UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 20-F
(Mark One)
[ ]  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, 2003
                               -------------
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from __________ to __________
Commission file number 000-29228
                       ---------

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

 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:  30,099,223  (33,899,223  as  of  December  11,  2003)

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
         ---           ---

(APPLICABLE  ONLY  TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE  YEARS)
Indicate  by  check  mark  whether  the  registrant  has filed all documents and
reports  required  to  be  filed  by  Sections 12, 13 or 15(d) of the Securities
Exchange  Act  of 1934 subsequent to the distribution of securities under a plan
confirmed  by  a  court.
Yes           No
     ---          ---


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

                                                                             Page
                                                                             ----
<S>                                                                          <C>
ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS . . . . . . .   3
ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE . . . . . . . . . . . . . .   3
ITEM 3.   KEY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .   4
            SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
            RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . .   9
            SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . .  10
            CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS. . . . . . .  10
            RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . .  11
ITEM 4.   INFORMATION ON THE COMPANY. . . . . . . . . . . . . . . . . . . . .  24
            BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
              Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
              Our Business Strategy . . . . . . . . . . . . . . . . . . . . .  25
              Development Programs. . . . . . . . . . . . . . . . . . . . . .  26
                Cancer Therapeutics . . . . . . . . . . . . . . . . . . . . .  26
                Cardiovascular Therapeutics . . . . . . . . . . . . . . . . .  32
              Drug Discovery Research . . . . . . . . . . . . . . . . . . . .  34
              Additional Research Programs. . . . . . . . . . . . . . . . . .  36
              Research and Clinical Collaborations. . . . . . . . . . . . . .  36
              Commercial Services Businesses. . . . . . . . . . . . . . . . .  39
                Life Sciences . . . . . . . . . . . . . . . . . . . . . . . .  39
                Contract Manufacturing. . . . . . . . . . . . . . . . . . . .  39
              Manufacturing Facilities. . . . . . . . . . . . . . . . . . . .  39
              Government Regulation . . . . . . . . . . . . . . . . . . . . .  40
              Patent Rights; Licenses and Proprietary Technology. . . . . . .  45
              Competition . . . . . . . . . . . . . . . . . . . . . . . . . .  47
              Employees . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
              Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . .  48
              Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . .  48
            MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
              Directors and Executive Officers. . . . . . . . . . . . . . . .  49
              Key Employees . . . . . . . . . . . . . . . . . . . . . . . . .  52
              Board Composition and Committees. . . . . . . . . . . . . . . .  52
ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS. . . . . . . . . . . .  54
            SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . .  54
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . .  55
ITEM 6.   DIRECTORS, SENIOR MANAGMENT AND EMPLOYEES . . . . . . . . . . . . .  62
            Directors and Senior Management . . . . . . . . . . . . . . . . .  62
            Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . .  62
            Board Practices . . . . . . . . . . . . . . . . . . . . . . . . .  63
            Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
            Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . .  63
            Option Plans. . . . . . . . . . . . . . . . . . . . . . . . . . .  63
            Employment Agreements . . . . . . . . . . . . . . . . . . . . . .  64
ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS . . . . . . . . .  65
            PRINCIPAL SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . .  65
            RELATED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . . .  66
ITEM 8.   FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .  67
ITEM 9.   THE OFFER AND LISTING . . . . . . . . . . . . . . . . . . . . . . .  68
ITEM 10.  ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . .  70
ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . . . .  74
ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. . . . . . .  74
ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES. . . . . . . . . . .  75
ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75


                                        2
<PAGE>
ITEM 15.  CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . .  75
ITEM 16.  [RESERVED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT . . . . . . . . . . . . . . . . .  76
ITEM 16B.  CODE OF ETHICS . . . . . . . . . . . . . . . . . . . . . . . . . .  76
ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . .  76
ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES . . . .  77
ITEM 17.  FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . .  77
ITEM 18.  FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . .  77
ITEM 19.  EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
</TABLE>



     All references in this annual report 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.



                                     PART I



ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

     Not applicable.



ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.







                                        3
<PAGE>
ITEM 3.     KEY INFORMATION

                                     SUMMARY

OVERVIEW

     Progen Industries Limited is an Australian-based, globally focused
biopharmaceutical company committed to the discovery, development and
commercialization of small molecule therapeutics for the treatment of cancer and
other serious diseases.  Our 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 and basic Fibroblast Growth Factor, and
heparanase, an enzyme implicated in metastasis (tumor spread).  PI-88 is
currently being studied in two clinical trials at the U.S. under an active
Investigational New Drug application, or IND, with the United States Food and
Drug Administration, or FDA.

     Interim results of these trials, as well as preliminary results of the
recently completed multi-center Australian Phase II clinical trial of PI-88 in
patients with multiple myeloma (bone marrow cancer) have shown:

     -    Disease stabilization in seven out of 18 patients with refractory or
          relapsed multiple myeloma treated with PI-88 subcutaneously and
          monitored for levels of paraprotein, a marker of multiple myeloma
          disease severity;

     -    Disease stabilization ranging from three to 27 months in 11 out of 33
          patients with advanced solid tumors treated with PI-88 subcutaneously;
          and

     -    PI-88 has a favorable safety and side effect profile.

     Our second lead oncology product candidate, PI-166, is undergoing a Phase I
clinical trial in patients with inoperable primary liver cancer (hepatocellular
carcinoma).  PI-166 is a potential novel treatment modality that serves a
particularly difficult patient population suffering from a disease that is
resistant to current therapies.

     Through our internal drug discovery research program and academic
collaborations, we are 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.  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 provide contract manufacturing and bioprocess technology
development services to the Australian Code of Good Manufacturing Practice, or
cGMP, standards and distribute life sciences products through our commercial
services division.   As part of our focused strategy on drug discovery and
development, we recently sold our life sciences division to Global Science and
Technology Limited as more fully described below in  "Item 3.  Key Information -
Recent Developments."


                                        4
<PAGE>
OUR BUSINESS STRATEGY

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

     -    Leverage our in-house expertise and capabilities in product
          development;

     -    Discover and develop novel small molecule therapeutics using our
          proprietary drug discovery technology platform;

     -    Expand our product candidate pipeline through in-licensing;

     -    Establish strategic collaborations for the development and
          commercialization of our product candidates;

     -    Leverage our in-house manufacturing capabilities to support the
          development and commercialization of our product candidates; and

     -    Establish and maintain a strong intellectual property portfolio.

DEVELOPMENT PROGRAMS

     CANCER THERAPEUTICS

     PI-88 - A MULTI-FUNCTIONAL THERAPEUTIC SOLUTION.  Our most advanced
     -----------------------------------------------
compound within our oncology pipeline is PI-88.  PI-88 is an anti-angiogenic new
investigational therapeutic currently in multiple early stage international
clinical trials under an IND as a novel agent for the treatment of various
cancers.  In preclinical and clinical studies, PI-88 has shown a favorable
safety and tolerability profile and few side effects.  PI-88 is also showing
preliminary signs of clinical efficacy in the multinational clinical development
program.  92 patients with various cancers have been treated and continuing
treatment for some patients ranges from three months to beyond two years.

     The principal efficacy of PI-88 as an anti-tumor agent is based on
inhibition of two biological processes: the retardation of the growth of primary
tumors by inhibiting new blood vessel growth (angiogenesis) and the spread of
secondary tumors (metastasis).  PI-88's anti-angiogenic activity is attributable
to three distinct mechanisms:

     -    Inhibition of heparanase, which prevents the release of angiogenic
          growth factors from the extracellular matrix;

     -    Direct interaction with angiogenic growth factors Vascular Endothelial
          Growth Factor, or VEGF, Fibroblast Growth Factor 1, or FGF1, and basic
          Fibroblast Growth Factor, or FGF2, 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.

     PI-88's anti-metastatic activity is attributable to the inhibition of
heparanase.


                                        5
<PAGE>
     Under an active IND with the FDA, our ongoing, recently completed and
currently planned clinical trials for PI-88 are as follows:

     -    We are conducting a Phase I trial at the University of Colorado Cancer
          Center in Denver, Colorado, in combination with Taxotere(R), a
          frequently used chemotherapy treatment, in patients with advanced
          solid tumors. This trial is designed to determine the appropriate safe
          dose of PI-88 when combined with weekly doses of Taxotere(R) as a
          precursor to a planned multi-center Australian Phase II trial of the
          combination in patients with advanced non-small cell lung cancer. 15
          patients have been recruited into this Phase I study to date and no
          serious safety concerns with the combination have been reported to
          date.

     -    We are also conducting a Phase I/II clinical trial at the University
          of Colorado Health Sciences Center in Denver, Colorado, in which PI-88
          is being self-administered subcutaneously (injected under the skin) to
          patients with advanced malignancies, including melanoma and renal-cell
          carcinoma, in order to determine the appropriate safe dose of PI-88
          for the Phase II component of this study. Based on interim data to
          date, 11 patients out of 33 with advanced tumors have had disease
          stabilization ranging from three to 27 months, which includes one
          partial response. Following completion of the Phase I component of
          this study, we intend to commence multi-center Phase II trials in the
          U.S. and across Australia with advanced melanoma patients and with
          continued study participation by the University of Colorado Health
          Sciences Center.

     -    In August 2003, we completed an Australian multi-center Phase II trial
          conducted at The Alfred Hospital in Melbourne, The Mater Misericordiae
          Hospital in Newcastle and the Wesley Clinic Research Centre in
          Brisbane. PI-88 was administered subcutaneously to patients with
          refractory or relapsed multiple myeloma (bone marrow cancer). The
          endpoint of the study, stabilization of serum disease markers, was
          achieved in seven, or 39%, of the 18 evaluable patients in the study.
          Two patients have long-term disease stabilization and continue to
          receive post-study PI-88 therapy under a special access scheme.

     -    We intend to conduct a multi-center Australian Phase II trial of PI-88
          in combination with Taxotere(R) in patients with advanced
          non-small-cell lung cancer following completion of the Phase I
          combinatorial study of PI-88 in patients with advanced solid tumors,
          and for which a protocol has been approved.

     -    A protocol has been approved by hospital ethics committee to conduct a
          Phase II trial of PI-88 for the post-operative (following surgery)
          treatment of patients with primary liver cancer (hepatocellular
          carcinoma or hepatoma) by our alliance partner and clinical
          collaborator, Medigen Biotechnology Corporation, or MBC, an emerging
          biotechnology company based in Taiwan. MBC has recently completed a
          Phase Ib clinical trial of PI-88 to assess the safety and tolerability
          of the drug in Taiwanese patients suffering from advanced forms of
          cancer.


                                        6
<PAGE>
     We have retained worldwide commercial rights to PI-88.  At the appropriate
time, we will select collaborators to conduct later-stage clinical trials and
commercialization of PI-88 as a cancer therapeutic.

     PI-166 - A NOVEL ANTI-CANCER AGENT.  Our second lead oncology drug
     ----------------------------------
candidate, PI-166, is a novel combination of a small organic molecule and a
regional delivery mechanism.  In preclinical studies, PI-166 has been shown to
have antiproliferative activity against hepatocellular carcinoma (liver cancer)
cells in vitro (within an artificial environment) and anti-tumor activity
against the Novikoff hepatocellular carcinoma in vivo (within a living
organism).

     A Phase I clinical trial with PI-166 was initiated at the St. George
Hospital in Sydney, Australia in January 2003.  The purpose of the trial is to
investigate the safety and tolerability of PI-166 in patients with unresectable
primary hepatocellular carcinoma, or advanced primary liver cancer.  The trial
is being conducted under a clinical trial notification, or CTN, with the
Australian Therapeutics Goods Administration, or TGA.  Based on interim data to
date, no drug-related side effects of PI-166 have been observed in patients
enrolled in the trial.

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

     CARDIOVASCULAR THERAPEUTICS

     In preclinical models, PI-88 has shown potential as an antithrombotic and
restenosis inhibitor.  PI-88 has anticoagulant properties by causing the release
of Tissue Factor Pathway Inhibitor, or TFPI, which directly interacts with
serine proteases and stimulates heparin cofactor II.  In addition, as a
heparanase inhibitor, PI-88 prevents restenosis resulting from the proliferation
of smooth muscle cells in artery walls.

     PI-88 has undergone a Phase I study in healthy volunteers in the United
Kingdom to determine an optimal route of administration suitable for
cardiovascular applications.  However, in light of our focus on developing novel
cancer therapeutics, recent competitive developments and the high cost of
development in this disease area, there is presently no plan to conduct further
cardiovascular trials.

