCT  PORTFOLIO  COULD  BE  LIMITED

     A  component  of  our  business  strategy  is  in-licensing  drug compounds
developed  by  other  commercial or academic entities. Competition for promising
compounds  is  intense.  If  we  are  not  able to identify additional licensing
opportunities  or  enter  into licensing arrangements on acceptable terms, if at
all,  we  will  be  unable to develop a diverse portfolio of product candidates.


                                       12
<PAGE>
     WE  MAY  REQUIRE  SUBSTANTIAL  ADDITIONAL  FINANCING  IN  THE  FUTURE  TO
     SUFFICIENTLY  FUND  OUR  OPERATIONS  AND  RESEARCH

     We  have been unprofitable to date and expect to incur losses over the next
several  years  as  we  expand  our  drug discovery and development programs and
preclinical  testing  and as we conduct clinical trials of PI-88, PI-166 and our
other  product  candidates. Although our future capital requirements will depend
on  many  factors,  we  believe that our existing cash and investments resources
will  be  adequate  to  satisfy  the  requirements  of  our  current and planned
operations  through  to March 2007. We cannot, however, make any assurances that
such  funds will be sufficient to meet our actual operating expenses and capital
requirements  during  such  period.  Our  actual  cash  requirements  may  vary
materially  from  those  now  planned  and  will  depend  upon numerous factors,
including:

     -    The  continued  progress  of  our  research  and development programs;

     -    The  timing,  scope,  results  and  costs  of  preclinical studies and
          clinical  trials;

     -    The  progress  of  licensing  efforts

     -    The  cost, timing and outcome of regulatory submissions and approvals;

     -    Determinations  as  to  the  commercial  potential  of  our  product
          candidates;

     -    Our  ability  to  successfully  expand  our  contract  manufacturing
          services;

     -    Our  ability  to  establish  and  maintain collaborative arrangements;

     -    The  status  and  timing  of  competitive  developments;  and

     -    Other  factors.

     Although  we  have  no  specific  plans  we anticipate that we will require
substantial  additional  funds  in  order  to  achieve  our  long-term goals and
complete  the research and development of our pharmaceutical product candidates.
In  addition,  we will require additional funds to pursue regulatory clearances,
prosecute  and  defend  our  intellectual  property rights, establish commercial
scale  manufacturing  facilities,  develop  marketing and sales capabilities and
fund operating expenses. We have no established bank financing arrangements, and
we  cannot  be  certain  that  we will be able to establish such arrangements on
satisfactory  terms,  or  at  all.  We  may seek such additional funding through
public  or  private  financings  and/or  through  strategic  alliances  or other
arrangements  with  corporate partners. We cannot, however, be certain that such
additional  financing will be available from any sources on acceptable terms, or
at  all,  or  that  we  will  be  able to establish strategic alliances or other
arrangements  with  corporate  partners  on  acceptable  terms,  or  at all. Any
shortfall  in  funding  could  result  in  our having to curtail our operations,
including  our  research and development activities, which could have a material
adverse  effect  on our business, financial condition and results of operations.


                                       13
<PAGE>
     WE  HAVE A HISTORY OF OPERATING LOSSES AND MAY NOT ACHIEVE PROFITABILITY IN
     THE  NEAR  FUTURE

     We  have  incurred  net  operating  losses  in  each  year  since  we began
operations  in  1989.  As  of  June  30,  2005, we had an accumulated deficit of
approximately  $43.5  million,  primarily  attributable  to  our  research  and
development  activities.  We expect to incur additional operating losses over at
least the next several years and to increase our cumulative losses substantially
as  we  expand  our  research  and  development  and  preclinical activities and
commence  additional  clinical  trials  of  PI-88  and  PI-166.

     OUR  SUCCESS  DEPENDS UPON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY
     AND  OUR  PROPRIETARY  TECHNOLOGY

     Our  success  will  depend  in  large  part  on  whether  we  can:

     -    Obtain  and  maintain  patents  to  protect  our  own  products;

     -    Obtain  licenses  to  the  patented  technologies  of  third  parties;

     -    Operate without infringing on the proprietary rights of third parties;
          and

     -    Protect  our  trade  secrets  and  know-how.

     Patent  matters  in  biotechnology are highly uncertain and involve complex
legal and factual questions. Accordingly, the availability and breadth of claims
allowed  in  biotechnology  and  pharmaceutical  patents  cannot  be  predicted.
Statutory  differences  in patentable subject matter may limit the protection we
can obtain on some or all of our inventions outside Australia or prevent us from
obtaining  patent  protection  outside  Australia,  either of which could have a
material  adverse  effect  on  our  business, financial condition and results of
operations.  For  example, methods of treating humans are not patentable in many
countries  outside  Australia  and  the  United  States.  Moreover, since patent
applications  in Australia and the United States are maintained in secrecy until
the  patent is issued, and since publication of discoveries in the scientific or
patent  literature  often  lags  behind actual discoveries, we cannot be certain
that  we or any of our licensors were the first creator of inventions covered by
pending  patent  applications or that we or our licensors were the first to file
patent  applications  for such inventions. Additionally, the enforceability of a
patent  is dependent on a number of factors that may vary between jurisdictions.
These factors may include the novelty of the invention, the requirement that the
invention  not  be  obvious  in  the  light of prior art (including prior use or
publication  of  the invention), the utility of the invention, and the extent to
which  the  patent  clearly  describes the best method of working the invention.

     While  we intend to seek patent protection for our therapeutic products and
technologies,  we  cannot  be  certain  that any of the pending or future patent
applications  filed  by  us  or  on our behalf will be approved, or that we will
develop additional proprietary products or processes that are patentable or that
we  will  be able to license any other patentable products or processes. We also
cannot be certain that others will not independently develop similar products or
processes,  duplicate  any  of  the  products  or  processes  developed or being
developed  by  us  or  licensed  to  us,  or  design around the patents owned or
licensed by us, or that any patents owned or licensed by us will provide us with
competitive  advantages.  Furthermore, we cannot be certain that patents held by
third  parties


                                       14
<PAGE>
will  not prevent the commercialization of products incorporating the technology
developed  by  us or licensed to us, or that third parties will not challenge or
seek  to  narrow,  invalidate or circumvent any of the issued, pending or future
patents  owned  or  licensed  by  us.

     Our  commercial  success will also depend, in part, on our ability to avoid
infringement  of  patents  issued  to others. If a court determines that we were
infringing  any  third party patents, we could be required to pay damages, alter
our  products  or  processes,  obtain  licenses  or cease certain activities. We
cannot be certain that the licenses required under patents held by third parties
would  be made available on terms acceptable to us or at all. To the extent that
we  are  unable  to  obtain  such  licenses,  we  could  be  foreclosed from the
development,  manufacture  or  commercialization  of  the product requiring such
license  or encounter delays in product introductions while we attempt to design
around  such  patents,  and  any  of  these  circumstances could have a material
adverse  effect  on our business, financial condition and results of operations.

     We  may  have  to  resort  to  litigation  to enforce any patents issued or
licensed to us or to determine the scope and validity of third party proprietary
rights.  Such  litigation  could  result  in  substantial costs and diversion of
effort  by  us.  We may have to participate in opposition proceedings before the
Australian  Patent  and Trademark Office or another foreign patent office, or in
interference  proceedings  declared  by  the  United States Patent and Trademark
Office,  to determine the priority of invention for patent applications filed by
competitors.  Any  such  litigation,  interference  or  opposition  proceeding,
regardless  of  outcome,  could  be  expensive  and  time consuming, and adverse
determinations  in  any  such  proceedings  could  prevent  us  from developing,
manufacturing  or commercializing our products and could have a material adverse
effect  on  our  business,  financial  condition  and  results  of  operations.

     In  addition  to patent protection, we rely on unpatented trade secrets and
know-how  and  proprietary  technological  innovation  and  expertise  that  are
protected  in  part  by confidentiality and invention assignment agreements with
our  employees,  advisors and consultants. We cannot make any assurances that we
will  have  adequate  remedies  for any breach. In addition, third parties could
independently  develop  the  same  or  similar  technologies.

     WE MAY NOT BE ABLE TO OBTAIN THE EXTENSIVE GOVERNMENT APPROVALS REQUIRED TO
     BRING  OUR  PHARMACEUTICAL  PRODUCTS  TO  MARKET

     Our ongoing research and development activities are, and the production and
marketing  of  our pharmaceutical product candidates derived there from will be,
subject  to  regulation  by  numerous  governmental  authorities  in  Australia,
principally  the  TGA,  and  by  the  FDA  in the United States, the Medicines &
Healthcare  Products  Regulatory  Agency  in the United Kingdom and the European
Medicines  Evaluation  Authority.  Prior  to  marketing, any therapeutic product
developed must undergo rigorous preclinical testing and clinical trials, as well
as  an  extensive  regulatory  approval  process mandated by the TGA and, to the
extent  that  any  of our pharmaceutical products under development are marketed
abroad,  by  foreign  regulatory agencies including the FDA in the United States
and the Medicines Control Agency in the United Kingdom. These processes can take
many  years  and  require  the  expenditure  of substantial resources. Delays in
obtaining  regulatory  approvals  could  adversely  affect  the  development and
commercialization  of  our  pharmaceutical  product  candidates and could have a
material  adverse  impact  on  our  business, financial condition and results of
operations.  Although  we  intend  to  make  use  of  fast-track and abbreviated
regulatory  approval


                                       15
<PAGE>
programs  when possible, we cannot be certain that we will be able to obtain the
clearances and approvals necessary for clinical testing or for manufacturing and
marketing  our  pharmaceutical  products  candidates.

     OUR  RESEARCH  AND  DEVELOPMENT EFFORTS WILL BE SERIOUSLY JEOPARDIZED IF WE
     ARE  UNABLE  TO ATTRACT AND RETAIN KEY PERSONNEL AND CULTIVATE KEY ACADEMIC
     AND  SCIENTIFIC  COLLABORATIONS

     We  are  a  small  company with only 41 full-time employees. Our success is
highly  dependent on the continued contributions of our principal management and
scientific  personnel  and  on  our  ability  to  develop and maintain important
relationships  with  leading  academic  institutions and scientists. Competition
among  biotechnology  and  pharmaceutical  companies  for qualified employees is
intense,  and  we  cannot be certain that we will be able to continue to attract
and  retain  qualified  scientific  and  management  personnel  critical  to our
success.  We  also  have  relationships  with  leading  academic  and scientific
collaborators  who  conduct  research at our request or assist us in formulating
our  research  and  development  strategies.  These  academic  and  scientific
collaborators  are  not our employees and may have commitments to, or consulting
or  advisory contracts with, other entities that may limit their availability to
us.  In addition, these collaborators may have arrangements with other companies
to  assist  such companies in developing technologies that may prove competitive
to  ours.

     WE  MAY  NOT  BE  ABLE  TO  KEEP PACE WITH TECHNOLOGICAL CHANGE OR WITH THE
     ADVANCES  OF  OUR  COMPETITORS

     The  biotechnology  and  pharmaceutical industries are subject to rapid and
significant technological change. Our competitors in Australia and elsewhere are
numerous  and  include,  among  others,  major  pharmaceutical  companies,
biotechnology  firms,  universities  and  other  research  institutions.  These
competitors  may  develop technologies and products that are more effective than
any  that  we  are developing, or which would render our technology and products
obsolete  or  non-competitive.  Many of these competitors have greater financial
and technical resources and manufacturing and marketing capabilities than we do.
In  addition,  many  of  our competitors have much more experience than we do in
preclinical  testing and human clinical trials of new or improved drugs, as well
as  in  obtaining  FDA,  TGA  and  other  regulatory  approvals.

     We  know  that  competitors  are  developing  or  manufacturing  various
technologies or products for the treatment of diseases that we have targeted for
product  development.  Some  of  these  competitive  products  use  therapeutic
approaches  that  compete  directly  with  some  of  our product candidates. Our
ability  to further develop our products may be adversely affected if any of our
competitors  were  to  succeed  in  obtaining  regulatory  approval  for  their
competitive  products  sooner  than  us.

     ACCEPTANCE  OF OUR PRODUCTS IN THE MARKETPLACE IS UNCERTAIN, AND FAILURE TO
     ACHIEVE  MARKET  ACCEPTANCE  WILL  NEGATIVELY  IMPACT  OUR  BUSINESS  AND
     OPERATIONS

     We  cannot  make  any  assurances  that  our  products  will achieve market
acceptance  even  if  they  are  approved  by the TGA and the FDA. The degree of
market acceptance of our products will depend on a number of factors, including:


                                       16
<PAGE>
     -    The  receipt  and  timing of regulatory approvals for the uses that we
          are  studying;

     -    The  establishment  and  demonstration in the medical community of the
          safety,  clinical  efficacy  and  cost-effectiveness  of  our  product
          candidates  and  their potential advantages over existing therapeutics
          and  technologies;  and

     -    The  pricing and reimbursement policies of governments and third-party
          payors.

     Physicians,  patients,  payors  or  the medical community in general may be
unwilling  to  accept,  use  or  recommend  any  of  our  products.

     WE  MAY  NEED TO ESTABLISH OUR SALES, MARKETING AND DISTRIBUTION CAPABILITY

     We  currently  have  no  experience  in marketing, sales or distribution of
pharmaceutical  products.  If  we  develop  any  commercially  marketable
pharmaceutical  products  and  decide  to  perform  our  own sales and marketing
activities,  we  will require additional management, will need to hire sales and
marketing  personnel,  and  will  require additional capital. We cannot make any
assurances  that qualified personnel will be available in adequate numbers or at
a  reasonable  cost,  that  additional financing will be available on acceptable
terms,  or  at  all,  or  that  our  sales  staff  will achieve success in their
marketing  efforts.  Alternatively,  we  may be required to enter into marketing
arrangements  with  other  parties  who  have established appropriate marketing,
sales  and distribution capabilities. We cannot make any assurances that we will
be  able to enter into marketing arrangements with any marketing partner or that
if  such  arrangements  are  established, our marketing partners will be able to
commercialize  our  products  successfully.  Other companies offering similar or
substitute  products  may  have  well-established  and well-funded marketing and
sales  operation  in  place  that  will allow them to market their products more
successfully.  Failure to establish sufficient marketing capabilities may have a
material  adverse  impact  our  potential  revenues  and  results of operations.

     HEALTHCARE  INSURERS  AND OTHER ORGANIZATIONS MAY NOT PAY FOR OUR PRODUCTS,
     OR  MAY  IMPOSE  LIMITS  ON  REIMBURSEMENT

     The drugs we hope to develop may be rejected by the marketplace due to many
factors,  including  cost.  The  continuing  efforts  of  governments, insurance
companies, health maintenance organizations and other payors of healthcare costs
to  contain  or  reduce  healthcare  costs  may  affect  our future revenues and
profitability  and those of our potential customers, suppliers and collaborative
partners,  as  well  as  the  availability  of capital. In Australia and certain
foreign markets, the pricing or profitability of prescription pharmaceuticals is
already  subject  to  government  control.  We  expect  initiatives  for similar
government control at both the state and federal level to continue in the United
States.  The adoption of any such legislative or regulatory proposals could have
a  material  adverse effect on our potential revenues and results of operations.

     Our  ability  to commercially exploit our products successfully will depend
in  part  on  the extent to which reimbursement for the cost of our products and
related  treatment  will  be  available  from  government  health administration
authorities,  private  health  coverage  insurers  and  other  organizations.
Third-party  payors,  such  as  government  and  private  health  insurers,  are
increasingly  challenging  the  price of medical products and services. Although
the  Australian  government


                                       17
<PAGE>
continues to provide a subsidy to certain prescribed prescription pharmaceutical
products through the Pharmaceutical Benefits Scheme, which, pending development,
could  include  PI-88  and  PI-166,  uncertainty  exists as to the reimbursement
status  of newly approved health care products and in foreign markets, including
the  United States. If third-party coverage is not available to patients for any
of  the  products we develop, alone or with collaborators, the market acceptance
of  these products may be reduced which may adversely affect our future revenues
and  profitability.  In addition, cost containment legislation and reductions in
government  insurance  programs  may result in lower prices for our products and
could  materially  adversely  affect  our  ability  to  operate  profitably.

     OUR BUSINESS AND OPERATIONS MAY BE NEGATIVELY IMPACTED IF WE FAIL TO COMPLY
     WITH  GOVERNMENT  REGULATIONS  APPLICABLE TO OUR CURRENT REVENUE GENERATING
     BUSINESS

     We  import  biological  products into Australia under existing permits from
the  Australian  Quarantine  and  Inspection  Service that require us to declare
incoming biological materials and to ensure that such products contain labels as
to  their  use  and  disposal under approved methods. Any potential violation of
Australian  import  laws  or  modification or revocation of our permits could be
significant  and may negatively impact our business and operations. Our contract
manufacturing  operations include some manufacturing processes that are required
to  comply  with  the  applicable  cGMP  requirements of the TGA, the Australian
Office  of  Gene  Technology  Regulator and the Australian National Registration
Authority  (agricultural  and  veterinary  chemicals), which govern the methods,
controls,  facilities  and  quality  assurance procedures used in manufacturing,
packing and storing biological and pharmaceutical products. In addition, certain
international markets have quality assurance and manufacturing requirements that
may  be  more  or  less  rigorous  than  those  in  Australia. Our manufacturing
facilities  are  also  subject  to  biennial  inspections  by  the  TGA  and the
Australian National Registration Authority. Any potential failure to comply with
cGMP  requirements  or  with  any  other international requirements could have a
material  adverse  impact  on  our  business, financial condition and results of
operations.

     WE  MAY  HAVE  PRODUCT  LIABILITY  EXPOSURE

     The  importation  of  biological  products  entails the risk of product and
manufacturer's liability under present Australian law. We currently have limited
product  and  manufacturer's liability insurance coverage related to our current
sales  activities.  We  cannot be certain that this coverage will be adequate to
protect  us  in  the  event  of a successful product or manufacturer's liability
claim  or  that  the  insurance  will  continue  to be available on commercially
reasonable  terms.

     The  testing, marketing and sale of human health care products also entails
an  inherent  risk of product liability. We may incur substantial liabilities or
be  required  to  limit  development  or commercialization of our products if we
cannot  successfully  defend  ourselves  against  product  liability  claims. In
addition,  product  liability  claims  or  product  recalls,  regardless  of the
ultimate  outcome,  could  require  us  to  spend  significant time and money in
litigation and to pay significant damages. We cannot be certain that our current
limited  product liability coverage will adequately protect us in the event of a
successful  product  liability  claim or that such insurance will continue to be
available  on  commercially  reasonable  terms.


                                       18
<PAGE>
     WE  MAY  BE  LIABLE  FOR DAMAGES FOR ANY ACCIDENTAL CONTAMINATION OR INJURY
     FROM OUR USE OF BIOLOGICAL AND HAZARDOUS MATERIALS OR OUR FAILURE TO COMPLY
     WITH  APPLICABLE  LAWS  AND  REGULATIONS

     Our research and development activities and manufacturing processes involve
the  use  or  sale  of  potentially  harmful  biological materials and hazardous
substances.  As  a  result,  we are subject to federal, state and local laws and
regulations  in  Australia governing the use, manufacture, storage, handling and
disposal  of  potentially  harmful biological materials and hazardous substances
and  certain  waste  products.  We  are  also  subject  to applicable Australian
environmental  laws  and  regulations.  Although  we  believe  that  our  safety
procedures  for  handling and disposing of such materials comply in all material
respects  with  the  standards prescribed by applicable laws and regulations, we
cannot  completely eliminate the risk of accidental contamination or injury from
these  materials.  In the event of such an accident, we could be held liable for
any resulting damages and any such liability could exceed our resources. We also
believe  that  we  are  in  compliance  in all material respects with applicable
environmental  laws  and  regulations. However, any potential violation of these
and  other  applicable  laws  and  regulations  could  be  significant  and  may
negatively  impact  our  business  and  operations.

     CHANGES  IN  GOVERNMENT  LEGISLATION  AND  POLICY  MAY  ADVERSELY AFFECT US

     While we do not anticipate in the near future any specific material changes
in  government legislation that may adversely affect us, any material changes in
interest  rate,  exchange  rate,  relevant  taxation and other legal regimes and
government policies may adversely affect us and the market price of our ordinary
shares.

     EXCHANGE  RATE FLUCTUATIONS WILL CONTINUE TO AFFECT OUR REPORTED RESULTS OF
     OPERATIONS

     Substantially  all  of  our revenues are realized, and substantially all of
our  operating  costs are incurred, in Australian dollars. Because our financial
statements  included  elsewhere  in  this  annual  report  are presented in U.S.
dollars,  any significant fluctuation in the currency exchange rates between the
Australian  dollar  and  the  U.S.  dollar  will  affect our reported results of
operations.

     OUR  STOCK  PRICE  MAY  BE  VOLATILE  AND  THE  U.S. TRADING MARKET FOR OUR
ORDINARY  SHARES  IS  LIMITED

     The  market  price  for our ordinary shares, like that of the securities of
other  biotechnology companies, has fluctuated substantially and may continue to
be  highly  volatile  in  the  future. We believe that the following factors, in
addition  to  other  risk  factors  described above and elsewhere in this annual
report,  will  continue to significantly affect the market price of our ordinary
shares:

     -    The  results  of preclinical testing and clinical trials by us and our
          competitors;

     -    Developments  concerning  research and development, manufacturing, and
          marketing  alliances  or  collaborations  by  us  and our competitors;

     -    Announcements  of technological innovations or new commercial products
          by  us  and  our  competitors;

                                       19
<PAGE>
     -    Determinations  regarding our patent applications and those of others;

     -    Publicity  regarding actual or potential results relating to medicinal
          products  under  development  by  us  and  our  competitors;

     -    Proposed  governmental  regulations and developments in Australia, the
          U.S.  and  elsewhere;

     -    Litigation;

     -    Economic  and  other  external  factors;  and

     -    Period-to-period  fluctuations  in  our  operating  results.

     In  addition,  stock  markets  have  experienced  extreme  price and volume
fluctuations. These fluctuations have especially affected the stock market price
of  many  high  technology  and  healthcare-related  companies,  including
biotechnology  companies,  and,  in  many  cases, are unrelated to the operating
performance  of  the  particular  companies.  We believe that these broad market
fluctuations  may  continue  to  affect the market price of our ordinary shares.

     From  time  to  time, there has been limited trading volume with respect to
our ordinary shares quoted on the Nasdaq SmallCap Market, but we cannot make any
assurances  that  there  will  continue  to  be a trading market in our ordinary
shares.


                                       20
<PAGE>
ITEM 4.  INFORMATION  ON  THE  COMPANY

ITEM 4.A.  HISTORY  AND  DEVELOPMENT  OF  THE  COMPANY

     We  were  incorporated in September 1989 as Almagest Pty. Ltd. in the State
of Queensland, Australia, and changed our name to Progen Industries Pty. Ltd. in
April  1990.  In  1991, we converted to a public limited liability company under
the  name  Progen  Industries  Limited  and  introduced  our first life sciences
products  to  the  Australian  market  for  use  in  DNA  recombinant  research.

     Since October 1993, we have been engaged in the research and development of
small molecule pharmaceuticals, including heparanase inhibitors, that are potent
and  selective  inhibitors  of carbohydrate-protein interactions implicated in a
range  of  disease states. Our research and development activities are conducted
in collaboration with private industry and academic and research institutions in
Australia,  the  United  States  and  elsewhere.

     As  part of our focused strategy towards drug discovery and development, we
sold  our Life Sciences division in November 2003 and intend to pursue selective
strategic  alliances  to  complete  product  development  and  move  our product
candidates  into  the  market  place.

     We  have incurred significant losses since our inception and as of June 30,
2005,  our  accumulated  deficit  was  approximately $43.5 million. We expect to
incur  additional  operating  losses  for  at least the next several years as we
accelerate  our  drug discovery research, expand our development and preclinical
activities,  conduct  additional  clinical  trials  with  PI-88  and PI-166, and
advance  into later stages of development. We may need to raise additional funds
in  the  future  to  continue  our  operations.

     To  date,  we  have funded our operations primarily through sales of equity
and debt securities, including an Australian initial public offering in 1995 for
approximately  A$7.7  million  ($5.7 million) in net proceeds, and an Australian
and  overseas  institutional placement underwritten by UBS Warburg in March 2000
for  approximately  A$10.6  million  ($6.7 million) in net proceeds. In November
2000,  we  raised  A$10.5  million  ($5.5  million) by the issue of 2.75 million
ordinary  shares to Medigen Biotechnology Corporation, our collaborative partner
for  PI-88  clinical trials. In June 2003, we raised approximately A$3.5 million
($2.35  million)  in  net  proceeds  under  an  Australian and New Zealand share
purchase  plan  and  Australian  placement,  and  in  November  2003,  we raised
approximately  A$5.3  million ($3.8 million) in net proceeds under an Australian
placement  to  institutional  and sophisticated investors. During the year ended
June 30, 2005 we raised A$6.5 million ($4.9 million) in net proceeds through the
exercise  of  bonus  options  granted to our shareholders on a one for eight pro
rata basis in November 2003. In addition we raised a further A$2.6 million ($1.9
million)  in  net  proceeds under an Australian placement being the shortfall of
options  not  exercised by option-holders by the expiry date of May 31, 2005 and
A$5.6  million ($4.2 million) from the exercise of options granted to directors,
employees  and  advisors.

CORPORATE  INFORMATION

     Our  principal  executive  offices are located at 2806 Ipswich Road, Darra,
Queensland  4076,  Australia.  Our  web  site  is  located at www.progen.com.au.
Information  contained on our web site is not incorporated by reference into and
does  not  form  a  part  of  this  annual  report.


                                       21
<PAGE>
Progen  is  a  registered  trademark  of  Progen Industries Limited. Trademarks,
tradenames  or  service marks of other companies appearing in this annual report
are  the  property  of  their  respective  owners.

ITEM 4.B.  BUSINESS  OVERVIEW

     Progen  Industries  Limited  is  an  Australian-based,  globally-focused
biotechnology  company  committed  to  the  discovery,  development  and
commercialization of small molecule therapeutics for the treatment of cancer and
other  serious  diseases.

     Our  lead  product in development is PI-88 which is a multi-targeted cancer
therapeutic  that  inhibits  angiogenesis  (development  of  new blood vessels),
tumour  invasiveness  and  metastasis  (development  of  secondary  tumours). It
inhibits  angiogenesis  by  interacting  with  the  heparin-binding  site  of
pro-angiogenic  growth  factors  such as VEGF, FGF-1 and FGF-2. It also inhibits
the  enzyme  heparanase,  which  mediates  tumour  invasiveness,  metastasis and
release  of  pro-angiogenic  growth  factors  from  the  extracellular  matrix.

     Our  second  oncology product candidate in development is PI-166 which is a
targeted  cytotoxic drug for the treatment of inoperable liver cancer. PI-166 is
a  formulation  with  a  very  high  affinity  for  primary  liver cancer cells.

     Our internal drug discovery program is focused on the design of novel small
molecules  for Progen's future drug development pipeline based on the inhibition
of  carbohydrate-protein  interactions  involved  in  disease  processes.  The
synthesis  and  biochemical analysis of new angiogenesis inhibitors continues to
be  the  focus  of  the  group's activities with the aim of developing potential
therapeutics  for  cancer  and  other  serious  diseases.  Our research team and
academic  collaborators  have  identified a portfolio of heparan sulfate binding
proteins  that  are  involved  in  different diseases, and we are now designing,
synthesizing and screening small molecule compounds that disrupt heparan sulfate
binding.

     We  also operate a manufacturing plant that is responsible for the clinical
supply  of  PI-88  and  PI-166  as  well as providing contract manufacturing and
bioprocess  technology  development  services  to  Australian and overseas based
clients. This manufacturing facility operates in accordance with internationally
recognized  Good  Manufacturing  Practice  (GMP)  requirements.

OUR  BUSINESS  STRATEGY

     We  intend  to  develop and commercialize therapeutics for cancer and other
serious  diseases.  To  achieve  this  objective,  we  are  concentrating on the
following  key  initiatives:

     -    Leveraging in-house expertise and capabilities in Product Development.
          We  believe  that  our  core  scientific  and  management  team  has
          significant  and  demonstrated  expertise  in  drug  discovery  and in
          selecting  and advancing promising product candidates into early stage
          human  clinical  trials  to  demonstrate  proof  of  efficacy.

     -    Discovering and developing novel small molecule therapeutics using our
          proprietary  drug  discovery  technology platform. We will continue to
          focus  our  drug  discovery  research  programs  on  the discovery and
          development  of  small  molecule  therapeutics


                                       22
<PAGE>
          for  cancer  and  other  serious  diseases, that will feed our product
          candidate  pipeline  and  leverage our drug development infrastructure
          over  time.

     -    Expanding  our  product  candidate  pipeline  through in-licensing. In
          addition  to  our  internal  drug  development  efforts,  we intend to
          selectively in-license lead compounds and new therapies for cancer and
          other  serious  diseases  at early stages of development and other new
          therapies  for  cancer  and other serious diseases and undertake early
          stage  clinical  development.

     -    Establishing  strategic  collaborations  for  the  development  and
          commercialization  of  our product candidates. We intend to complement
          our  internal capabilities by selectively entering into collaborations
          with  pharmaceutical  and  biotechnology companies to complete product
          development  and  move  our product candidates into the marketplace as
          well  as to improve our ability to move new compounds into the clinic.

     -    Leveraging  our  in-house  manufacturing  capabilities  to support the
          development  and  commercialization  of  our  product  candidates.  We
          manufacture  PI-88  and  formulate PI-166 for preclinical and clinical
          trials  at  our  manufacturing  facility.  We  intend  to leverage our
          experience  in  bioprocess  manufacturing  technologies to support the
          development  and  commercialization  of our present and future product
          candidates.

     -    Establishing and maintaining a strong intellectual property portfolio.
          We  plan  to  continue  to  aggressively  pursue  patent protection in
          Australia, the United States and other significant markets, as well as
          protect trade secrets and know-how, as our drug discovery technologies
          uncover  additional  small  molecule  product  candidates  or  as
          necessitated  by  our  in-licensed  development  programs.