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

DRUG DISCOVERY RESEARCH

     We intend to use our proprietary drug discovery technology to sustain a
pipeline of drug candidates.  We are initially focusing on the role of heparan
sulfate, a complex sugar that belongs to a class of carbohydrates called
glycosaminoglycans, or GAGs, that are linked to core proteins.  GAG-binding
proteins have been implicated in a range of different diseases including cancer,
cardiovascular diseases, inflammation, infectious diseases, amyloidal diseases,
diabetic retinopathy, macular degeneration and xenotransplantation.  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.  We
believe that these new small molecule compounds produced by our proprietary
synthetic procedures can also potentially incorporate chemical groupings to aid
detection and oral delivery.


                                        7
<PAGE>
      We have exclusive proprietary rights to a class of small molecules.  These
small molecules are semi-synthetic oligosaccharides (short sugar chains) that we
have screened as inhibitors of specific functions of heparan sulfate-binding
proteins targets such as heparanase, growth factors that stimulate angiogenesis
and proteins involved in the coagulation pathway.  PI-88, our lead product
candidate is a heparan sulfate mimetic that has been shown at the cellular level
to prevent the binding of growth factors to target receptors and to inhibit
heparanase.  We are also developing novel manufacturing techniques to synthesize
low molecular weight glycomimetics to increase the variety of carbohydrate and
carbohydrate-like molecules for screening as potential therapeutics.

OTHER RESEARCH

     Additional research is being conducted, both independently and in
collaboration with academic and commercial partners, in a number of areas
related to our core focus of small molecules, including the development of small
molecule heparanase inhibitors as anti inflammatory drug leads at the Institute
of Glycomics, Griffith University, Australia, and the screening of sulfated
oligosaccharides as inhibitors of viral infections.

COMMERCIAL SERVICES BUSINESS

     Our commercial services division provides revenue generating manufacturing
services for human clinical trial products, human therapeutics and veterinary
pharmaceuticals in compliance with cGMP standard and the Australian National
Registration Authority, as well as non-cGMP bioproducts manufacturing services
and bioprocess technology development and consulting services.

CORPORATE INFORMATION

     Our principal executive offices are located at 2806 Ipswich Road, Darra,
Queensland 4076, Australia.   References in this annual report to "Progen,"
"we," "our" and "us" refer to Progen Industries Limited.  Our web site is
located at www.progen.com.au.  Information contained in our web site is not
           -----------------
incorporated by reference into and does not form a part of this annual report.


                                        8
<PAGE>
                               RECENT DEVELOPMENTS

     SALE OF LIFE SCIENCES DIVISION.   Pursuant to a business sale agreement
dated November 10, 2003 with Global Science and Technology Limited, a New
Zealand company ("GST"), we sold to GST certain contracts, inventories and
equipment related to our life sciences business, for a cash sale price of A$1.2
million ($858,144).  The sale price was determined by arms-length negotiation
between us and GST.  The sale was completed on November 28, 2003.

     AUSTRALIAN PLACEMENT.  On November 12, 2003, we issued 3,800,000 ordinary
shares to Australian institutional and sophisticated investors placed by Taylor
Collison Limited with the support of Emerging Growth Capital Pty. Ltd.  As part
of the placement, we issued an option to Taylor Collison to purchase 700,000
ordinary shares at an exercise price of A$2.50 per share, expiring on May 31,
2005.  The proceeds of the placement will be used for working capital and
general corporate purposes, including the expansion of our proprietary
glycobiology drug discovery technology platform.

     RIGHTS OFFERING.  On November 19, 2003, we commenced a bonus options
offering pursuant to which we will grant, on a pro rata basis and at no charge,
to the eligible holders of our ordinary shares of record on November 28, 2003
one transferable option for every eight ordinary shares held.   Each option will
entitle the eligible holder thereof to subscribe for and purchase one ordinary
share at an exercise price of A$2.50 per share and will expire on May 31, 2005.
The proceeds received on exercise of the bonus options will be used for working
capital and general corporate purposes, including expanding initiative for the
out-licensing of PI-88 and expenditures for in-licensing product candidates and
research and development.


                                        9
<PAGE>
                             SELECTED FINANCIAL DATA

     The following financial data should be read in conjunction with "Item 5.
Operating and Financial Review and Prospects" and the financial statements and
notes included elsewhere in this annual report.

<TABLE>
<CAPTION>
                                                                For the Years Ended June 30,
                                                         -------------------------------------------
                                                             2001           2002           2003
----------------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenue From Operations . . . . . . . . . . . . . . . .  $    198,331   $    704,044   $  1,051,695
Cost of Operations:
     Research and development . . . . . . . . . . . . .     2,374,319      2,185,066      2,435,896
     Selling, general and administrative costs. . . . .       862,031      1,214,771      1,958,355
Total Cost of Operations. . . . . . . . . . . . . . . .     3,757,915      4,104,544      5,018,983
                                                         -------------  -------------  -------------
Gross Loss. . . . . . . . . . . . . . . . . . . . . . .    (3,716,051)    (3,601,294)    (4,391,353)
Total Other Income (Expenses) . . . . . . . . . . . . .       402,528        417,658        537,991
                                                         -------------  -------------  -------------
Net Loss  from continuing operations. . . . . . . . . .  $ (3,313,523)  $ (3,183,636)  $ (3,853,362)
Discontinued operations . . . . . . . . . . . . . . . .        41,341        104,421        288,213
Net Loss. . . . . . . . . . . . . . . . . . . . . . . .   ($3,272,182)   ($3,079,215)   ($3,565,149)
                                                         =============  =============  =============
Net Loss Per Ordinary Share
     Continuing operations. . . . . . . . . . . . . . .  $      (0.14)  $      (0.13)  $      (0.16)
                                                         =============  =============  =============
     Discontinued operations. . . . . . . . . . . . . .             -              -   $       0.01
                                                         =============  =============  =============
     Net loss per ordinary share. . . . . . . . . . . .  $      (0.14)  $      (0.13)  $      (0.15)
                                                         =============  =============  =============
Weighted Average Number of Ordinary Shares Outstanding.    23,404,883     24,391,869     24,391,869
                                                         =============  =============  =============
</TABLE>


<TABLE>
<CAPTION>
                                                                                --------------------
                                                                                For the Year Ended
                                                                                June 30, 2003
                                                                                --------------------
<S>                                                                             <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . .  $       8,001,842
Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          7,332,942
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         10,230,017
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  0
Accumulated Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (35,415,660)
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . .          8,504,942
</TABLE>




              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 5.  Business" and  "Item 5. Operating and Financial Review and
Prospects," as well as those discussed elsewhere in this annual report.


                                       10
<PAGE>
     We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
annual report.  We will not update any forward-looking statement to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.



                                  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

     We are at an early stage in the development of our pharmaceutical products.
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, 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,
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 HIGH 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 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.


                                       11
<PAGE>
     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 two Phase I/II clinical trials of PI-88 in
cancer patients in the United States, and additional Phase II trials are
planned.  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 a collaborative arrangement with a large
pharmaceutical or biotechnology company 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 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 large pharmaceutical or biotechnology company
to 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 TGA's Drug Safety and
Evaluation Branch or a new drug application to the FDA, or that such request and
application will be reviewed and cleared by the TGA, the Australian Drug
Evaluation Committee and the FDA, 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 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.


                                       12
<PAGE>
     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 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.

     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.


                                       13
<PAGE>
     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 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, under fund 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;


                                       14
<PAGE>
     -    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
     FROM OUR PROPRIETARY GLYCOBIOLOGY TECHNOLOGY PLATFORM BEYOND PI-88 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 recently begun to
direct significant effort toward the expansion of our scientific staff and
research capabilities to identify and develop product candidates in addition to
PI-88, we may not identify, develop or commercialize any additional new product
candidates from our proprietary glycobiology technology platform or other
technologies.

     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.

     WE 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 June 2005   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:


                                       15
<PAGE>
     -    The continued progress of our research and development programs;

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

     -    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.

     Notwithstanding that revenues may be produced from contract manufacturing
operations, 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 intend to 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.

     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, 2003, we had an accumulated deficit of
approximately $35.4 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.


                                       16
<PAGE>
     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
patents issue, 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 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.


                                       17
<PAGE>
     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 Control
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 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 46 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


                                       18
<PAGE>
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:

     -    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.


                                       19
<PAGE>
     WE 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 on our business, financial condition 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 business, financial condition 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 continues to provide a subsidy to certain prescribed
prescription pharmaceutical products through the Pharmaceutical Partnership
Program, or P3 Program, 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.


                                       20
<PAGE>
     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 Gene
Technology Regulator 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 may be more or less rigorous than those in Australia.  Our
manufacturing facilities are also subject to biennial inspections by the TGA and
the 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.

     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.


                                       21
<PAGE>
     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 pharmaceutical and 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;

     -    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


                                       22
<PAGE>
     -    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
pharmaceutical and 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 negatively 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.


                                       23
<PAGE>
ITEM 4.     INFORMATION ON THE COMPANY

                                    BUSINESS

OVERVIEW

     Progen Industries Limited is an Australian-based, globally focused
biopharmaceutical company committed to the discovery, development and
commercialization of small molecule therapeutics for the treatment of cancer and
other serious diseases.  Our 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 VEGF, FGF1 and FGF2, and
heparanase, an enzyme implicated in metastasis (tumor spread).  PI-88 is
currently being studied in two clinical trials in the U.S. under an active
Investigational New Drug application, or IND, with the United States Food and
Drug Administration, or FDA.

     Interim results of these trials, as well as preliminary results of the
recently completed multi-center Australian Phase II clinical trial of PI-88 in
patients with multiple myeloma (bone marrow cancer) have shown:

     -    Disease stabilization in seven out of 18 patients with refractory or
          relapsed multiple myeloma treated with PI-88 subcutaneously and
          monitored for levels of paraprotein, a marker of multiple myeloma
          disease severity;

     -    Disease stabilization for at least three months in 11 out of 33
          patients with advanced solid tumors treated with PI-88 subcutaneously;
          and

     -    PI-88 has a favorable safety and side effect profile.

     Our second lead oncology product candidate, PI-166, is undergoing a Phase I
clinical trial in patients with inoperable primary liver cancer (hepatocellular
carcinoma).  PI-166 is a potential novel treatment modality that serves a
particularly difficult patient population suffering from a disease that is
resistant to current therapies.

     Through our internal drug discovery research program and academic
collaborations, we are 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.  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 provide contract manufacturing and bioprocess technology
development services to the Australian Code of Good Manufacturing Practice, or
cGMP, standards and distribute life sciences products through our commercial
services division.  As part of our focused strategy on drug discovery and
development, we recently sold our life sciences division to Global Science and
Technology Limited as more fully described above in  "Item 3.  Key Information -
Recent Developments."


                                       24
<PAGE>
OUR BUSINESS STRATEGY

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

     -    Leverage Our 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. We will, as
          necessitated by our existing and in-licensed programs, expand our
          in-house capabilities in molecular modeling, biochemistry, cell
          biology, crystallography, medicinal and synthetic chemistry,
          pharmacology and clinical trial management.

     -    Discover and Develop Novel Small Molecule Therapeutics Using Our
          Proprietary Drug Discovery Technology Platform. We will continue to
          focus our drug discovery research programs on discovering and
          developing small molecule therapeutics for cancer and other serious
          diseases that will feed our product candidate pipeline and leverage
          our drug development infrastructure over time.

     -    Expand Our Product Candidate Pipeline Through In-Licensing. In
          addition to our internal drug development efforts, we intend to
          selectively in-license lead compounds at early stages of development
          and other new therapies for cancer and other serious diseases and
          undertake early stage clinical development.

     -    Establish 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.

     -    Leverage Our In-House Manufacturing Capabilities to Support the
          Development and Commercialization of Our Product Candidates. We have
          our own manufacturing facility at which we manufacture PI-88 and
          prepare PI-166 for preclinical and clinical trials. We intend to
          leverage our experience in bioprocess manufacturing technologies to
          support the development and commercialization of our present and
          future product candidates.

     -    Establish and Maintain a Strong Intellectual Property Portfolio.
          Recognizing the importance of intellectual property in our industry,
          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.


                                       25
<PAGE>
DEVELOPMENT PROGRAMS

     CANCER  THERAPEUTICS

     PI-88 - NOVEL ANGIOGENESIS AND HEPARANASE INHIBITOR

     PI-88 is our most advanced compound within our oncology pipeline.  Our
principal objective is to commercialize PI-88 as a non-toxic therapy applicable
to a broad range of solid tumors.  While our current cancer drug development
program is focused on solid tumor cancers and attacking the life support systems
of these cancers rather than the tumor itself, PI-88 also has potential
application in hematological or non-solid cancers (tumors of the blood) such as
multiple myeloma (bone marrow cancer) and leukemia which we may, at the
appropriate time, develop in collaboration with a corporate partner.

     The method of attacking the life support system of solid tumors is
two-fold:

     -    To inhibit new blood vessel growth (angiogenesis) which is essential
          to feed tumor growth; and

     -    To prevent the spread of secondary tumors (metastasis).

     It is expected that attacking these processes rather than their end results
will lead to the development of a therapeutic approach that does not have the
toxic side effects associated with current therapies such as chemotherapy,
irradiation or other 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.  Because angiogenesis occurs only
in specific instances in healthy adults (wound healing, fetal development and
the menstrual cycle), anti-angiogenic therapeutics, including PI-88,
specifically targeted at cancerous tumors may result in fewer side effects.  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 cocktails of these
non-toxic drugs with the potential for co-treatment with other therapies will
halt the progression of cancer and grant patients many years of 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 enables 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 and matrix
          metalloproteases, 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.


                                       26
<PAGE>
     -    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 cell surface
          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 Vascular Endothelial Growth Factor, or VEGF,
          Fibroblast Growth Factor 1, or FGF1, and basic Fibroblast Growth
          Factor, or FGF2.

     -    Heparanase degradation of the extracellular matrix and basement
          membrane also allows the proliferating endothelial cells to migrate
          and to 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 - A Multi-Functional Therapeutic Solution

     Our lead cancer product candidate, PI-88, is being developed as a small
molecule inhibitor of both angiogenesis and metastasis.  In preclinical studies,
PI-88 appears applicable to both a range of solid tumors and hematological
tumors (blood tumors) and has been shown to retard the growth of primary tumors
by inhibiting new blood vessel growth (angiogenesis) and the spread of secondary
tumors (metastasis).  PI-88's anti-angiogenic activity is attributable to three
distinct  mechanisms:


                                       27
<PAGE>
     -    PI-88 inhibits the heparanase enzyme secreted by a variety of cells,
          thus preventing the degradation of the extracellular matrix and the
          basement membrane of blood vessels as well as the release of growth
          factors;

     -    PI-88 inhibits endothelial cell proliferation by preventing the
          angiogenic growth factors FGF1, FGF2 and VEGF from binding to the
          receptors on endothelial cells; and

     -    PI-88 stimulates the release of Tissue Factor Pathway Inhibitor, or
          TFPI, an endogenous protein that has anti-angiogenic and
          anticoagulation properties

     PI-88's anti-metastatic activity is attributable to the inhibition of
heparanase.

     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 a favorable
safety and tolerability profile and few side effects.  PI-88 is also showing
preliminary signs of clinical efficacy in the multinational clinical development
program.  92 patients with various cancers have been treated and continuing
treatment for some patients range from 3 months to beyond two years.  Since
PI-88 is an anti-angiogenic agent, the primary and relevant efficacy endpoint
for these early stage clinical trials is stabilization of disease.  This is an
important difference from cytotoxic anti-cancer therapies, where a more toxic
agent is used to eradicate cancer cells, often with adverse consequences to the
patient.

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


                                       28
<PAGE>
<TABLE>
<CAPTION>
                                                               NO. OF
                                                   CLINICAL    PATIENTS
       INDICATION               TREATMENT           PHASE      TREATED           ENDPOINT               STATUS
-----------------------  ------------------------  --------  ------------  ---------------------  -------------------
<S>                      <C>                       <C>       <C>           <C>                    <C>
Advanced solid tumors    Subcutaneous self-            I          15       Dose ranging study     Ongoing
                         administration in
                         combination with weekly
                         doses of Taxotere(R) for
                         three consecutive weeks
                         in a four week cycle

Melanoma and other       Subcutaneous self-          I/II          40        11 patients with     Phase I ongoing.
advanced solid tumors    administration 4 days                             disease stabilization  Phase II to start
                         each week                             50 planned  for at least 3 months  on completion of
                                                             for Phase II                         recruitment into
                                                             component                            Phase I.

Multiple myeloma         Subcutaneous                 II           19          Disease marker     Completed
                         administration 4                                     study; 7 patients
                         consecutive days each                                 with disease
                         week for 8 week cycles                                stabilization

Advanced non-small       Subcutaneous self-           II      100 planned            -            Protocol finalized;
lung cancer              administration in                                                        completion of
                         combination with weekly                                                  Phase I required
                         doses of Taxotere(R) for                                                 before start of
                         three consecutive weeks                                                  Phase II
                         in a four week cycle

Post resection hepatoma  Subcutaneous self-           II      270 planned            -            Protocol finalized
                         administration three
                         consecutive weeks in a
                         four week cycle
</TABLE>


     Three clinical trials with PI-88 have been underway during 2002/2003 with a
primary aim of generating a solid information package addressing safety and
early signs of efficacy of PI-88 as a monotherapy for solid tumor cancers and
multiple myeloma, and as a combination therapy with the chemotherapy drug
docetaxel, or Taxotere(R).

     A Phase I clinical trial of PI-88 in combination with the chemotherapy
docetaxel commenced in August 2002 at the University of Colorado Cancer Center
in Denver, Colorado, in 15 patients with advanced solid tumors to assess the
safety and toxicity of PI-88 when used in combination with docetaxel compared to
treatment with PI-88 alone.  Based on interim data to date, the combination
appears well tolerated with similar side effects to those experienced with
treatment with docetaxel alone.  These data continue to support our plans to
extend this study into a multi-center Australian Phase II advanced non-small
lung cancer trial following completion of this Phase I study, and for which a
protocol has been approved.


                                       29
<PAGE>
     We are conducting a Phase I/II clinical trial at the University of Colorado
Health Sciences Center, Denver, Colorado, in which escalating dosages of PI-88
are being self-administered subcutaneously (injected under the skin) for four
consecutive days each week to patients with advanced malignancies, including
melanoma and renal-cell carcinoma, in order to determine the appropriate safe
dose of PI-88 for the Phase II component.  In November 2002, Dr. Scott Holden,
clinical trial co-investigator at the University of Colorado Health Sciences
Center in Denver presented interim data from this trial at the meeting of the
European Organization for Research and Treatment of Cancer, or EORTC, in
Amsterdam.  This meeting was held in association with the American Association
for Cancer Research, or AACR, and the American National Cancer Institute, or
NCI.  Data presented showed that PI-88 was well tolerated and demonstrated
encouraging anti-tumor activity in some patients with advanced cancer.  Based on
interim data to date, 11 out of 33 patients treated have had disease
stabilization ranging from three to 27 months, which includes one partial
response.   Following completion of the Phase I component of this study, we
intend to commence multi-center Phase II trials in the U.S. and across Australia
with advanced melanoma patients and with continued study participation by the
University of Colorado Health Sciences Center.

     In August 2003, we completed our first Phase II clinical trial of PI-88.
19 patients with refractory or relapsed multiple myeloma, a bone marrow cancer,
were enrolled at three Australian hospitals, The Alfred Hospital in Melbourne
under Dr. Andrew Spencer, The Mater Misericordiae in Newcastle under Dr. Arno
Enno, and The Wesley Clinical Research Centre in Brisbane under Dr. John
Bashford.  In the study, PI-88 was administered subcutaneously four consecutive
days each week for eight-week cycles.  The primary endpoint of the study was to
investigate clinical efficacy in patients with advanced disease who had
exhausted other treatment options.  For purposes of this study, a clinical
response was specified as patients remaining stable or experiencing a decrease
in blood levels of paraprotein, a marker of multiple myeloma disease severity.
This endpoint was achieved in seven, or 39%, of the 18 evaluable patients in the
study.  Two patients have long-term disease stabilization and continue to
receive post-study PI-88 therapy under a special access scheme.

     Our alliance partner and clinical collaborator, Medigen Biotechnology
Corporation, has received hospital ethics committee approval to conduct a Phase
II clinical trial of PI-88 in patients with post-resection primary livery cancer
(hepatocellular carcinoma or hepatoma).

     Our previous 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 in 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. The 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.


                                       30
<PAGE>
     -    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 (injected under the
          skin).

     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 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.

     Results of our 1999 United Kingdom Phase I trials of PI-88 in healthy
volunteers indicate that at escalating dosages administered as single two-hour
intravenous infusions, PI-88 does not cause any immediate adverse reactions
within the human body except for transient elevations of activated partial
thromboplastin time (the time for blood to clot under defined in vitro
conditions).  In addition, results of our 2000 United Kingdom Phase I trial of
PI-88 in healthy volunteers indicate that, at escalating dosages administered
subcutaneously (injected under the skin), PI-88 was well tolerated with minimal
local effects and 98% bioavailability.


                                       31
<PAGE>
     Development Strategy

     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.

     PI-166 - NOVEL ANTI-CANCER AGENT

     PI-166, our second lead oncology product candidate, is a novel combination
of an active small organic chemical molecule and a delivery vehicle that directs
and retains 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).

     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
(hepatocellular carcinoma) that, like human hepatoma, is known to be highly
resistant to standard chemotherapeutic agents.

     Development Strategy for PI-166

     A Phase I clinical trial with PI-166 was initiated in January 2003 at the
St. George Hospital in Sydney, Australia.  The primary objective of this trial
is to investigate the safety and tolerability of escalating doses of PI-166 in
patients with advanced stage hepatocellular carcinoma where surgical
intervention is no longer an option (unresectable primary hepatocellular
carcinoma or advanced primary liver cancer).  Based on interim data to date, no
drug-related side effects of PI-166 have been observed in patients enrolled in
the trial.

     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.

     CARDIOVASCULAR THERAPEUTICS

     PI-88 has been shown in preclinical models to have potential as an
anti-thrombotic and inhibitor of restenosis.  Our studies show that PI-88's
mechanism of action is different from that of commonly used anti-thrombotic
agents such as heparin and low molecular weight heparins.

     Thrombosis Background

     Thrombosis is the blockage of a blood vessel by a fibrous clot.  Venous
clots usually occur in the limbs (deep vein thrombosis) as a result of major
surgery such as joint replacement or debulking of tumors.  These clots cause
severe pain, inflammation and, in some instances, pulmonary embolism if the clot
migrates to the lungs.


                                       32
<PAGE>
     The coagulation of blood is the result of a cascade of events, compromising
the extrinsic and intrinsic coagulation pathways:

     -    In the intrinsic pathway, all components necessary for coagulation are
          present in the blood, and coagulation begins upon exposure of the
          "contact" factors (Factor XII, high molecular weight kininogen and
          prekallikrein) in plasma to a negatively charged surface.

     -    In addition to the circulating components in the blood, the extrinsic
          pathway requires Tissue Factor, a protein that is not normally found
          in the blood compartment.

These pathways, using various enzymes called activated blood-coagulation
factors, lead to the formation of thrombin, one of the key factors in
coagulation. The natural anticoagulant Tissue Factor Pathway Inhibitor, or TFPI
inhibits Tissue Factor, which is the normal stimulus for initiating thrombin
production in vivo.

     To prevent the formation of blood clots, heparin and low molecular weight
heparins have been widely used as injectable anticoagulants for many years.
While relatively inexpensive, heparin therapy has several disadvantages and
hidden costs including the high cost of administering medication, treatment
delays in achieving a therapeutic dose, and constant monitoring to prevent
bleeding complications due to overdose.  These products are also derived from
animal tissues.  Additionally, heparins have a narrow window between no
therapeutic action and overdose.  In many instances, doses must be gradually
increased over a period of 24 to 48 hours before therapeutic anticoagulation is
achieved.

     Novel Profile of PI-88

     PI-88 has been shown in preclinical models to have a novel profile as a
potential anti-thrombotic and restenosis inhibitor.  Our studies show that
PI-88's mechanism of action is different from that of commonly used
antithrombotic agents such as heparin and low molecular weight heparins:

     -    First, by causing potent and sustained release of TFPI, PI-88 prevents
          the formation of thrombin via the extrinsic pathway.

     -    Second, by direct interaction with serine protease inhibitors, PI-88
          also prevents the formation of thrombin via the intrinsic pathway.