DEVELOPMENT  PROGRAMS

     CANCER  THERAPEUTICS

     PI-88  -  NOVEL  ANGIOGENESIS  AND  METASTASIS  INHIBITOR

PI-88  is our most advanced compound within our oncology pipeline. Our principal
objective  is  to  commercialize  PI-88  as  a  cytostatic  anti-cancer  therapy
applicable  to a broad range of cancer types.  All PI-88 clinical trials to date
are  being  conducted  under  an active Investigational New Drug application, or
IND,  with  the  United  States  Food  and  Drug  Administration,  or  FDA.

     PI-88  has  been developed to attack the life support system of cancer in a
     two-fold  manner:

     -    Inhibition  of  new  blood  vessel  growth  (angiogenesis)  which  is
          essential  to  promote  tumor  growth. The anti-angiogenic activity is
          manifest  in  three  distinct  ways:

          -    Inhibition  of  heparanase,  which  prevents  the  release  of
               angiogenic growth factors which are resident in the extracellular
               matrix;


                                       23
<PAGE>
          -    Direct  interaction  with  the heparan sulfate-binding domains of
               angiogenic  growth factors Vascular Endothelial Growth Factor, or
               VEG-F,  basic  Fibroblast  Growth  Factor  1, or FGF-1, and basic
               Fibroblast  Growth  Factor,  or  FGF-2,  which  reduces  their
               functional  activity;  and

          -    Stimulation of the release of Tissue Factor Pathway Inhibitor, or
               TFPI,  an  endogenous  protein  that  has  anti-angiogenic  and
               anticoagulation  properties.

     -    Reduction  in  the spread of secondary tumors (metastasis) through the
          inhibition  of  heparanase,  as  heparanase  is required to break down
          vasculature  to  allow  tumor  cells  to  spread.

     It  is expected that attacking these processes will lead to the development
of  a  cytostatic  therapeutic  approach  that may reduce the toxic side effects
associated  with  current  therapies such as irradiation, or cytotoxic drugs. By
inhibiting  angiogenesis,  it  is  possible to starve the tumor of nutrients and
oxygen.  This  process  has  been  shown  to stop tumor growth in animal models.
Anti-angiogenic  therapeutics,  including  PI-88,  specifically  targeted  at
cancerous  tumors  may  result  in  additive  and/or  synergistic  efficacy when
combined  with  other agents without significantly increasing side effects since
angiogenesis occurs only in specific instances in healthy adults (wound healing,
fetal  development  and  menstrual  cycle).  In  addition, anti-angiogenic drugs
developed  are  expected  to have broader application in a range of cancers. The
concept  of  halting  the  growth  of  cancer  and  "living with the disease" is
becoming  a  more  accepted  paradigm  and  is  reflected  in  the  design  of
anti-angiogenic  clinical  trials,  including  our  clinical  program for PI-88.
Ultimately,  it is hoped that these anti-angiogenic drugs may have the potential
for  co-treatment  with  other  therapies and halt the progression of cancer and
grant  patients  many  years  of  additional  quality  life.

     Angiogenesis  Background

     Angiogenesis  (the  development of new vasculature to provide blood supply)
is  an  important process in the progression of cancer. All tumors require blood
supply  to  grow and survive. The vascularization of the tumor also promotes the
spread  of  tumor  cells  throughout the body, which results in the formation of
metastases  (secondary  tumors).

     Tumor  angiogenesis  involves  the  following  key  steps:

     -    The  tumor  produces  enzymes,  including heparanase, that degrade the
          basement  membrane  of  blood  vessels  and  the  extracellular matrix
          surrounding  the  endothelial  cells  that  line  blood  vessel walls.
          Specifically,  heparanase  degrades  heparan  sulfate  in the basement
          membrane  where  growth  factors  are  stored.

     -    The  release of growth factors provides the angiogenic stimulus to the
          endothelial  cells lining the nearby blood vessels. The growth factors
          that  are  released  interact  with  heparan sulfate and with receptor
          molecules  located  on  the  surface of the endothelial cells, both of
          which  are  bound  to  the  cell surface. As a result, the endothelial
          cells  begin  proliferating.  Three  important  growth factors in this
          process  are  VEG-F,  FGF-1  and  FGF-2.


                                       24
<PAGE>
     -    Heparanase  degradation  of  the  extracellular  matrix  and  basement
          membrane  also  allows  the proliferating endothelial cells to migrate
          and  form  new  blood  vessels  and  the  remodeling  of  the basement
          membrane.

     -    The  new  blood  vessels supply the tumor with the essential nutrients
          and  oxygen  required  for  growth.

     Metastasis  Background

     The  spread  of  cancer  beyond  an  initial  tumor (metastasis) is a major
contributing  factor to the accelerated progression of cancer. In the process of
metastasis,  tumor  cells  confront  the extracellular matrix that surrounds the
endothelial  cells  lining blood vessel walls and the basement membrane of blood
vessels.  Tumor  cells confront these blood vessels and membranes at least twice
and  must  penetrate  them  using  degradative  enzymes  including  heparanase.
Metastasis  occurs  in  the  following  sequence:

     -    Tumor  cells  detach  from the primary tumor site and invade the blood
          vessel.  This  invasion  requires  enzymatic  degradation  of  the
          extracellular  matrix  and  basement  membrane  of blood vessel walls.
          Heparanase  is  a  key  enzyme  in  this  process.

     -    Tumor  cells  enter into the circulation and migrate to other sites in
          the  body  where  they  lodge  in small capillaries. As with invasion,
          tumor cells secrete heparanase to degrade the basement membrane of the
          blood vessel, thus allowing the tumor cells to cross the wall into the
          nearby  tissue.

     -    At the distant site the tumor cells divide and form a secondary tumor.

     PI-88  Clinical  Development  Program

     All  clinical  trials of PI-88 are being conducted under an active IND with
the  FDA.  In  preclinical  and  clinical studies, PI-88 has shown an acceptable
safety  and  tolerability  profile  in  clinical  trials  to date. PI-88 is also
showing  early  signs  of  clinical  efficacy  in  the  multinational  clinical
development  program.  327  patients with various cancers have been treated with
PI-88  for periods ranging from one dose to beyond four years. Since PI-88 is an
anti-angiogenic  agent,  the  primary  and relevant efficacy endpoints for these
early stage clinical trials is stabilization of disease, time to progression and
survival. This is an important difference from traditional cytotoxic anti-cancer
therapies,  where  response  rates  are often more relevant for these more toxic
agents  (cytotoxics)  as  they  are  used  to eradicate cancer cells, often with
adverse  consequences  to  normal  cells  and  to  the  patient.

PI-88  is currently in Phase II clinical development with four Phase II clinical
trials ongoing in the U.S., Australia and Taiwan under an active Investigational
New  Drug  application,  or  IND,  with  the  United  States  Food  and  Drug
Administration,  or  FDA.


                                       25
<PAGE>
     The  following  chart  summarizes  the  results  of  our  ongoing, recently
completed  and  currently  planned  clinical  trials  for  PI-88.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------

                                                PI-88 PHASE II CLINICAL TRIALS

-----------------------------------------------------------------------------------------------------------------------------
INDICATION                            TREATMENT                                    STATUS & KEY POINTS
-----------------------------------------------------------------------------------------------------------------------------
<S>                        <C>                               <C>
ADVANCED PROSTATE CANCER   2-arm study: Self-                  -  Trial commenced in August 2005
                           administration of PI-88             -  90 patients to be recruited
(ANDROGEN-INDEPENDENT      combined with Taxotere(R)           -  Lead-in stage will assess safety of combination
PROSTATE CANCER)           (docetaxel).                        -  Randomized stage will assess PI-88 at two different
                                                               -  dose regimens in combination with Taxotere(R).
-----------------------------------------------------------------------------------------------------------------------------
                                                               -  Trial commenced in May 2005.
                           2-arm study: Combination            -  100 patients to be recruited
ADVANCED MELANOMA          therapy DTIC (dacarbazine),         -  Lead in stage will assess safety of combination.
                           with and without self-                 Randomized stage will assess the benefit of the
(FIRST-LINE TREATMENT)     administration of PI-88                addition of PI-88 to DTIC.

-----------------------------------------------------------------------------------------------------------------------------
                           2-arm study: Combined               -  Trial commenced February 2004.
ADVANCED LUNG CANCER       therapy Taxotere(R) (docetaxel)     -  100 patients to be recruited.
(NSCLC)                    with and without self-              -  Completion of recruitment expected by the end of Q4
                           Administration of PI-88                CY05.

-----------------------------------------------------------------------------------------------------------------------------
                                                               -  Trial commenced July 2004.
PRIMARY LIVER CANCER       3-arm study: 2 dose levels of       -  340 patients to be recruited.
(POST SURGERY)             PI-88 and a no treatment arm        -  Completion of recruitment of stage I (170 patients)
                           (control).                             expected by the end of Q4 CY05

-----------------------------------------------------------------------------------------------------------------------------

ADVANCED MELANOMA -                                            -  Completed
SINGLE AGENT TRIAL         Self-administration of PI-88.       -  44 patients recruited.
                                                               -  Encouraging 9 months median survival led to
                                                                  initiation of first line trial in combination with DTIC

-----------------------------------------------------------------------------------------------------------------------------

                                                               -  Completed.
MULTIPLE MYELOMA           Self-administration of PI-88.       -  Disease marker study - 19 patients.
                                                               -  Disease Stabilization - 41% of evaluable patients.

-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

     PI-88  is  being investigated under an active IND with the FDA. Ongoing and
recently  completed  clinical  trials  for  PI-88  are  as  follows:

     -    In August 2003, we completed an Australian multi-center Phase II trial
          in  Multiple Myeloma. 19 patients with refractory or relapsed multiple
          myeloma,  a  bone  marrow  cancer,  were  enrolled at three Australian
          hospitals,  The  Alfred Hospital in Melbourne, The Mater Misericordiae
          in Newcastle, and The Wesley Clinical Research Centre in Brisbane. The
          endpoint  of  the  study  was achieved with the stabilization of serum
          disease  markers,  in seven, of the 18 evaluable patients (39%) in the
          study.  One  patient  continues  to  receive  PI-88 post-study under a
          special  access  scheme  after  44  months.

     -    In  January  2004  we  concluded the Phase I component of a Phase I/II
          clinical trial at the University of Colorado Health Sciences Center in
          Denver,  Colorado,  in  which  PI-88 was self-administered to patients
          with  advanced  malignancies  (including  melanoma  and


                                       26
<PAGE>
          renal-cell  carcinoma) in order to determine the appropriate safe dose
          of  PI-88  for  the  Phase  II  component  of this study. 15 out of 38
          evaluable  patients  with  advanced  tumors  (39%)  have  had  disease
          stabilization  ranging  from three to 50 months, including one partial
          response.  This  trial examined the dosing and investigated the safety
          and  tolerability  of  PI-88  as  a  single-agent  therapy.  Following
          completion  of  the  Phase  I  component  of  this study, the Phase II
          component,  investigating advanced melanoma specifically, was launched
          in  four  sites  across  Australia  and  at the University of Colorado
          Health  Sciences Center in Denver, Colorado. The Phase II component of
          this  study  concluded  with  46  patients  enrolled on the study. One
          patient  had  a  partial  response  and another 10 patients had stable
          disease,  out  of  the  37 evaluable patients in this trial (30%). The
          median  survival  rate  of  the patients on this trial was 9.0 months.
          This  data  were sufficient to launch a trial in first line therapy in
          patients  with  advanced  melanoma in combination with the standard of
          care,  chemotherapy  agent,  dacarbazine  (DTIC).

     -    In May 2005, we launched a 2-arm randomized Phase II trial of PI-88 as
          a  first  line  therapy  in patients with advanced melanoma. The trial
          will  assess  the  safety  and  patient  benefit  of  adding  PI-88 to
          dacarbazine  (DTIC).  The  2-arm randomized study, aims to recruit 100
          chemotherapy  naive  advanced  melanoma  patients  and  will  compare
          patients  receiving  DTIC  (dacarbazine),  with  and  without
          self-administration  of PI-88. The trial has targeted clinical centers
          in  Australia  and  the  USA.

     -    In  February  2004  we  concluded a Phase I trial at the University of
          Colorado  Cancer  Center  in Denver, Colorado, of PI-88 in combination
          with  docetaxel  (Taxotere), a frequently used chemotherapy treatment,
          in  patients  with  advanced  solid tumors. This trial was designed to
          determine the appropriate safe dose of PI-88 when combined with weekly
          doses  of  Taxotere  and  was  conducted  as  a precursor to a planned
          multi-center  Australian Phase II trial of the combination in patients
          with  advanced  non-small cell lung cancer. 16 patients were recruited
          into  this  Phase  I  study  and  the  trial  met  its  objectives  of
          determining  the  safety and tolerability of PI-88 in combination with
          taxotere.

     -    Following  the  completion  of  the  Phase  I  trial,  a  multi-center
          Australian  Phase  II  trial  of PI-88 in combination with Taxotere in
          patients  with  advanced  non-small-cell  lung  cancer was launched in
          February  2004  utilizing  the  dose  established  from  the  Phase  I
          combination study. This 2-armed Phase II trial will compare the safety
          and  efficacy  of Taxotere with and without the self administration of
          PI-88.  The  trial  aims  to  recruit  100  patients  by  early  2006.

     -    In  July  2004  a Phase II trial of PI-88 as post-operative (following
          surgery)  adjuvant  treatment  in  patients  with primary liver cancer
          (hepatocellular  carcinoma  or  hepatoma) was launched by our alliance
          partner  and  clinical collaborator, Medigen Biotechnology Corporation
          (MBC)  an  emerging  Taiwanese  biotechnology  company. The trial is a
          3-arm  study,  assessing the rate of liver cancer recurrence comparing
          two  doses  levels  of  PI-88 to a no-treatment arm (control arm). The
          trial  is  divided  into  two  stages  and


                                       27
<PAGE>
          recruitment  of  Stage I (170 patients) is expected to be concluded by
          the  end  of  2005  in  6  Taiwan  clinical  centers.

     -    In  August  2005,  an investigator initiated trial investigating PI-88
          therapy  in  combination  with  Taxotere  for  patients  with advanced
          prostate  cancer commenced. The trial includes androgen-independent or
          hormone  refractory  patients,  meaning  they  have  received  hormone
          therapy,  but their prostate cancer will have continued to worsen. The
          2-armed  randomized  trial will assess the safety and clinical benefit
          of  two  dose  regimens of PI-88 combined with docetaxel (Taxotere) in
          this  patient  population. The trial is a three-way collaboration with
          clinical  investigators,  Sanofi-Aventis  (marketer  of  Taxotere) and
          Progen.  Sanofi-Aventis  will  provide two thirds of the trial funding
          and  supply  their drug Taxotere(R) for the trial. Progen will provide
          the  remaining  funding,  supply  PI-88, monitor the trial and provide
          safety  reporting  to  the FDA under IND guidelines. The trial aims to
          recruit  90  patients  in  several  sites  across  Australia.

     Other  earlier  PI-88  clinical  trials  include:

     -    Completion  of  a Taiwanese Phase Ib clinical trial in advanced cancer
          patients  to  assess  the  safety  and  tolerability  of  PI-88  given
          intravenously  in  Asian  patients  suffering  from  advanced forms of
          cancer,  by  our  alliance  partner and clinical collaborator, Medigen
          Biotechnology  Corporation.

     -    Completion  of  a  Phase  I  clinical  trial  in healthy volunteers in
          Manchester,  the  United Kingdom in March 1999. This first-time-in-man
          clinical  trial  was designed to evaluate the safety, tolerability and
          pharmacokinetic  profile  (concentration  in  the  blood over time) of
          PI-88  when  administered  intravenously.

     -    Completion  of a multi-center Phase Ib clinical trial in patients with
          advanced  solid  tumors  at the Royal Melbourne Hospital and the Peter
          MacCallum  Cancer  Institute in Melbourne, Australia in November 2000.
          The  clinical trial was designed to assess the safety and tolerability
          of  PI-88  when  administered  intravenously.

     -    Completion  of  a  Phase  I  clinical  trial  in healthy volunteers in
          Manchester, the United Kingdom in October 2000. The clinical trial was
          designed  to  evaluate  the  safety,  tolerability and pharmacokinetic
          profile  of  PI-88  when  administered  subcutaneously.

     Preclinical Studies of PI-88

     Preclinical  studies confirm that PI-88 significantly reduces the growth of
primary human tumors and inhibits metastasis in animal models. We have conducted
extensive  preclinical  pharmacology in animal models that approximate the human
clinical  condition.  In  one such experiment, mammary tumor cells were injected
into  a  foot  pad  of  mice and allowed to grow for seven days until a palpable
tumor  could  be  detected.  The mice were then treated with PI-88 by continuous
subcutaneous  infusion  over a 24-day period. At the conclusion of the treatment
period, mice that had received PI-88 had a reduction in lung metastases of up to
75%.  In  another  experiment,  PI-88 reduced the growth of pancreatic tumors in
transgenic  mice  by  80%  of  the  size  of  tumors  in


                                       28
<PAGE>
control  animals.  Moreover,  PI-88 was shown to be most effective at preventing
small  but highly vascularized tumors from developing into large tumors. This is
consistent  with  PI-88's  action  as  an  angiogenesis inhibitor. In additional
experiments,  the  growth  of human colon carcinoma xenografts in nude (athymic)
mice  was  reduced  by  up  to  28% in animals treated with PI-88 twice daily by
injection  for  22  to  26  days.

     Microscopic examination of primary tumors in animals treated with PI-88 has
shown a significant reduction in vascularization both within and surrounding the
tumor.  This  has  been confirmed by measurement of hemoglobin content in tumors
removed  from  animals  treated  with  PI-88  and  untreated  animals.

     Additional  preclinical  studies  have shown that PI-88 in combination with
chemotherapeutic agents, such as 5-fluorouracil, is significantly more effective
than  either  compound  alone  in  reducing  tumor  growth  in  mice.

     Several  independent  assessments  of  PI-88 have been completed, including
single  dose, two-week dose ranging, four-week and 13-week toxicology studies in
rats; a single dose, two-week, four-week and 13-week dosing studies in primates;
and  a  safety  pharmacology  study for cardiovascular and respiratory functions
with dogs. Results of these studies have been comparable between species. In rat
toxicology studies, minimal effects were observed at low dosages with toxicities
observed  only  at high dosages. In monkey toxicology studies, a no-effect level
was achieved at low dosage. In the dog safety pharmacological study, a no-effect
level  was  observed  at  low  dosage.

     Development  Strategy  for  PI-88

     We  have  retained worldwide commercial rights to PI-88. At the appropriate
time,  we  will  select  collaborators  for later-stage clinical development and
commercialization  of  PI-88  as  a  cancer  therapeutic.


                                       29
<PAGE>
     PI-166  -  NOVEL  ANTI-CANCER  AGENT

     PI-166, our second oncology product candidate, is a novel combination of an
active  small  organic chemical molecule and a delivery vehicle that directs the
active  drug  constituent  at  the  tumor  site.  PI-166  is being developed for
potential  application  in  the  treatment  of advanced hepatocellular carcinoma
(primary  liver  cancer).

     PI-166  Clinical  Development  Program

     A  Phase  I  clinical  trial  with  PI-166  was initiated at the St. George
Hospital  in  Sydney  in 2003. Due to slower than expected recruitment from this
center  additional  sites have recently been added (Princess Alexandra Hospital,
Brisbane and Monash Hospital, Melbourne). The primary objective of this trial is
to  investigate  the  safety  and  tolerability of escalating doses of PI-166 in
patients with advanced stage primary liver cancer where surgical intervention is
no  longer  an  option  (unresectable).  Based  on  interim  data  to  date,  no
drug-related  side  effects of PI-166 have been observed in patients enrolled in
the  trial.

     Preclinical Studies of PI-166

     Preclinical  studies  of  PI-166  indicate that this treatment modality has
antiproliferative activity against hepatocellular carcinoma (liver cancer) cells
in  vitro  (within  an  artificial  environment) and anti-tumor activity in vivo
against the Novikoff hepatoma in rats, a model of primary liver cancer in humans
that  like  human  hepatoma,  is  known  to  be  highly  resistant  to  standard
chemotherapeutic  agents.

     Development  Strategy  for  PI-166

     We  have retained worldwide commercial rights to PI-166. At the appropriate
time,  we  will  select collaborators to conduct later-stage clinical trials and
commercialization  of  PI-166  as  a  cancer  therapeutic.

     DRUG  DISCOVERY  RESEARCH

     The  goal  of  our drug discovery research is to discover and develop small
molecule  drug  candidates  that  modulate the interaction between carbohydrates
(sugars)  and  disease  related  protein  targets  as potential therapeutics for
cancer.  Our current drug discovery research involves the on-going collaboration
with  the academic laboratory of Professor Martin Banwell of the Research School
of  Chemistry  at the Australian National University in Canberra, Australia. The
proprietary  core technology for our drug discovery research, out of which PI-88
was  developed,  emanates  from  our  previous collaborative research on heparan
sulfate  mimics and related polysaccharides with Professor Christopher Parish of
The  John  Curtin  School  of  Medical  Research  at  the  Australian  National
University,  Canberra,  Australia.


                                       30
<PAGE>
     Our  internal  research  program,  augmented  by  the  work of our academic
collaborators,  has  led to the identification of a portfolio of heparan sulfate
binding  proteins that are involved in different diseases, and we are designing,
synthesizing and screening small molecule compounds that disrupt heparan sulfate
binding.  A collaboration with the Centre for Drug Candidate Optimization at the
Victorian  College  of  Pharmacy (Monash University) was also initiated in 2005.
This  joint  project  is  aimed  at  characterizing  and  improving  the various
drug-related properties of our molecules to make them more suitable as drugs and
to  increase  the  likelihood  of  their  successful  development

     Our drug discovery research program was partially funded by a A$3.1 million
Australian  federal  government  AusIndustry START grant awarded in August 2001.
This  grant  concluded in June 2005 with Progen achieving all the milestones set
out  in  the  grant.  The Company was successful in applying for a further three
years  partial  funding  of  this  program under an AusIndustry Commercial Ready
grant.  This grant is for a maximum of A$3.4 million over three years commencing
August  2005.  With additional funding now secured the aim of the project is the
continued  development  of  our  molecule  library  through  to  drug  candidate
selection  suitable  for  human  clinical  trials.

     We  believe  our  advanced  understanding  of  the role of carbohydrates in
disease  processes combined with our clinical development expertise in advancing
promising  product  candidates  into  early stage clinical trials to demonstrate
proof  of efficacy enables us to discover novel therapeutics as well as identify
and  license  product  candidates.  We  intend to enter into collaborations with
pharmaceutical  and  biotechnology  companies that will allow us to build on our
in-house  expertise  and  capabilities,  including  acquiring additional product
candidates,  as  well  as  improve  our  ability  to move new compounds into the
clinic.

RESEARCH  AND  CLINICAL  COLLABORATIONS

     In  the course of conducting our research and clinical studies, we maintain
collaborations  with  private  industry  and  a  number of academic and research
institutions  in  Australia,  the  U.S.  and  elsewhere.

     We  currently  support  research at the Research School of Chemistry at the
Australian  National  University,  Canberra,  Australia. This sponsored research
program  is  developing  a  combinatorial chemistry approach to the synthesis of
molecules  that  mimic  the  structure  of  sugars.  This  chemistry will enable
synthesis  of  defined  structures  to  overcome  the  limitations in commercial
synthesis  of  oligosaccharides  and  plays  a  pivotal  supporting  role to our
in-house  drug  discovery  research  program.

     We are currently conducting, or have conducted, our clinical trial programs
at  the  following  medical  centers:

Phase  I/II  melanoma  monotherapy  study:
     -    The  University of Colorado Health Sciences Center (Denver, Colorado);
     -    Sir  Charles  Gairdner  Hospital  (Perth,  Australia);
     -    Princess  Alexandra  Hospital  (Brisbane,  Australia);
     -    The  Alfred  Hospital  (Melbourne,  Australia);  and


                                       31
<PAGE>
     -    The  Queen  Elizabeth  Hospital  (Adelaide,  Australia).

Phase  II  Non-Small  Cell Lung (NSCL) cancer studying PI-88 in combination with
taxotere:
     -    Royal  Prince  Alfred  Hospital  (Sydney,  Australia);
     -    Sir  Charles  Gairdner  Hospital  (Perth,  Australia);
     -    Border  Medical  Oncology  (Wodonga,  Australia);
     -    Mater  Adult  Hospital  (Brisbane,  Australia);
     -    Prince  Charles  Hospital  (Brisbane,  Australia);
     -    The  Alfred  Hospital  (Melbourne,  Australia);
     -    Royal  North  Shore  Hospital  (Sydney,  Australia);
     -    The  Queen  Elizabeth  Hospital  (Adelaide,  Australia);
     -    Prince  of  Wales  Hospital  (Sydney,  Australia);
     -    Newcastle  Mater  Hospital  (Newcastle,  Australia);
     -    Sydney  Haematology  and  Oncology  Clinics  (Sydney,  Australia);
     -    The  Nambour  General  Hospital  (Nambour,  Australia);  and
     -    The  Princess  Alexandra  Hospital  (Brisbane,  Australia).

Phase  II  Study of PI-88 with dacarbazine in patients with Metastatic Melanoma:
     -    Sir  Charles  Gairdner  Hospital  (Perth,  Australia);
     -    Princess  Alexandra  Hospital  (Brisbane,  Australia);  and
     -    Royal  Prince  Alfred,  Sydney  Cancer  Centre  (Sydney,  Australia).

Phase  II  randomised  study  of two dose schedules of PI-88 in combination with
docetaxel  in  patients  with  androgen-independent  prostate  cancer:
     -    Sydney  Haematology  and  Oncology  Clinics  (Sydney,  Australia);
     -    Royal  North  Shore  Hospital  (Sydney,  Australia);
     -    Border  Medical  Oncology  (Wodonga,  Australia);  and
     -    Port  Macquarie  Base  Hospital  (Port  Macquarie,  Australia).

Phase  I  trial of PI-166 in patients with unresectable hepatocellular carcinoma
is  being  conducted  at:
     -    St  George  Hospital  (Sydney,  Australia);
     -    Princess  Alexandra  Hospital  (Brisbane,  Australia);  and
     -    Monash  Medical  Centre  (Melbourne,  Australia).

Medigen  Biotechnology  Corporation  in Taipei, Taiwan, is conducting a Phase II
clinical  trial  with  PI-88  in  patients  with  hepatocellular carcinoma after
resection  at:
     -    The  National  Taiwan  University  Hospital  (Taipei,  Taiwan);
     -    Chang  Gung  Memorial  Hospital  (Linkou,  Taiwan);
     -    Veterans  General  Hospital  (Taichung,  Taiwan);
     -    China  Medical  University  Hospital.  (Taipei,  Taiwan);
     -    Koahsiung  Veterans  General  Hospital  (Koahsiung,  Taiwan);  and
     -    National  Cheng  Kung  University  Hospital  (Tainan,  Taiwan).

The  collaboration between us and Medigen is described in the following section.


                                       32
<PAGE>
     In  August  2003, we completed an Australian multi-center Phase II study of
PI-88  in  multiple  myeloma  patients  at The Alfred Hospital in Melbourne, The
Mater  Misericordiae Hospital in Newcastle and the Wesley Clinic Research Centre
in Brisbane. In 2001, clinical testing of intravenous PI-88 in Phase Ib clinical
trials in advanced stage cancer patients at the Peter MacCallum Cancer Institute
and  at  the  Royal  Melbourne  Hospital was concluded under the auspices of the
Center  for  Developmental  Cancer  Therapeutics.

     COLLABORATION WITH MEDIGEN BIOTECHNOLOGY CORPORATION

     In  May  2000,  we entered into a strategic alliance agreement with Medigen
Biotechnology  Corporation, or MBC, a biotechnology company based in Taiwan. The
collaboration  relates  to  early  stage  clinical  trials  of  PI-88. Under the
original  agreement:

     -    We  have  retained  all  intellectual  property  rights  to  PI-88;

     -    MBC  will  receive  a  percentage of our future revenues received from
          PI-88  in  cancer and cardiovascular disease provided MBC successfully
          completes all clinical trials agreed to be conducted and funded by MBC
          under  the  agreement;

     -    MBC  will use reasonable endeavors to complete one Phase II trial with
          PI-88  in  an  oncology  indication,  one Phase II trial of PI-88 in a
          cardiovascular  indication,  and  two  proof  of  principle  trials in
          oncology  indications;

     -    We  will  supply  PI-88  to  MBC, at no charge, for the conduct of all
          trials  funded  by  MBC;  -  We have agreed to supply to MBC, at MBC's
          cost,  technical  assistance,  including  the  services  of  trained
          personnel  and  technical training, for the conduct of clinical trials
          by  MBC;

     -    We  have  agreed  to  assist  MBC,  at  MBC's  cost,  to  establish  a
          manufacturing  plant  that can produce potential human therapeutics in
          accordance  with  cGMP  and  FDA  requirements  if  so  requested; and

     -    MBC  has  the  right to negotiate the funding and conduct of Phase III
          trials  with  PI-88,  subject to any agreements that we may enter into
          with  strategic  partners  to further develop and commercialize PI-88.

     -    MBC  issued  to  us  a  19.9%  equity  stake  in  MBC  with  certain
          anti-dilution  rights;  and

     -    MBC  paid  to us A$11 million for 2.75 million of our ordinary shares.

     In  April  2005  Progen  and  MBC agreed to amend the terms of the Alliance
Agreement  in that Progen agreed to waive the requirement for MBC to conduct one
of  the Phase II trials outlined in the Alliance Agreement. In return MBC agreed
to  fund  50%,  up  to  A$1  million,  of  the  recently  initiated


                                       33
<PAGE>
Phase  II  trial  of  PI-88  as  a  first line therapy in patients with advanced
melanoma  (PI-88  in  combination  with  dacarbazine).

COMMERCIAL SERVICES BUSINESSES

     LIFE  SCIENCES

     Prior  to  the  sale  of  our  life sciences division to Global Science and
Technology  Limited  in  November  2003  we  were the Australian and New Zealand
distributor of a wide range of life sciences research products manufactured by a
number  of  U.S.  and  European life sciences companies. We also offered our own
range  of  fine  chemical  products  sold  under the Progen brand name. Our life
sciences  products  were  marketed  to  research  and diagnostic laboratories in
private  and  government  institutions,  including  universities,  hospitals and
biotechnology  companies,  by  our  own  sales  staff  and under sub-distributor
arrangements  in  New  Zealand  and  Western  Australia.

     CONTRACT  MANUFACTURING

     We  provide  contract  manufacturing services to cGMP standards for various
human clinical trial and therapeutic products and veterinary pharmaceuticals, as
well  as  non-cGMP  bioproducts contract manufacturing services. We also provide
bioprocess  technology  development  services and consulting services in quality
and  regulatory  management  systems.  Contract and consulting services revenues
constituted  approximately  37.6%, 56.0% and 100.0% of our sales revenue for the
fiscal  years  ended  June  30,  2003,  2004  and  2005,  respectively.

     Following  the sale of our life sciences division in November 2003 contract
manufacturing  services  contributes  100%  of  our  sales  revenue.

     Due  to prioritization of our Manufacturing Division on the supply of PI-88
for  clinical  trial  requirements  we  currently  do  not  actively promote our
contract  manufacturing  services  to  potential  clients.

GOVERNMENT  REGULATION

     Regulation  by  government  authorities  in  the  U.S., Australia and other
countries  in  which  the Company operates is a significant consideration in the
research  and  development  of  our  products.

     The  Company  is  also  subject  to  various  laws,  regulations, policies,
guidelines  and  recommendations  relating  to  such  matters  as  safe  working
conditions,  laboratory  and  manufacturing  practices,  the experimental use of
animals  and  the  protection  of the environment. Furthermore, there has been a
general  trend towards greater regulation of the pharmaceutical industry and its
products.

     CONTRACT MANUFACTURING

     Our  contract manufacturing operations include some manufacturing processes
that are required to comply with the applicable cGMP requirements of the TGA and
the  National  Registration  Authority,  which  govern  the  methods,  controls,
facilities  and  quality assurance procedures used in manufacturing, packing and
storing  biological  and  pharmaceutical  products.  In  addition,  certain
international markets have quality assurance and manufacturing requirements that


                                       34
<PAGE>
may  be  more  or  less  rigorous  than  those  in  Australia. Our manufacturing
facilities  are  also subject to biennial inspections by the TGA. We cannot make
any assurances that we will continue to be in compliance with cGMP requirements.
Failure  to  comply  with  cGMP  requirements  or  with  any other international
requirements  could  have  a  material adverse effect on our business, financial
condition  and  results  of  operations.

     RESEARCH AND DEVELOPMENT

     The  research  and  development,  manufacture  and commercialization of our
pharmaceutical  products  will be subject to regulation by governmental entities
in  Australia  and  other  countries including the United States. Pharmaceutical
products  are  subject  to  rigorous  regulation by the TGA under the Australian
Therapeutic  Goods  Act,  by the FDA in the United States, and by similar health
authorities  in  foreign countries under laws and regulations that govern, among
other  things,  the  testing,  clinical  trials,  manufacture, safety, efficacy,
labeling, storage, record keeping, advertising, promotion, export, marketing and
distribution  of  such  products.  Product  development and approval within this
regulatory framework is uncertain and can take a number of years and require the
expenditure  of substantial resources. Any failure to obtain regulatory approval
or any delay in obtaining such approvals could have a material adverse effect on
our  business,  financial  condition  and  results  of  operations.

     Australian Government Regulation

     The steps required before a drug may be approved for marketing in Australia
generally  include:

     -    Preclinical  laboratory  and  animal  testing;

     -    Submission  to  the TGA of a clinical trial notification, or CTN, or a
          clinical  trial  exemption,  or  CTX,  application  for  human trials;

     -    Submission of an investigators' brochure and clinical protocols to the
          independent ethics committee, or IEC, of each institution at which the
          trial  is  to  be  conducted;

     -    Adequate and well-controlled clinical trials to demonstrate the safety
          and  efficacy  of  the  product;

     -    Development  of  a  Drug  Masterfile,  which  demonstrates  that  the
          manufacture  of  the  product  conforms  to  GMP  guidelines;

     -    Submission  of the manufacturing, preclinical and clinical data to the
          TGA;  and

     -    Approval  by  the  TGA  for  inclusion  in  the Australian Register of
          Therapeutic  Goods.

     The  testing  and  approval  processes for a drug require substantial time,
effort  and  financial  resources. Furthermore, post-market surveillance must be
carried  out, and any adverse reactions to the drug must be reported to the TGA.
We  cannot  make  any  assurances  that any approval will be granted on a timely
basis,  if  at  all.


                                       35
<PAGE>
     Preclinical studies include laboratory evaluation of the product as well as
animal  studies  to assess the potential safety and efficacy of the product. The
results of the preclinical studies are submitted to each investigator's IEC and,
in  some instances, to the TGA. Approval by each IEC and by the TGA is necessary
before  clinical  trials  can  commence.  An  IEC  is a review committee at each
institution  at which a study is conducted and is set up under guidelines of the
Australian  National  Health and Medical Research Council. The role of an IEC is
to  review  proposals  for clinical trials, and approve and subsequently monitor
the clinical trials.  The IEC will consider, among other things, ethical factors
and  the safety of human subjects. We cannot make any assurances that submission
to  the  applicable  IECs  and  the TGA will result in authorization to commence
clinical  trials.

     Clinical  trials  involve  administering  the  investigational  product  to
healthy  volunteers  or  patients under the supervision of a qualified principal
investigator.  The  TGA  has  developed  guidelines for a CTN and a CTX, the two
classes  of clinical trials in Australia. Under the CTN scheme, under which most
clinical  trials  in  Australia  are  conducted, the TGA is formally notified by
submission  of  a CTN application but is not obliged to review the safety of the
drug  or  any  aspect of the proposed trial. However, the TGA can request safety
information  or  halt  a  trial  on  the  basis  of  safety  issues.  Primary
responsibility  for  all  aspects of the trial conducted under a CTN application
remains  with  the  IEC  of  each  investigator's institution and with us. A CTX
application  requires  submission  of a summary of preclinical and manufacturing
data  to  the  TGA,  in  addition to submission of an investigators brochure and
protocol to the applicable IEC. In cases where an IEC is unsure of the safety or
efficacy  of  a product, a CTX application is submitted. Approval by both bodies
is necessary before the trials can commence. The role of the TGA is primarily to
assess  safety  issues.

     Clinical trials are typically conducted in three sequential phases that may
overlap:

     -    Phase  I  clinical trials that involve the initial introduction of the
          drug  into  human  subjects and the exploration of its safety (adverse
          effects),  dosage  tolerance,  absorption,  metabolism,  excretion and
          pharmacodynamics;

     -    Phase  II  clinical  trials that (i) evaluate the efficacy of the drug
          for  specific,  targeted  indications, (ii) determine dosage tolerance
          and  optimal  dosage,  and (iii) identify possible adverse effects and
          safety  risks.  Phase  II  trials usually involve studies in a limited
          patient  population;  and

     -    Phase  III  clinical  trials  that generally further evaluate clinical
          efficacy  and  further  test  for  safety  within  an expanded patient
          population  sufficient  to  provide  statistically  significant  data.

     In  the case of products with a high risk of toxicity, the initial clinical
trials  are  sometimes conducted in patients with the target disease rather than
in  healthy  volunteers.  Since  these  patients  are already afflicted with the
target disease, it is possible that such clinical trials may provide evidence of
efficacy  traditionally obtained in Phase II clinical trials. We cannot make any
assurances  that  Phase  I,  Phase  II  or  Phase  III testing will be completed
successfully  within any specific time period, if at all, with respect to any of
our  product  candidates.  Furthermore,  the  TGA  and/or the applicable IEC may
suspend clinical trials at any time on various grounds, including a finding that
the  subjects  or  patients  are  being  exposed to an unacceptable health risk.


                                       36
<PAGE>
     All  completed  and  ongoing  PI-88  patient  clinical trials are/have been
conducted  under an active IND application with the FDA, under a CTN application
with the TGA for Australian sites and other health authority jurisdictions where
relevant.

     In  January  2003,  a  Phase  I clinical trial with PI-166 in patients with
unresectable  primary  liver cancer, was initiated at the St. George Hospital in
Sydney,  Australia.  This  Phase I trial is being conducted under a separate CTN
application  with  the  TGA.

     In order to obtain Australian marketing approval for a drug, the results of
the  preclinical studies and clinical trials, together with detailed information
on the manufacture and composition of the product, are submitted to the TGA with
a  request  for  registration  of  the  product  in  the  Australian Register of
Therapeutic  Goods. The TGA may delay approval if applicable regulatory criteria
are  not  satisfied,  require  additional testing or information, and/or require
post-marketing  testing  and surveillance to monitor the safety or efficacy of a
product.  We cannot make any assurances that approval by the TGA will be granted
on  a  timely  basis,  if  at  all. Also, if regulatory approval of a product is
granted,  such  approval  may entail limitations on the indicated uses for which
such  product  may  be  marketed.

     U.S. Government Regulation

     FDA  approval  to  market  our  drug products in the U.S. is expected to be
undertaken  by  us  or  in  conjunction  with a commercial partner. The approval
process  of  the  FDA  and  TGA  are  similar, with substantial requirements for
preclinical  research,  conduct  of  clinical  trials,  and  manufacture  of the
product.  Human clinical testing of a new drug requires the submission of an IND
that  must  include  the  results  of  preclinical  studies,  together  with
manufacturing  information  and analytical data.  We cannot make any assurances,
however,  that  submission  of an IND will allow us to commence clinical trials.
Furthermore,  once  trials  have  commenced,  the  FDA  may  stop the trials, or
particular  types of trials, by placing a "clinical hold" on such trials because
of, for example, concerns regarding the safety of the product being tested. Such
holds can cause substantial delay and, in some cases, may require abandonment of
a  product.  In  addition,  in  the U.S., Phase IV clinical trials are conducted
after  approval  by  the FDA to gain additional experience from the treatment of
patients  in  the  intended  therapeutic  indication  and to document a clinical
benefit in the case of drugs approved under accelerated approval regulations. If
the FDA approves a product while a company has ongoing clinical trials that were
not  necessary  for  approval,  a company may be able to use the data from these
clinical  trials to meet all or part of any Phase IV clinical trial requirement.
These  clinical  trials  are  often  referred  to as "Phase III/IV post-approval
clinical  trials."  Failure  to  promptly conduct Phase IV clinical trials could
result in withdrawal of product approval under accelerated approval regulations.

     The  results  of  preclinical  studies  and  clinical trials, together with
detailed  information  on  the  manufacture  and composition of the product, are
submitted  to  the FDA in the form of a New Drug Application, or NDA, requesting
approval  to  market  the product. Before approving an NDA, the FDA will inspect
the  facilities  at  which  the product is manufactured and will not approve the
product  unless  the  manufacturing  facility  is in GMP compliance. The FDA may
delay  an  NDA  if  applicable  regulatory  criteria  are not satisfied, require
additional  testing  or  information,  and/or require post-marketing testing and
surveillance  to monitor the safety or efficacy of a product. We cannot make any
assurances  that  FDA  approval  of any NDA submitted by us will be granted on a
timely  basis,  if


                                       37
<PAGE>
at all.  Also, if regulatory approval of a product is granted, such approval may
entail  limitations on the indicated uses for which the product may be marketed.

     The  FDA  has  implemented  accelerated  review and approval procedures for
therapies  that have been studied for their safety and effectiveness in treating
serious  life-threatening or severely debilitating diseases, and which provide a
meaningful therapeutic benefit to patients over existing treatments. Sponsors of
such  products may request to meet with the FDA-reviewing officials early in the
drug  development  process  to  review  and  reach  agreement  on  the design of
necessary preclinical and clinical studies. We believe that PI-88 may ultimately
qualify for this expedited review and approval process. Depending on the results
of  our  current  PI-88 clinical trial program, some of our later stage clinical
trials  may  be  designed with the objective of securing accelerated approval by
the FDA.  Significant uncertainty exists as to whether, and the extent to which,
accelerated  review  and  approval  will  be  granted.  The  FDA  also  retains
considerable  discretion  in  determining eligibility for accelerated review and
approval  and  is  not  bound by discussions that an applicant may have with FDA
staff.  Accordingly, the FDA could employ such discretion to deny eligibility of
PI-88  as  a  candidate  for  accelerated  review or require additional clinical
trials or other information before approving PI-88. In addition, the approval of
a  product  under  the  expedited  approval  procedures  is  subject  to various
conditions,  including  the  requirement  to  verify  clinical  benefit  in
post-marketing  studies  and  the  authority  on the part of the FDA to withdraw
approval  under  streamlined  procedures  if such studies do not verify clinical
benefit,  or  under  various other circumstances. We cannot predict the ultimate
impact,  if  any, of the new approval process on the timing or likelihood of FDA
approval  of  PI-88  or  any  of  our  other  potential  products.

     We are currently conducting several Phase II clinical trials of PI-88 under
our IND with the FDA and separate CTN applications with the TGA. We may seek FDA
and  TGA  approval  for  independent  Phase  II trials of PI-166 in the U.S. and
Australia  upon  successful  completion  of  the  Phase I trial in Australia. We
cannot  make  any  assurances that our submissions to the FDA or the TGA will be
successfully  reviewed,  that  the  requisite  approvals  will  be granted, that
accelerated  approvals  will  apply,  or  that  later stage clinical trials will
commence.

     Orphan Drug Status

     PI-88, our lead product candidate, has been designated as an orphan drug by
the FDA for treatment of high risk Stage II, Stage III and Stage IV melanoma. If
our  other  product  candidates  meet the criteria, we may also apply for orphan
drug  status  for  such  product  candidates.

     The  FDA  may  grant  orphan  drug status to drugs intended to treat a rare
disease  or  condition,  which  is generally a disease or condition that affects
fewer than 200,000 individuals in the United States. Orphan drug status does not
convey  any  advantage in, or shorten the duration of, the regulatory review and
approval process, and the FDA may grant orphan drug status to multiple competing
product  candidates  targeting  the  same  indication.  A  product that has been
designated  as  an orphan drug that subsequently receives the first FDA approval
for  the  indication  for  which it has received such designation is entitled to
orphan  drug  exclusivity  and the FDA may not approve any other applications to
market  the  same  drug  for  the  same  indication,  except  in  very  limited
circumstances,  for  seven  years from the date of FDA approval. A supplier of a
designated  orphan  product  may  also  seek  certain  tax  benefits.


                                       38
<PAGE>
PATENT  RIGHTS;  LICENSES  AND  PROPRIETARY  TECHNOLOGY

GENERALLY

     Our  success  will  depend  in  large  part  on  whether  we  can:

     -    Obtain  patents  to  protect  our  own  products;

     -    Obtain  licenses  to  the  patented  technologies  of  third  parties;

     -    Operate without infringing on the proprietary rights of third parties;
          and

     -    Protect  our  trade  secrets  and  know-how.

     For  a  discussion  of  the  risks  and  uncertainties  associated with our
intellectual property position, see "Risk Factors - Our success depends upon our
ability  to  protect  our intellectual property and our proprietary technology."

     PATENTS

     The  Company's  policy  is  to protect and defend the intellectual property
associated  with  its  technology  and  products,  principally  through  patent
protection.

     We  own  or  have  exclusive rights to 15 patent families, incorporating 23
granted  patents  and  30  filed  applications.

     The  most  material  of  these  patents  and  patent  applications  being:

     -    PI-88  -  Composition of matter and method of use patent families have
          been  granted in countries including the U.S., Australia, South Africa
          and  New  Zealand.  Further,  the  PI-88  composition of matter patent
          application  has  been  filed in countries including Europe, Japan and
          Canada.  The  PI-88  composition  of  matter  patent  expires in 2016.

     -    ANGIOGENESIS INHIBITORY ANTIBODIES - This patent describes an antibody
          and  the use of this antibody for the inhibition of angiogenesis. More
          specifically  the antibody, being a monoclonal antibody is specific to
          proliferating  human  endothelial  cells.  The specification also sets
          forth  a  method  of  producing  the  antibody  by  hybridoma culture.

     The  availability  and  breadth  of  claims  allowed  in  biotechnology and
pharmaceutical  patents is highly uncertain and generally involves complex legal
and  factual questions. We cannot make any assurances that any of our pending or
future  patent applications will be approved, or that we will develop additional
proprietary  products  or  processes, or be able to license any other patentable
products  or  processes. We also cannot make any assurances that others will not
independently  develop  similar  products  or  processes,  duplicate  any of the
products  or  processes  developed  or  being developed by or licensed to us, or
design  around the patents owned or licensed by us, or that any patents owned or
licensed by us will provide us with competitive advantages. Furthermore, patents
held  by  third  parties  may  prevent  the  commercialization  of  products
incorporating  the  technology


                                       39
<PAGE>
developed  by  or  licensed  to  us,  and third parties may challenge or seek to
narrow,  invalidate  or  circumvent  any or all of the issued, pending or future
patents  owned  or  licensed  by  us.

     If  it  were determined that we were infringing any third party patents, we
could  be  required  to  pay  damages,  alter  our products or processes, obtain
licenses  or  cease  certain  activities. We cannot make any assurances that the
licenses required under patents held by third parties would be made available to
us  on  acceptable  terms, or at all. To the extent that we are unable to obtain
such  licenses,  we  could  be  foreclosed  from the development, manufacture or
commercialization  of  the product requiring such license or encounter delays in
product  introductions  while  we  attempt  to  design  around  such  patents.

     We  also  believe  that  because of the differences in patent laws, foreign
patents,  if  obtained,  and the protection afforded by such foreign patents and
foreign  intellectual property laws may be more limited than that provided under
Australian  or United States patents and intellectual property laws. Litigation,
which could result in substantial costs and diversion of effort on our part, may
also  be  necessary  to  enforce  any  patents  issued  or  licensed to us or to
determine  the scope and validity of third party proprietary rights. We may have
to  participate  in  opposition  proceedings  before  the  Australian Patent and
Trademark  Office  or  another  foreign  patent  office,  or  in  interference
proceedings  declared  by  the  United  States  Patent  and Trademark Office, to
determine  the  priority  of  the  invention  for  patent  applications filed by
competitors.  Any  such  litigation,  interference  or  opposition  proceeding,
regardless  of  outcome,  could  be  expensive  and  time consuming, and adverse
determinations  in  any such proceedings could have a material adverse effect on
our  business,  financial  condition  and  results  of  operations.

     LICENSES

     PI-88.  We have an exclusive worldwide license from the Australian National
     -----
University  in  Canberra,  Australia,  to  five  families  of patents and patent
applications  relating  to  PI-88,  our  sulfated  oligosaccharide  heparanase
inhibitor.  Our  license rights terminate on November 4, 2018 or ten years after
the  expiration of the last patent related to the PI-88 technology, whichever is
later.  Our  license  with the Australian National University requires us to pay
the  University  a  portion  of PI-88 related payments that we receive including
royalties  on sales of PI-88 as well as on any fees we receive from sublicensing
this  technology. In addition we are the assignee to a sixth patent application.


     PI-166.  We also have an exclusive worldwide license from the University of
     ------
New  South  Wales  in  Sydney,  Australia,  to PI-166, a novel drug and delivery
technology  that  is a potential new therapy for the treatment of hepatocellular
carcinoma  (primary liver cancer). Our license rights terminate on expiration of
the  last patent forming part of the technology or, if no patent issues, in 2012
with  an  option  to  extend  until 2022. Our license with the University of New
South  Wales requires us pay the University a portion of PI-166 related payments
that  we receive including royalties on sales of PI-88 as well as on any fees we
receive  from  sublicensing  this  technology.


                                       40
<PAGE>
     Drug Discovery Technology. We also have an exclusive worldwide license from
     -------------------------
the  Australian  National  University  to  our  patent  application covering the
synthesis  of potential drug intermediaries. Our license rights terminate at the
expiration  of  the last patent related to the synthesis technology. Our license
with the Australian National University requires us pay the University a portion
of  product  related  payments  that  we receive including royalties on sales of
products arising from the synthesis technology as well as on any fees we receive
from  sublicensing  this  technology,  and  to  make  periodic  payments  on the
achievement  of certain milestones. In addition we are the assignee to a further
patent  application.


     PROPRIETARY TECHNOLOGY

     In  addition  to patent protection, we rely on unpatented trade secrets and
know-how  and  proprietary  technological innovation and expertise, all of which
are  protected  in  part  by confidentiality and invention assignment agreements
with our employees, advisors and consultants. We cannot make any assurances that
these  agreements  will not be breached, that we will have adequate remedies for
any  breach,  or  that our unpatented proprietary intellectual property will not
otherwise  become  known  or  independently  discovered  by competitors. We also
cannot  make  any  assurances  that persons not bound by an invention assignment
agreement  will  not  develop  relevant  inventions.

COMPETITION

     Drug  Development

     We  face  competition  in  each  of  our  target  product  markets.  The
pharmaceutical  and biotechnology industries are also intensely competitive. Our
anti-cancer  pharmaceutical  product  candidates would be subject to significant
competition  from  existing  drugs  and  therapies, as well as from products and
therapies  utilizing  alternative  or  similar  technologies.  There  are  many
pharmaceutical  and  biotechnology  companies,  and  public and private academic
institutions  and  research  organizations  actively engaged in the research and
development  of alternative products and therapies for the treatment of diseases
that  we have targeted for product development. Many of these organizations have
greater  financial,  technical,  manufacturing  and  marketing  resources.

     We  are  aware  of certain products that are being developed by competitors
that  modulate  tumor-related  angiogenesis,  including  heparanase  inhibitors,
FGF-2,  VEG-F  and  other  signal  protein inhibitors, and inhibitors of certain
matrix  metalloproteases,  a family of enzymes known to be involved in processes
through which tumors invade tissues, metastasize and grow. Other competitors are
developing  technologies  that  interfere with cancer cells directly. Several of
these  product  candidates  are  in advanced stages of clinical trials and being
marketed.  Competitors  that  are  marketing products or developing technologies
that compete with PI-88, our lead oncology product candidate, include Genentech,
Inc., EntreMed, Inc., Imclone Systems, OSI Pharmaceuticals, Eyetech Corporation,
Bayer  Pharmaceuticals  Corporation,  Genaera  Corporation, Genzyme Corporation,
MedImmune  Inc.,  Pfizer  Inc., Novartis AG and Celgene Corporation. We are also
aware  of several agents that are being developed by others for the treatment of
hepatocellular  carcinoma  thereby  competing  with  PI-166. These agents are in
various  stages  of  clinical  development  and comprise small synthetic organic
molecules  and  biologicals,  as  well as targeted radiotherapy and hyperthermia
treatments.  These companies include Maxim Pharmaceuticals, Onyx Pharmaceuticals
and  SIRTeX  Medical.


                                       41
<PAGE>
     Some of our competitors may succeed in developing products earlier than us,
obtain governmental approvals more rapidly than us, or develop products that are
safer and more effective than those under development by us. Other companies may
also  develop  products  or  therapies  that  render our technology and products
obsolete or non-competitive. We also cannot make any assurances that any therapy
developed  by  us  will  be  preferred  to  any  existing  or  newly  developed
technologies.  Some of our competitors may succeed in developing treatments that
are  superior  to  any  therapy  or  product  developed  by  us.  Our ability to
successfully  compete  with  these  and  other  companies  will also depend to a
considerable  degree on the continuing availability of capital to us, as well as
our  ability  to  recruit  and  retain highly qualified scientific personnel and
consultants,  and  to  compete  with the established manufacturing and marketing
capabilities  of  our  competitors.

     Contract  Manufacturing

     Our  contract  manufacturing  division's  clients  are  mostly  from  the
Australasia  region  with  a  limited  number  also  from  the  United  States.
Competitors  offering  a  similar  service  or  facility  to us within Australia
include  BresaGen  Ltd. and CSL Ltd. Our ability to compete with these and other
companies  located  elsewhere  in the world will depend on our ability to remain
cost  competitive  and  to  recruit  and  retain  qualified  personnel.

ITEM 4.D.  PROPERTY,  PLANTS  AND  EQUIPMENT

     We  maintain  and  operate  an  11,200  square  foot  fully-integrated
pharmaceutical  raw  material  manufacturing  facility  in  Darra,  Queensland,
Australia.  Our principal offices are also located on the premises. The facility
has the capability to develop and manufacture therapeutic products for worldwide
markets  and  consists  of  15  modular  laboratories,  each  with  a designated
function. There are two independent and eight integrated laboratory modules that
comply  with the Code of Good Manufacturing Practice, or cGMP, and five non-cGMP
laboratory  modules.  The  cGMP  laboratory  modules  have  specific  functions
including  media preparation, cell culture, fermentation, harvest, purification,
pack  and  fill,  and bioprocessing. The non-cGMP laboratories have functions in
fermentation,  research  and  development,  and  analytical  services  covering
microbiology,  biochemistry,  protein  and carbohydrate analysis and processing,
and  quality  control  testing.

     The  facility  is  used  to  manufacture  a  range  of biological products,
including  PI-88 active ingredient and preparation of PI-166 for preclinical and
clinical trials. It is equipped for the genetic manipulation of micro-organisms,
cell  culture,  small  and  large-scale  fermentation  of  micro-organisms,
purification  and  downstream processing, freeze-drying, and sterile packing and
filling.

     Our  manufacturing facility is licensed by the Australian Therapeutic Goods
Administration,  or  TGA,  for  the  manufacture  of  biological-based  starting
materials  for human therapeutics to cGMP standards and by the Australian Office
of  Gene  Technology  Regulator  for  the manufacture of large scale genetically
modified  organisms.  The TGA regulates the manufacture of compounds intended as
starting materials for human therapeutics. In addition, the facility is licensed
by the Australian National Registration Authority for manufacture of sterile and
immunobiological  veterinary  products  to  cGMP standards and by the Australian
Quarantine  and  Inspection  Service  as  a  quarantine  facility.


                                       42
<PAGE>
     The  building  in  which our principal offices and manufacturing facilities
are located is leased.  Under a lease agreement expiring in March 2007, we pay a
current  rental  of  approximately  $78,000 per annum, subject to annual review,
based  on  the  movement  in  the  consumer  price  index.

     In  November  2005  we  entered  a lease agreement to lease office space in
Toowong,  Queensland,  Australia.  We  intend  relocating  our  corporate,
administration,  clinical  development  and  business development departments to
these  premises  in  early  2006.  This will free up space at our Darra facility
which we intend to develop as additional laboratory space for our drug discovery
program  and additional office space for our manufacturing employees. This lease
agreement  is for a three year period beginning December 15, 2005 with an option
to  lease for a further three years. Rental is approximately $102,000 per annum,
subject  to  annual  review.


                                       43
<PAGE>
ITEM 5.  OPERATING  AND  FINANCIAL  REVIEW  AND  PROSPECTS

     The  following  discussion  and analysis should be read in conjunction with
our financial statements and the related notes included elsewhere in this annual
report.

     This  discussion  may  contain  forward-looking statements based on current
expectations  that  involve  risks and uncertainties. Our actual results and the
timing  of  selected  events  could  differ materially from those anticipated in
these forward-looking statements as a result of several factors, including those
set  forth  in  "Item  3. Key Information - Risk Factors" above and elsewhere in
this  annual  report.

OVERVIEW

     We  are  an  Australian-based,  globally  focussed,  biotechnology  company
committed  to the discovery, development and commercialization of small molecule
therapeutics  for  the  treatment  of  cancer  and  other  serious  diseases.

     We  have  two cancer product candidates are PI-88 and PI-166 under clinical
development.  PI-88,  our lead candidate, is currently being trialed in multiple
Phase  II  clinical  trials for solid cancer tumors. PI-166, our second oncology
product  candidate,  is  in  a  Phase Ib clinical trial for unresectable primary
liver  cancer.

     Our  drug  discovery  research  program  has  identified  a  portfolio  of
therapeutic  targets  that  play key roles in cancer and other serious diseases,
and  we  are  designing,  synthesizing  and  screening  small molecule compounds
directed  at  these  targets.  This  research program was partially funded by an
AusIndustry  START  grant  until June 2005. In August 2005 we were successful in
being awarded a further AusIndustry grant known as a Commercial Ready Grant that
will continue to partially fund this program for the three years to August 2008.

     We  operate  a  cGMP  certified  pilot manufacturing facility that provides
contract  manufacturing  services to the biotechnology industry earning revenues
on  a fee for service basis. The facility manufactures PI-88 and prepares PI-166
for  all  clinical  trials  to  date.

     As  part  of our focused strategy toward drug discovery and development, we
divested  our  life  sciences  division  in  November  2003 and intend to pursue
selective  strategic  alliances to complete product development and register our
product  candidates.

     We  have incurred significant losses since our inception and as of June 30,
2005,  our  accumulated  deficit  was  approximately  $43.5 million. We devote a
substantial  portion  of our financial resources to fund the development our two
cancer  product candidates and our drug discovery research efforts. We expect to
incur  additional  operating  losses  for  at least the next several years as we
accelerate  our  drug  discovery research and conduct additional clinical trials
with PI-88 and PI-166, and advance into later stages of development. We may need
to  raise  additional  funds  in  the  future  to  continue  our  operations.


                                       44
<PAGE>
     Our  operations  have historically been financed by the issuance of capital
stock  because  it  is  generally  difficult to fund pharmaceutical research via
borrowings  due  to  the  lack  of  revenues to service debt and the significant
inherent  uncertainty  as  to  results  of this research and the timing of those
results.

CRITICAL ACCOUNTING POLICIES

     The following discussion and analysis of our operating and financial review
and  prospects are based upon our financial statements, which have been prepared
in  accordance  with  U.S.  generally  accepted  accounting  principles.  These
accounting  principles require us to make certain estimates and assumptions that
can  affect the reported amounts of assets and liabilities as of the date of the
financial  statements,  as  well as the reported amounts of revenue and expenses
during  the  periods  presented.  Based  on  the  nature  of our operations, our
accounting  policies  do  not  require  difficult,  subjective or highly complex
judgments  and  therefore  our  reported  amounts  are  not  subject to material
variation  based  on changes in assumptions. Our significant accounting policies
are  described in Note 1 to the financial statements for the year ended June 30,
2005.