     -    Third, unlike heparin or the low molecular weight heparins that
          inactivate thrombin by stimulating antithrombin III, PI-88 does not
          interact with antithrombin III, but directly interacts with serine
          proteases and stimulates heparin cofactor II to inhibit the action of
          thrombin formed by extrinsic and intrinsic pathways.

     In addition, our research indicates that PI-88, as a heparanase inhibitor,
prevents restenosis resulting from the proliferation of smooth muscle cells in
damaged artery walls.


                                       33
<PAGE>
     Development Strategy

     We believe that PI-88 will have several advantages over heparin and low
molecular weight heparins in treating deep vein thrombosis.  PI-88 has undergone
a Phase I study in healthy volunteers in the United Kingdom to determine an
optimal route of administration suitable for cardiovascular applications.  In
light of our focus on developing novel cancer therapeutics, recent competitive
developments and the high cost of development in the cardiovascular disease
area, we do not presently plan to initiate a PI-88 cardiovascular clinical trial
program.

     We have retained worldwide commercial rights to PI-88.  At the appropriate
time, we will select collaborators for further clinical development and
commercialization of PI-88 as a potential cardiovascular 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 drug discovery research involves the collaboration with the
academic laboratories of two prominent scientists working in the innovative area
of glycomics, or sugar medicines:  Professor Martin Banwell of the Research
School of Chemistry at the Australian National University in Canberra,
Australia, and Professor Mark von Itzstein of the Institute of Glycomics at
Griffith University, Gold Coast, Australia.  The proprietary core technology for
our drug discovery research, and out of which PI-88 was developed, emanates from
our collaborative research on heparin derivatives and related polysaccharides
with Professor Christopher Parish of The John Curtin School of Medical Research
at the Australian National University, Canberra, Australia.  Our drug discovery
research program is co-funded by an Australian federal government AUSIndustry
START grant awarded in August 2001.

     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.

     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 to improve our ability to move new compounds into the
clinic.

     BACKGROUND

     Carbohydrate-Protein Interactions and Disease.     Most diseases involve
     ---------------------------------------------
complex interaction between proteins and many of these interactions also involve
carbohydrates.  Different classes of proteins in which many members are known to
be dependent on a carbohydrate sequence for function are cytokines, chemokines,
infectious agents such as viruses, selectins, and proteases.  Incorrect
functioning of any of these processes can lead to disease states including
cancer, inflammation, cardiovascular disease and infection.


                                       34
<PAGE>
     Carbohydrates. Carbohydrates constitute a third class of bioinformatic
     -------------
molecules after DNA and proteins.  While the nutritional and structural roles of
carbohydrates have long been understood, an appreciation of their function as
information carriers and recognition molecules has occurred only recently.
Carbohydrates play an important role in a wide range of biological processes as
diverse as cellular differentiation, hormone-cell regulation, and cell-to-cell
interaction, especially viral-host cell and bacteria-host cell recognition.
Historically, the potential for carbohydrates as targets for therapeutics and
therapeutic agents was limited, one limiting factor being the lack of cost
effective and scaleable synthetic processes.  While synthesis is feasible on a
small scale, large-scale manufacture is prohibitively expensive with current
technology.

     Small Molecule Drugs. The advantage of small molecule drugs over
     --------------------
therapeutic proteins includes their potential for oral administration,
applicability to a wider range of disease targets, including those inside the
cell, improved effectiveness and reduced side effects. Small molecule drugs are
particularly appropriate for the treatment of chronic diseases that require
daily administration over many years. Historically, the opportunity to
commercialize small molecule drugs has been limited by the difficulty of
discovering safe and effective small molecules.

     OUR SOLUTION

     We are initially focusing on the role of heparan sulfate, a complex sugar
that belongs to a class of carbohydrates called glycosaminoglycans, or GAGs.
GAGs are sulfated polysaccharides (long sugar chains) that are generally found
linked to core proteins in a complex known as a proteoglycan.  Proteoglycans are
found on the surface of all cells where they act as receptors, participate in
cell-to-cell interactions, and promote or inhibit cell growth.  In addition,
GAGs play a structural role by forming a major component of the extracellular
matrix surrounding endothelial cells as well as the basement membrane of blood
vessels.  GAG-binding proteins have been implicated in a range of different
diseases including cancer, cardiovascular diseases, inflammation, infectious
diseases, amyloidal diseases, diabetic retinopathy, macular degeneration and
xenotransplantation.

      Our goal is to produce lead molecules that inhibit the binding of heparan
sulfate to different proteins.  Our rational drug design approach analyzes the
binding of specific regions of heparan sulfate to target proteins by computer
modeling to aid the design of very selective drugs that bind to the same protein
and block heparan sulfate.  We have been able to identify a significant number
of heparan sulfate binding proteins and many are shown to be involved in
different diseases including cancer, infectious disease, cardiovascular disease
and inflammatory disease such as multiple sclerosis.  Previous work by our
research collaborators and others have demonstrated that if these targets are
blocked, then the disease can be halted.

     Using a comparative database of the three dimensional structures of a
number of heparan sulfate-binding proteins, we have been able to design,
synthesize and screen several first generation classes of molecules (scaffolds)
that bind to the protein targets and inhibit their heparan sulfate-binding
ability.  We have also been able to chemically modify these scaffolds to
dramatically increase their specificity for specific protein targets.  We
believe that these new small molecule compounds produced by our proprietary
synthetic procedures can also potentially incorporate chemical groupings to aid
detection and oral delivery.  Our initial primary targets include Vascular
Endothelial Growth Factor, or VEGF, and a family of cell signaling molecules
called Fibroblast Growth Factors, or FGFs, and include FGF1, FGF2, FGF7 and
FGF9.


                                       35
<PAGE>
     We have exclusive proprietary rights to a class of small molecules. These
small molecules are semi-synthetic oligosaccharides (short sugar chains) that we
have screened as inhibitors of specific functions of heparan sulfate-binding
proteins targets such as heparanase, growth factors that stimulate angiogenesis
and proteins involved in the coagulation pathway. PI-88, our lead product
candidate is a heparan sulfate mimetic that has been shown at the cellular level
to prevent the binding of growth factors to target receptors and to inhibit
heparanase. We are also developing novel manufacturing techniques to synthesize
low molecular weight glycomimetics to increase the variety of carbohydrate and
carbohydrate-like molecules for screening as potential therapeutics.

ADDITIONAL RESEARCH PROGRAMS

     Additional research programs supported through collaborations with academic
institutions and industry include:

     Heparanase Technologies.  Technologies are being developed for the
     -----------------------
heparanase enzyme as a diagnostic and therapeutic target, including a more
sensitive assay to distinguish heparanase levels in various disease states, such
as malignant versus benign tumors, metastatic versus non-metastatic cancers and
various cardiovascular diseases.

     Inflammation Disease Therapeutics. Based on research results on agents that
     ---------------------------------
target and restrict the activity of heparanase, the same small molecule sulfated
oligosaccharides that inhibit cancer spread (including PI-88) are also
potentially effective prophylactic anti-inflammatory agents. Furthermore,
heparanase inhibitors constitute a prospective new class of drugs for use in the
treatment of inflammatory disease (such as inflammatory bowel disease and
multiple sclerosis).

     Carbohydrate-Based Anti-Viral Technologies. An important function of
     ------------------------------------------
polysaccharides in the human body is the facilitation of cell-to-cell
interactions and cell adhesion. These molecules act as specific identifiers at
the surface of different cells and play a role in the physical adhesion between
two cells. Carbohydrates have also been associated with the attachment of many
parasites, as well as a number of viruses. Screening of small molecule sulfated
oligosaccharides as inhibitors of viral infection is continuing.

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.


                                       36
<PAGE>
     We support pivotal research at the following institutions:

     -    The Research School of Chemistry at the Australian National
          University, Canberra, Australia, 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 funded in part by an Australian
          Federal Government research grant.

     -    The Institute of Glycomics at Griffith University, Gold Coast,
          Australia, is developing small molecule heparanase inhibitors as
          anti-inflammatory drug leads derived from a structure/function
          analysis of this protein and related molecules. We have previously
          shown that this molecule is a valid target for anti-inflammatory drugs
          in treatment of diseases such as multiple sclerosis and inflammatory
          bowel disease.

     We have also collaborated in research with The John Curtin School of
Medical Research at the Australian National University in Canberra, Australia,
the Institute of Medical and Veterinary Sciences, Adelaide, Australia, the
University of Otago in Otago, New Zealand, the Gothenburg University in
Gothenburg, Sweden, the University of California in Davis and in San Francisco,
California, the University of Nebraska in Lincoln, Nebraska, the University of
L'Aquila in L'Aquila, Italy, and The Royal North Shore Hospital, Sydney,
Australia.

     Our clinical collaborators include:

     -    The University of Colorado Health Sciences Center in Denver, Colorado,
          which is conducting a Phase I/II study of PI-88 with patients
          suffering from advanced melanoma and other solid tumors. Following
          completion of the Phase I component of this study, we plan to initiate
          a Phase II component as a multi-center study in the U.S. and in
          hospitals across Australia with study participation by the University
          of Colorado Health Sciences Center.

     -    The University of Colorado Cancer Center in Denver, Colorado, which is
          conducting a Phase I study of PI-88 in combination with Taxotere(R), a
          chemotherapy agent, in patients with advanced cancer. Following
          completion of this study, we plan to initiate a Phase II trial as a
          multi-center study in Australia.

     -    The Cancer Treatment Centre at the St. George Hospital in Sydney,
          Australia, which is conducting the Phase I trial of PI-166 in patients
          with unresectable hepatocellular carcinoma.

     -    Medigen Biotechnology Corporation in Taipei, Taiwan, intends to
          conduct a Phase II clinical trial with PI-88 in patients with
          post-resection hepatoma and is planning additional clinical trials of
          PI-88. This collaboration is described in the following section.


                                       37
<PAGE>
     In August 2003, we completed a multi-center Phase II study of PI-88 in
multiple myeloma patients at The Alfred Hospital in Melbourne, Australia, The
Mater Misericordiae Hospital in Newcastle, Australia, and the Wesley Clinic
Research Centre in Brisbane, Australia.  In 2001, clinical testing of 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 newly-formed biotechnology company based in
Taiwan. The collaboration relates to early stage clinical trials of PI-88. Under
the 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;

     -    We 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 Progen may enter
          into with strategic partners to further develop and commercialize
          PI-88.

     In return, MBC:

     -    Will fund and conduct one Phase II cancer trial with PI-88 and one
          Phase II cardiovascular trial with PI-88;

     -    Will fund and conduct two Phase II proof of principle cancer trials
          with PI-88;

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

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


                                       38
<PAGE>
COMMERCIAL SERVICES BUSINESSES

     LIFE SCIENCES

     Prior to the sale of our life sciences division to Global Science and
Technology Limited as more fully described above in "Item 3.  Key Information -
Recent Developments," 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.  Sales from our life sciences division constituted
approximately 84.4%, 65% and 62.4% of our sales revenue for the fiscal years
ended June 30, 2001, 2002 and 2003, respectively.

     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 15.6%, 34.9%, and 37.6% of our sales for the fiscal
years ended June 30, 2001, 2002 and 2003, respectively.

MANUFACTURING FACILITIES

     We maintain and operate an 11,200 square foot fully-integrated
pharmaceutical manufacturing facility in Darra, 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 prepare PI-166 for preclinical and
clinical trials, and 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 Gene
Technology Regulator for the manufacture of large scale genetically modified
organisms. The TGA is a division of the Australian Department of Health and Aged
Care in Canberra and a member of the International Pharmaceutical Inspection


                                       39
<PAGE>
Convention. The TGA regulates the manufacture of compounds intended as starting
materials for human therapeutics. To our knowledge, the Australian requirements
are largely consistent with the FDA's requirements for the U.S. market. In
addition, the FDA has accepted a Type 1 Drug Masterfile, or DMF, for our
manufacturing facility. We may use the DMF to support applications to the FDA
for the investigation or approval of new therapeutics or for the licensing of a
new process for the manufacture of a therapeutic. Where such an application is
made, the FDA will review the process to be used in the facility. 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.

     The building in which our principal offices and manufacturing facilities
are located is leased. Under a two-year lease agreement expiring in March 2004,
we pay a current rental of approximately $62,000 per annum, subject to annual
review, based on the consumer price index, and have a three-year renewal option.
If, however, the renewal option is not exercised on or prior to March 2004, a
penalty payment of approximately $8,800 will apply.