DISCONTINUED  OPERATIONS

     On  November  11,  2003,  we  entered  into an agreement to divest our Life
Sciences  business.  This sale was consummated on November 28, 2003. The results
of operations for the 2003 and 2004 fiscal years from our Life Sciences business
are  presented  in  the  statement  of  operations  as  discontinued operations.


                                       45
<PAGE>
ITEM 5.A.  OPERATING  RESULTS

     YEARS ENDED JUNE 30, 2005, 2004 AND 2003

     The functional currency for the Company's operations is Australian dollars.
The  translation  from  Australian  dollars  into  U.S. dollars is performed for
balance  sheet  accounts using current exchange rates in effect at balance sheet
date and for revenue and expense accounts using the average exchange rate during
the  period.

     The  following  table  shows  the  movement  in  the average exchange rates
between  fiscal  2003 and 2004, and fiscal 2004 and 2005. These average exchange
rates  have been used to translate Australian dollar revenue and expense amounts
into  U.S.  dollars.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
                                                              YEARS ENDED JUNE 30,
--------------------------------------------------------------------------------------
                                                            2003       2004       2005
--------------------------------------------------------------------------------------
<S>                                                     <C>       <C>        <C>
Average Australian dollar to U.S. dollar exchange rate  $0.58465  $0.71385   $0.75352
--------------------------------------------------------------------------------------
Movement in exchange rate to prior year                           $ 0.1292   $0.03967
--------------------------------------------------------------------------------------
% movement in exchange rate to prior year                             22.1%       5.6%
--------------------------------------------------------------------------------------
</TABLE>


     Revenue from Operations

     Our  revenue from sales and provision of services for fiscal 2003, 2004 and
2005  is  as  follows  (in  thousands):

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                                                 YEARS ENDED JUNE 30,
---------------------------------------------------------------------------------------
                                                               2003      2004      2005
---------------------------------------------------------------------------------------
<S>                                                        <C>       <C>       <C>
---------------------------------------------------------------------------------------
Sale of life science research products                     $  1,742  $  1,097  $      -
---------------------------------------------------------------------------------------
Revenue from provision of contract manufacturing services     1,052     1,394     1,076
---------------------------------------------------------------------------------------
TOTAL REVENUE FROM SALES AND PROVISION OF SERVICES         $  2,794  $  2,491  $  1,076
---------------------------------------------------------------------------------------
</TABLE>


     For  the  years  ending  June 30, 2003 and 2004 we derived revenue from the
following  two  sources:

          -    The  sale  of  life  science  research  products;  and

          -    The  provision  of  contract  manufacturing  services

     With the disposal of our Life Sciences division in November 2003 we derived
all of our revenues solely from the provision of contract manufacturing services
in  fiscal  2005.  For the fiscal year ended June 30, 2005 total sales decreased
$1,415,000  to  $1,076,000  a decline of 56.8% from the prior year. In the prior
year  the  Life  Sciences division contributed $1,097,000 to operating revenues.
Excluding  Life Science, operating revenues were down $318,000, or 22.8% year on
year  to  $1,076,000. This decline is attributable to our Contract Manufacturing
division concentrating on the production of PI-88 for our clinical trial program
over  the  pursuit  of  external  revenue  generating  contracts. PI-88 clinical
demands  increased  21%  year  on  year  due  to  Medigen  Biotechnology


                                       46
<PAGE>
Corporation's  ("Medigen"), our clinical development partner, advancing Phase II
liver  cancer  trial  and  the  initiation  of  new PI-88 Phase II trials by us.

     Despite  the sale of the Life Science business in November 2003 total sales
only decreased 10.8% to $2,491,000 in fiscal 2004 from $2,794,000 in fiscal 2003
as  revenues  from  contract  manufacturing services grew 32.5% to $1,394,000 in
fiscal 2004 from $1,052,000 in fiscal 2003. In Australian dollars (the Company's
functional currency) revenues only grew by 8.6% in fiscal 2004 over fiscal 2003.

     We  cannot  be  certain  that  we  will  be  able to continue to secure new
manufacturing  contracts. Additionally, growth in contract manufacturing revenue
will be limited by PI-88 production requirements, which are expected to increase
in  the  foreseeable  future  as both the Company and Medigen expand recruitment
into  respective  PI-88  clinical  trials.  Along  with  PI-88  production  the
Manufacturing  Divisions priority is also focused on optimizing PI-88 production
processes  and  validating  manufacturing  steps in preparation for anticipating
production/technology  transfer  for  future  supply of Phase III clinical trial
material.

     We ultimately expect to derive additional revenue from the out-licensing of
our  product  candidates  currently  under  development  in return for milestone
payments  and  royalties  on  commercial  sales.

     Research and Development Expenses

     Our research and development expenses for compounds under development and
discovery are as follows (in thousands):

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
                                                YEARS ENDED JUNE 30,
-----------------------------------------------------------------------
                                             2003      2004      2005
-----------------------------------------------------------------------
<S>                                        <C>       <C>       <C>
PI-88                                      $    709  $  1,155  $  1,074
-----------------------------------------------------------------------
PI-166                                           64        46        63
-----------------------------------------------------------------------
Drug discovery                                1,109     1,294     1,064
-----------------------------------------------------------------------
General research and development expenses       490       566       556
-----------------------------------------------------------------------
TOTAL RESEARCH AND DEVELOPMENT EXPENSES    $  2,372  $  3,061  $  2,757
-----------------------------------------------------------------------
</TABLE>


     Costs  for  PI-88 and PI-166, our two oncology compounds under development,
include  external  direct  costs  such  as principal investigators fees, patient
recruitment  fees,  data  monitoring  charges as well as our personnel costs for
preclinical,  clinical  and  regulatory  activities  associated  with  preparing
compounds  for submission of new drug applications to the FDA and TGA or similar
agencies.  General  research  and  development  expenses  include  research  and
development  management personnel costs and general laboratory costs that cannot
be allocated to a specific compound or our drug discovery effort. Drug discovery
costs  include  our  personnel and associated costs incurred in relation to this
effort  as  well  as  external  sponsored  research  costs.

     Prior  to  July  1, 2000 our accounting records did not record research and
development  costs  by  project.  Since  July 1, 2000 cumulative direct external
costs  incurred on PI-88, PI-166 and drug discovery are $4,793,000, $173,000 and
$4,475,000  respectively.


                                       47
<PAGE>
     The  current  year's investment in our research and development initiatives
have  decreased  from the prior year by $304,000 or 9.9% to $2,757,000 primarily
due  to  the  following:

     -    Expenditure  on  our  PI-88  clinical  development  program decreasing
          $81,000  to  $1,074,000  due  to the completion of patient recruitment
          into  the  Phase I/II trial in patients with advanced melanoma and the
          Phase  I  trial at the University of Colorado Cancer Center in Denver,
          Colorado, in combination with docetaxel (Taxotere) during fiscal 2004.
          This  was  off-set somewhat by an increase in expenditure on the Phase
          II  trial  in  patients  with  non-small  cell  lung  cancer due to an
          increase  in  patient recruitment and the commencement of the Phase II
          trial  in  patients  with  advanced  melanoma  in  combination  with
          dacarbazine.
     -    Expenditure  on our drug discovery program declined $230,000 primarily
          due  to  the  sponsored research contract with the Griffith University
          glycomics  program  having  completed  during  fiscal  2004.

     Research  and  development  expenses  for fiscal 2004 increased 29.1% in US
dollars, however in Australian dollars the increase was only 5.7%. This increase
was  primarily  due to increased costs associated with conducting PI-88 phase II
human  clinical  trials.

     We  expect our research and development expenses to increase in fiscal 2006
in  line with the increase in patients recruited into the ongoing PI-88 Phase II
trials  in  patients  with  advanced  melanoma  and advanced prostate cancer. In
addition  we  intend  increasing the size of our drug discovery program with the
hire  of  several  additional  scientists. The increase in the costs of our drug
discovery  program will be partially off-set by the AusIndustry Commercial Ready
grant.

     Our  lead  drug  candidates, PI-88 and PI-166 are currently in Phase II and
Phase  I  clinical trials respectively. Many drugs in human clinical trials fail
to  demonstrate  the  desired  safety  and efficacy characteristics. Even if our
drugs  progress  successfully  through  initial  human testing, they may fail in
later  stages  of  development.  Regulatory agencies, including the FDA and TGA,
regulate  many  aspects  of a product candidate's life cycle, including research
and  development  and  preclinical  and  clinical  testing. We or the regulatory
authorities  may  suspend  clinical  trials  at  any  time on the basis that the
participants  are  being  exposed  to  unacceptable  health risks. Completion of
clinical trials depends on, among other things, the number of patients available
for  enrollment  in  a  particular  trial,  which is a function of many factors,
including  the  availability  and  proximity  of  patients  with  the  relevant
condition. We rely on third parties to conduct clinical trials, which may result
in delays and failure to complete trials if the third parties fail to perform or
meet  applicable standards. Our drug discovery efforts are still in the research
phase  and have not yet commenced preclinical development, which means they have
not  yet  been  tested  on  humans.  We will need to commit significant time and
resources  to  develop  these  product  candidates.

     Our  products  will  only  be  successful  if:

          -    our  product candidates are developed to a stage that will enable
               us  to  commercialize  them  or  sell related marketing rights to
               pharmaceutical  companies;

          -    we  are  able  to  commercialize  product  candidates in clinical
               development  or  sell  the marketing rights to third parties; and


                                       48
<PAGE>
          -    our  product  candidates,  if  developed,  are  approved.

     We  depend on the successful completion of these goals in order to generate
significant  revenues.  We  also  enter  into  collaboration  agreements for the
development  and  commercialization of our product candidates. We cannot control
the  amount  and  timing  of  resources  our  collaborators  devote  to  product
candidates,  which  may also result in delays in the development or marketing of
our  products.

     Because of these risks and uncertainties, we cannot accurately predict when
or  whether  we  will  successfully  complete  the  development  of  our product
candidates  or  the  ultimate  product  development  cost.

     Without revenue generated from commercial sales, we anticipate that funding
to  support  our  ongoing  research,  development  and  general  operations will
primarily  come  from  public  equity financings, collaborations, milestones and
licensing  opportunities  from  future  collaborations.

     Selling, General and Administrative Costs

     Selling,  general  and  administrative costs increased $337,000 or 12.9% in
fiscal  2005  to  $2,954,000  compared  with  $2,617,000  for  fiscal  2004  and
$2,023,000  for  fiscal  2003.  In  Australian dollars (the Company's functional
currency) the increase in selling, general and administrative expenses was 6.9%.
This increase was primarily due to the following factors: an increase of $61,000
in  fees paid to consultants and advisors with the appointment of a clinical and
regulatory  consultant,  and  an  advisor to assist with out-licensing PI-88; an
increase  of  $85,000  in  remuneration  paid  to  executive  and  non-executive
directors;  an  increase  of  $29,000  in  stock exchange listing fees and share
registry fees due to the issuance of additional ordinary shares, and an increase
of  $24,000  in  travel  and  accommodation  expenditure  incurred  on attending
conferences  and  meetings associated with our efforts to out-license PI-88. The
29.4%  increase in selling, general and administrative costs in fiscal 2004 over
fiscal  2003  was primarily due to movements in the exchange rate between the US
dollar  and the Australian dollar which is the Company's functional currency. In
Australian  dollars selling, general and administrative costs increased 4.6% due
to  a  further  strengthening  of  our  business  development department with an
additional  headcount.

     We  expect  selling, general and administrative costs to increase in fiscal
2006  as  we  have engaged consultants to assist with the out-licensing of PI-88
for later-stage clinical development and commercialization. Additionally, we are
currently  relocating  our corporate offices as we have space constraints at our
current  facility.  As  a  result  rental  and  associated  occupancy costs will
increase.

     Other Costs of Operations

     Other  costs  of  operations  increased $318,072 to $397,416 in fiscal 2005
following  a  33.3%  fall  in  fiscal  2004  over  2003.  These  costs  are  the
un-recovered  overheads  of  our  Contract  Manufacturing  division that are not
recovered  against  cost  of  sales  and  increased  in  fiscal  2005, following
decreases  in  prior  years,  as  contract  manufacturing  revenue  decreased. A
majority  of  these  costs are fixed and therefore as the manufacturing facility
was  utilized  to  a  greater  extent on external revenue generating contracts a
greater  portion  of these costs were recovered against revenue and are shown as
cost  of  sales.


                                       49
<PAGE>
     The  costs  are  primarily  salaries and wages and repairs and maintenance.

     Depreciation expense

     Depreciation  expense  decreased  $35,000  in  fiscal 2005 to $429,000. The
decrease in depreciation was due primarily to assets becoming fully depreciated.
In  fiscal  2004  depreciation  expense increased $14,000, however in Australian
dollars  (our  functional  currency) depreciation actually reduced by A$132,000.
The  decrease  (in  Australian  dollars) was primarily due to assets being fully
depreciated.  Depreciation expense is expected to decline further in fiscal 2006
as  assets  continue  to  be fully depreciated and depreciation on our estimated
capital expenditure requirements will not be sufficient to off-set that decline.

     Other  Income  (Expenses)

We  realized  total  net other income of $1,257,000 in fiscal 2005 compared with
$1,079,000  in  fiscal 2004 and $538,000 in fiscal 2003. The components of Other
Income (Expenses) as shown in our statements of operations included elsewhere in
this  annual  report  are  (in  thousands):


<TABLE>
<CAPTION>
   -------------------------------------------------------------
                                        YEARS ENDED JUNE 30,
   -------------------------------------------------------------
                                     2003       2004       2005
   -------------------------------------------------------------
<S>                              <C>        <C>        <C>
   Interest income                    288        475        618
   -------------------------------------------------------------
   Interest expense                    (7)       (12)       (13)
   -------------------------------------------------------------
   Grant income                       435        596        578
   -------------------------------------------------------------
   Other income                        28         20         74
   -------------------------------------------------------------
   Realised loss on investments      (206)         -          -
   -------------------------------------------------------------
   TOTAL OTHER INCOME            $    538   $  1,079   $  1,257
   -------------------------------------------------------------
</TABLE>

     Interest  income  received varies from year to year depending on the amount
of  cash  we  have  available to invest and the interest rate prevailing at that
time. The Company raised an additional net $11.0 million from the sale of equity
during  fiscal  2005,  this significantly increased the total funds available to
invest.  As  a  result  interest  income  received  increased 30.1% to $618,000.

     Grant  income  relates  to  the  funding  we receive for our drug discovery
program  under  the  AusIndustry  START  grant.  The  grant  was  based on a 50%
re-imbursement  of  eligible  expenditure,  and therefore is directly related to
level  of  expenditure  incurred  on  this  program. The amount of the grant was
capped  at A$3.1 million. Income received from this grant fell $18,000 in fiscal
2005  a  drop of 3% due to a decrease in program expenditure as described above.
The  AusIndustry  START  grant  expired  on  June 30, 2005. We applied, and were
granted,  another  AusIndustry grant known as a Commercial Ready grant that will
continue  to  partially  fund  our  drug  discovery  program for the three years
beginning  August  2005.  We  expect  grant income to increase slightly over the
levels  of the last two fiscal years as we expect expenditure on this program to
increase.  As  with the START grant the Commercial Ready grant is based on a 50%
re-imbursement  of  eligible  expenditure. The amount of this grant is capped at
A$3.39  million.



                                       50
<PAGE>
     Income Taxes

     As  at  June  30, 2005, we had net tax loss carry forwards of approximately
$54.5 million, resulting in a deferred tax asset of approximately $16.3 million.
We  had  net tax loss carry forwards of $44.5 million as at June 30, 2004. Since
re-coupment  of  the  carried  forward  tax  loss is not more likely than not, a
valuation  allowance  has  been  established  to offset in full the deferred tax
asset  resulting  in  a  net  deferred  asset  of  $nil.

ITEM 5.B.  LIQUIDITY  AND  CAPITAL  RESOURCES

     Sources of Liquidity

     Since  inception,  we have financed our operations primarily through public
and  private  sales  of  equity and debt securities totaling approximately $59.9
million  in net proceeds. As at June 30, 2005, cash and cash equivalents totaled
approximately  $17.9  million  and consisted primarily of highly liquid interest
bearing  investments  with  maturities  of three months or less. We believe that
these  investments  do  not  constitute  any  material  market  risk  exposure.

     Cash Flows

     We  expended approximately $4.0 million in cash and cash equivalents during
the  twelve  months ended June 30, 2005 to finance our net operating activities.
This  compares  to  $3.8  million  and  $1.6  million  for fiscal 2004 and 2003,
respectively.  The  increase  in  net  cash  expended on operating activities in
fiscal  2005  over  fiscal  2004 was primarily due to the Life Sciences division
contributing  positive  cash  flows  in  fiscal  2004.  The disposal of the Life
Sciences  division  during  fiscal 2004 reduced both receipts from customers and
payments  to  suppliers  and  employees in fiscal 2005. The increase in net cash
expended  in  fiscal 2004 over fiscal 2003 was primarily due to the $1.2 million
received  from  the  proceeds  of  an  investment  in  fiscal  2003.

     Net  cash  from  investing  activities was positive in fiscal 2004 with the
proceeds  from  the sale of the Life Sciences division being received. In fiscal
2003  and  2005  cash  flows  from investing activities were negative due to the
purchase  of  property,  plant  and  equipment.

     Cash  and cash equivalents held as at June 30, 2003, 2004 and 2005 was $8.0
million,  $9.9  million  and $17.9 million respectively. The balance of cash and
cash  equivalents  increased each fiscal year due to proceeds from the sale of a
discontinued operation and/or the raising of cash through the sale of our equity
securities.

     Funding  Requirements

     We  currently  have  commitments  for  capital  expenditures  totalling
approximately  $380,000.  We  expect  to incur substantial future commitments in
light  of  our  oncology clinical program and our drug discovery program. We are
presently  funding  three Phase II multi-center clinical trials of PI-88 and one
Phase  Ib  clinical  trial  of  PI-166.

     We  expect  to  incur net costs of $1.27 million over the next two years on
our  current PI-88 clinical development program by which time all current trials
are  anticipated  to  have completed. In addition we expect to incur $203,000 on
our  current  PI-166  Phase  Ib  trial.


                                       51
<PAGE>
     Drug  discovery  is  partially  funded  by  a  A$3.39  million  AusIndustry
Commercial  Ready  grant.  This grant is for three years commencing August 2005.
Over  this period the Company's contribution to this program is expected to also
be  A$3.39  million.

     Our future cash requirements will depend on a number of factors, including:
the  scope  and  results  of  preclinical studies and clinical trials, continued
progress  of  our  research and development programs, including our in-licensing
activities,  our  ability  to  successfully  expand  our  contract  manufacture
services;  our  ability to generate revenue from the commercialization of PI-88,
PI-166 and our drug discovery platform, and the availability of other financing.

     Based  upon  current  and  expected levels of cash expenditures, we believe
that our existing cash and investments resources, approximately $15.4 million at
November  28,  2005, will be adequate to satisfy the requirements of our current
and planned operations through March 2007. Thereafter, to the extent that we are
unable  to  generate cash from our operating or commercialization activities, we
will  be  required to seek additional funding through the public or private sale
of  debt  or  equity securities. We may require additional financing before such
time  and  we  cannot be certain that we will have access to the capital markets
for  the sale of our securities on acceptable terms, or at all. Any shortfall in
funding  could  result  in  our  having to curtail our operations, including our
research  and  development activities which could have a material adverse effect
on  our  business,  financial  condition  and  results  of  operations.

ITEM 5.E.  OFF-BALANCE  SHEET  ARRANGEMENTS

     We  have not entered into any off-balance sheet transactions, agreements or
other  contractual  arrangements  (including  contingent  obligations)  with any
unconsolidated  entity  that  have or are reasonably likely to have a current or
future  effect  on  our  financial  condition,  changes in financial conditions,
revenues  or expenses, results of operations, liquidity, capital expenditures or
capital  resources.


                                       52
<PAGE>
ITEM 5.F.  TABULAR  DISCLOSURE  OF  AGGREGATE  CONTRACTUAL  OBLIGATIONS

     As  of June 30, 2005, we have known contractual obligations and commitments
of  $2,372,000.  Of  this  amount $1,520,000 relates to research and development
agreements  (primarily relating to our Phase II clinical program for PI-88). The
additional  $852,000  relates  to  the  following:  our  current operating lease
commitments  including  the  lease  of our premises ($140,000), repayment of our
insurance  premium  funding  ($409,000) and other commitments ($303,000) most of
which  relates  to  payment  obligations  under  various consulting and advisory
agreements.

     The  following  table  sets forth our aggregate contractual obligations for
the  three  years  following  June  30,  2005  (in  thousands):

<TABLE>
<CAPTION>
     -------------------------------------------------------------------
                                              PAYMENTS DUE BY PERIOD
     -------------------------------------------------------------------
     CONTRACTUAL OBLIGATIONS                 TOTAL   < 1 YEAR  1-3 YEARS
     -------------------------------------------------------------------
<S>                                         <C>      <C>       <C>
     Operating leases                           140        81         59
     -------------------------------------------------------------------
     Sponsored research and clinical trial
     obligations and commitments              1,520     1,251        269
     -------------------------------------------------------------------
     Insurance premium funding                  409       409          -
     -------------------------------------------------------------------
     Other commitments                          303       303          -
     -------------------------------------------------------------------
     TOTAL                                    2,372     2,044        328
     -------------------------------------------------------------------
</TABLE>

     We do not have any contractual obligations that extend beyond the next
three years.


                                       53
<PAGE>
ITEM 6.  DIRECTORS,  SENIOR  MANAGMENT  AND  EMPLOYEES

ITEM 6.A.  DIRECTORS  AND  SENIOR  MANAGEMENT

     The following table sets forth certain information about our directors and
executive officers:

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------
     NAME                    AGE  POSITION
     ----                    ---  --------
     ---------------------------------------------------------------------------
<S>                          <C>  <C>
     Stephen Chang            56  Executive Chairman
     ---------------------------------------------------------------------------
     Lewis J. Lee             47  Managing Director
     ---------------------------------------------------------------------------
     Prof. John R. Zalcberg   53  Non-Executive Director (1)
     ---------------------------------------------------------------------------
     Patrick O. Burns         68  Non-Executive Director (1), (2)
     ---------------------------------------------------------------------------
     Dr. Malvin L. Eutick     56  Non-Executive Director (1), (2)
     ---------------------------------------------------------------------------
     Dr. Stanley S.C. Chang   49  Non-Executive Director
     ---------------------------------------------------------------------------
     Dr. Anand Gautam         45  Vice President, Research and Development
     ---------------------------------------------------------------------------
     Sarah J. Meibusch        28  Director, Business Development
     ---------------------------------------------------------------------------
     Linton W. P. Burns       40  Company Secretary and Chief Financial Officer
     ---------------------------------------------------------------------------
     Gregory M. Orders        48  General  Manager Contract Manufacturing
     ---------------------------------------------------------------------------
</TABLE>

-------------

(1)  Member of Audit Committee
(2)  Member of Remuneration Committee

-------------

     STEPHEN  CHANG  is a founding Director and has served as Chairman from 1989
to 1994 and again since 1999. From 2000 to 2001, Mr. Chang served as chairman of
Medigen  Biotechnology  Corporation.  Mr.  Chang  holds  a  B.Sc.  in mechanical
engineering  from  the National Taiwan College of Marine Science and Technology.
There  is  no  family  relationship  between  Mr.  Chang  and Dr. Stanley Chang.

     LEWIS J. LEE has served as our Managing Director since February 2000. Prior
to  joining  us,  Mr.  Lee  held a number of senior management positions with F.
Hoffmann-La  Roche  Limited,  Switzerland,  and  its  various  international
subsidiaries  over  a  ten-year period, including the global business leader for
PEGASYS(TM),  a major Roche drug, global brand manager for Roferon-A. Mr. Lee is
also  a  director  of Xenome Ltd., a public, non-listed Australian biotechnology
company.  Mr.  Lee  holds  a B.Sc. in engineering science and an M.B.A. from the
University  of  Queensland,  Australia.

     PROFESSOR  JOHN R. ZALCBERG, M.D., PH.D. joined as a Non-Executive Director
in May 1995. He is Professor/Director of the Division of Haematology and Medical
Oncology  at the Peter MacCallum Cancer Institute in Melbourne, Australia. Among
his  numerous  professional positions, Prof. Zalcberg served as President of the
Clinical  Oncology  Society  of  Australia;  is the Chairman of the Australasian
Gatrointestinal  Trials  Group;  and  a member of the National Colorectal Cancer
Care  Surgery  Working  Party.

     PATRICK O. BURNS was appointed a Non-Executive Director in March 1999. From
1997,  Burns  has  also  been  a member of the Board of Directors of Synbiotics,
which specialises in animal health care, and Annovis, Inc a speciality chemicals
company  and  a  Senior  Advisor  to  AcrossFrontiers  International, Inc. He is
currently  a  non-executive  director  of  ChemGenex  Pharmaceuticals  Ltd,  an
Australian  listed  biotechnology  company;  vice  chairman  of  Euclid  Systems


                                       54
<PAGE>
Corporation,  a  private  eye  care  company; the chairman of Stable Eyes, Inc a
biotechnology  company in the eye care field and an advisor to a number of early
stage technology companies. Mr. Burns holds an B.A. in Government from Dartmouth
College  and  an L.L.B. from Harvard Law School. There is no family relationship
between  Mr.  Burns  and  Mr. Linton W. P. Burns our Company Secretary and Chief
Financial  Officer.

     DR. MALVIN L. EUTICK, PH.D. was appointed a Non-Executive Director in March
1999.  He is a director of both TUTA Healthcare and Pharmalab. He has had a long
association  with  the  biotechnology  industry and was awarded the Medal of the
Order  of  Australia  for  services  to the industry in 1995. Dr. Eutick holds a
B.Sc.  and  a  Ph.D.  in  biochemistry from the University of Sydney, Australia.

     DR.  STANLEY  CHANG,  M.D., PH.D. was appointed a Non-Executive Director in
February  2001,  and  is  the  chief  executive officer and managing director of
Medigen  Biotechnology  Corporation,  a  Taiwan-based biotechnology company. Dr.
Chang  holds  an  M.D.  from  the  College  of  Medicine  at the National Taiwan
University and a Ph.D. from the Department of Surgery, University College London
Medical  School  at the University of London, United Kingdom. There is no family
relationship  between  Dr.  Chang  and  Mr.  Stephen  Chang,  our  Chairman.

     DR.  ANAND  GAUTAM  PH.D.   was  appointed  Vice  President,  Research  and
Development  in  September  2005. Prior to joining us Dr Gautam has held several
positions  with  biotechnology  companies  including Pharmexa, Denmark as Senior
Vice  President  of Research, and Chief Scientific Officer of Coridon Pty Ltd an
Australian  based  biotechnology  company. Dr. Gautam completed his Ph.D. at the
University  of  London  in  1990  followed by post-doctoral training at Stanford
University, California, USA.

     SARAH  J.  MEIBUSCH  joined  us  in  2003  as  Business Development Manager
following  a  similar  role  at Pyxis Genomics, Inc a private Chigaco, USA based
biotechnology  company.  Ms.  Meibusch  was  promoted  to  Director,  Business
Development  in  June  2005. She holds a Bachelor degree in Agricultural science
from  the  University  of Queensland and a Master of Professional Studies degree
from  Cornell  University,  USA.

     LINTON  W.  P.  BURNS  was  appointed  Chief  Financial Officer and Company
Secretary  in August 2004. Prior to joining us, Mr. Burns spent 5 years as chief
financial  officer  and  company  secretary for ASX listed biotechnology company
BresaGen  Limited.  Preceding  that  role  Mr. Burns was the New Zealand general
manager  for  the  information  solutions company, Equifax Ltd. Prior to that he
held  senior  financial  positions  with  Equifax  in  Australia  and the United
Kingdom.  Mr.  Burns holds a Bachelor of Arts in Accountancy from the University
of  South  Australia,  Adelaide,  Australia  and  is  a member of the Australian
Institute  of  Chartered  Accountants.

     GREGORY M. ORDERS joined us in April 2001 as Quality Assurance Manager, and
served  as  the  Acting  General  Manager of Contract Services from October 2001
until  August  2002,  at  which  time  he was appointed General Manager Contract
Manufacturing.  From  1995 to 2001, Mr. Orders held various positions in quality
assurance  and pharmaceutical manufacture for Sigma Pharmaceuticals Pty. Ltd, an
Australian-based  contract  pharmaceutical  manufacturer.  From 1993 to 1995, he
worked at the virology and bacteriology laboratories of Fernz Corporation, a New
Zealand  manufacturer  of  interferon  tablets.  Mr.  Orders holds a B.Sc. and a
Masters  in  molecular  science  from


                                       55
<PAGE>
LaTrobe University in Melbourne, Australia.

ALTERNATE  DIRECTOR

     EUGENE  CHENG was appointed the alternate director for Dr. Stanley Chang in
March 2003. He is currently the chief operating officer of Medigen Biotechnology
Corporation.  Prior  to  joining  Medigen  Mr.  Cheng  was a partner of E-telint
Capital Partners, a Silicon Valley based venture capital firm. Mr. Cheng was the
president of Advanced Semiconductor Engineering, Inc., a publicly held Taiwanese
corporation  and  one  of  the  largest  global  providers  of  semiconductor
manufacturing services. Mr. Cheng has also occupied various management positions
with Acer Inc., a publicly held Taiwanese corporation and one of the world's top
branded  PC  vendors.  Mr.  Cheng  holds a B.E. in chemical engineering from the
Chung  Yuan  College of Science and Engineering, Chung Li, Taiwan, and an M.B.A.
from  the  Management  School of the National Sun Yat-sen University, Kaohsiung,
Taiwan.

     Our  executive officers are appointed by, and serve at the pleasure of, our
board  of  directors.  There  are no family relationships among our directors or
executive  officers. No director has a contractual right to serve as a member of
our  board  of  directors.

ITEM 6.B.  COMPENSATION

     The  following  table  sets  forth  certain  information  concerning  the
compensation  that we paid to our directors and our five most highly compensated
executive  officers,  both  individually  and as a group, during the fiscal year
ended  June  30,  2005:

<TABLE>
<CAPTION>
                                                                      Annual Compensation
                                                                      -------------------
                                                       Directors'   Superannuation   Benefits &   Stock
Name and Principal Position                   Salary      Fees       Contributions  Allowances   Options    TOTAL
---------------------------                   ------      ----       -------------  ----------   -------    -----
                                               (1)                        (2)                      (3)
                                               ---
<S>                                          <C>       <C>         <C>               <C>         <C>       <C>
Stephen Chang
  Chairman and Executive Director            177,964            -            16,017           -        -     193,981
Lewis J. Lee
  Executive Director and Managing Director   202,533            -            18,228      28,547        -     249,308
Prof. John R. Zalcberg
  Non-Executive Director                           -       33,438             3,010           -        -      36,448
Patrick O. Burns
  Non-Executive Director                           -       36,448                 -           -        -      36,448
Dr. Malvin L. Eutick
  Non-Executive Director                           -       33,438             3,010           -        -      36,448
Dr. Stanley S.C. Chang
  Non-Executive Director                           -       36,448                 -           -        -      36,448
Dr. Robert. H. Don (4)
  Vice President Research and Development     81,255            -             5,598           -        -      86,853
Dr. Darren M. Schliebs (5)
  Vice President Business Development        102,938            -             8,069           -   19,230     130,237
Milton S. McColl (6)
  Chief Financial Officer and Company
  Secretary                                    4,921            -               579       1,544        -       7,044


                                       56
<PAGE>
Linton W. P. Burns
  Chief Financial Officer and Company
  Secretary                                   88,779            -             7,990           -   25,115     121,884
Gregory M. Orders
  General Manager Contract Manufacturing      67,159            -             6,796      21,443        -      95,398
Dr. Brian Creese
  Head of Clinical Development                75,355            -             7,036           -        -      82,391
Sarah Meibusch (7)
  Director, Business Development               2,478            -               222           -        -       2,700
All directors and executive officers
    as a group (13 persons)                  803,382      139,772            76,555      51,534   44,345   1,115,588
</TABLE>

---------------
(1)  No  part of the compensation shown was paid pursuant to a material bonus or
     profit-sharing  plan.

(2)  We  are  obligated to contribute to various superannuation plans to provide
     pension, retirement or similar benefits under the Australian Superannuation
     Guarantee Legislation. Contributions are at set percentages of salaries and
     wages.  We  have no responsibility for the administration or performance of
     the superannuation plans. We have not established any superannuation plans.

(3)  During the 2005 fiscal year stock options were granted to certain executive
     officers under the terms of their contracts of employment. The options were
     issued free of charge. Each option entitles the holder to subscribe for one
     fully  paid  ordinary  share  in  the Company at an exercise of A$4.00. The
     options  expire  on February 28, 2006. The estimated value of these options
     is  calculated  at the date of grant using the Black-Scholes option pricing
     model.

(4)  Dr.  Don  resigned  in  March  2005.

(5)  Dr.  Schliebs  resigned  in  June  2005.

(6)  Mr.  McColl  resigned  in  August  2004.

(7)  Ms.  Meibusch  was  appointed  Director, Business Development in June 2005.
     Prior  to  this  she was the Manager of Business Development. Amounts shown
     above  include  S  Meibusch's  remuneration  as  the  Director,  Business
     Development  and  not  that  of  the  entire  reporting  period.


ITEM 6.C.  BOARD  PRACTICES

     We  currently  have  six directors. Our constitution provides that at least
one-third  of  our  directors (except our managing director) must retire at each
annual  general  meeting  of  shareholders.  As  a result, only a portion of our
board  of  directors  will be elected each year.  Mr. Stephen Chang, Dr. Stanley
Chang  and  Mr.  P  Burns  were re-elected at our 2004 annual general meeting of
shareholders.  Prof.  J.  Zalcberg and Dr. M. Eutick were re-elected at our 2005
annual  general  meeting  of  shareholders.

     No  termination  benefits  are  provided  to directors other than statutory
superannuation.

     AUDIT  COMMITTEE.  Our  audit committee currently consists of Dr. M. Eutick
(Chair),  Mr.  P.  Burns,  and Prof. J. Zalcberg, all of whom are non-management
members  of  our  board  of directors. The authority and responsibilities of our
audit  committee  are  set  forth  in  its  charter  and  includes:

     -    The appointment, compensation, retention, and oversight of the work of
          the  independent  auditors who report directly to the audit committee;

                                       57
<PAGE>
     -    The  approval of all audit and non-audit engagements and fees with the
          independent  auditors;

     -    The  authority  to  engage,  without board approval, independent legal
          counsel  and  other  advisors,  at  the  Company's  expense, as deemed
          necessary  to  carry  out  its  duties;

     -    Reviewing  and  monitoring  the framework of our internal controls and
          the  objectivity  of  our  financial  reporting;

     -    Oversight  of  the  internal audit function including the adequacy and
          effectiveness  of  the  Company's  internal  controls  over  financial
          reporting  and  disclosure  controls  and  procedures;

     -    Reviewing,  prior  to  filing, our unaudited interim or audited annual
          financial  statements  and  discussing the statements and reports with
          our management and the independent auditors, including any significant
          adjustments,  management  judgments  and  estimates,  new  accounting
          policies  and  disagreement  with  management;

     -    Reviewing  and  discussing  with  management the Company's interim and
          year-end  earnings  press  releases prior to the release being issued;
          and

     -    Establishing  and  reviewing  procedures for complaints received by us
          regarding  accounting  matters.

     REMUNERATION  COMMITTEE.  Our  remuneration committee currently consists of
Dr.  M.  Eutick and Mr. P. Burns, who are non-management members of our board of
directors.  The  function  of  our  remuneration  committee  includes:

     -    Reviewing  and,  as it deems appropriate, recommending to our board of
          directors,  policies,  practices  and  procedures  relating  to  the
          compensation  arrangements  for  management  and  other  personnel,
          including  the  granting  of  options  under  our  option  plans;

     -    Establishing  and  reviewing  general  compensation  policies with the
          objective  to  attract  and  retain superior talent, reward individual
          performance  and  achieve  our  financial  goals;  and

     -    Advising  and  consulting  with  our  executive  officers  regarding
          managerial  personnel  and  development.


                                       58
<PAGE>
ITEM 6.D.  EMPLOYEES

     The  number  of  persons,  including  executive  directors, employed by the
Company,  as  of  June 30, 2005, 2004 and 2003, broken down by activity is shown
below.

<TABLE>
<CAPTION>
                                          AS OF JUNE 30,

                                         2003  2004  2005
<S>                                      <C>   <C>   <C>

Management and administration              10    10     9

Research and development                   15    17    17

Sales and marketing                         7     -     -

Production and operations                  14    13    15

TOTAL                                      46    40    41
</TABLE>

     Our  sales  and marketing department was disbanded with the disposal of our
Life  Sciences  division  in  November  2003.

     All  our  employees  are  based  at  our  facility  in  Darra,  Queensland,
Australia.  None  of our employees are represented by a labor union, nor have we
experienced work stoppages. We believe that our relations with our employees are
good.

ITEM 6.E.  SHARE  OWNERSHIP

     The  following  table  sets forth, for each director or senior executive of
the Company, their interest in the ordinary shares of the Company (including the
interests  of  their immediate families and persons connected with them) and the
percentage  of  the  Company's  outstanding  share  capital  represented by such
ownership  interests  as  of  December  13,  2005.

<TABLE>
<CAPTION>
                                                          PERCENTAGE OF       NUMBER OF
                                       NUMBER OF ISSUED  ISSUED ORDINARY   ORDINARY SHARES
NAME                                   ORDINARY SHARES      SHARES (1)        ISSUABLE
----                                   ---------------      ----------       PURSUANT TO
                                                                              OPTIONS
                                                                              -------
<S>                                    <C>               <C>               <C>
Stephen Chang                                   736,424              1.8%           75,000
Lewis J. Lee                                    160,000                *            50,000
Prof. John R. Zalcberg                          115,849                *            75,000
Patrick O. Burns                                100,500                *            75,000
Dr. Malvin L. Eutick                            100,000                *            75,000
Dr. Stanley S.C. Chang                          100,000                *                 -
Dr. Robert H. Don (2)                                 -                -                 -
Dr. Darren M. Schliebs (3)                            -                -                 -
Dr. Brian Creese                                      -                -                 -
Sarah J. Meibusch (3)                                 -                -            10,000
Milton S. McColl (4)                                  -                -                 -
Linton W. P. Burns (4)                                -                -            66,000
Gregory M. Orders                                     -                -                 -
All directors and executive officers
  As a group (13 persons)                     1,312,773              3.2%          426,000
</TABLE>


                                       59
<PAGE>
*       Represents  less  than  1%.

(1)       Based  on  40,556,793  issued ordinary shares as of December 13, 2005.

(2)       Dr.  Don  resigned  as  VP  R&D  in  March  2005.

(3)       Dr.  Schliebs  resigned  as  VP  Business Development in June 2005. S.
Meibusch  was  promoted  to  Director  of  Business  Development.

(4)      Mr. McColl resigned as Company Secretary and Chief Financial Officer in
August  2004  and  was  replaced  by  Mr.  L.  Burns.

-------------

OPTION PLANS

     The  following  director and employee option plans were in existence during
the fiscal year ending June 30, 2005. The plans are overseen by the Remuneration
Committee  which  determines  the  terms  under  which  eligible individuals may
participate.

     In  accordance  with Australian law, we will not grant any option if, after
such  issuance,  the  number of options issued to non-executive employees during
the  previous  five  years  whether  or  not  exercised  and  which have not yet
terminated  or  expired  would exceed 5% of the then total number of outstanding
ordinary  shares. In accordance with Australian Stock Exchange Listing Rules all
grants of options to directors require the prior approval from our shareholders.

     In November 1999, our shareholders approved the executive directors' option
plan.  Only  our  directors  who  hold  salaried  employment  are  eligible  to
participate  in  the plan. Our board of directors may impose any conditions upon
the  vesting  or exercise of any options granted under the plan. 400,000 options
issued  under  this plan at a weighted average exercise price of $4.12 per share
expired  on  February  8, 2005. There are no options issued under this plan that
are  currently  outstanding.

     In  October  2000, our board of directors approved an employee option plan.
All  our employees and our executive and non-executive directors are eligible to
participate  in  the plan. As approved by our shareholders in November 2000, all
grants  of options under the plan to employees who are not directors may be made
without  shareholder  approval. The plan also provides that the minimum exercise
price  must  be  A$4.00 ($3.05) per share for initial grants under the plan and,
thereafter,  must  equal  the  greater of A$4.00 ($3.05) or 125% of the weighted
average  market  price  of our ordinary shares as quoted on the Australian Stock
Exchange  for the ten business days prior to the option grant. As of November 2,
2005,  there  were  outstanding  options  under the 2000 employee option plan to
purchase  an  aggregate of 502,820 ordinary shares at an exercise price of $2.22
per share of which options to purchase a total of 350,000 ordinary shares expire
on  December 22, 2005 and options to purchase a total of 152,820 ordinary shares
expire  on  February  28,  2006.

     In  October  2003,  our  shareholders  approved  the directors and employee
incentive scheme and the allotment thereunder of options issuable for a total of
900,000  ordinary  shares  to  our  directors


                                       60
<PAGE>
and  options  issuable  for  a  total  number  of 900,000 ordinary shares to our
employees.  All our directors and all employees, whether full time or part time,
are  eligible  to  participate  in  the  scheme.  Options to purchase a total of
900,000  ordinary  shares  were  subsequently issued to directors and options to
purchase  a  total  of 900,000 ordinary shares were issued to our employees. The
scheme  also provides that all options granted under the scheme have an exercise
price of A$2.50 ($1.77) per share with an expiry date of on May 31, 2005. During
the  fiscal  year  ended  June 30, 2005 1,528,211 options issued under this plan
were  exercised.  During the fiscal year ended June 30, 2005 options to purchase
of  total  of  32,000  ordinary shares were issued for nil consideration with an
exercise  price of $2.78. As of November 28, 2005 there were outstanding options
to  purchase  an  aggregate  of  10,000  ordinary  shares  under  this  plan.

     In  November  2004,  our  shareholders  approved the directors and employee
option incentive plan. All our directors and all employees, whether full time or
part  time, are eligible to participate in this plan. The minimum exercise price
of  options  granted  under this plan shall not be less than the average closing
share  price  as  recorded on the Australian Stock Exchange in the five business
days  preceding  the  grant  of those options. The expiry date of options issued
under  this  plan  can  not  exceed  10 years from the date of grant. During the
fiscal  year  ended June 30, 2005 options to purchase a total of 33,000 ordinary
shares were issued under this plan. These options were issued free of charge and
have  an exercise price of $3.15. As of November 28, 2005 there were outstanding
options  to  purchase  an  aggregate  of 33,000 ordinary shares under this plan.

                                       61
<PAGE>
ITEM 7.  MAJOR  SHAREHOLDERS  AND  RELATED  PARTY  TRANSACTIONS

ITEMS  7.A.  MAJOR  SHAREHOLDERS

     The  table  below  shows  all holders who, to the Company's knowledge, own,
directly  or  indirectly,  5%  or  more  of the Company's ordinary shares, as of
December  11,  2003, December 2, 2004 and December 13, 2005, each being the most
recent  practicable  date  before  reporting  for  the  last three fiscal years.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                         2003              2004               2005
                                 -------------------------------------------------------
                                             % OF               % OF               % OF
                                   # OF     ISSUED    # OF     ISSUED    # OF     ISSUED
NAME                              SHARES    SHARES   SHARES    SHARES   SHARES    SHARES
----------------------------------------------------------------------------------------
<S>                              <C>        <C>     <C>        <C>     <C>        <C>

Manifest Capital Management Pty      N/A                 N/A           2,655,286    6.55
Ltd
----------------------------------------------------------------------------------------

Medigen Biotechnology            3,250,089    9.60  1,961,350    5.50  1,911,350    4.71
Corporation
----------------------------------------------------------------------------------------
</TABLE>


     As  of December 13, 2005, a total of 3,350,526 ordinary shares (or 8.26% of
the  total  number  of  our ordinary shares then outstanding) were held by seven
holders  with  registered  addresses  in  the  United States. We believe we have
approximately  1,017  beneficial  shareholders  in  the  United  States.

     To  the  best of our knowledge, we are not owned or controlled, directly or
indirectly,  by  another  corporation, by any foreign government or by any other
natural  or  legal  persons severally or jointly, and we disclaim control by the
companies,  entities or individuals listed in the table above. We do not know of
any  arrangements  in  place  that  could  result  in a change in control of our
company.

ITEM 7.B.  RELATED  PARTY  TRANSACTIONS

     Except  as disclosed herein and elsewhere in this annual report, there were
no  material  transactions  to  which  we  were  a party and in which any of our
directors, executive officers or major shareholders (or any of their affiliates,
associates  or  enterprises)  were  involved  since  July  1,  2004.

     None  of our directors, executive officers or major shareholders (or any of
their  affiliates,  associates  or  enterprises)  was indebted to us at any time
since  July  1,  2004.


                                       62
<PAGE>
ITEM 8.  FINANCIAL  INFORMATION

ITEM 8.A.  FINANCIAL  STATEMENTS  AND  OTHER  FINANCIAL  INFORMATION

     Our  audited  financial  statements  and related notes for our fiscal years
ended  June  30,  2003, 2004 and 2005 are contained on pages F-1 through F-24 of
this  annual  report.

EXPORT SALES

     The following table indicates the percent of revenues derived from export.

<TABLE>
<CAPTION>
                                 FOR THE YEARS ENDED JUNE 30,
                                   2003        2004        2005
<S>                             <C>         <C>         <C>
Contract manufacture                 74.3%       18.2%       13.8%
</TABLE>


     The  percentage  of  contract manufacturing revenues derived from customers
outside  Australia  fluctuates as these contracts are typically adhoc in nature.
We  entered  into  a  significant  contract  with  another  Australian  based
biotechnology  company in fiscal 2003. This contract was completed during fiscal
2005.  In fiscal 2005 we earned $425,000 in revenue from this contract, or 39.5%
of  total  revenue (2004: $786,000 in revenue, being 56.3% of total revenue). In
fiscal  2005  we  derived  78.3% of our total revenues from two Australian based
companies.  As  a  result  of the above, our export revenues declined as we have
limited  manufacturing  capacity.

LEGAL PROCEEDINGS

     There  is  no litigation of a material nature pending or threatened against
our  property  or  the  Company.

DIVIDEND POLICY

     We  have  never  declared cash dividends on our ordinary shares and have no
present  intention  of  declaring such cash dividends in the foreseeable future.
Our  board  of  directors  will  not  be  able  to  recommend the payment of any
dividends  until  we  make  a profit. Future profitability will depend on future
earnings  and our working capital requirements. Our board of directors currently
intends  to  reinvest  income in the continued development and operations of our
business. We expect to continue to generate operating losses on our research and
development  projects  until  products arising from our research and development
activities  are successfully commercialized. Factors beyond our control, such as
market  competition,  exchange  rate fluctuations and changing government policy
may  also  affect  profitability  and  our  capacity  to  pay  dividends.

ITEM 8.B.  SIGNIFICANT  CHANGES

     Except  as disclosed elsewhere in this annual report, no significant change
has  occurred since the date of the annual financial statements included in this
annual  report.


                                       63
<PAGE>
ITEM 9.  THE  OFFER  AND  LISTING

ITEM 9.C.  MARKETS

     The  principal  non-United States trading market for our ordinary shares is
the  Australian  Stock  Exchange,  or the ASX, on which our ordinary shares have
been trading under the code "PGL" since December 1995. Prior to that time, there
was  no  established public trading market for our ordinary shares. Our ordinary
shares  are  also quoted on the Nasdaq SmallCap Market under the symbol "PGLAF."

PRICE RANGE OF ORDINARY SHARES

     AUSTRALIAN STOCK EXCHANGE (ASX)

     The  following  table  sets  forth the high and low closing sales prices in
Australian  dollars and the trading volume of our ordinary shares as reported on
the  ASX  during  the  periods  indicated:

<TABLE>
<CAPTION>
                                                         TRADING
                                         HIGH    LOW      VOLUME
                                        ------  ------  ----------
<S>                                     <C>     <C>     <C>
     Yearly Data:
     ------------
         Fiscal year 2001 . . . . . . . A$2.83  $A1.02   9,081,542
         Fiscal year 2002 . . . . . . .   2.02    0.75   5,385,169
         Fiscal year 2003 . . . . . . .   1.25    0.50   3,310,777
         Fiscal year 2004 . . . . . . .   3.76    0.72  25,976,500
         Fiscal year 2005 . . . . . . .   6.22    2.04  23,242,125
     Quarterly Data:
     ---------------
         First Quarter 2003 . . . . . .   0.95    0.72     348,846
         Second Quarter 2003. . . . . .   1.18    0.48   2,317,800
         Third Quarter 2003 . . . . . .   2.27    0.72   4,937,400
         Fourth Quarter 2003. . . . . .   1.70    1.40   2,886,700
         First Quarter 2004 . . . . . .   3.45    1.49  10,320,200
         Second Quarter 2004. . . . . .   3.76    2.75   7,832,200
         Third Quarter 2004 . . . . . .   4.70    3.32   5,403,285
         Fourth Quarter 2004. . . . . .   6.22    4.35   6,891,832
         First Quarter 2005 . . . . . .   4.55    2.90   4,363,820
         Second Quarter 2005. . . . . .   3.66    2.04   6,583,188
         Third Quarter 2005 . . . . . .   3.14    2.35   3,476,989
     Monthly Data:
     -------------
         June 2005. . . . . . . . . . .   2.69    2.04   3,018,047
         July 2005. . . . . . . . . . .   2.95    2.63   1,293,822
         August 2005. . . . . . . . . .   3.14    2.35   1,483,237
         September 2005 . . . . . . . .   2.76    2.38     699,930
         October 2005 . . . . . . . . .   3.34    2.58   2,703,103
         November 2005. . . . . . . . .   3.17    2.65   1,752,069
</TABLE>


                                       64
<PAGE>
     NASDAQ SMALLCAP MARKET

     The following table sets forth the high and low closing sales prices in
United States dollars and the trading volume of our ordinary shares as reported
on the Nasdaq SmallCap Market during the periods indicated:

<TABLE>
<CAPTION>
                                                        TRADING
                                         HIGH   LOW     VOLUME
                                         -----  -----  ----------
<S>                                      <C>    <C>    <C>
     Yearly Data:
     ------------
         Fiscal year 2001 . . . . . . .  $1.68  $0.56   3,112,300
         Fiscal year 2002 . . . . . . .   0.99   0.41     948,645
         Fiscal year 2003 . . . . . . .   0.88   0.30   2,478,639
         Fiscal year 2004 . . . . . . .   3.24   0.51  18,534,500
         Fiscal year 2005 . . . . . . .   4.71   1.60   4,411,100
     Quarterly Data:
     ---------------
         First Quarter 2003 . . . . . .   0.55   0.34      27,600
         Second Quarter 2003. . . . . .   0.88   0.30   2,176,930
         Third Quarter 2003 . . . . . .   1.25   0.51   2,887,600
         Fourth Quarter 2003. . . . . .   1.33   0.91   3,147,700
         First Quarter 2004 . . . . . .   3.11   1.12   7,084,100
         Second Quarter 2004. . . . . .   3.24   1.75   5,415,100
         Third Quarter 2004 . . . . . .   3.29   2.31   1,205,500
         Fourth Quarter 2004. . . . . .   4.71   3.15   1,822,000
         First Quarter 2005 . . . . . .   3.48   2.33     778,900
         Second Quarter 2005. . . . . .   2.70   1.60     604,700
         Third Quarter 2005 . . . . . .   2.35   1.71     454,400
     Monthly Data:
     -------------
         June 2005. . . . . . . . . . .   1.92   1.60     203,500
         July 2005. . . . . . . . . . .   2.21   1.88     225,500
         August 2005. . . . . . . . . .   2.35   1.77     158,300
         September 2005 . . . . . . . .   2.00   1.71      70,600
         October 2005 . . . . . . . . .   2.40   1.86     109,000
         November 2005. . . . . . . . .   2.50   1.95      79,300
</TABLE>

     On  December  13,  2005,  the  closing  sales price in U.S. Dollars of the
ordinary  shares as reported on the ASX and the Nasdaq SmallCap Market was $2.19
and  $2.15,  respectively.


                                       65
<PAGE>
ITEM 10.  ADDITIONAL  INFORMATION

ITEM 10.B.  MEMORANDUM  AND  ARTICLES  OF  ASSOCIATION

     The following description of our ordinary shares, including brief summaries
of  the  rights  of  our  shareholders  as  conferred  by  our  constitution and
Australian law, and certain matters respecting directors, is not complete and is
qualified  by reference to Australian law and our constitution. Our constitution
may  be  inspected  and copied at the Public Reference Section of the Securities
and  Exchange  Commission  at  450  Fifth  Street, N.W., Washington, D.C. 20549.

     COMPLIANCE WITH NASDAQ RULES

     NASDAQ  corporate  governance rules require that we disclose the exemptions
that  we  have  obtained,  and  rely  on,  from  compliance with existing NASDAQ
corporate  governance  rules.  Under  our  Constitution  and consistent with the
Australian  Corporations  Act,  the  quorum  required for an ordinary meeting of
shareholders  consists  of at least three shareholders, represented in person or
by  proxy.  Under  the  NASDAQ  Marketplace  Rules, a NASDAQ listed-company must
provide  for  a  quorum  that  in  no  case  shall  be  less than 33 1/3% of the
outstanding  shares  of  the company's common voting stock. Pursuant to a letter
from  NASDAQ  in 1997, NASDAQ granted us an exemption from such NASDAQ rule. Our
quorum  requirement  is in accordance with Australian law and generally accepted
business  practices in Australia. We also obtained from NASDAQ an exemption from
NASDAQ Marketplace Rule 4350(i) concerning shareholder approval of certain share
plans,  although  we  have  not  to  date  relied  on  such  exemption.

     In  a  letter  to  NASDAQ dated June 2005 from our home country (Australia)
legal  counsel  we  advised  that pursuant to NASDAQ Marketpace Rule 4350(a)(1),
Progen  will  follow certain governance practices of its home country in lieu of
the comparable NASDAQ requirement under NASDAQ Marketplace Rule 4350(c)(1) which
provides  that  a  majority  of  the  Board  of  directors  must be comprised of
independent  directors.  Progen does not currently comply with this requirement.
We  have six members on the Board, three of whom are considered independent. The
Principles of Good Corporate Governance and Best Practice Recommendations (BPRs)
released by the Australian Stock Exchange (ASX) recommend that a majority of the
board  should  be independent. However, current practice in Australia recognises
that  the BPRs are guidelines only. If a company considers that a recommendation
is  not  appropriate to its particular circumstances, it has the flexibility not
to  adopt  it.


                                       66
<PAGE>
ITEM 10.C.  MATERIAL  CONTRACTS

     Information  about material contracts, other than contracts entered into in
the  ordinary  course  of  business,  to  which we are a party and which we have
entered  into  during  the  two immediately preceding fiscal years are disclosed
above  in  "Item  4.  Information  on  the  Company  ".

ITEMS  10.D.  EXCHANGE  CONTROLS

     In  the  early  1980s,  the  Australian  Government  began  a  program  of
deregulation of the Australian financial sector. This led to the introduction of
competition  from  foreign  banks and, perhaps more notably, the deregulation of
foreign  exchange controls. Deregulation has been at the forefront of Australian
Government  policy  since the early 1980's and, except as discussed below, there
are  no  laws  or regulations in Australia that restrict the export or import of
capital  or  affect  the remittance of dividends or other payments to holders of
our  ordinary  shares  who are nonresidents of Australia, subject to withholding
taxes  under  Australian  law  with  respect to remittances of dividends (to the
extent the taxes on the dividends are not paid by us) and interest payments. See
"Taxation"  below.

     THE  FOREIGN  ACQUISITIONS  AND  TAKEOVERS  ACT  1975

     The Foreign Acquisitions and Takeovers Act 1975 is an act of the Parliament
of  the Commonwealth of Australia which seeks to regulate overseas investment in
Australia.  By  and  large,  the  Government's  policy  is  to encourage foreign
investment  provided  that  it  is  consistent  with the needs of the Australian
community.  Although  restrictions are applied in certain areas, in the majority
of  industry  sectors, proposals are approved unless they are judged contrary to
the  national  interest.  The  Act  requires  compulsory notification of certain
proposed acquisitions of Australian assets and makes other proposed acquisitions
and  arrangements  subject  to  prohibition  or divestiture after they have been
examined  and  found  to  be  contrary  to  the  national  interest.

     THE  FINANCIAL  TRANSACTIONS  REPORTS  ACT  1988

     The  Financial Transactions Reports Act 1988 is an act of the Parliament of
the  Commonwealth  of  Australia,  designed to facilitate the administration and
enforcement  of  Australia's  revenue  laws.  It  provides  for the reporting of
certain  financial transactions and transfers, including the export or import of
currency  exceeding  A$10,000  to  the  Cash  Transactions  Reporting  Agency.

     THE  INCOME TAX ASSESSMENT ACT OF 1936 AND THE INCOME TAX ASSESSMENT ACT OF
     1997  (COLLECTIVELY,  THE  "TAX  ACT")

     The  Tax  Act  is  the  principal  law  of  the  Commonwealth of Australia,
concerning the collection and administration of taxes (except goods and services
tax).  Under  the  Tax  Act, overseas residents are obliged to pay income tax in
Australia  on  income  derived  from  Australian  sources.

ITEM 10.E.  TAXATION

     The  following  is a summary of the current tax laws of the U.S. (including
the Internal Revenue Code of 1986, as amended, its legislative history, existing
and  proposed  regulations


                                       67
<PAGE>
thereunder,  published rulings and court decisions) and Australia as they relate
to  us  and  our  shareholders, including United States and other non-Australian
shareholders.  The  summary  is  based  upon  laws  and relevant interpretations
thereof in effect as of the date of this annual report, all of which are subject
to  change, possibly on a retroactive basis. The discussion does not address any
aspects  of  U.S.  taxation other than federal income taxation or any aspects of
Australian  taxtion  other  than  federal income taxation, inheritance taxation,
stamp  duty  and  goods  and  services  tax.

     Prospective  purchasers of ordinary shares are advised to consult their own
tax  advisors  with  respect  to  the  specific  tax consequences to them of the
purchase,  ownership  and  disposition  of  ordinary  shares,  including,  in
particular,  the  effect  of  any  foreign,  state  or  local  taxes.

     AUSTRALIAN  TAX  CONSEQUENCES

     Non-Australian  residents  are  liable  to  pay  tax on income derived from
Australian  sources.  The  mechanism by which that tax is paid (for nonresidents
who  have  no  permanent  establishment  in Australia or where the income is not
connected with a permanent establishment) is known as withholding tax. Dividends
paid  by  a  resident  Australian  company to a resident of the United States of
America  are  subject  to  withholding  tax  at  the  rate  of  15%. The rate of
withholding  tax  on  dividends is normally 30%, but since the United States has
concluded  a  double tax treaty agreement with Australia, the rate is reduced to
15%.  It should be noted, however, that under Section 128B(3) of the Tax Act, to
the  extent  that  dividends  paid  to nonresidents have been franked (generally
where  a  company  pays  tax itself), such dividends are exempt from withholding
tax. Franked dividends is the expression given to dividends when the profits out
of  which those dividends are paid have been taxed in our hands. Accordingly, an
Australian  company  paying  fully  franked  dividends  to  a nonresident is not
required  to  deduct any withholding tax. Dividends on which withholding tax has
been  paid  are  not  subject to any further Australian tax. In other words, the
withholding  tax  represents  the  final Australian tax liability in relation to
those  dividends.