GOVERNMENT REGULATION

     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
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.


                                       40
<PAGE>
     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 investigator's 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.

     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.


                                       41
<PAGE>
     Clinical trials typically are 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.

     -    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 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.

     We successfully completed our first Phase I clinical trial with PI-88 in
healthy volunteers in Manchester, the United Kingdom, in March 1999, and our
first Phase Ib clinical trial with PI-88 in cancer patients in November 2000.
The multi-center oncology Phase Ib clinical trial was conducted at the Royal
Melbourne Hospital and the Peter MacCallum Cancer Institute, Melbourne,
Australia, under the auspices of the Centre for Developmental Cancer
Therapeutics pursuant to an IND application with the FDA, a CTN application with
the TGA and IEC approvals.

     In August 2001, a Phase I/II clinical trial with PI-88 in patients with
advanced malignancies was initiated at the University of Colorado Health
Sciences Center under an IND.  The latest interim data from this study have
shown varying degrees of disease stabilization in 11 of the 33 patients over a
three to 27 month period, which includes one partial response. Following
completion of the Phase I component of this study, we intend to commence
multi-center Phase II trials in hospitals across Australia with continued study
participation by the University of Colorado Health Sciences Center.

     In order to assess the safety and toxicity of PI-88 as a single therapeutic
agent in comparison with PI-88 when used in combination with another anti-cancer
drug, in September 2002, a Phase I trial with PI-88 in combination with
Taxotere(R), a frequently used chemotherapy treatment, was initiated in patients
with advanced cancer at the University of Colorado Cancer Center also under the
active IND application.  Interim data to date indicate that the combination is
well tolerated with similar side effects to those experienced with treatment
with Taxotere(R) alone.  Following completion of the Phase I trial, we intend to
commence multi-center Phase II trials with PI-88 in combination with Taxotere(R)
in Australia.


                                       42
<PAGE>
     In August 2003, an Australian multi-center Phase II trial with PI-88 in
patients with multiple myeloma (a bone marrow cancer) was completed.
Participating centers included The Alfred Hospital (Melbourne), The Mater
Misericordiae Hospital (Newcastle) and the Wesley Clinic Research Centre
(Brisbane). The trial was conducted under our IND with the FDA as well as a CTN
application with the TGA. For the purposes of this clinical trial, a clinical
response was specified as patients remaining stable or experiencing a decrease
in blood levels of paraprotein (a marker of multiple myeloma disease severity).
This endpoint was achieved in 39% of evaluable patients in the study.

     In January 2003, a Phase I clinical trial with PI-166 in patients with
unresectable primary hepatocellular carcinoma, or advanced 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 is similar to that of the TGA, 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.


                                       43
<PAGE>
     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 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 qualify
for this expedited review and approval process. Depending on the results of our
current PI-88 clinical trial program, 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 a Phase I/II clinical trial of PI-88 as a
single agent therapy and a Phase I trial of PI-88 in combination with
Taxotere(R) in the U.S. We intend to commence the Phase II component of PI-88 as
a single agent therapy in a multi-center study in Australia and the U.S. and a
Phase II multi-center combination study of PI-88 and Taxotere(R) in Australia
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 clinical trials will commence.


                                       44
<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

     We own or have exclusive rights to 30 granted patents (including those
accepted for grant) and a further 24 patent applications worldwide that relate
to our proprietary technology in Australia, the United States and other foreign
countries, of which four are issued Australian patents and nine are
corresponding issued United States patents with expiration dates between 2010
and 2018. We also have exclusive licenses to approximately 12 families of patent
applications.

     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 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.


                                       45
<PAGE>
     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 seven 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
royalties on sales of PI-88 as well as on any fees we receive from sublicensing
this technology.

     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 to pay royalties on sales of PI-166 as well as on any
fees we receive from sublicensing this technology.

     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 to pay royalties on sales of
products arising from the synthesis technology as well as on any royalties we
receive from sublicenses of the technology, and to make periodic payments on the
achievement of certain milestones.

     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.


                                       46
<PAGE>
COMPETITION

     We face competition in each of our target product markets.  A number of
Australian and non-Australian companies compete with us in the development,
manufacture, import/export and distribution of molecular biology products and
specialized proteins.  Some of these companies are large, publicly-held
diversified research supply companies or conglomerates and have greater
resources and more manufacturing and marketing experience than us.

     The pharmaceutical and biotechnology industries are also intensely
competitive. Our anti-cancer and cardiovascular 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 companies, 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, FGF2,
VEGF 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 the endothelial cell directly. In
addition, a number of pharmaceutical and biotechnology companies are developing
drugs and therapies to treat thrombosis and restenosis, including third
generation anticoagulants, products with unique modes of action, and radiation
therapy. Several of these product candidates are in advanced stages of clinical
trials. We are also aware of several agents that are being developed by
competitors that are intended for the treatment of hepatocellular carcinoma.
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.

     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.


                                       47
<PAGE>
EMPLOYEES

     As of June 30, 2003, we had a workforce of 46 full-time employees, of whom
15 hold Ph.D. degrees, and five hold other advanced degrees.  Of our total
workforce, 15 are engaged in research and development, nine in manufacturing
operations, five in quality assurance, seven in sales and marketing, and ten in
business development, finance and administration.  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.  We also maintain
consulting agreements with a number of scientists at various universities and
other research institutions.

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.

LEGAL PROCEEDINGS

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


                                       48
<PAGE>
                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>
     NAME                           AGE                     POSITION
     -----------------------------  ---  ----------------------------------------------
<S>                                 <C>  <C>
     Stephen Chang                   54  Chairman and Executive Director
     Lewis J. Lee                    45  Managing Director and Executive Director
     Prof. John R. Zalcberg          51  Non-Executive Director
     Patrick O. Burns                66  Non-Executive Director (1), (2)
     Dr. Malvin L. Eutick            54  Non-Executive Director (1), (2)
     Dr. Stanley S.C. Chang          44  Non-Executive Director
     Dr. Robert H. Don, Ph.D.        47  Vice President Research and Development
     Dr. Darren M. Schliebs, Ph.D.   35  Vice President Business Development
     Milton S. McColl                56  Company Secretary and Chief Financial Officer
     Gregory M. Orders               45  General Manager Contract Manufacturing
_____________
<FN>
(1)  Member of Audit Committee
(2)  Member of Remuneration Committee
</TABLE>


     STEPHEN CHANG is a founding Director and has served as Chairman from 1989
to 1994 and since 1999.  Mr. Chang is also a director of Capac International
Pty. Ltd., a private import/export firm.  From 2000 to 2001, Mr. Chang served as
chairman of Medigen Biotechnology Corporation, and from 1977 to 2001, was a
director of Australia Pacific Electric Cables Pty. Ltd. and Australia Pacific
Electric Cables (Holdings) Pty. Ltd.  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, serving respectively over a ten-year period since 1989 as the
global business leader for PEGASYS(TM), a major Roche multi-indication drug,
global brand manager for Roferon(R)-A, another major Roche biological product,
the biotechnology division head of Roche Products Ltd, Taiwan, product manager
of Roche Sydney and headquarter country manager for several emerging markets in
the Middle-East and Far East. Mr. Lee holds a B.Sc. in engineering 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 is the chairman of the
Australasian Gastrointestinal Trials Group and a board member of the New South
Wales Cancer Institute and Cancer Trials Australia. Prof. Zalcberg was the past
president of the Clinical Oncology Society of Australia from 2000 to 2001, a
member of the Committee of Management of the University of Sydney Cancer
Research Fund from 1997 to 1999, and a past member of the Global Oncology
Advisory Board of Pharmacia & Upjohn. Prof. Zalcberg is a member of the
editorial boards of Investigational New Drugs, Annals of Oncology, European
Journal of Cancer, Journal of Clinical Oncology, and American Journal of Drugs.
He has been the recipient of numerous research grants and has published
extensively in scientific journals. Prof. Zalcberg holds a Ph.D. from the
University of Melbourne and is a fellow of the Royal Australian College of
Physicians (Medical Oncology).


                                       49
<PAGE>
     PATRICK O. BURNS was appointed a Non-Executive Director in March 1999. Mr.
Burns is vice chairman of Euclid Systems Corporation, a private eye care
company, and the chairman of its 66% subsidiary Stable Eyes Inc. He is also a
senior consultant to Airline Capital Associates, Inc., a private aviation
consulting company. Previously, Mr. Burns served as a director of Synbiotics
Corp., a public company specializing in animal health care, from 1997 to 2002, a
senior consultant to Early Stage Enterprises, a New Jersey venture capital fund
investing primarily in developing technology growth companies, from 1997 to
2003, vice president/principal of R&D Funding Corp., the general partner of four
research and development funds and an affiliate of Prudential Securities
Incorporated, from 1986 to 1997, and Senior Vice President of Prudential
Securities from 1991 until 1997. Mr. Burns holds an A.B. from Dartmouth College
and an L.L.B. from Harvard Law School.

     DR. MALVIN L. EUTICK, PH.D. was appointed a Non-Executive Director in March
1999. He is a director of TUTA Healthcare Pty. Ltd., a private Australian
supplier of plastic medical devices, and Starrate Australia Pty. Ltd., a private
Australian biotechnology company. Previously, Dr. Eutick served as the chief
executive officer of Ophthalmic Laboratories Pty. Limited, a private Australian
pharmaceutical company, and the Chairman of Bioquest Limited, a private
Australian biotechnology company specializing in the supply of molecular biology
products, equipment and training. Dr. Eutick holds a B.Sc. and a PhD 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 directors of
Medigen Biotechnology Corporation, a Taiwan based biotechnology company. Dr.
Chang also serves as a director of MediGreen Biotechnology Corp., a 40%
Taiwanese subsidiary of Medigen Biotechnology Corporation, and GeneTrol
Biotherapeutics, Inc., a private U.S. biotechnology company. Previously, Dr.
Chang was chairman of the Faculty of Medicine of Tzu Chi College of Medicine and
Humanities, Taiwan, from 1996 to 2000, and a consultant urologist at the
Department of Urology of Tzu Chi General Hospital from 1988 to 2000. Dr. Chang
served on the editorial board of The Journal of Ultrasound in Medicine from 1996
to 1998 and from 1998 to 2000, and is a fellow of the Association of Urology,
Taiwan and the Society of Ultrasound in Medicine, Taiwan. Dr. Chang is the
recipient of numerous research grants and has published many scientific
articles. He 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. ROBERT H. DON, PH.D. joined us in 1994 as Vice President of Research
and Development.  Prior to joining us, Dr. Don was a program leader at the
Center for Molecular Biology and Biotechnology at the University of Queensland,
Australia, from 1989 to 1994, leading a research group in the study of molecular
genetics of embryonal development.  Previously, Dr. Don was a research scientist
at the Commonwealth Scientific and Industrial Research Organization, or CSIRO,
in Brisbane where he worked on development of animal vaccines as part of a
collaborative research program with CSL Ltd., a senior scientific officer at the
Oncology Research Center, Prince of Wales Hospital in Sydney, and a research
fellow of the Department of Medical Biochemistry at the University of Geneva,
Switzerland, in collaborative research with the Bayer AG.  Dr. Don has published
numerous articles on molecular genetics.  He holds a B.Sc. and a Ph.D. in
microbiology from the University of Queensland, Australia.


                                       50
<PAGE>
     DR. DARREN M. SCHLIEBS, PH.D. joined us in May 2003 as Vice President of
Business Development.  Prior to joining us, Dr. Schliebs served from 1998 to
2003 in various business development and scientific positions for Alchemia
Limited, an Australian public biotechnology company, and its U.S. subsidiary for
business development support, where he was most recently based in the San
Francisco Bay Area as business development manager.  Dr. Schliebs is an inventor
of a patent relating to carbohydrate based drug discovery, and has published
several articles on carbohydrate and natural product chemistry in scientific
journals and magazines.  Dr. Schliebs holds a B.Sc. in organic chemistry from
the University of Adelaide, Australia, and a Ph.D. in organic chemistry from The
Australian National University, Canberra, Australia.