     The pertinent provisions of the double tax treaty between Australia and the
United States provide that dividends are primarily liable for tax in the country
of  residence of the beneficial owner. However, the source country, in this case
Australia,  may  also tax them, but in such case the tax will be limited to 15%.
Where  the  beneficial  owner  is a United States resident company that holds at
least  10% of us, the tax will be limited to 5%. The 15% limit does not apply to
dividends  derived  by  a  resident  of  the  United States of America who has a
permanent  establishment  or fixed base in Australia, if the holding giving rise
to  the dividends is effectively connected with that establishment or base. Such
dividends  are  taxed  in  the  normal  way  as  business profits or independent
personal  services  income  as  the  case  may  be.

     We  have  not  paid  any  cash  dividends since our inception and we do not
anticipate  the  payment  of  cash  dividends  in  the  foreseeable  future.
Additionally,  we  expect  to  incur  additional operating losses until products
arising  from  our  research  and  development  programs  are  successfully
commercialized.  See  "Item  8.A.  Financial  Statements  and  Other  Financial
Information-Dividend  Policy."

     Capital  gains tax in Australia is payable on real gains over the period in
which  the  shares  have  been held, that is, the difference between the selling
price  and  the  original cost price. The cost price is indexed for inflation if
the  shares  have  been  held  for  more  than  one  year,  and  individual


                                       68
<PAGE>
taxpayers  can,  with  respect  to  shares held for more than one year, elect to
forego  indexation  of  the  cost base in exchange for being taxed on 50% of the
realized gain. Capital losses are available as deductions but only against other
capital  gains.

     STAMP  DUTY

     Any  transfer  of  shares through trading on the ASX and NASDAQ, whether by
Australian  residents  or  foreign  residents, are not be subject to stamp duty.

     AUSTRALIAN  DEATH  DUTY

     Australia  does  not  have  estate  or  death  duties. No capital gains tax
liability  is  realized  upon the inheritance of a deceased person's shares. The
disposal  of  inherited  shares  by  beneficiaries, may, however, give rise to a
capital  gains  tax  liability.

     GOODS  AND  SERVICES  TAX

     The  issue  or  transfer  of  shares  will  not  incur Australian goods and
services tax and does not require a stockholder to register for Australian goods
and  services  tax  purposes.

     U.S. FEDERAL INCOME TAXATION

     As used below, a "U.S. Holder" is a beneficial owner of an ordinary share
that is, for U.S. federal income tax purposes, (i) a citizen or resident alien
individual of the United States, (ii) a corporation (or an entity treated as a
corporation) organized under the law of the United States, any State thereof or
the District of Columbia, (iii) an estate the income of which is subject to U.S.
federal income tax without regard to its source or (iv) a trust if (1) a court
within the U.S. is able to exercise primary supervision over the administration
of the trust, and one or more U.S. persons have the authority to control all
substantial decisions of the trust, or (2) the trust was in existence on August
20, 1996 and properly elected to continue to be treated as a U.S. person. For
purposes of this discussion, a "non-U.S. Holder" is a beneficial owner of an
ordinary share that is (i) a nonresident alien individual, (ii) a corporation
(or an entity treated as a corporation) created or organized in or under the law
of a country other than the U.S. or a political subdivision thereof or (iii) an
estate or trust that is not a U.S. Holder.

     TAXATION OF DIVIDENDS

     U.S. Holders. In general, subject to the passive foreign investment company
rules discussed below, a distribution on an ordinary share will constitute a
dividend for U.S. federal income tax purposes to the extent made from the
Company's current or accumulated earnings and profits as determined under U.S.
federal income tax principles. If a distribution exceeds the Company's current
and accumulated earnings and profits, it will be treated as a non-taxable
reduction of basis to the extent of the U.S. Holder's tax basis in the ordinary
share on which it is paid, and to the extent it exceeds that basis it will be
treated as capital gain. For purposes of this discussion, the term "dividend"
means a distribution that constitutes a dividend for U.S. federal income tax
purposes. The gross amount of any dividend on an ordinary share (which will
include the amount of any Australian taxes withheld) will be subject to U.S.
federal income tax as foreign source dividend


                                       69
<PAGE>
income. The amount of a dividend paid in Australian dollars will be its value in
U.S. dollars based on the prevailing spot market exchange rate in effect on the
day the U.S. Holder receives the dividend. Any gain or loss realized on a
conversion or other disposition of Australian dollars generally will be treated
as U.S. source ordinary income or loss. Any Australian withholding tax will be
treated as a foreign income tax eligible for credit against a U.S. Holder's U.S.
federal income tax liability, subject to generally applicable limitations under
U.S. federal income tax law. For purposes of computing those limitations
separately under current law for specific categories of income, a dividend
generally will constitute foreign source "passive income" or, in the case of
certain holders, "financial services income." You should consult your tax
adviser with respect to the determination of the foreign tax credit limitation,
as the relevant rules are complex and are scheduled to change in future years. A
foreign tax credit may not be allowed for withholding tax imposed in respect of
certain short-term or hedged positions in an ordinary share. Alternatively, any
Australian withholding tax may be taken as a deduction against taxable income. A
dividend will not be eligible for the corporate dividends received deduction.

     Subject to certain exceptions for short-term and hedged positions, a
dividend an individual receives on an ordinary share before January 1, 2009 will
be subject to a maximum tax rate of 15% if the dividend is a "qualified
dividend." A dividend on an ordinary share will be a qualified dividend if (i)
either (a) the ordinary shares are readily tradable on an established securities
market in the U.S. or (b) the Company is eligible for the benefits of a
comprehensive income tax treaty with the U.S. that the Secretary of the Treasury
determines is satisfactory for purposes of these rules and that includes an
exchange of information program, and (ii) the Company was not, in the year prior
to the year the dividend was paid, and is not, in the year the dividend is paid,
a passive foreign investment company ("PFIC"), foreign personal holding company
("FPHC") or foreign investment company ("FIC"). The ordinary shares are listed
on the NASDAQ SmallCap Market. It is not clear whether that listing will qualify
them as readily tradable on an established securities market in the United
States. However, the Treaty satisfies the requirements of clause (i)(b), and,
although the matter is not free from doubt, the Company believes that it should
be a resident of Australia entitled to the benefits of the Treaty. However,
because the facts relating to the Company's entitlement to the benefits of the
Treaty can change over time, there can be no assurance that it will be entitled
to the benefits of the Treaty for any taxable year. Based on the Company's
audited financial statements and relevant market and shareholder data, the
Company believes it was not a PFIC, FPHC or FIC for U.S. federal income tax
purposes for its June 30, 2005 taxable year. In addition, based on the Company's
audited financial statements and its current expectations regarding the value
and nature of its assets, the sources and nature of its income, and relevant
market and shareholder data, the Company does not anticipate becoming a PFIC,
FPHC or FIC for its June 30, 2006 taxable year. Effective for taxable years of
foreign corporations beginning after December 31, 2004, the rules relating to
FPHCs and FICs are repealed. However, as described in the section below entitled
"Passive Foreign Investment Company Rules," if the Company was a PFIC in a year
while a U.S. Holder held an ordinary share, and if the U.S. Holder has not made
a qualified electing fund election effective for the first year the U.S. Holder
held the ordinary share, the ordinary share remains an interest in a PFIC for
all future years or until such an election is made. The Internal Revenue Service
takes the position that that rule will apply for purposes of determining whether
an ordinary share is an interest in a PFIC in the year a dividend is paid or in
the prior year, even if the Company does not satisfy the tests to be a PFIC in
either of those years. Even if the Company has not been a PFIC in any prior year
and is not currently a PFIC, because the composition of the Company's income and
assets will vary over time, there can


                                       70
<PAGE>
be no assurance that it will not be considered a PFIC for any taxable year. The
U.S. Treasury has announced its intention to promulgate rules pursuant to which
holders of stock of non-U.S. corporations, and intermediaries though whom the
stock is held, will be permitted to rely on certifications from issuers to
establish that dividends are treated as qualified dividends. Because those
procedures have not yet been issued, it is not clear whether the Company will be
able to comply with them. Special limitations on foreign tax credits apply to
dividends subject to the reduced rate of tax. Holders shares should consult
their own tax advisers regarding the availability of the reduced dividend tax
rate in the light of their own particular circumstances.

     Non-U.S. Holders. A dividend paid to a non-U.S. Holder of an ordinary share
will not be subject to U.S. federal income tax unless the dividend is
effectively connected with the conduct of trade or business by the non-U.S.
Holder within the U.S.(and is attributable to a permanent establishment or fixed
base the non-U.S. Holder maintains in the U.S. if an applicable income tax
treaty so requires as a condition for the non-U.S. Holder to be subject to U.S.
taxation on a net income basis on income from the ordinary share). A non-U.S.
Holder generally will be subject to tax on an effectively connected dividend in
the same manner as a U.S. Holder. A corporate non-U.S. Holder may also be
subject under certain circumstances to an additional "branch profits tax," the
rate of which may be reduced pursuant to an applicable income tax treaty.

     TAXATION OF CAPITAL GAINS

     U.S. Holders. Subject to the passive foreign investment company rules
discussed below, on a sale or other taxable disposition of an ordinary share, a
U.S. Holder will recognize capital gain or loss in an amount equal to the
difference between the U.S. Holder's adjusted basis in the ordinary share and
the amount realized on the sale or other disposition, each determined in U.S.
dollars. Any gain a U.S. Holder recognizes generally will be U.S. source income
for U.S. foreign tax credit purposes, and, subject to certain exceptions, any
loss generally will be a U.S. source loss. If an Australian tax is paid on a
sale or other disposition of an ordinary share, the generally applicable
limitations under U.S. federal income tax law on crediting foreign income taxes
may preclude a U.S. Holder from obtaining a foreign tax credit for the
Australian tax. In general, any adjusted net capital gain of an individual in a
taxable year ending before January 1, 2009 is subject to a maximum tax rate of
15%. In later years, the maximum tax rate on the net capital gain of an
individual will be 20%. The deductibility of capital losses is subject to
limitations.

     Non-U.S. Holders. A non-U.S. Holder will not be subject to U.S. federal
income tax on gain recognized on a sale or other disposition of an ordinary
share unless (i) the gain is effectively connected with the conduct of trade or
business by the non-U.S. Holder within the U.S.(and is attributable to a
permanent establishment or fixed base the non-U.S. Holder maintains in the U.S.
if an applicable income tax treaty so requires as a condition for the non-U.S.
Holder to be subject to U.S. taxation on a net income basis on income from the
ordinary share), or (ii) in the case of a non-U.S. Holder who is an individual,
the holder is present in the U.S. for 183 or more days in the taxable year of
the sale or other disposition and certain other conditions apply. Any
effectively connected gain of a corporate non-U.S. Holder may also be subject
under certain circumstances to an additional "branch profits tax," the rate of
which may be reduced pursuant to an applicable income tax treaty.


                                       71
<PAGE>
     PASSIVE FOREIGN INVESTMENT COMPANY RULES

     A special set of U.S. federal income tax rules applies to a foreign
corporation that is a PFIC for U.S. federal income tax purposes. As noted above,
based on the Company's audited financial statements and relevant market and
shareholder data, the Company believes it was not a PFIC for U.S. federal income
tax purposes for its June 30, 2005 taxable year. In addition, based on the
Company's audited financial statements and its current expectations regarding
the value and nature of its assets, the sources and nature of its income, and
relevant market and shareholder data, the Company does not anticipate becoming a
PFIC for its June 30, 2006 taxable year.

     In general, a foreign corporation is a PFIC if at least 75% of its gross
income for the taxable year is passive income or if at least 50% of its assets
for the taxable year produce passive income or are held for the production of
passive income. In general, passive income for this purpose means, with certain
designated exceptions, dividends, interest, rents, royalties (other than certain
rents and royalties derived in the active conduct of trade or business),
annuities, net gains from dispositions of certain assets, net foreign currency
gains, income equivalent to interest, income from notional principal contracts
and payments in lieu of dividends. The determination of whether a foreign
corporation is a PFIC is a factual determination made annually and is therefore
subject to change. Subject to exceptions pursuant to certain elections that
generally require the payment of tax, once stock in a foreign corporation is
stock in a PFIC in the hands of a particular shareholder that is a U.S. person,
it remains stock in a PFIC in the hands of that shareholder.

     If the Company treated as a PFIC, contrary to the tax consequences
described in "U.S. federal Income Tax Considerations-Taxation of Dividends" and
"-U.S. federal Income Tax Considerations-Taxation of Capital Gains" above, a
U.S. Holder that does not make an election described in the succeeding two
paragraphs would be subject to special rules with respect to (i) any gain
realized on a sale or other disposition of an ordinary share and (ii) any
"excess distribution" by the Company to the U.S. Holder (generally, any
distribution during a taxable year in which distributions to the U.S. Holder on
the ordinary share exceed 125% of the average annual taxable distributions the
U.S. Holder received on the ordinary share during the preceding three taxable
years or, if shorter, the U.S. Holder's holding period for the ordinary share).
Under those rules, (i) the gain or excess distribution would be allocated
ratably over the U.S. Holder's holding period for the ordinary share, (ii) the
amount allocated to the taxable year in which the gain or excess distribution is
realized would be taxable as ordinary income and (iii) the amount allocated to
each prior year, with certain exceptions, would be subject to tax at the highest
tax rate in effect for that year, and the interest charge generally applicable
to underpayments of tax would be imposed in respect of the tax attributable to
each of those years. A U.S. Holder who owns an ordinary share during any year
the Company is a PFIC must file Internal Revenue Service Form 8621.

     The special PFIC rules described above will not apply to a U.S. Holder if
the U.S. Holder makes a timely election to treat the Company as a "qualified
electing fund" ("QEF") in the first taxable year in which the U.S. Holder owns
an ordinary share and the Company is a PFIC and if the Company complies with
certain reporting requirements. Instead, a shareholder of a QEF generally is
currently taxable on a pro rata share of the Company's ordinary earnings and net
capital gain as ordinary income and long-term capital gain, respectively.
Neither that ordinary income nor any actual dividend from the Company would
qualify for the 15% maximum tax rate on dividends described


                                       72
<PAGE>
above if the Company is a PFIC in the taxable year the ordinary income is
realized or the dividend is paid or in the preceding taxable year. The Company
has not yet determined whether, if it is a PFIC, it would make the computations
necessary to supply U.S. Holders with the information needed to report income
and gain pursuant to a QEF election. It is, therefore, possible that U.S.
Holders would not be able to make or retain that election in any year the
Company is a PFIC. Although a QEF election generally cannot be revoked, if a
U.S. Holder made a timely QEF election for the first taxable year it owned an
ordinary share and the Company is a PFIC (or is treated as having done so
pursuant to any of certain elections), the QEF election will not apply during
any later taxable year in which the Company does not satisfy the tests to be a
PFIC. If a QEF election is not made in that first taxable year, an election in a
later year generally will require the payment of tax and interest, and in
certain circumstances the election may cease to be available at a later date.

     In lieu of a QEF election, a U.S. Holder of stock in a PFIC that is
considered marketable stock could elect to mark the stock to market annually,
recognizing as ordinary income or loss each year an amount equal to the
difference as of the close of the taxable year between the fair market value of
the stock and the U.S. Holder's adjusted basis in the stock. Losses would be
allowed only to the extent of net mark-to-market gain previously included in
income by the U.S. Holder under the election for prior taxable years. A U.S.
Holder's adjusted basis in the ordinary share will be adjusted to reflect the
amounts included or deducted with respect to the mark-to-market election. If the
mark-to-market election were made, the rules set forth in the second preceding
paragraph would not apply for periods covered by the election. A mark-to-market
election will not apply during any later taxable year in which the Company does
not satisfy the tests to be a PFIC. In general, the ordinary share will be
marketable stock if they are traded, other than in de minimis quantities, on at
least 15 days during each calendar quarter. However, there is no certainty that
the shares will be considered "marketable stock" for these purposes.

     INFORMATION REPORTING AND BACKUP WITHHOLDING

     Dividends paid on, and proceeds from the sale or other disposition of,
ordinary shares to a U.S. Holder generally may be subject to information
reporting requirements and may be subject to backup withholding at the rate of
28% unless the U.S. Holder provides an accurate taxpayer identification number
or otherwise establishes an exemption. The amount of any backup withholding
collected from a payment to a U.S. Holder will be allowed as a credit against
the U.S. Holder's U.S. federal income tax liability and may entitle the U.S.
Holder to a refund, provided certain required information is furnished to the
Internal Revenue Service.

     A non-U.S. Holder generally will be exempt from these information reporting
requirements and backup withholding tax but may be required to comply with
certain certification and identification procedures in order to establish its
eligibility for exemption.

     THE DISCUSSION ABOVE IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF
ALL TAX CONSIDERATIONS APPLICABLE TO AN INVESTMENT IN ORDINARY SHARES. HOLDERS
AND POTENTIAL HOLDERS SHOULD CONSULT THEIR TAX ADVISER(S) CONCERNING THE TAX
CONSEQUENCES RELEVANT TO THEM IN THEIR PARTICULAR SITUATION.


                                       73
<PAGE>
ITEM 11.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     The primary objective of our investment activities is to preserve principal
and, at the same time, maximize income without significantly increasing risk. At
June  30,  2005,  our  cash  and  cash equivalents consisted primarily of highly
liquid  investments  with maturities of one month or less. We believe that these
investments  do  not  constitute  any  material  market  risk  exposure.

     In  fiscal  2005 the majority of our operating expenses were denominated in
Australian  dollars.  From  time  to  time,  in  order to reduce our exposure to
foreign  currency  exchange  rate  risks,  we buy and hold foreign currencies to
cover our operating expenses denominated in those currencies. We also, from time
to  time, attempt to hedge our currency exchange risk. At June 30, 2005, we were
not  a  party  to  any  foreign  currency  hedging or other derivative financial
instruments.

     The  Australian  dollar  is  our  functional  currency.  Our  assets  and
liabilities  are translated into U.S. dollars at the exchange rate prevailing on
the  balance  sheet  date,  and  our  revenues,  expenses,  gains and losses are
translated  into  U.S.  dollars  at  the  average exchange rate for the relevant
period.  In  general,  fluctuations  between  the U.S. dollar and the Australian
dollar  may  affect  our  operating  results  as  reported  in  U.S.  dollars.


                                       74
<PAGE>
ITEM 12.  DESCRIPTION  OF  SECURITIES  OTHER  THAN  EQUITY  SECURITIES

     Not applicable.


                                       75
<PAGE>
                                     PART II

ITEM 13.  DEFAULTS,  DIVIDEND  ARREARAGES  AND  DELIQUENCIES

     None.


ITEM 14.  MATERIAL  MODIFICATIONS  TO  THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS

     None.



ITEM 15.  CONTROLS  AND  PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

     An evaluation as of June 30, 2005 was carried out under the supervision and
with the participation of the Company's management, including its Chief
Executive Officer and its Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures, as
defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934.
Based on that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that the Company files and submits under
the Exchange Act is (i) recorded, processed, summarized and reported as and when
required and (ii) accumulated and communicated to management, including the
Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure as of the end of the Company's most recent fiscal
year. No changes in the Company's internal controls over financial reporting
occurred during the period covered by this report that materially affected, or
are reasonably likely to materially affect, the Company's internal controls over
financial reporting.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Not applicable.

ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM

     Not applicable.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     In connection with the audits of our fiscal years ended June 30, 2005 and
2004, Ernst & Young, the Company's independent auditors, informed our audit
committee that they consider the following matters represent material weaknesses
in the operation of our internal control over financial reporting:

     -    The  financial  statement  close process and knowledge of US GAAP; and


                                       76
<PAGE>
     -    Adequate  segregation  of  duties

     In order to address the weakness in our knowledge of US GAAP, and
consistent with the program implemented last year, our senior finance staff have
attended, and will continue to attend, targeted US GAAP and SEC reporting
courses and subscribe to additional information publications and updates of SEC
and US GAAP releases and rule changes and of information about the requirements
of the Public Company Accounting Oversight Board. We will also consider
mitigating this weakness by conferring and/or hiring outside accounting advisers
with respect to the technical requirements applicable to our financial
statements.

     Our management and audit committee continually assess the level of
segregation of duties existing within the financial reporting function and are
committed to segregating duties where practically possible. Since the end of
fiscal 2005 we have improved the segregation of duties, however, given the
number of staff employed in our finance department it is sometimes not
practicable to segregate all duties.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

     Our management, including our managing director and chief financial
officer, does not expect that our disclosure controls and procedures or our
internal control over financial reporting will assure that all appropriate
information will, in fact, be communicated to management to allow timely
decisions to be made or prevent all error and fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Additionally, the
design of a control system must reflect the fact that there are resource
constraints, and the benefit of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the company have been detected or that our control
system will operate effectively under all circumstances. Moreover, the design of
any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.


ITEM 16.  [RESERVED]


ITEM 16A.  AUDIT  COMMITTEE  FINANCIAL  EXPERT

     The Company's board of directors has determined that audit committee member
Mr. P. Burns is an audit committee financial expert as defined under the rules
and regulations of the Securities and Exchange Commission.


                                       77
<PAGE>
ITEM 16B.  CODE  OF  ETHICS

     We have adopted a code of ethics that applies to our executive directors
and chief financial officer. A copy of this Code of Ethics is available on the
Company's website at www.progen.com.au.
                     -----------------

     No waivers to this Code of Ethics were granted to our executive directors
or chief financial officer during the fiscal year ended June 30, 2005.


ITEM 16C.  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

     The aggregate fees and expenses for professional services rendered by our
principal accountant, Ernst & Young, for the audit of our annual financial
statements for the years ended June 30, 2004 and 2005 and for other listed
services rendered in those years are set forth in the following table:

<TABLE>
<CAPTION>
          ---------------------------------------------------
                                               2004      2005
<S>                                         <C>      <C>
          ---------------------------------------------------
          Audit Fees                        $86,375  $129,040
          ---------------------------------------------------
          Audit-Related Fees (1)                  -         -
          ---------------------------------------------------
          Tax Fees (2)                            -         -
          ---------------------------------------------------
          All Other Fees (3)                  9,459         -
          ---------------------------------------------------
          TOTAL FEES                        $95,834  $129,040
          ---------------------------------------------------
</TABLE>

(1)  There were no assurance and related services rendered by our principal
     accountant related to the performance of the audit or review of our
     financial statements which have not been disclosed under audit fees above.

(2)  There were no professional services rendered by our principal accountant
     for tax compliance, tax advice or tax planning.

(3)  This category comprises services provided by our principal accountant other
     than audit fees, audit-related fees and tax fees set forth above. In fiscal
     2004 the costs in this category included training provided by our principal
     accountant in relation to new accounting standards and pronouncements.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

     All audit and non-audit services performed by our independent auditors must
be specifically pre-approved by our audit committee. Consistent with this
policy, for the year ended June 30, 2005, all audit and non-audit services
initiated by Ernst & Young were pre-approved by our audit committee.


ITEM 16D.  EXEMPTIONS  FROM  THE  LISTING  STANDARDS  FOR  AUDIT  COMMITTEES

     Not applicable.


                                       78
<PAGE>
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

     Not applicable.

                                    PART III

ITEM 17.  FINANCIAL  STATEMENTS

     Not Applicable.


ITEM 18.  FINANCIAL  STATEMENTS

     FINANCIAL STATEMENTS - INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S>                                                                                  <C>
     Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . F-1
     Balance Sheets as of June 30, 2004 and 2005 . . . . . . . . . . . . . . . . . . F-2
     Statements of Operations for the years ended June 30, 2003, 2004 and 2005 . . . F-3
     Statements of Changes in Stockholders' Equity for the years
         ended June 30, 2003, 2004 and 2005. . . . . . . . . . . . . . . . . . . . . F-4
     Statements of Cash Flow for the years ended June 30, 2003, 2004 and 2005. . . . F-6
     Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-8 through
                                                                                     F- 24
</TABLE>


ITEM 19.  EXHIBITS

<TABLE>
<CAPTION>
     Exhibit Number   Description
     --------------   -----------
<S>                   <C>
     4(b)(iv)         2004 addendum to Lease 2806 Ipswich Road Darra *
     4(c)(1)          Employment agreement dated May 21, 2003 between Progen Industries
                      Limited and Darren Schliebs *
     4(c)(2)          Employment agreement dated August 5, 2004 between Progen Industries
                      Limited and Linton Burns *
     4(c)(3)          Progen Industries Limited Directors and Employee Option Incentive Plan
                      Rules for the directors and employees incentive scheme approved by a
                      resolution of shareholders at the annual general meeting of the Company
                      held on November 30, 2004 *
     12.1             Certification of Lewis J. Lee under Rule 13a-14(a) (1)
     12.2             Certification of Linton W. P. Burns under Rule 13a-14(a) (1)
     13               Certification of Lewis J. Lee and Linton W. P. Burns under Section 1350
                      of Chapter 63 of Title 18 of the United States Code (1)
</TABLE>

     *    Incorporated  by reference to exhibits filed with the Annual Report on
     Form  20-F,  filed  on  December  20,  2004.
     (1)  Filed  herewith


                                       79
<PAGE>
                                   SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                       PROGEN INDUSTRIES LIMITED

                                       By:  /s/ Lewis J. Lee
                                          -----------------------------
                                          Lewis J. Lee
                                          Managing Director


Dated:  December 21, 2005

                                       80
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


THE BOARD OF DIRECTORS AND SHAREHOLDERS OF PROGEN INDUSTRIES LIMITED

We have audited the accompanying balance sheets of Progen Industries Limited as
of June 30, 2005 and 2004, and the related statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended June 30, 2005. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
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 Progen Industries Limited at
June 30, 2005 and 2004, and the results of its operations and its cash flows for
each of the three years in the period ended June 30, 2005, in conformity with
U.S. generally accepted accounting principles.




Ernst & Young
Brisbane, Queensland, Australia
December 6, 2005


--------------------------------------------------------------------------------
                                      F - 1
<PAGE>
<TABLE>
<CAPTION>
PROGEN INDUSTRIES LIMITED


BALANCE SHEETS                                                 (U.S. DOLLARS)
===============================================================================

                                                             JUNE 30,
                                                       2004           2005
<S>                                                <C>            <C>
ASSETS:
CURRENT ASSETS:
  Cash and cash equivalents                        $  9,885,656   $ 17,851,895
  Accounts receivable                                   315,922        184,912
  Prepaid expenses                                      111,442         29,459
                                                   -------------  -------------

TOTAL CURRENT ASSETS                                 10,313,020     18,066,266
                                                   -------------  -------------

NON-CURRENT RECEIVABLES                                  10,355          9,906
PROPERTY AND EQUIPMENT - NET                            884,765        692,083
                                                   -------------  -------------

TOTAL ASSETS                                       $ 11,208,140   $ 18,768,255
                                                   =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
  Accounts payable                                 $    896,953   $    885,352
  Accrued employee benefits                             164,046        190,305
  Deferred revenue                                      144,334              -
                                                   -------------  -------------

TOTAL CURRENT LIABILITIES                             1,205,333      1,075,657
                                                   -------------  -------------

NON-CURRENT ACCRUED EMPLOYEE BENEFITS                    68,252         88,177
ASSET RETIREMENT OBLIGATION                                   -         81,797
                                                   -------------  -------------

TOTAL LIABILITIES                                     1,273,585      1,245,631
                                                   -------------  -------------

COMMITMENTS AND CONTINGENCIES                                 -              -

STOCKHOLDERS' EQUITY:
Capital stock, ordinary shares, no par value;
34,521,065 and 40,556,793 issued and outstanding
in 2004 and 2005 respectively                        48,869,981     59,907,735

Accumulated deficit                                 (38,960,115)   (43,508,429)

Accumulated other comprehensive income/(loss)            24,689      1,123,318
                                                   -------------  -------------

TOTAL STOCKHOLDERS' EQUITY                            9,934,555     17,522,624
                                                   -------------  -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $ 11,208,140   $ 18,768,255
                                                   =============  =============
<FN>
See accompanying notes to financial statements.
</TABLE>


--------------------------------------------------------------------------------
                                      F - 2
<PAGE>
<TABLE>
<CAPTION>
PROGEN INDUSTRIES LIMITED


STATEMENTS OF OPERATIONS                                                     (U.S. DOLLARS)
===============================================================================================
                                                                     YEARS ENDED
                                                                      JUNE 30,
                                                           2003          2004          2005
<S>                                                    <C>           <C>           <C>
REVENUE FROM SALE OF SERVICES                          $ 1,051,695   $ 1,394,589   $ 1,076,308

COST OF SERVICES                                           424,065       373,266       253,276

COST OF OPERATIONS:

  Research and development                               2,371,704     3,061,120     2,757,081
  Depreciation                                             449,596       463,456       428,891
  Rentals on operating leases                               56,126        78,583        91,329
  Selling, general and administrative costs              2,022,547     2,616,728     2,953,886
  Other costs of operations                                119,010        79,344       397,416
                                                       ------------  ------------  ------------

  TOTAL COST OF OPERATIONS                               5,018,983     6,299,231     6,628,603
                                                       ------------  ------------  ------------

LOSS FROM OPERATIONS                                    (4,391,353)   (5,277,908)   (5,805,571)
                                                       ------------  ------------  ------------

OTHER INCOME (EXPENSES):

  Interest income                                          288,289       474,589       617,822
  Interest expense                                          (7,377)      (12,437)      (12,923)
  Grant income                                             434,829       596,522       577,756
  Other income                                              28,143        20,113        74,602
  Realised loss on sale of investments                    (205,893)            -             -
                                                       ------------  ------------  ------------

TOTAL OTHER INCOME                                         537,991     1,078,787     1,257,257
                                                       ------------  ------------  ------------

NET LOSS FROM CONTINUING OPERATIONS                     (3,853,362)   (4,199,121)   (4,548,314)

DISCONTINUED OPERATIONS

  Income from operations of Life Sciences division
  (including profit on disposal of $486,402 in 2004)       288,213       654,666             -

NET LOSS                                               $(3,565,149)  $(3,544,455)  $(4,548,314)
                                                       ============  ============  ============

NET LOSS PER ORDINARY SHARE (BASIC AND DILUTED)

  Continuing operations                                $     (0.16)  $     (0.13)  $     (0.13)
  Discontinued operations                              $      0.01   $      0.02             -
                                                       ------------  ------------  ------------