     MILTON S. MCCOLL was appointed Company Secretary and Chief Financial
Officer in December 2001. Prior to joining us, Mr. McColl was the company
secretary of e-Shares Corporation Ltd., a public Australian on-line brokerage
and corporate services company, from 1999 to 2001, and of Australian
International Carbon Ltd., a public Australian carbon manufacturer, from 1998 to
1999. Previously, Mr. McColl was the company secretary and financial controller
of Fraser Range Granite Ltd., a public Australian quarry operator, and the
company secretary of Golden Valley Mining NL, a public Australian quarry
operator. Mr. McColl also serves as a director of RUC (Australia) Pty. Ltd., a
private Australian company that provides contract services to the mining
industry, and Rigtec Pty. Ltd., a private Australian company that hires rigs to
the mining industry. Mr. McColl is an associate member of both the Institute of
Chartered Accountants and Chartered Secretaries of Australia and holds a
Bachelor of Accounting Science degree from the University of South Africa,
Pretoria.

     GREGORY M. ORDERS joined us in April 2001 as Quality Assurance Manager,
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
Master in molecular science from LaTrobe University in Melbourne, Australia.

     ALTERNATE  DIRECTOR

     Eugene Cheng (50) was appointed the alternate director for Dr. Stanley
Chang on March 24, 2003.  Mr. Cheng is a partner of E-telint Capital Partners, a
Silicon Valley based venture capital firm.  From 2000 to 2001, Mr. Cheng was the
president of sales and marketing of Advanced Semiconductor Engineering, Inc., a
publicly held Taiwanese corporation and one of the largest global providers of
semiconductor manufacturing services.  From 1987 to 1999, Mr. Cheng occupied
various management positions with Acer Inc., a publicly held Taiwanese
corporation and one of the world's top branded PC vendors, serving from 1994 to
1999 as chief of staff of Acer Information Products Group.  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.


                                       51
<PAGE>
KEY  EMPLOYEES

     The following table sets forth certain information regarding our other key
employees:

     NAME                 AGE              POSITION
     -------------------  ---  --------------------------------
     Kaye L. Roberts       37  Vice President Clinical Research
     Dr. Brian R. Creese   50  Clinical Development Manager


     KAYE L. ROBERTS has served as our Vice President of Clinical Research since
November 2000 and joined us in July 1998 as Quality Assurance Manager.  From
1997 to 1998, Ms. Roberts was the quality assurance manager at Parnell
Laboratories (Australia) Pty. Ltd., a manufacturer of sterile injectables and
non-sterile veterinary pharmaceuticals.  From 1995 to 1997, Ms. Roberts was QC
chemistry laboratory manager for F.H. Faulding & Co. Ltd., a manufacturer of
pharmaceutical and consumer products.  From 1991 to 1994, Ms. Roberts held
various research officer positions with the Victorian College of Pharmacy at
Monash University in Melbourne, Australia.  Ms. Roberts holds a Master and
Bachelor of Pharmacy degrees from the Victorian College of Pharmacy at Monash
University and is a registered pharmacist with the Pharmacy Board of Victoria,
Australia.

     DR. BRIAN R. CREESE, PH.D. joined us in August 2000 as a Preclinical
Research Scientist and was appointed Clinical Development Manager in December
2002.  Prior to joining us, Dr. Creese was a principal toxicologist from 1985 to
2000 and a senior toxicologist from 1984 to 1985 in the Drug Toxicology
Evaluation Section of the Australian Therapeutics Goods Administration.  Since
1996, Dr. Creese also serves as an adjunct senior lecturer at the School of
Biomedical Sciences of the University of Queensland in Brisbane, Australia, and
as a member of the NHMRC Working Committee on Toxicity and Risk Assessment.  Dr.
Creese holds a B.Sc. in biochemistry from the Australian National University,
Canberra, Australia, and a Ph.D. in clinical science from the John Curtin School
of Medical Research at the Australian National University.

     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.

BOARD COMPOSITION AND COMMITTEES

     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. Lee was elected at the August
2000 general meeting of shareholders and Mr. Stephen Chang was elected at the
2000 annual general meeting of shareholders.  Dr. Stanley Chang, who was
appointed by our board of directors in February 2001, was re-elected, along with
Mr. Burns, at the 2001 annual general meeting of shareholders.  Prof. Zalcberg
was re-elected at the 2002 annual general meeting of shareholders and Dr. Eutick
was re-elected at the 2003 annual general meeting of shareholders.


                                       52
<PAGE>
     AUDIT COMMITTEE. Our audit committee currently consists of Mr. Burns and
Dr. Eutick, both of whom are non-management members of our board of directors.
The function of our audit committee includes:

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

     -    Meeting with our independent auditors and our internal financial
          personnel regarding these matters;

     -    Recommending to our board of directors the engagement of our
          independent auditors;

     -    Reviewing our audited financial statements and reports and discussing
          the statements and reports with our management, including any
          significant adjustments, management judgments and estimates, new
          accounting policies and disagreement with management; and

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

     REMUNERATION COMMITTEE.  Our remuneration committee currently consists of
Dr. Eutick and Mr. 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.


                                       53
<PAGE>
ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS

                             SELECTED FINANCIAL DATA

     The following selected financial data for the five years ended June 30,
2003 should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations below and our financial statements
and related notes contained elsewhere in this annual report.  The balance sheet
information as at June 30, 2002 and 2003 and the statement of operations data
for fiscal 2001, 2002 and 2003 are derived from our audited financial statements
included in this annual report.  Balance sheet information as of June 30, 1999,
2000 and 2001 and statement of operations information for fiscal 1999 and 2000
are derived from our audited financial statements which are not included in this
annual report.

<TABLE>
<CAPTION>
                                                            For the Years Ended June 30,
                                      -------------------------------------------------------------------------
                                          1999           2000           2001           2002           2003
---------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:

Revenue From Operations               $     39,984   $    173,661   $    198,331   $    704,044   $  1,051,695

Cost of Operations:

     Research and development            3,052,124      2,757,628      2,374,319      2,185,066      2,435,896
     Selling, general and
       administrative costs                991,357        869,266        862,031      1,214,771      1,958,355

Total Cost of Operations                 4,702,338      4,241,123      3,757,915      4,104,544      5,018,983
                                      -------------  -------------  -------------  -------------  -------------

Gross Loss                              (4,662,354)    (4,067,462)    (3,716,051)    (3,601,294)    (4,391,353)

Total Other Income (Expenses)               (7,311)      (206,050)       402,528        417,658        537,991
                                      -------------  -------------  -------------  -------------  -------------

Net Loss from continuing operations   $ (4,669,665)  $ (4,273,512)  $ (3,313,523)  $ (3,183,636)  $ (3,853,362)

Discontinued operations                   (123,076)      (206,621)        41,341        104,421        288,213
                                      -------------  -------------  -------------  -------------  -------------

Net Loss                               ($4,792,741)   ($4,480,133)   ($3,272,182)   ($3,079,215)   ($3,565,149)
                                      =============  =============  =============  =============  =============

 Loss Per Ordinary Share
                                      =============  =============  =============  =============  =============

     Continuing operations            $      (0.27)  $      (0.22)  $      (0.14)  $      (0.13)  $      (0.16)
                                      =============  =============  =============  =============  =============

     Discontinued operations                     -   $      (0.01)             -              -   $       0.01
                                      =============  =============  =============  =============  =============

     Net loss per ordinary share      $      (0.27)  $      (0.23)  $      (0.14)  $      (0.13)  $      (0.15)
                                      =============  =============  =============  =============  =============
Weighted Average Number of
   Ordinary Shares Outstanding          17,518,103     19,729,300     23,404,883     24,391,869     24,391,869


                                       54
<PAGE>
                                                            For the Years Ended June 30,
                                      -------------------------------------------------------------------------
                                          1999           2000           2001           2002           2003
---------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:

Cash and Cash Equivalents             $  3,034,567   $  6,529,982   $  8,391,775      6,430,377      8,001,842

Working Capital                          3,141,991      6,277,381      9,517,072      7,174,683      7,332,942

Total Assets                             9,106,523     10,440,838     11,649,736      9,865,368     10,230,017

Long-Term Debt                                 -0-            -0-            -0-            -0-            -0-

Capital Stock                           28,993,931     35,737,563     41,800,156     41,800,156     44,153,011

Accumulated Deficit                    (21,018,981)   (25,499,114)   (28,771,296)   (31,850,511)   (35,415,660)

Total Stockholders' Equity            $  8,255,910   $  9,468,280     10,823,825      8,523,149      8,504,942
</TABLE>



    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS

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

OVERVIEW

     We are an Australian-based biopharmaceutical company committed to the
discovery, development and commercialization of small molecule therapeutics for
the treatment of cancer and other serious diseases.  We currently have two
cancer product candidates in development, both of which have been in-licensed by
us.  PI-88, our lead oncology product candidate, is in two Phase I clinical
trials in the U.S. as a single agent therapy for solid tumor cancers and as a
combination therapy with the chemotherapy drug docetaxel, or Taxotere(R).  In
August 2003, we completed an Australian multi-center Phase II clinical trial of
PI-88 as a single agent therapy for multiple myeloma (bone marrow cancer).
PI-166, our second lead oncology product candidate, is in a Phase I clinical
trial for unresectable primary hepatocellular carcinoma.  Through our drug
discovery research program, we have 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.

     We operate a cGMP certified pilot manufacturing facility that provides
contract manufacturing services to the biotechnology industry.   The facility
has supplied PI-88 and PI-166 for all clinical trials to date.

     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. As part
of our focused strategy on drug discovery and development, we recently sold our
life sciences division to Global Science and Technology Limited, a New Zealand
company, as more fully described above in "Item 3. Key Information - Recent
Developments."


                                       55
<PAGE>
     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.

     We have incurred significant losses since our inception and as of June 30,
2003, our accumulated deficit was approximately $35.4 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.

     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 early stage 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.

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 U.S. generally accepted accounting principles.  The preparation of
these financial statements requires us to make estimates and judgments that
affect the reported amounts of revenue, assets, liabilities and expenses. We
re-evaluate our estimates on an on-going basis.  Our estimates are based on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances.  Actual results may differ from these
estimates under different assumptions or conditions.

     We believe the following are our critical accounting policies that affect
our more significant judgments and estimates used in the preparation of our
financial statements.

     REVENUE RECOGNITION

     We recognize grant income when key milestones set within cash agreements
are achieved and accepted by all parties to the grant. The agreements comprise
different phases based on product development.  Milestones are based on the
phases of each product development, for example, Phase 1, Phase 2, and Phase 3.
Revenue is not recognized prior to acceptance that the milestones have been
achieved, as collectibility is not assured until this point is reached. Once
each milestone is reached and approved, the grantor is obligated to pay us and
we have no further significant obligations in relation to that part of the
milestone.  Grant income for achievement of such milestones is agreed between
the parties in legally binding contracts.  Revenue for each milestone achieved
is fixed up front.

     We recognize interest income as it is earned and when collectibility is
reasonably assured.


                                       56
<PAGE>
     RESEARCH AND DEVELOPMENT EXPENSE

     Research and development expense, which includes personnel costs,
manufacturing expenses and administration expenses consists of expenditures for
research we conduct. We expense research and development expenses as they are
incurred.

     In addition, although we believe that our patents and underlying technology
have continuing value, the future benefits to be derived therefrom are
uncertain. We, therefore, include patent costs under research and development
expenses rather than capitalizing them.

     DISCONTINUED OPERATIONS

     On November 10, 2003, we entered into an agreement to sell our Life
Sciences business. This sale was consummated on November 28, 2003. The assets
and liabilities sold have been classified in the balance sheet as held for sale,
as an active plan to sell the business had been initiated prior to June 30, 2003
and we were engaged in marketing the business to potential buyers. The assets
and liabilities of the group have been measured at their carrying values, which
are considered to be less than their fair values. Fair value has been determined
based on the proceeds from the sale of the business. In addition, the results of
operations from our Life Sciences business are presented in the statement of
operations as discontinued operations, as the operations and cash flows of the
Life Sciences business will not have significant continuing involvement in the
operations of the business.

RESULTS OF OPERATIONS

     YEARS ENDED JUNE 30, 2003, 2002 AND 2001

     Sales and Services

     Sales increased 49.4% to $1,051,695 in fiscal 2003 from $704,044 in fiscal
2002 due to continued strong growth in contract manufacturing sector.  Sales
increased 254% from $198,331 in fiscal 2001 to $704,044 in fiscal 2002 due to
increased focus on acquiring additional contract manufacturing sales and a
strong growth within the sector.