NET LOSS PER ORDINARY SHARE (BASIC AND DILUTED)        $     (0.15)  $     (0.11)  $     (0.13)
                                                       ============  ============  ============

WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING USED IN
THE CALCULATION OF NET LOSS PER SHARE                   24,391,869    32,675,867    35,709,343
                                                       ============  ============  ============
<FN>
See accompanying notes to financial statements.
</TABLE>


--------------------------------------------------------------------------------
                                      F - 3
<PAGE>
<TABLE>
<CAPTION>
PROGEN INDUSTRIES LIMITED


STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY                 (U.S. DOLLARS)
==========================================================================================================

                                                                               ACCUMULATED
                                                                                  OTHER
                                    NUMBER OF                                 COMPREHENSIVE
                                     ORDINARY                  ACCUMULATED       INCOME
                                      SHARES       AMOUNT        DEFICIT         (LOSS)          TOTAL
                                    ----------  ------------  -------------  ---------------  ------------
<S>                                 <C>         <C>           <C>            <C>              <C>
BALANCE - JUNE 30, 2002             24,391,869  $41,800,156   $(31,850,511)  $   (1,426,496)  $ 8,523,149

Other comprehensive income:
Translation adjustment                       -            -              -        1,077,128     1,077,128
Reclassification of investment
losses included in net income                -            -              -          116,959       116,959
Net loss                                     -            -     (3,565,149)               -    (3,565,149)
                                                                                              ------------
Comprehensive loss                           -            -              -                -    (2,371,062)
                                                                                              ------------
Issuance of ordinary shares          5,707,354    2,436,663              -                -     2,436,663
Share issue costs                            -      (83,808)             -                -       (83,808)
                                    ----------  ------------  -------------  ---------------  ------------

BALANCE - JUNE 30, 2003             30,099,223  $44,153,011   $(35,415,660)  $     (232,409)  $ 8,504,942

Other comprehensive income:
Translation adjustment                       -            -              -          257,098       257,098
Net loss                                     -            -     (3,544,455)               -    (3,544,455)
                                                                                              ------------
Comprehensive loss                           -            -              -                -    (3,287,357)
                                                                                              ------------
Issuance of ordinary shares          3,800,000    3,797,682              -                -     3,797,682
Share issue costs                            -     (190,467)             -                -      (190,467)
Options issued under the Directors
and Employees Incentive Scheme
(2003) and exercised by directors
and employees                          199,756      356,489              -                -       356,489
Options issued under the 2003
Prospectus and exercised by
shareholders                           422,086      753,266              -                -       753,266
<FN>
See accompanying notes to financial statements.
</TABLE>


--------------------------------------------------------------------------------
                                      F - 4
<PAGE>
<TABLE>
<CAPTION>
PROGEN INDUSTRIES LIMITED


STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)                               (U.S. DOLLARS)
====================================================================================================================

                                                                                         ACCUMULATED
                                                                                            OTHER
                                              NUMBER OF                                 COMPREHENSIVE
                                               ORDINARY                  ACCUMULATED       INCOME
                                                SHARES       AMOUNT        DEFICIT         (LOSS)          TOTAL
                                              ----------  ------------  -------------  ---------------  ------------
<S>                                           <C>         <C>           <C>            <C>              <C>
BALANCE - JUNE 30, 2004                       34,521,065  $48,869,981   $(38,960,115)  $        24,689  $ 9,934,555

Other comprehensive income:
Translation adjustment                                 -            -              -         1,098,629    1,098,629
Net loss                                               -            -     (4,548,314)                -   (4,548,314)
                                                                                                        ------------
Comprehensive loss                                     -            -              -                 -   (3,449,685)
                                                                                                        ------------
Issuance of ordinary shares                    1,219,015    2,296,380              -                 -    2,296,380
Share issue costs                                      -     (349,259)             -                 -     (349,259)
Options issued under the Directors
and Employees Incentive Scheme
(2003) and exercised by directors
and employees                                  1,528,211    2,878,844              -                 -    2,878,844
Options issued under the 2003
Prospectus and exercised by
shareholders                                   2,588,502    4,876,220              -                 -    4,876,220
Options issued to an advisor and exercised       700,000    1,318,660              -                 -    1,318,660
Fair value of options issued to a consultant           -       16,909              -                 -       16,909
                                              ----------  ------------  -------------  ---------------  ------------

BALANCE - JUNE 30, 2005                       40,556,793  $59,907,735   $(43,508,429)  $     1,123,318  $17,522,624
                                              ==========  ============  =============  ===============  ============
<FN>

The functional currency for the Company's operations is Australian dollars.  The translation from Australian dollars
into  U.S.  dollars  is performed for balance sheet accounts using current exchange rates in effect at balance sheet
date  and  for  revenue and expense accounts using the average exchange rate during the period.  The gains or losses
resulting  from  such  translation  are  included  in  stockholders'  equity.


See accompanying notes to financial statements.
</TABLE>


--------------------------------------------------------------------------------
                                      F - 5
<PAGE>
<TABLE>
<CAPTION>
PROGEN INDUSTRIES LIMITED


STATEMENTS OF CASH FLOWS                                                   (U.S. DOLLARS)
=============================================================================================

                                                                   YEARS ENDED
                                                                     JUNE 30,
                                                         2003          2004          2005
<S>                                                  <C>           <C>           <C>
OPERATING ACTIVITIES:

Receipts from customers                              $ 3,520,272   $ 3,369,628   $ 2,031,457
Payments to suppliers and employees                   (6,658,976)   (7,611,601)   (6,637,662)
Proceeds from trading investments                      1,222,363             -             -
Interest received                                        288,289       474,589       617,822
Interest paid                                             (7,377)      (12,437)      (12,923)
Other operating cash receipts                              8,047         2,115             -
                                                     ------------  ------------  ------------

NET CASH - OPERATING ACTIVITIES                       (1,627,382)   (3,777,706)   (4,001,306)
                                                     ------------  ------------  ------------

INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment       15,724        17,998         6,029
Proceeds from sale of discontinued operation                   -       838,622             -
Purchase of property, plant and equipment                (98,552)     (135,577)     (163,357)
                                                     ------------  ------------  ------------

NET CASH - INVESTING ACTIVITIES                          (82,828)      721,043      (157,328)
                                                     ------------  ------------  ------------

FINANCING ACTIVITIES:
Proceeds from share issues                             2,436,663     3,797,682     2,296,380
Share issue costs                                        (83,808)     (190,467)     (349,259)
Proceeds from exercise of options                              -     1,109,755     9,073,724
Repayment of capital lease liabilities                    (8,431)            -             -
                                                     ------------  ------------  ------------

NET CASH - FINANCING ACTIVITIES                        2,344,424     4,716,970    11,020,845
                                                     ------------  ------------  ------------

EFFECT OF EXCHANGE RATE ON CASH                          937,251       223,507     1,104,028
                                                     ------------  ------------  ------------

NET INCREASE IN CASH AND CASH
EQUIVALENTS                                            1,571,465     1,883,814     7,966,239

CASH AND CASH EQUIVALENTS BEGINNING OF
YEAR                                                   6,430,377     8,001,842     9,885,656
                                                     ------------  ------------  ------------

CASH AND CASH EQUIVALENTS END OF YEAR                $ 8,001,842   $ 9,885,656   $17,851,895
                                                     ============  ============  ============
<FN>
See accompanying notes to financial statements.
</TABLE>


--------------------------------------------------------------------------------
                                      F - 6
<PAGE>
<TABLE>
<CAPTION>
PROGEN INDUSTRIES LIMITED


STATEMENTS OF CASH FLOWS                                                              (U.S. DOLLARS)
-------------------------------------------------------------------------------------------------------

                                                                             YEARS ENDED
                                                                               JUNE 30,
                                                                   2003          2004          2005
<S>                                                            <C>           <C>           <C>
RECONCILIATION OF OPERATING LOSS AFTER INCOME TAX TO NET CASH
USED IN OPERATING ACTIVITIES:

  Operating loss after income tax                              $(3,565,149)  $(3,544,455)  $(4,548,314)
  Proceeds from sale of discontinued operation                           -      (838,622)            -

  Non-cash items:
  Depreciation                                                     457,047       463,720       428,891
  Loss on sale of investments                                      205,893             -             -
  (Gain) / loss on sale of property, plant and equipment            (7,372)       (2,115)        9,852
  Other non cash items                                                   -             -        11,335

  Net change in operating assets and liabilities:

  (Increase)/decrease in assets:
    Accounts receivable                                            (96,048)      149,077       162,000
    Investments                                                  1,222,363             -             -
    Prepaid expenses                                                37,466       (50,119)       92,475
    Inventory                                                     (220,157)      568,467             -

  Increase/(decrease) in liabilities:
    Accounts payable                                               299,988      (559,621)     (261,152)
    Accrued payroll                                                 38,587        35,962        21,810
    Asset retirement obligation                                          -             -        81,797
                                                               ------------  ------------  ------------

  NET CASH USED IN OPERATING ACTIVITIES                        $(1,627,382)  $(3,777,706)  $(4,001,306)
                                                               ============  ============  ============
<FN>
See accompanying notes to financial statements.
</TABLE>


--------------------------------------------------------------------------------
                                      F - 7
<PAGE>
PROGEN INDUSTRIES LIMITED


1.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

ORGANIZATION  AND  NATURE  OF  OPERATIONS
Progen  Industries  Limited  ("Progen"  or  the  "Company")  was incorporated in
Queensland,  Australia  on  September  26,  1989 and became an Australian public
company  on  March  8,  1991.

Progen  is  a  biotechnology company committed to the discovery, development and
commercialization of small molecule therapeutics for the treatment of cancer and
other  serious diseases.  The Company's lead product candidate, PI-88, is one of
a  new  class of multi-functional, multi-targeted cancer therapeutics inhibiting
both  angiogenesis,  or  tumor  promoting  factors  such as Vascular Endothelial
Growth  Factor, Fibroblast Growth Factor 1, Fibroblast Growth Factor 2, and also
heparanase,  an  enzyme  implicated  in  metastasis  (tumor  spread).  PI-88  is
currently  in  Phase  II clinical development with four Phase II clinical trials
ongoing  in  the  U.S., Australia and Taiwan under an active Investigational New
Drug  application,  or IND, with the United States Food and Drug Administration,
or  FDA.

Progen's  second  oncology  product  candidate,  PI-166, is undergoing a Phase I
clinical  trial in patients with inoperable primary liver cancer (hepatocellular
carcinoma  or  HCC).  PI-166  is  a novel combination of an active small organic
chemical  molecule  and  a  delivery  vehicle  that  directs  the  active  drug
constituent  at  the  tumor  site.  PI-166  is  being  developed  for  potential
application in the treatment of advanced hepatocellular carcinoma (primary liver
cancer).

Through  the  Company's  internal  drug  discovery research program and academic
collaborations,  Progen  is  developing  small  molecule  drug  candidates  that
modulate  the  interaction  between  carbohydrates  (sugars) and disease-related
protein targets as potential therapeutics for cancer and other serious diseases.
The  Company's  research  team  and  academic  collaborators  have  identified a
portfolio  of  heparan  sulfate  binding proteins that are involved in different
diseases, and Progen is now designing, synthesizing and screening small molecule
compounds  that  disrupt  heparan  sulfate  binding.

The  Company  maintains  and  operates  an  approximate  11,200  square  foot
fully-integrated  pharmaceutical  raw  material manufacturing facility in leased
premises  at  Darra,  a suburb of Brisbane, Australia, and its principal offices
are  also  located  on the premises.  The facility has the capability to develop
and  manufacture  therapeutic  products for worldwide markets and consists of 15
modular  laboratories.

BASIS  OF  PRESENTATION
These  financial  statements have been prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") and are presented in U.S.
dollars.

CASH  AND  CASH  EQUIVALENTS
Cash  equivalents  are  comprised  of certain highly liquid investments that are
both:  (i)  readily  convertible  to  known  amounts  of  cash, and (ii) so near
maturity  (within  3  months) that they present insignificant risk of changes in
value  because  of  changes  in  interest  rates.

ACCOUNTS  RECEIVABLE
Trade  debtors  are  carried  at  amounts  due.  The  collectibility of debts is
assessed  at  balance  date  and  specific  provision  is  made for any doubtful
accounts.


--------------------------------------------------------------------------------
                                      F - 8
<PAGE>
PROGEN INDUSTRIES LIMITED


1.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

PROPERTY  AND  EQUIPMENT  AND  DEPRECIATION
Property  and  equipment are stated at cost, net of accumulated amortization and
depreciation.  Property  and  equipment are depreciated on a straight-line basis
over  the  estimated  useful  lives  of  the  assets. Leasehold improvements are
amortized on a straight-line basis over the shorter of the estimated life of the
asset  or  the  term  of  the  lease.

Classes  of  property  and  equipment  and  related useful lives are as follows:

<TABLE>
<CAPTION>
                                                        ESTIMATED
     ASSET                                             USEFUL LIFE
                                                          YEARS
<S>                                                    <C>
     Machinery and equipment                                  5-10
     Furniture and fixtures                                   3-10
     Leasehold improvements                                     11
</TABLE>

REVENUE  RECOGNITION
The Company generates revenue principally from the sales of goods, the provision
of  contract  manufacturing  services  and  government  grants.

Revenue  is  recognised  when the four basic criteria of revenue recognition are
met:  (1)  a  contractual agreement exists; (2) services have been rendered; (3)
the  fee is fixed or determinable; and (4) collectibility is reasonably assured.
For  each  source  of revenue Progen complies with the above revenue recognition
criteria  in  the  following  manner:

  -  A  sale  is  recorded when goods have been delivered to and accepted by the
     customer  pursuant  to  a  fixed  price  sales order, collectibility of the
     selling price is reasonably assured and the associated risks have passed to
     the  customer.  The  Company  grants  no  refund  or  return  rights.

  -  Revenues from services rendered are recognized as the service is performed,
     and  no  additional  services  or  products  are  required  to be provided.

  -  Government grants, which support the Company's research efforts in specific
     projects,  generally  provide for reimbursement of approved costs incurred.
     Grant  receipts  are  recognised  as  revenue when research and development
     expenditure  to  which  the  particular  grant  relates  has been incurred.
     Advance  payments received are classified as deferred revenue until earned.

RESEARCH  AND  DEVELOPMENT  EXPENDITURE
Research  and  development  costs  are charged as an expense when incurred. Such
costs  include  direct  salaries,  patient  recruitment  fees, contract research
costs,  laboratory  expenses, rent, utilities and certain related administrative
expenses.

PATENTS
Costs  associated with filing, maintaining, defending and protecting patents for
which  no  future benefit is reasonably assured are expensed as selling, general
and  administrative  costs  when  incurred.

STOCK-BASED  COMPENSATION
The Company has elected to account for its stock option plans in accordance with
Accounting  Principles  Board  Opinion  No.  25:  Accounting for Stock Issued to
Employees  and  related interpretations ("APB 25") and adopt the disclosure-only
provisions  of  SFAS  No.  123:  Accounting  for Stock-Based Compensation ("SFAS
123").  Under  APB  25,  the  Company  recognizes compensation expense for stock
option  grants  on  the  date of the grant to the extent that the current market
price  of  the  underlying stock exceeds the exercise price of the option at the
measurement  date.  Unearned  compensation expense is charged against operations
ratably  over  the  vesting period of the options. For disclosure purposes under
SFAS  123,  stock  options  are  valued  at  the  measurement  date  using  the
Black-Scholes  option  valuation  model  and  compensation  costs are recognized
ratably  over  the  vesting  period.

Options  granted  to  consultants  and  other non-employees are accounted for in
accordance  with  Emerging Issues Task Force consensus No 98-18, "Accounting for
                                                                  --------------
Equity  Instruments that are issued to Other than Employees for Acquiring, or in
--------------------------------------------------------------------------------
Connection with  Selling  Goods or Services", and valued using the Black-Scholes
----------------------------------------------
option  valuation  model.


--------------------------------------------------------------------------------
                                      F - 9
<PAGE>
PROGEN INDUSTRIES LIMITED


1.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

STOCK-BASED  COMPENSATION  (CONTINUED)
Compensation  cost for stock options granted to non-employees is measured at the
fair  value  of  stock  options  as  calculated  using  the Black-Scholes option
valuation  model  and  are  expensed  over the period in which the options vest.

The following table illustrates the effect on net loss and net loss per share if
the Company had applied the fair value recognition provisions of SFAS No. 123 to
stock  based  employee  compensation for the years ended June 30, 2003, 2004 and
2005:

<TABLE>
<CAPTION>
                                            2003          2004          2005
<S>                                     <C>           <C>           <C>
Net Loss, as reported                   $(3,565,149)  $(3,544,455)  $(4,548,314)

Add: Total stock-based employee
compensation expense determined under
fair value based method for all awards      (11,439)     (424,027)      (53,086)

Pro forma net loss                      $(3,576,588)  $(3,968,482)  $(4,601,400)
                                        ============  ============  ============

Net loss per share
  Basic - as reported                   $     (0.15)  $     (0.11)  $     (0.13)
  Basic - pro forma                     $     (0.15)  $     (0.12)  $     (0.13)

  Diluted - as reported                 $     (0.15)  $     (0.11)  $     (0.13)
  Diluted - pro forma                   $     (0.15)  $     (0.12)  $     (0.13)
</TABLE>

NET  LOSS  PER  SHARE
Basic and diluted net loss per share has been calculated by dividing net loss by
the  weighted  average  ordinary  shares  outstanding  during  the  periods.

Stock options have not been included in the computation of net loss per share in
the  periods  presented  as  their  effect  is  anti-dilutive.  For  additional
disclosures  regarding  stock  options  see  Note  11.

FOREIGN  CURRENCY  TRANSACTIONS
Foreign currency transactions are initially remeasured to Australian currency at
the  rate  of exchange at the date of the transaction. At the balance sheet date
amounts  payable  and  receivable  in  foreign  currencies  are  remeasured  to
Australian  currency  at  rates  of  exchange  current  at  that date. Resulting
exchange  differences  are  included  in  earnings.

FOREIGN  CURRENCY  TRANSLATION
The  Australian dollar is the functional currency for the Company. Balance sheet
amounts (other than equity accounts) denominated in Australian dollars have been
translated  into  United  States  dollars  using  the year end rate of exchange.
Operating  results  denominated  in Australian dollars have been translated into
U.S.  dollars using the average rate of exchange. Equity accounts are translated
at  historic rates. Gains or losses resulting from such translation are included
as  a  component  of  comprehensive  loss.

ACCOUNTING  ESTIMATES
The  preparation  of  financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets  and  liabilities  and disclosure of contingent assets and liabilities at
the  date  of  the  financial  statements and the reported results of operations
during  the reporting period.  Actual results could differ from those estimates.
Accounting  estimates  have  been  applied  to  calculated accruals for employee
entitlements.


--------------------------------------------------------------------------------
                                     F - 10
<PAGE>
PROGEN INDUSTRIES LIMITED


1.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

INCOME TAXES
Income taxes have been provided using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No 109 (SFAS 109)
"Accounting for Income Taxes".
 ---------------------------

FINANCIAL  INSTRUMENTS
The  fair  values of financial instruments, including cash and cash equivalents,
accounts  receivable,  investments,  and  accounts  payable,  approximate  their
carrying  value  due  to  their  short term nature. Refer to Note 14 for further
details.

INVESTMENTS
Management  determines  the  appropriate  classification  of  its investments in
equity securities at the time of purchase and re-evaluates such determination at
each  balance  sheet date. Equity securities for which the Company does not have
the  intent or ability to hold to maturity are classified as available for sale.
Securities  available  for  sale  are carried at fair value, with any unrealized
holding  gains  and  losses,  net  of  tax,  reported in a separate component of
comprehensive  income/(loss)  until  realized.

Investments  in  which  the  Company  has  the  ability  to exercise significant
influence  are accounted for in accordance with APB No 18. "The Equity Method of
                                                            --------------------
Accounting  for  Investments  in  Common  Stock".  Under  the  equity method, an
-----------------------------------------------
investment  in  common  stock  is  generally  shown  in  the balance sheet of an
investor as a single amount. Likewise, an investor's share of earnings or losses
from  its  investment  is  ordinarily  shown in its income statement as a single
amount.  The Company has no obligation to fund liabilities of investee companies
beyond  its  investment  and therefore its investments in associates will not be
reduced  below  zero.

ACCRUALS  FOR  EMPLOYEE  ENTITLEMENTS
The Company accrues compensated absences and related benefits as current charges
to  earnings  when  the  following criteria are met: (i) the employee's right to
receive compensation for the future absences is attributable to services already
performed by the employee; (ii) the employee's right to receive the compensation
for the future absences is vested, or accumulates; (iii) it is probable that the
compensation  will  be  paid;  and (iv) the amount of compensation is reasonably
estimable.

IMPAIRMENT
Pursuant  to guidance established in Statement of Financial Accounting Standards
No.  144,  "Accounting  for the Impairment or Disposal of Long-Lived Assets" the
            ---------------------------------------------------------------
Company  evaluates  if  long  lived  assets  are impaired whenever indicators of
impairment  are  present.  Management  considers  assets  to  be impaired if the
carrying  value  exceeds the future projected cash flows from related operations
(undiscounted  and  without interest charges). If impairment is deemed to exist,
the assets will be written down to fair value.  Management also re-evaluates the
periods of amortization to determine whether subsequent events and circumstances
warrant  revised  estimates  of  useful  lives.

Management  also  re-evaluates  the periods of amortisation to determine whether
subsequent  events  and circumstances warrant revised estimates of useful lives.
The  Company  did  not deem any of its long-lived assets to be impaired, and for
the  years  ended  June  30,  2005,  2004  and  2003  no impaired adjustment was
recorded.

ASSET  RETIREMENT  OBLIGATIONS
In  January  2003,  the Financial Accounting Standards Board issued Statement of
Accounting  Standards  No.  143  (SFAS  143),  "Accounting  for Asset Retirement
                                                --------------------------------
Obligations". SFAS 143 requires legal obligations associated with the retirement
-----------
of  long-lived  assets  to  be  recognized  at  their fair value at the time the
obligations are incurred. Upon initial recognition of a liability, the costs are
capitalized  as  part  of  the related long-lived asset and allocated to expense
over  the  useful  life  of the asset. Changes in asset retirement estimates are
capitalized  as part of the long-lived asset and expensed prospectively over the
useful  life of the asset. The discount rate used when estimating the fair value
of  the asset retirement obligation is a credit-adjusted risk-free interest rate
with  the  same  expected  maturity  as  the  removal  obligation.

During 2004, the Company recorded an asset retirement obligations in relation to
remedial actions, which will involve the dismantling of plant and equipment at
the time the Company vacates the leased manufacturing facility and principle
offices located in Darra, Australia. Under the terms of the lease agreement the
Company has an obligation to refurbish the sites at the expiration of the lease
contract in March 2007.  Accretion expense of $7,353 related to 2005 is recorded
in Other costs of operations within the Statement of Operations.


--------------------------------------------------------------------------------
                                     F - 11
<PAGE>
PROGEN INDUSTRIES LIMITED


1.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

COMPARATIVES
Where  necessary, comparative figures have been adjusted to conform with changes
in  presentation  in  the  current  year.

RECENT ACCOUNTING PRONOUNCEMENTS
In  December  2004, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 123 (revised 2004), (SFAS 123R), "Share-Based Payment".
SFAS  123R  is  a  revision  of  SFAS  No.  123R,  Accounting  for  Stock  Based
Compensation, and supersedes APB 25. Among other items, SFAS 123R eliminates the
use  of  APB  25  and  the  intrinsic  value  method of accounting, and requires
companies to recognize in the financial statements the cost of employee services
received  in  exchange for awards of equity instruments, based on the grant date
fair  value  of  those  awards.  The  effective  date  of SFAS 123R is the first
reporting after June 15, 2005, with early adoption permitted. SFAS 123R requires
companies  to  adopt its requirements using a "modified prospective" method or a
"modified  retrospective"  method.  Under  the  "modified  prospective"  method,
compensation  cost  is recognized in the financial statements beginning with the
effective  date,  based  on  the  requirements  of SFAS 123R for all share-based
payments  granted after that date, and based on the requirements of SFAS 123 for
all  unvested  awards  granted  prior  to  the  effective date of SFAS 123R. The
"modified  retrospective"  method  also  permits  entities  to restate financial
statements  of previous periods based on proforma disclosures made in accordance
with  SFAS  123.

The  Company  currently  utilizes  a  standard  option  pricing  model  (ie.
Black-Scholes)  to  measure the fair value of stock options granted to employees
for  proforma purposes. While SFAS 123R permits entities to continue to use such
a model, the standard also permits the use of a "lattice" model. The Company has
not yet determined which model it will use to measure the fair value of employee
stock  options  upon  the  adoption  of  SFAS  123R.

SFAS  123R also requires that the benefits associated with the tax deductions in
excess  of  recognized  compensation  cost be reported as a financing cash flow,
rather  than as an operating cash flow as required under current literature. The
Company  has  not  yet  determined what effect, if any, this change will have on
future  periods.

The  Company will adopt SFAS 123R effective July 1, 2005 however, it has not yet
determined  which  of  the  aforementioned  adoption  methods  it  will  use.

2.   CONCENTRATIONS  OF  CREDIT  RISK

Financial instruments which potentially subject the Company to concentrations of
credit  risk  consist  principally  of  cash  and  cash  equivalents,  accounts
receivable  and investments. The Company invests cash and cash equivalents which
are  not  required for immediate operating needs, and for its investment trading
program  with  various  high  credit  quality  financial institutions located in
Australia. The Company extends credit to its customers which results in accounts
receivable  arising  from  its  normal business activities. The Company does not
require  collateral  from its customers or investees, but routinely assesses the
financial  strength  of  its  customers  and, based upon factors surrounding the
credit  risk of its customers, believes that its receivable credit risk exposure
is  limited  given  there  is  no  concentration  of  customers.

3.   ACCOUNTS  AND  NOTES  RECEIVABLE

Accounts  and  notes  receivable  consists  of  the  following:

<TABLE>
<CAPTION>
                                               JUNE 30,
                                         ------------------
                                             2004      2005
<S>                                      <C>       <C>
Amounts receivable from trade customers  $237,267  $ 11,335
Underwriters, promoters & employees        19,266         -
Interest receivable                        43,329    75,119
Amounts receivable from related parties         -    11,797
Other                                      16,060    86,661
                                         ------------------
                                         $315,922  $184,912
                                         ==================
</TABLE>

Amounts  receivable  from  related parties have the same terms and conditions as
amounts  receivable  from  trade  customers,  which are non-interest bearing and
generally  on  30  day  terms.


--------------------------------------------------------------------------------
                                     F - 12
<PAGE>
PROGEN INDUSTRIES LIMITED


4.   INVESTMENTS  ACCOUNTED  FOR  USING  THE  EQUITY  METHOD

Effective  May  31,  2000,  Progen  entered  into  an  agreement  with  Medigen
Biotechnology Corporation ('MBC'), a company incorporated in Taiwan, in relation
to the co-development and commercialisation of PI-88 (the 'Alliance Agreement').
Under  the  Alliance Agreement, MBC will fund and conduct, at no cost to Progen,
several  Phase  II  clinical  trials  in  respect  of PI-88. These trials are in
addition  to the trials to be undertaken by Progen. In return MBC is entitled to
receive  15%  of  Progen's  future  PI-88  revenues  generated  from  cancer and
cardiovascular diseases. In addition, MBC has the right to negotiate the funding
and  conduct  of  several  Phase  III  clinical  trials.  In accordance with the
Alliance  Agreement  Progen  is  to  supply  PI-88 to MBC free of charge for the
designated  trials and provide technical know-how to assist MBC with the conduct
of the trials and to establish a compliant pharmaceutical manufacturing facility
in Taiwan if so requested.  If provided, Progen will be paid for these services.

In  connection  with  the Alliance Agreement under a separate Share Subscription
Agreement  on  November  6,  2000,  the  Company  issued 2.75 million fully paid
ordinary  shares to MBC at an issue price of $2.09 per share. In addition, under
the  Alliance Agreement Progen was issued 19.9% of MBC's issued common equity at
no cost and with certain anti-dilution rights.  As at June 30, 2005 and June 30,
2004  Progen  holds  15,176,525  common  shares  in MBC. Due to recurring losses
subsequent  to  our  initial  investment  in  MBC,  the  carrying  value of this
investment  as  of  June  30,  2005  and  2004  is  nil  (see  note  9).

On  April  28,  2005  Progen  and  MBC agreed to amend the terms of the Alliance
Agreement  in that Progen agreed to waive the requirement for MBC to conduct one
of  the Phase II trials outlined in the Alliance Agreement. In return MBC agreed
to  fund  50%,  up  to  A$1 million, of the recently initiated Phase II melanoma
clinical  trial  (PI-88  in  combination  with  dacarbazine).

<TABLE>
<CAPTION>
                                                                               JUNE 30,
                                                                             2004   2005
<S>                                                                          <C>    <C>
CARRYING AMOUNT OF INVESTMENT IN ASSOCIATE
Balance at the beginning of the financial year                               $   -  $   -
Issue of shares in associate                                                     -      -
Share of associate's net profits for the financial year                          -      -
                                                                             -----  -----
Carrying amount of investment in associate at the end of the financial year  $   -  $   -
                                                                             =====  =====
</TABLE>

5.   PROPERTY  AND  EQUIPMENT

Property  and  equipment  consists  of  the  following:

<TABLE>
<CAPTION>
                                                        JUNE 30,
                                             --------------------------
                                                    2004          2005
<S>                                          <C>           <C>
  Machinery and equipment                    $ 3,084,811   $ 3,454,666
  Furniture and fixtures                         295,830       342,318
  Leasehold improvements                         373,882       534,304
                                             ------------  ------------
                                               3,754,523     4,331,288
  Accumulated depreciation and amortization   (2,869,758)   (3,639,205)
                                             ------------  ------------
  PROPERTY AND EQUIPMENT, NET                $   884,765   $   692,083
                                             ============  ============
</TABLE>

Depreciation  expense  related  to  property and equipment amounted to $449,596,
$463,456,  and  $428,891  for  the  years  ended  June  30, 2003, 2004, and 2005
respectively.

6.   DISCONTINUED  OPERATIONS

On  November  11,  2003  Progen announced the sale of the Company's Life Science
business segment to Global Science and Technology Ltd (GST), a subsidiary of New
Zealand  based  EBOS  Ltd.

The  decision  to  dispose  of the division was based on the Company strategy to
focus  on  core  R&D  activities where most potential shareholder value resides.

Under the terms of the contract, Progen paid out all employee entitlements prior
to the employees being transferred to GST, settled outstanding accounts payable,
and  collected  accounts  receivable  due on settlement date. These payments and
receipts  are  recognised  in  the  results  for  the  year ended June 30, 2004.

The sale was completed on November 28, 2003.


--------------------------------------------------------------------------------
                                     F - 13
<PAGE>
PROGEN INDUSTRIES LIMITED

6.   DISCONTINUED  OPERATIONS  (CONTINUED)

FINANCIAL  PERFORMANCE  INFORMATION  OF  THE LIFE SCIENCE DIVISION FOR THE YEARS
ENDED:

<TABLE>
<CAPTION>
                                                      JUNE 30,
                                         --------------------------------
                                                2003         2004    2005
<S>                                      <C>           <C>          <C>
Proceeds for sale of business            $         -   $  838,622   $   -
                                         ================================

Revenue from ordinary activities           1,742,257    1,096,897       -
Expenses from ordinary activities         (1,454,044)    (928,636)      -
Profit on disposal of business activity            -      486,405       -
                                         --------------------------------
Profit before income tax                     288,213      654,666       -
Income tax                                         -            -       -
                                         --------------------------------
INCOME FROM DISCONTINUED OPERATIONS      $   288,213   $  654,666   $   -
                                         ================================
</TABLE>

7.   INCOME  TAXES

At  June  30,  2005  the  Company  had  net operating tax loss carry-forwards of
approximately  $54,463,000  (2004:  $44,504,000)  which are indefinite as to use
unless it is unable to comply with the recognition criteria for carrying forward
tax  losses  under  Australian  taxation  laws.  As  a  result of these tax loss
carry-forwards, the Company has deferred tax assets of approximately $16,339,000
at  June  30,  2005  (2004:  $13,351,000,  2003:  $11,917,000).  Because  of the
Company's  lack of earnings history, realization of these deferred tax assets is
not  more  likely  than  not,  therefore the deferred tax assets have been fully
offset  by a valuation allowance of $16,340,000, $13,351,000, and $11,917,000 at
June  30,  2005,  2004  and  2003,  respectively.

The  change  in  the  valuation  allowance  and  the corresponding change in the
deferred  tax  asset  amounted to $2,989,000, $1,434,000, and $2,970,000 for the
years  ended  June  30,  2005,  2004  and  2003  respectively.

The  tax  loss  carry-forward  can  be  reconciled  as  follows:

<TABLE>
<CAPTION>
                                               2004         2005
<S>                                     <C>          <C>
Opening tax loss carry-forward          $39,724,000  $44,504,000
Current year tax loss                     3,331,000    5,408,000
Effect of foreign currency translation    1,449,000    4,551,000
                                        -----------  -----------
Gross tax loss                          $44,504,000  $54,463,000
                                        ===========  ===========
</TABLE>

Reconciliation  of  net  loss  to  the  tax  loss:

<TABLE>
<CAPTION>
                                               2003          2004          2005
<S>                                     <C>           <C>           <C>
Tax at  30% Australian tax rate         $ 1,069,545   $ 1,063,336   $ 1,364,494
Permanent differences:
  Non deductible items                            -       (64,036)      (31,189)
  Additional deductions                     263,655             -       237,064
Effect of foreign exchange translation    1,636,800       434,700     1,418,631
                                        ------------  ------------  ------------
Net tax loss                              2,970,000     1,434,000     2,989,000
Change in valuation allowance            (2,970,000)   (1,434,000)   (2,989,000)
                                        ------------  ------------  ------------
Tax expense                             $         -   $         -   $         -
                                        ============  ============  ============
</TABLE>

The  Company's deferred income tax balance and the difference between income tax
computed  at  the  Australian statutory rate and income tax expense is primarily
the  result  of  tax  losses  carryforward.


--------------------------------------------------------------------------------
                                     F - 14
<PAGE>
PROGEN INDUSTRIES LIMITED


8.   ACCOUNTS  PAYABLE

Accounts  payable  consists  of  the  following:

<TABLE>
<CAPTION>
                                            JUNE 30,
                                     -------------------
                                          2004      2005
<S>                                  <C>        <C>
Trade accounts payable               $ 746,233  $672,450
Accrued employee benefits and taxes    150,720   212,902
                                     -------------------
                                     $ 896,953  $885,352
                                     ===================
</TABLE>

9.   RELATED  PARTY  DISCLOSURES

Stanley  Chang,  a  director  of  Progen,  was  the  Chairman and CEO of Medigen
Biotechnology Company (MBC) during the years ended June 30, 2003, 2004 and 2005.

During the 2005 financial year Progen transacted with MBC under the terms of the
Alliance Agreement (refer note 4). Progen received payment from MBC of $32,857
in relation to its 50% contribution to the costs of PI-88 Phase II trial in
combination with dacarbazine.

During the 2003, 2004 and 2005 financial years Progen purchased goods totalling
$4,056, $4,457 and $nil respectively from companies associated with Dr Malvin
Eutick a director of Progen Industries Limited.
During  the  2004  financial  year  Medigen  Biotechnology Corporation exercised
406,261  options  received  through  the  one for eight shareholder bonus option
issue.  Total  proceeds received from Medigen Biotechnology Corporation amounted
to  A$1,015,652.

10.  COMMITMENTS  AND  CONTINGENCIES

(a)  EXPENDITURE  COMMITMENTS

Sponsored  Research  Agreement
In 2002 the Company signed a Sponsored Research Agreement with the Australian
National University. The terms of this agreement state that the Company is to
fund research in quarterly amounts of $44,414 until 30 September 2005. During
the financial year both parties agreed to an extension of the previous agreement
up to 17 February 2006 without additional payments during the extension period.

Insurance  Premium
In  July  2005  the  Company signed an agreement to fund the Company's insurance
premium for the year ended June 30, 2006. The terms of this agreement state that
the amount funded is to be repaid in nine equal instalments of $45,465 including
finance  charges  (2004:  nine  equal  instalments  of  $39,445).

Consultant Agreements
During the 2005 financial year Progen entered into various Consultant agreements
with a committed value of $287,208 for the next financial year.

Purchases
At the end of the financial year 2005 Progen ordered goods and services with a
total value of $15,532 which had not been delivered by June 30, 2005.

The  total  remaining  commitment  payable in respect of the above agreements at
June  30,  2005  and  2004  are  as  follows:


--------------------------------------------------------------------------------
                                     F - 15
<PAGE>
PROGEN INDUSTRIES LIMITED


<TABLE>
<CAPTION>
                                                                  JUNE 30,
                                                              2004      2005
<S>                                                         <C>       <C>
    Payable not later than one year:
    Sponsored Research Agreement                            $159,459  $ 44,414
    Consultant Agreements                                          -   287,208
    Insurance Premium                                        354,814   409,185
    Purchases                                                      -    15,532
                                                            ------------------
    Total not later than one year                            514,273   756,339

    Payable later than one and not longer than five years:   344,460         -
                                                            ------------------
    Total expenditure commitments                           $858,733  $756,339
                                                            ==================
</TABLE>

(b)  LEASE  EXPENDITURE  COMMITMENTS

OPERATING  LEASES

The operating lease commitments include the rental of office premises. The lease
agreement  expired  in March 2004 at which time the Company exercised its option
to  renew  the  lease  for  a  further  three  years  to  March  2007.

During  the  fiscal  years  ended June 30, 2003, 2004 and 2005, rent expense was
$56,126,  $78,583  and  $91,329  respectively.

Under  the  terms  of  this  lease  agreement the rental payments are subject to
annual  review  based  on  the  movement  in the consumer price index. The total
minimum annual rentals under non-cancellable operating leases subsequent to June
30,  2005  are  as  follows:

<TABLE>
<CAPTION>
               YEAR ENDING
               JUNE 30,
<S>                                                       <C>
               2006                                       $ 81,354
               2007                                       $ 58,674
                                                          --------
               Total                                      $140,028
                                                          ========
</TABLE>

(c)  CLINICAL  TRIALS

At  June  30,  2005  the  Company  had  anticipated  expenditure  commitments of
$1,475,232 (2004: $1,121,047) in relation to the clinical trials currently being
undertaken  for  PI-88  and PI-166. These commitments are forecast to become due
and  payable  as follows: $1,206,246 not later than one year, and $268,986 later
than  one  year  and  not later than five years, however that may vary depending
upon  the  rate  of  patient  recruitment.

These  costs  are  included  in  research  and  development expense as incurred.

(d)  OTHER

Effective  May  31,  2000,  Progen entered into an agreement with MBC, a related
party  (see  Note 9), in relation to the co-development and commercialisation of
PI-88  (the  "Alliance  Agreement").  Under the terms of the Alliance Agreement,
Progen indemnifies MBC fully and effectively against any losses, costs, actions,
claims, demands, expenses, judgements, court orders or other liabilities arising
directly or indirectly out of or in connection with any claim made or threatened
against  MBC  by a third party arising from or concerning PI-88 that prevents or
interferes  with  MBC's  conduct  of their Phase II and further clinical trials.


--------------------------------------------------------------------------------
                                     F - 16
<PAGE>
PROGEN INDUSTRIES LIMITED


11.  STOCK  OPTION  PLANS

All  options  are  granted  in  stock  trading  on the Australian Stock Exchange
('ASX'),  have  an  Australian  exercise  price  and  are  exercisable  only  in
Australian  dollars.

EMPLOYEE  COMPENSATION  PLANS

EMPLOYEE  OPTION  PLAN  PRE  OCTOBER  2003

The  Progen  Board  of  Directors adopted an employee option plan on October 24,
2000  ("2000 Plan").  Both employees and non-executive directors are eligible to
participate.  This option plan stipulates that the initial issue of options will
have an exercise price of A$4.00 ($2.76) and thereafter a minimum exercise price
of  the  greater  of  A$4.00  ($2.76)  and a price equal to 125% of the weighted
average  price  of  the  Company's shares quoted on the ASX for 10 business days
before  the  date of grant of the options; all options vest between one and four
years  after the date of grant, options may carry performance related conditions
as  determined  at the Board's discretion and expire five years from the date of
grant.

There  were  no  options  granted under this plan during the year ended June 30,
2005.

During  2002,  22,000  options were granted to employees under this plan with an
exercise  price  of  $2.14, the options vest on the first anniversary of date of
grant  and  expire  on  the  fifth  anniversary  of  the  date  of  grant.

As  at  June  30,  2005  there were 502,820 options outstanding that were issued
under  this  plan.

EXECUTIVE  DIRECTORS'  OPTION  PLAN

In  November  1999, the Company's shareholders approved the executive directors'
option  plan.  Only  directors  who  hold  salaried  employment  are eligible to
participate  in the plan.  The board of directors may impose any conditions upon
the vesting or exercise of any options granted under the plan.  This option plan
has  similar  terms  and  conditions  as  the  2000  Plan.

The  exercise price of the options is equal to the weighted average price of the
Company's fully paid ordinary shares traded over the 5 business days immediately
prior  to  the time the options are granted (the Base price), unless the options
are  to  be  issued in tranches, in which case the exercise price will be either
the  Base  price  or  a higher price determined by the directors of the Company.

During  2000, 400,000 options were granted under the executive directors' option
plan.  These  options  are  exercisable  as  follows:

<TABLE>
<CAPTION>
                                                              Exercise Price
<S>                                                           <C>
100,000 options exercisable no earlier than February 8, 2001       2.84
200,000 options exercisable no earlier than February 8, 2002       3.97
100,000 options exercisable no earlier than February 8, 2003       5.67
</TABLE>

The 400,000 options above expired unexercised on February 8, 2005.


--------------------------------------------------------------------------------
                                     F - 17
<PAGE>
PROGEN INDUSTRIES LIMITED


11.  STOCK  OPTION  PLANS  (CONTINUED)

DIRECTORS AND EMPLOYEES INCENTIVE SCHEME

In October 2003, the Company's shareholders approved the directors and employees
incentive scheme ("2003 Plan") under which a total of 1,800,000 options were
granted, having an exercise price of $1.77 and under the terms of this plan all
options vest immediately at grant date and expired on May 31, 2005.

During 2005 a further 32,000 options were granted to employees under the terms
of this plan. These options were issued for nil consideration, they vest
immediately and have an exercise price of $2.78. The expiry date for these
options is February 28, 2006.

As at June 30, 2005 there were 32,000 options outstanding that were issued under
this  plan.

DIRECTORS AND EMPLOYEES OPTION INCENTIVE SCHEME

In  2004  the Company's shareholders approved the directors and employees option
incentive  scheme  ("2004 Plan"). During 2005, 33,000 options were granted under
the  terms  of  this plan. These options were issued for nil consideration, they
vest  immediately and have an exercise price of $3.15. The expiry date for these
options  is  February  28,  2006.

As at June 30, 2005 there were 33,000 options outstanding that were issued under
this  plan.

The following table summarises the movements in options outstanding to directors
and  employees  as  of  June  30,  2005,  2004  and  2003:

<TABLE>
<CAPTION>
                                     NUMBER OF       WEIGHTED       NUMBER OF      WEIGHTED
                                      OPTIONS         AVERAGE        OPTIONS        AVERAGE
                                    OUTSTANDING   EXERCISE PRICE   EXERCISABLE  EXERCISE PRICE
<S>                                 <C>           <C>              <C>          <C>
Options outstanding, June 30, 2002    1,240,770   $          2.98    1,118,770  $          2.49
- granted                                     -                 -
- forfeited                                   -                 -
- expired                               (72,550)  $          2.28
- exercised                                   -                 -
                                    ------------
Options outstanding, June 30, 2003    1,168,220   $          3.03    1,168,220  $          3.03
- granted                             1,800,000   $          1.77
- forfeited                                   -                 -
- expired                              (239,400)  $          3.10
- exercised                            (199,756)  $          1.77
                                    ------------
Options outstanding, June 30, 2004    2,529,064   $          2.23    2,529,064  $          2.23
- granted                                65,000   $          2.97
- forfeited                             (26,000)  $          2.10
- expired                              (472,033)  $          3.75
- exercised                          (1,528,211)  $          1.77
                                    ------------
Options outstanding, June 30, 2005      567,820   $          2.27      567,820  $          2.27
</TABLE>

There  were  a  total  of  65,000  options  granted  and issued during 2005. The
weighted  average  equivalent  market  price per share at grant date for options
granted  during  2005  was  $3.22  (2004:  $1.08,  2003:  Nil).


--------------------------------------------------------------------------------
                                     F - 18
<PAGE>
PROGEN INDUSTRIES LIMITED


11.  STOCK  OPTION  PLANS  (CONTINUED)

The  following  table summarises information about director and employee options
outstanding  at  June  30,  2005:

<TABLE>
<CAPTION>
     EXERCISE PRICE   OPTIONS              OUTSTANDING                  EXERCISABLE

                               WEIGHTED AVERAGE     WEIGHTED      NUMBER OF     WEIGHTED
                                  REMAINING          AVERAGE       OPTIONS       AVERAGE
                               CONTRACTUAL LIFE  EXERCISE PRICE              EXERCISE PRICE
<S>                   <C>      <C>               <C>              <C>        <C>
               2.22  350,000         0.5 years  $          2.22    350,000  $          2.22
               2.36  217,820         0.7 years  $          2.36    217,820  $          2.36
                     --------                                     --------
              Total  567,820                                       567,820
                     ========                                     ========
</TABLE>

BONUS OPTIONS

In  December  2003  shareholders  were  issued  one bonus option for every eight
shares  registered  on  the record date of November 28, 2003. These options were
issued  under  a  Prospectus  dated  November 19, 2003. Each bonus option has an
exercise  price  of $1.81 and entitles the holder to subscribe for one share for
each  option  until  May  31,  2005.

During  fiscal  2005,  2,588,502  shareholder  options  were  exercised.

OPTIONS ISSUED TO NON-EMPLOYEES

Compensation  cost for stock options granted to non-employees is measured at the
fair value of stock options as calculated using the Black-Scholes option pricing
model  and  is  expensed  over  the  period  in  which  the  options  vest.

In  November  2003 the Company's corporate advisors to the November 2003 private
placement  of  3.8  million  shares were granted stock options to purchase up to
700,000  shares  of  Progen's  common  stock  at  an exercise price of $1.77 per
option. These options vested on grant date and were exercised during fiscal year
2005.

The  fair  value  of  these  options  was  estimated  to  be  $163,555 using the
Black-Scholes  option  pricing  model  with  the following assumptions: dividend
yield of 0%; expected volatility of 70.9%; risk free interest rate of 5.39%; and
an  expected  life  of 1.6 years. Accordingly, a non-cash amount of $163,555 has
been  recorded  against  contributed  equity.

As  at  June  30, 2005 there were nil options outstanding that were issued under
this  plan.

CONSULTANTS AND ADVISORS OPTION INCENTIVE PLAN

In February 2005 the directors' of Progen Industries Limited approved the Progen
Consultants  and Advisors Option Incentive Plan. During 2005 22,500 options were
issued  under  the  terms  of  this  plan.  These  options  were  issued for nil
consideration,  are  fully vested at June 23, 2005 and have an exercise price of
$3.27.  The  expiry  date  for  these  options  is  December  23,  2006.

At  June  30,  2005,  the Company has reserved shares of common stock for future
issuance  as  follows:

<TABLE>
<CAPTION>
<S>                                                    <C>
     Employee option plan pre October 2003             502,820
     Directors and employees incentive plan             32,000
     Directors and employees incentive plan 2004        33,000
     Non-employee options                               22,500

                                                       -------
     Total                                             590,320
                                                       =======
</TABLE>


--------------------------------------------------------------------------------
                                     F - 19
<PAGE>
PROGEN INDUSTRIES LIMITED


11.  STOCK  OPTION  PLANS  (CONTINUED)

OTHER  INFORMATION

The Company has adopted the disclosure only alternative of SFAS 123 for employee
options  granted  which  requires that proforma results be presented as if stock
based  compensation  were  recorded  at  the fair value of options granted. This
compensation,  determined  using  the  Black-Scholes  option valuation model, is
expensed  over  the  vesting  periods  of  each  option  grant.  The  pro  forma
compensation  expense  was  calculated to be $53,086 for the year ended June 30,
2005  (2004:  $424,027,  2003:  $11,439).

The fair value of all options granted to employees, directors and consultants in
2004  and 2005 were computed at the date of grant using the Black-Scholes option
pricing  model  with the following weighted average assumptions (note there were
no options granted in 2003 therefore no information is presented for that year):

<TABLE>
<CAPTION>
                                                   2004    2005
<S>                                                <C>    <C>
     Risk Free Interest Rate                       5.39%   5.29%
     Expected Dividend Yield                       0.00%   0.00%
     Expected Lives (years)                         1.6   1.035
     Expected Volatility                           70.9%   51.9%
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating the
fair  value  of  non-traded  options, which have no vesting restrictions and are
fully  transferable.  In  addition, option valuation models require the input of
highly  subjective  assumptions  including  the expected stock price volatility.
Because  the Company's employee stock options have characteristics significantly
different  from  those  of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models  may  not  necessarily provide a reliable single
measure  of  the  fair  value  of  its  employee  stock  options.

Using  the Black-Scholes option valuation model, the weighted-average fair value
of  options  granted  was  $0.80  in  2005  and  $0.24  in  2004.

12.  SEGMENT  DISCLOSURES

The  Company  is  organized  based  on the products and services that it offers.
Under  this  organizational  structure,  there  are two reportable segments: (i)
research  and  development  and  (iii)  contract  manufacture.  The research and
development  segment  is focussed on the development of PI-88 and PI-166 as well
as  a drug discovery effort that is partially funded by an AusIndustry R&D Start
Grant.  The  contract  manufacture  segment  is  involved  with the provision of
contract  manufacturing  services  to cGMP standards for various human clinical,
therapeutic  product,  and veterinary pharmaceutical trials, as well as non-cGMP
bioproduct  contract  manufacturing  services.  The contract manufacture segment
also  provides  bioprocess  technology  development  services,  and  consulting
services  in  quality  and  regulatory  management  systems.

The  Company  views  certain  other revenues and expenses, particularly selling,
general  and  administration  costs,  as  not  belonging  to  any one reportable
segment.  As  a  result,  the Company has aggregated these items into an "Other"
non-segment  line,  as  permitted by Statement of Financial Accounting Standards
No.  131  "Disclosures about Segments of an Enterprise and Related Information."
           --------------------------------------------------------------------

The  Company  also  views  certain  other  assets,  particularly  cash  and cash
equivalents,  and investments as not belonging to any one reportable segment. As
a  result,  the  Company  has aggregated these items into an "Other" non-segment
line,  as  permitted  by  Statement  of  Financial  Accounting Standards No. 131
"Disclosures  about  Segments  of  an  Enterprise  and  Related  Information."
 ----------------------------------------------------------------------------

The  accounting  policies  of  the Company's reportable segments are the same as
those  described  in  Note  1  "Summary of Significant Accounting Policies". The
Company evaluates the performance of its segments based on each segment's income
(loss)  from  continuing  operations.


--------------------------------------------------------------------------------
                                     F - 20
<PAGE>
PROGEN INDUSTRIES LIMITED


12.  SEGMENT  DISCLOSURES  (CONTINUED)

YEAR ENDED JUNE 30, 2005

<TABLE>
<CAPTION>
                                              RESEARCH &      CONTRACT        TOTAL
                                              DEVELOPMENT    MANUFACTURE
<S>                                          <C>            <C>            <C>
Sales to external customers                  $          -   $  1,076,308   $ 1,076,308
Grant income                                      577,756              -       577,756
Clinical trial fee                                 44,654              -        44,654
Depreciation                                      168,380        242,687       411,067

Net income/(loss)                              (2,667,249)      (183,638)   (2,850,887)
Interest income                                         -              -       617,822
Interest expense                                        -              -       (12,923)
Other non-segment other income                                                  29,948
Other non-segment expenses                                                  (2,264,910)
                                                                           ------------
Consolidated net income/ (loss) before tax
from continuing operations                                                 $(4,480,950)
                                                                           ============

Total assets for reportable segments              140,490        537,935       678,425
Other assets                                                                18,089,830
Consolidated assets                                                        $18,768,255
                                                                           ============

Purchase of long lived assets
for reportable segments                            26,567        129,403       155,970
Other purchases                                                                  7,387
Total purchases                                                            $   163,357
                                             ==========================================
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 2004

                                              RESEARCH &      CONTRACT       TOTAL
                                              DEVELOPMENT   MANUFACTURE
<S>                                          <C>            <C>           <C>
Sales to external customers                  $          -   $  1,394,589  $ 1,394,589
Grant income                                      596,522              -      596,522
Depreciation                                      187,313        250,636      437,949

Net income/(loss)                              (2,968,223)       438,483   (2,529,740)
Interest income                                         -              -      474,589
Interest expense                                        -              -      (12,437)
Other non-segment other income                                                 20,113
Other non-segment expenses                                                 (2,151,646)
                                                                          ------------
Consolidated net income/ (loss) before tax
from continuing operations
                                                                          $(4,199,121)
                                                                          ============

Total assets for reportable segments              316,157        828,360    1,144,517
Other assets                                                               10,063,623
Consolidated assets                                                       $11,208,140
                                                                          ============

Purchase of long lived assets
for reportable segments                            32,837         94,228      127,065
Other purchases                                                                 8,512
Total purchases                                                           $   135,577
                                             =========================================
</TABLE>


--------------------------------------------------------------------------------
                                     F - 21
<PAGE>
PROGEN INDUSTRIES LIMITED


12.  SEGMENT  DISCLOSURES  (CONTINUED)

YEAR ENDED JUNE 30, 2003

<TABLE>
<CAPTION>
                                              RESEARCH &      CONTRACT        TOTAL
                                              DEVELOPMENT    MANUFACTURE
<S>                                          <C>            <C>            <C>
Sales to external customers                  $          -   $  1,051,695   $ 1,051,695
Grant income                                      434,829              -       434,829
Depreciation and amortization                     184,165        265,431       449,596

Net income/(loss)                              (3,226,808)      (184,532)   (3,411,340)
Interest income                                         -              -       288,289
Interest expense                                        -              -        (7,377)
Other non-segment other income                                                 462,972
Other non-segment expenses                                                  (1,185,906)
                                                                           ------------
Consolidated net income/ (loss) before tax
from continuing operations
                                                                           $(3,853,362)
                                                                           ============

Total assets for reportable segments              430,280        862,560     1,292,840
Other assets                                                                 8,937,177
Consolidated assets                                                        $10,230,017
                                                                           ============

Purchase of long lived assets
for reportable segments                            15,343         35,356        50,699
Other purchases                                                                 47,853
Total purchases                                                            $    98,552
                                             ==========================================
</TABLE>

There were no inter-segment sales.

In  2003,  2004  and 2005, the Company operated in one geographical segment with
all  of  its  assets  and  operations  located  in  Australia.

The  percentage  of  revenues  derived  from  customers  outside  of  Australia
represented  13.8%  in  2005,  18.2%  in  2004  and  74.3%  in  2003.

Revenues  from  one  Australian customer of the Company's Contract Manufacturing
segment  represents  approximately  $425,000  of the Company's sales to external
customers  in  2005,  $786,000  in  2004  and  $180,000  in  2003.

RECONCILIATION  TO  REPORTED  RESULTS

<TABLE>
<CAPTION>
DEPRECIATION AND AMORTISATION         2003      2004      2005
<S>                                 <C>       <C>       <C>
Total reportable segments           $449,596  $437,949  $411,067
Unallocated corporate depreciation         -  $ 25,507  $ 17,824
                                    ----------------------------
Total reported depreciation         $449,596  $463,456  $428,891
                                    ============================
</TABLE>


--------------------------------------------------------------------------------
                                     F - 22
<PAGE>
PROGEN INDUSTRIES LIMITED


13.  ACCUMULATED  OTHER  COMPREHENSIVE  INCOME  (LOSS)

The  components  of  other  comprehensive  income  are  as  follows:

<TABLE>
<CAPTION>
                                                      UNREALISED
                                       CURRENCY     GAINS (LOSSES)
                                      TRANSLATION    ON AVAILABLE       TOTAL
                                      ADJUSTMENTS      FOR SALE
                                                      SECURITIES

<S>                                  <C>            <C>              <C>
Balance at June 30, 2002             $ (1,309,537)  $     (116,959)  $(1,426,496)

Reclassification of investment loss             -          116,959       116,959
Currency translation adjustment         1,077,128                -     1,077,128
                                     -------------  ---------------  ------------
Balance at June 30, 2003             $   (232,409)               -   $  (232,409)

Currency translation adjustment           257,098                -       257,098
                                     -------------  ---------------  ------------
Balance at June 30, 2004             $     24,689                -   $    24,689

Currency translation adjustment         1,098,629                -     1,098,629
                                     -------------  ---------------  ------------

Balance at June 30, 2005             $  1,123,318                -   $ 1,123,318
                                     =============  ===============  ============
</TABLE>


14.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

<TABLE>
<CAPTION>
                                                    JUNE 30,

                              2005           2005           2004          2004
                            CARRYING    ESTIMATED FAIR    CARRYING   ESTIMATED FAIR
                             AMOUNT          VALUE         AMOUNT         VALUE
<S>                        <C>          <C>              <C>         <C>
ASSETS
Cash and cash equivalents  $17,851,895  $    17,851,895  $9,885,656  $     9,885,656
Accounts receivable            184,912          184,912     315,922          315,992

LIABILITIES
Accounts payable               885,352          885,352     896,953          896,953
</TABLE>

The  carrying amounts approximate fair value in view of the short-term nature of
these  balances.

Limitations:  Fair value estimates are made at a specific point in time, and are
based  on  relevant  market  information  about  the financial instrument. These
estimates  are  subjective  in  nature  and involve uncertainties and matters of
significant  judgment and therefore cannot be determined with precision. Changes
in  assumptions  could  significantly  affect  the  estimates.


15.  EMPLOYEE  BENEFIT  PLAN

As  required by Australian superannuation legislation, the Company contributes a
defined  contribution  of  9%  (2004: 9%; 2003: 9%) of all Australian employee's
salary  to  an  approved  superannuation  fund for their retirement benefit. The
Company  contributed,  on  behalf of employees, $210,672 to superannuation funds
for  the  year  ended  June  30,  2005  (2004:  $153,138;  2003:  $147,914).


16.  FOREIGN  CURRENCY  TRANSLATION

The  functional  currency for the Company's operations is Australian dollars. As
June  30,  2005  A$1  equated to $0.7620. As at December 13, 2005 A$1 equated to
$0.7539.


--------------------------------------------------------------------------------
                                     F - 23
<PAGE>
PROGEN INDUSTRIES LIMITED


17.  SUBSEQUENT  EVENTS

On July 19, 2005 the Company received an offer from AusIndustry of a Commercial
Ready grant to assist with the funding of the Company's drug discovery program.
The offer is for the funding of 50% of eligible project expenditure up to
A$3,393,608 over the next three years. The Company subsequently accepted this
offer.

On August 9, 2005 the Company announced the expansion of its PI-88 Phase II
clinical trial program into prostate cancer. PI-88 will be combined with the
chemotherapy agent Taxotere(R) (docetaxel) from the global pharmaceutical
company Sanofi-Aventis, to assess the efficacy and safety of PI-88 in 82
patients with androgen-independent prostate cancer (patients whose condition
continues to worsen despite having received hormone therapy). Progen is
conducting the trial with the support of Sanofi-Aventis which is providing a
financial grant to the clinical investigators as well as the supply of
Taxotere(R). Progen will be monitoring trial progress and providing safety
reporting under the IND (Investigational New Drug) guidelines of the United
States FDA (Food & Drug Administration).


--------------------------------------------------------------------------------
                                     F - 24