     During the fiscal year negotiations took place regarding the trade sale of
the Life Sciences business, which was considered the best opportunity to realize
the future growth potential of the division. Due to the change in focus of the
company's activities from that of a Life Sciences company to one with a Research
& Development focus, the Life Sciences business has no longer been considered a
core business activity of the company for some time. The company strategy has
been to build-up the value of the division sufficiently to attract a trade sale
partner. A trade sale agreement was signed on November 10th 2003, subject to
certain conditions, which needed to be met by the completion date, namely
November 28th 2003. All these conditions have been met and the final settlement
was concluded on November 28th 2003.


                                       57
<PAGE>
     The consideration received was $867,432. The sale involved Inventory, Plant
and Equipment and Goodwill. Debtors and Creditors remained with the Company.
This transaction contributes a minimum of $867,432 in cash and does not have a
material effect on the net tangible assets of the company. Receivables as at 30
June 2003 will reduce by $292,190 and accounts payables by $353,563.

     The anticipated impact on future operations, based on results for fiscal
2003, is that turnover will reduce by $1,742,206 and net contribution from
Commercial Services division will reduce by approximately $288,213.

     The contribution from contract manufacturing has grown from an internal
resource for the development of PI-88 to a turnover of $1,051,695 in 2003. The
contribution in 2003 was $184,532.

     Research and Development Expenses

     Research and development expenditures were $2,435,896 for fiscal 2003
compared to $2,185,066 for fiscal 2002 and $2,374,319 for fiscal 2001. Research
and development expenses for fiscal 2003 increased 11.5% due to increase in
research and development activities, including full year costs of collaboration
agreements with Griffiths University and Australian National University, of
$155,582, and ongoing and additional clinical trials for PI-88 and PI-166 of
$364,237, offset by a savings of $410,424 on preclinical expenditure. Research
and development expenses in fiscal 2002 increased only 0.4% in A$ terms over
fiscal 2001. Due to the expiration of one of our collaboration agreements with
The John Curtin School of Medical Research at the Australian National University
in Canberra, Australia, a reduction in preclinical expenses and a delay in the
recruitment of patients for the Phase I/II clinical trial of PI-88 in the U.S.
We expect our research and development expenses to further increase by $710,395
due to the enlargement of our clinical trials program of PI-88, additional
preclinical studies of PI-166, the ongoing Phase I clinical trial of PI-166 with
hepatocellular carcinoma patients, and the further expansion of our drug
discovery program, including our drug lead in-licensing activities.

     Selling, General and Administrative Costs

     Selling, general and administrative costs were $1,958,355 for fiscal 2003
compared to $1,214,771 for fiscal 2002 and $862,031 for fiscal 2001. The 61.2%
increase in selling, general and administrative costs in fiscal 2003 was due to
$229,767 of funding for the scientific development division, responsible for the
licensing of PI-166 and associated in-licensing fees, insurance costs increased
by $54,957, foreign exchange loss of $75,420, increase in salaries $90,400 and
consulting fees of $63,142 paid for corporate initiatives. Selling, general and
administrative costs for fiscal 2002 increased 29% due to the inclusion for a
full year of a new business development position at a cost of $144,128.

     Depreciation expense

     Depreciation expense increased by $151,695 in 2003 due to depreciation on
equipment purchases made at the end of fiscal 2002. Depreciation expense in
fiscal 2002 increased marginally by $44,509.


                                       58
<PAGE>
     Other Income (Expenses)

     We realized total other income of $537,991 in fiscal 2003, $417,658 in
fiscal 2002 and $402,528 in fiscal 2001. The 28.8% increase in total other
income in fiscal 2003 was primarily due to an increase in the funding for our
drug discovery technology platform under the AusIndustry START grant, which was
partially offset by the realized loss of $159,566 on our investment in Zaxis
International Inc. and $46,327 on the sale of non-current trading securities.
Interest received reduced by $91,799 due to draw downs on funds as required by
operations. The 3.8% increase in total other income in fiscal 2002 resulted from
a realized gain on our investment in Zaxis International Inc. of $251,054, an
unrealized gain on investments of $101,899, the receipt of funding for our drug
discovery technology platform under the AusIndustry START grant, and a refund of
unexpected funds following the expiration of one of our research agreements with
The John Curtin School of Medical Research at the Australian National University
in Canberra, Australia. This was offset by the increase in our share of net
losses of Medigen Biotechnology Corporation, our collaborative partner for early
clinical trials and in which we hold a 19.9% equity stake, from $86,345 in
fiscal 2001 to $509,606 in fiscal 2002.

     Income Taxes

     As at June 30, 2003, we had net operating loss carry forwards of
approximately $35 million, resulting in a deferred tax asset of approximately
$10.3 million.  We had net operating loss carry forwards of $30.5 million as at
June 30, 2002 and $26.5 million as at June 30, 2001.  Since re-coupment of the
carried loss forward is not reasonably assured, a valuation allowance has been
established to offset in full the deferred tax asset resulting in a net deferred
asset of nil.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have financed our operations primarily through public
and private sales of equity and debt securities totaling approximately $53.0
million in net proceeds.  As at June 30, 2003, cash and cash equivalents totaled
approximately $8.0 million.

     We expended approximately $1.6 million in cash and cash equivalents during
the twelve months ended June 30, 2003 to finance our operations and research and
development activities.  Cash used for operating activities (which included
funding research and development and payments for investments) was $2.0 million
and $2.6 million for fiscal 2002 and 2001, respectively.

     In June 2003 the company raised $2.35 million through a placement of $5.7
million fully paid ordinary shares. In October 2003, the company raised $3.72
million through a placement of $3.8 million fully paid ordinary shares The
proceeds will replenish the cash resources to cover future operational
expenditure.

     We believe that securing new contracts by our contract manufacture
operations will remain a key factor for future profitability and financial
independence of our commercial services division. The sale of Life Sciences
business will impact on the turnover and net contribution for the division as
indicated above, however, the net operating cash flow will not be materially
affected. We cannot, however, be certain that we will be able to secure new
manufacturing contracts or that any new manufacturing contracts will be
commercially successful.


                                       59
<PAGE>
     Leasehold improvements to consolidate and increase office accommodations
were completed in September 2001, and we currently have no other material
commitments for capital expenditures.  However, we expect to incur substantial
future commitments in light of our oncology clinical program and our drug
discovery program.  In October 2001, we were awarded an A$3.1 million matching
funds grant from the Australian federal government under the AusIndustry START
program to fund our drug discovery research platform over the next three years.
The grant also commits us to spend an equivalent amount of our own funds on the
project.  Funds are paid quarterly in advance on the basis of 50% of estimated
total project expenditure.  In addition, we are presently contracted to fund two
Phase II multi-center clinical trials of PI-88 and one Phase Ib clinical trial
of PI-166. We expect to initiate one of these Phase II trials of PI-88 in
combination with docetaxel in a multi-center Australian study upon completion of
the Phase I trial.  These three ongoing trials of PI-88 and PI-166 are expected
to cost approximately $2.5 million over the next two years.  Our future capital
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 drug lead 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 $11.5 million at
December 2, 2003, will be adequate to satisfy the requirements of our current
and planned operations through June 2005.  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 our 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.

MARKET RISKS

     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, 2003, 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 April 2003,
we sold our investment in a listed floating rate note for $1,222,363, for a loss
on sale of $46,327, thus converting all non-liquid funds into cash and cash
equivalents.

     In fiscal 2003, approximately 60% 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, 2003, 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.


                                       60
<PAGE>
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.

TABULAR DISCLOSURE OF AGGREGATE CONTRACTUAL OBLIGATIONS

     Not applicable.


                                       61
<PAGE>
ITEM 6.     DIRECTORS, SENIOR MANAGMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

     Information about our directors, executive officers and key employees is
disclosed in "Item 4.  Information on the Company - Management."

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, 2003:


<TABLE>
<CAPTION>
                                                                                        Annual Compensation
                                                                                   -------------------------------
                                                                                   Directors'     Superannuation    Automobile
Name and Principal Position                                               Salary      Fees      Contributions (1)    Allowance
-----------------------------------------------------------------------  --------  -----------  ------------------  -----------
<S>                                                                      <C>       <C>          <C>                 <C>
Stephen Chang                                                            $116,345            -  $            9,682            -
   Chairman and Executive Director
Lewis J. Lee                                                             $154,932            -  $           12,892  $     9,928
   Executive Director and Managing Director
Prof. John R. Zalcberg                                                          -  $    23,059  $            2,075            -
   Non-Executive Director
Patrick O. Burns                                                                -  $    25,134                   -            -
   Non-Executive Director
Dr. Malvin L. Eutick                                                            -  $    23,059  $            2,075            -
   Non-Executive Director
Dr. Stanley S.C. Chang                                                          -  $    25,134                   -            -
   Non-Executive Director
Dr. Robert. H. Don                                                       $ 73,666            -  $            6,077            -
   Vice President Research and Development
Dr. Darren M. Schliebs                                                   $  3,216            -  $              289            -
   Vice President Business Development
Dr. Peter Devine                                                         $ 34,794            -  $            2,372  $     8,014
   Vice President Business Development until October 21, 2002
Milton S. McColl                                                         $ 59,839            -  $            5,151  $     3,435
   Company Secretary and Chief Financial Officer
Dr. Ross W. Stephens                                                     $ 51,347            -  $            4,467            -
   Vice President Scientific Development until May 22, 2003
Gregory M. Orders                                                        $ 60,143            -  $            4,999            -
   General Manager Contract Manufacturing
Rodney A. Stewart                                                        $ 50,779            -  $            4,209            -
   Sales and Marketing Manager (Life Sciences) until November 28, 2003
All directors and executive officers
   As a group (13 persons)                                               $605,061  $    96,386  $           54,288  $    21,377
_______________


                                       62
<PAGE>
<FN>
(1)     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.
_______________
</TABLE>

BOARD PRACTICES

     Information about our directors, their term of office and the audit and
remuneration committees of the board of directors is disclosed above in "Item 4.
Information on the Company - Management."

EMPLOYEES

     Information about our employees is disclosed above in "Item 4.  Information
on the Company - Business - Employees."

SHARE OWNERSHIP

     Information about the share ownership and option holdings of our directors
and executive officers is disclosed below in "Item 7.  Major Shareholders and
Related Party Transactions - Principal Shareholders."

OPTION PLANS

     In September 1995, our shareholders approved an employee option plan.  All
our employees (including directors) who are at least 18 years of age are
eligible to participate in the plan.  Pursuant to the plan, we will not grant
any option if, after such issuance, the number of options issued to
non-executive directors and 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.  All
grants of options to directors pursuant to the plan require the prior approval
from our shareholders.  As of December 11, 2003, there were no outstanding
options to purchase ordinary shares under the 1995 employee option plan.

     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. As of December
11, 2003, there were outstanding options under the executive 1999 directors'
option plan to purchase a total of 400,000 ordinary shares at a weighted average
exercise price of A$6.46 per share expiring on February 8, 2005.

     In October 2000, our board of directors approved an employee option plan.
In accordance with Australian law, we will not grant any option if, after such
issuance, the number of options issued to non-executive directors and
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. 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.
However, all grants of options to directors require the prior approval from our
shareholders. The plan also provides that the minimum exercise price must be
A$4.00 per share for initial grants under the plan and, thereafter, must equal
the greater of A$4.00 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 December 11, 2003, there were outstanding
options under the 2000 employee option plan to purchase an aggregate of 582,020
ordinary shares at an exercise price of A$4.00 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 232,020 ordinary shares expire on February 28,
2006.


                                       63
<PAGE>
     In October 2003, our shareholder 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 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. Pursuant to the scheme, we will not grant any options if, after such
issuance and subject to limited exceptions, the number of ordinary shares
issuable upon exercise of such options together with the number of ordinary
shares issuable upon exercise of options granted under our other employee share
schemes and the number of ordinary shares issued during the previous five years
in accordance with an employee share scheme exceeds 5% of the then total number
of outstanding ordinary shares. In accordance with Australian law, all grants of
options to directors under the scheme require the prior approval from our
shareholders. The scheme also provides that all options granted under the scheme
have an exercise price of A$2.50 per share and will expire on March 31, 2005. As
of December 11, 2003, there were no outstanding options to purchase ordinary
shares under the 2003 directors and employees incentive scheme.

EMPLOYMENT AGREEMENTS

     We entered into a service deed with Mr. Lewis Lee, our Managing Director,
in October 1999 that became effective upon the commencement of Mr. Lee's
employment with us in February 2000.  Mr. Lee is paid an annual base salary of
A$200,000 and was granted options under our 1999 executive directors' option
plan to purchase (a) 100,000 of our ordinary shares at an exercise price of
A$4.46 at any time from February 8, 2001 to February 8, 2005, (b) 200,000 of our
ordinary shares at an exercise price of A$6.24 at any time from February 8, 2002
to February 8, 2005, (c) 100,000 of our ordinary shares at an exercise price of
A$8.91 at any time from February 8, 2003 to February 8, 2005.  Either we or Mr.
Lee may terminate Mr. Lee's employment for any reason upon three months' notice.
In the event that we terminate Mr. Lee's employment without cause, Mr. Lee is
entitled to receive A$200,000 in severance if termination is prior to February
2001, and A$50,000 if termination is prior to February 2002.  Mr. Lee is not
entitled to any severance if he terminates his employment.  All options granted
to Mr. Lee under the 1999 executive directors' option plan are immediately
exercisable in the event of a change in our ownership or control.  These options
are, however, only exercisable for a period of 30 business days after
termination for any reason of Mr. Lee's employment, other than by reason of
death, permanent disability or permanent retirement, in which case, they are
exercisable for only 30 days.


                                       64
<PAGE>
ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

                             PRINCIPAL SHAREHOLDERS

     The following table sets forth as of December 11, 2003, certain information
with respect to the ownership of our outstanding ordinary shares and options to
purchase ordinary shares by:

     -    Each person who is know to us to be the beneficial owner of 5% or more
          of our ordinary shares;

     -    Each of our directors and executive officers; and

     -    All our directors and executive officers as a group.

<TABLE>
<CAPTION>
                                                          PERCENTAGE OF    NUMBER OF ORDINARY
                                       NUMBER OF ISSUED  ISSUED ORDINARY     SHARES ISSUABLE
NAME                                   ORDINARY SHARES      SHARES (1)     PURSUANT TO OPTIONS
-------------------------------------  ----------------  ----------------  -------------------
<S>                                    <C>               <C>               <C>
Medigen Biotechnology Corporation             3,250,089              9.6%                  ---
Stephen Chang (2)                               432,377                *                75,000
Lewis J. Lee (3)                                    ---              ---               450,000
Prof. John R. Zalcberg (4)                       15,849                *                75,000
Patrick O. Burns (5)                                500                *                75,000
Dr. Malvin L. Eutick (6)                            ---              ---                75,000
Dr. Stanley S.C. Chang (7)                          ---              ---                   ---
Dr. Robert H. Don (8)                               ---              ---                22,000
Dr. Darren M. Schliebs                            2,000                *                   ---
Milton S. McColl                                 24,688                *                   ---
Gregory M. Orders                                   ---              ---                   ---
All directors and executive officers
  As a group (10 persons) (9)                 3,725,503                                772,000
________________
<FN>

*     Represents less than 1%.

(1)     Based on 33,899,223 issued ordinary shares as of December 11, 2003.  Excludes ordinary
shares issuable pursuant to options granted under our 1995 employee option plan, 1999
executive directors' option plan, 2000 employee option plan and 2003 Directors and Employees
Incentive Scheme, which are more fully described above in "Item 6. Directors, Senior
Management and Employees - Option Plans."

(2)     Includes (a) 376,616 ordinary shares held of record by Mr. Stephen Chang and Mrs. Lisa
Chang Super Fund and 55,761 ordinary shares held of record by Capac International Pty. Ltd. of
which Mr. Chang is a director and a majority shareholder, and (b) 75,000 ordinary shares
issuable upon exercise of an option granted under our 2000 employee option plan exercisable at
any time on or before December 22, 2005 at an exercise price of A$4.00 per share.

(3)     Includes (a) 100,000 ordinary shares issuable upon the exercise of an option granted
under our 1999 executive directors' option plan exercisable at any time on or before February
8, 2005 at an exercise price of A$4.46 per share, (b) 200,000 ordinary shares issuable upon
the exercise of an option granted under our 1999 executive directors' option plan exercisable
at any time on or before February 8, 2005 at an exercise price of A$6.24 per share, (c)
100,000 ordinary shares issuable upon the exercise of an option granted under our 1999
executive directors' option plan exercisable at any time on or before February 8, 2005 at an
exercise price of A$8.91 per share, and (d) 50,000 ordinary shares issuable upon exercise of
an option granted under our 2000 employee option plan exercisable at any time on or before
December 22, 2005 at an exercise price of A$4.00 per share.


                                       65
<PAGE>
(4)     Includes 75,000 ordinary shares issuable upon exercise of an option granted under our
2000 employee option plan exercisable at any time on or before December 22, 2005 at an
exercise price of A$4.00 per share.

(5)     Includes 75,000 ordinary shares issuable upon exercise of an option granted under our
2000 employee option plan exercisable at any time on or before December 22, 2005 at an
exercise price of A$4.00 per share.

(6)     Includes 75,000 ordinary shares issuable upon exercise of an option granted under our
2000 employee option plan exercisable at any time on or before December 22, 2005 at an
exercise price of A$4.00 per share.

(7)     Dr. Chang is the chief executive officer of Medigen Biotechnology Corporation and
disclaims beneficial ownership of the ordinary shares held by Medigen Biotechnology
Corporation.

(8)     Includes 22,000 ordinary shares issuable upon exercise of an option granted under our
2000 employee option plan exercisable at any time on or before February 28, 2006 at an
exercise price of A$4.00 per share.

(9)     On a fully-diluted basis that takes into account 772,000 ordinary shares issuable
pursuant to options granted under either our 1999 executive directors' option plan, 2000
employee option plan or 2003 Directors and Employees Incentive Scheme, all directors and
executive officers as a group would have an interest in 3.6% of our issued and outstanding
ordinary shares.
--------------
</TABLE>



     As of November 28, 2003, a total of 3,144,187 ordinary shares (or 9.28% of
the total number of our ordinary shares then outstanding) were held by six
holders with registered addresses in the United States. We believe we have
approximately 757 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.



                           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, 2002.


                                       66
<PAGE>
     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, 2002.



ITEM 8.     FINANCIAL INFORMATION

AUDITED FINANCIAL STATEMENTS

     Our audited financial statements and related notes for our fiscal years
ended June 30, 2002 and 2003 are contained on pages F-1 through F-24 of this
annual report.

LEGAL PROCEEDINGS

     Information about legal proceeding is disclosed above in "Item 4.
Information on the Company - Business - Legal Proceedings."

DIVIDEND POLICY

     Information about our dividend policy is disclosed above in "Item 4.
Information on the Company - Business - Dividend Policy."

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.


                                       67
<PAGE>
ITEM 9.     THE OFFER AND LISTING

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 Small Cap 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 year1999                                  A$8.75  A$4.25  3,839,214
       Fiscal year2000                                    5.55    1.75  6,436,562
       Fiscal year 2001                                   2.83    1.02  9,081,542
       Fiscal year 2002                                   2.02    0.75  5,385,169
       Fiscal year 2003                                   1.25    0.50  3,310,777
     Quarterly Data:
     -------------------------------------------------
       Fourth Quarter 2001                                1.42    0.80  1,508,105
       First Quarter 2002                                 1.75    1.25  1,216,704
       Second Quarter 2002                                1.47    1.00  1,092,398
       Third Quarter 2002                                 1.25    0.96    284,203
       Fourth Quarter 2002                                1.00    0.75    359,780
       First Quarter 2003                                 0.95    0.72    348,846
       Second Quarter 2003                                1.18    0.50  2,317,948
       Third Quarter 2003                                 2.27    0.72  4,947,344
       Fourth Quarter 2003 (through November 28, 2003)    1.70    1.39  1,570,578
     Monthly Data:
     -------------------------------------------------
       June 2003                                          1.18    0.55   1,867964
       July 2003                                          1.07    0.72  1,323,405
       August 2003                                        1.75    1.01  1,515,200
       September 2003                                     2.27    1.57  2,108,739
       October 2003                                       1.70    1.50    757,699
       November 2003 (through November 28, 2003)          1.67    1.40    812,879
</TABLE>


                                       68
<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 year1999                                  $5.438  $2.563    334,300
       Fiscal year 2000                                  4.063   1.000  4,223,100
       Fiscal year 2001                                  1.688   0.563  3,112,300
       Fiscal year 2002                                  0.990   0.410    948,645
       Fiscal year 2003                                  0.880   0.300  2,478,639
     Quarterly Data:
     -------------------------------------------------
       Fourth Quarter 2001                               0.960   0.450    406,406
       First Quarter 2002                                0.800   0.600     98,929
       Second Quarter 2002                               0.759   0.550    173,805
       Third Quarter 2002                                0.650   0.530     65,014
       Fourth Quarter 2002                               0.570   0.370    209,095
       First Quarter 2003                                0.550   0.340     27,600
       Second Quarter 2003                               0.880   0.300  2,176.930
       Third Quarter 2003                                1.250   0.510  2,887,600
       Fourth Quarter 2003 (through November 28, 2003)   1.330   0.900  2,241,700
     Monthly Data:
     -------------------------------------------------
       June 2003                                         0.880   0.360  2,114,980
       July 2003                                         0.810   0.440    623,900
       August 2003                                       1.490   0.580    704,200
       September 2003                                    1.670   1.060  1,559,500
       October 2003                                      1.250    0.98    959,500
       November 2003 (through November 28, 2003)         1.330   0.900  1,282,200
</TABLE>

     On November 28, 2003, the closing sales price in U.S. Dollars of the
ordinary shares as reported on the ASX and the Nasdaq SmallCap Market was $1.54
and $1.100, respectively.


                                       69
<PAGE>
ITEM 10.     ADDITIONAL INFORMATION

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.

     GENERAL

     Our issued capital is made up of 33,899,223 ordinary shares.  All our
ordinary shares are fully paid and non-assessable.  Holders of our ordinary
shares have no preemptive or conversion rights, and there are no redemption or
sinking fund provisions applicable to our ordinary shares.

     Other than the provisions contained in the Foreign Acquisitions and
Takeovers Act 1975 as briefly described below under "Exchange Controls - Foreign
Acquisitions and Takeovers Act of 1975," there are no restrictions on overseas
residents from holding our ordinary shares.  In addition, there are no
restrictions either at law or in our constituent documents, which limit the
right of nonresident shareholders to vote at our general meetings.

     DIRECTORS

     One third of our directors (except the managing director) must retire at
each annual general meeting of shareholders. Retiring directors are eligible for
re-election at the annual general meeting at which the retirement occurs. Any
person under the age of 72 may be appointed or reappointed as a director, unless
otherwise permitted by a special resolution of our shareholders at a general
meeting. There is no share qualification for directors. At any meeting of our
directors, a director who has a direct or indirect material personal interest in
a matter may not vote on or in relation to such matter, unless otherwise
permitted by ordinary resolution of our shareholders at a general meeting.
Remuneration of non-executive directors is determined by ordinary resolution at
a general meeting of shareholders. Our constitution does not limit the borrowing
powers of the company exercisable by our directors.

     GENERAL MEETINGS OF SHAREHOLDERS

     We must convene an annual general meeting of shareholders within five
months after the end of each fiscal year and may convene other general meetings
of shareholders when necessary or at the request of a shareholder holding at
least 5% of our paid up capital carrying voting rights. The annual general
meeting of our shareholders is generally convened by our company secretary
pursuant to resolution of our board of directors.

     Ordinary resolutions, such as the election of directors, may be passed by
simple majority of the votes cast. Special resolutions, such as amendments to
our constitution, a change of our corporate name, a reduction in our share
capital or the voluntary winding-up of our company, require the affirmative vote
of at least 75% of the votes cast.


                                       70
<PAGE>
     Written notice setting out the agenda of general meetings must be given to
all shareholders of record at least 28 days prior to a general meeting. A quorum
for a general meeting is the presence of at least three shareholders in person.

     VOTING RIGHTS

     Every registered holder of our ordinary shares is entitled to attend
general meetings of our shareholders in person or by proxy and has one vote on a
show of hands unless a poll is demanded. If a poll is demanded, each registered
holder present in person or by proxy is entitled to one vote for each fully paid
ordinary share held.

     DIVIDEND RIGHTS

     Our board of directors may declare final dividends and interim dividends.
No dividend may be paid except out of our profits.

     Under Queensland law, dividends that are not claimed by the person entitled
cannot be forfeited. After six years, we must enter the amount in a register
that we will maintain. If the monies are not claimed after one year of entry on
the register, we much pay such amounts to the Queensland Public Trustee from
whom the person entitled may claim the monies. Both we and the Queensland Public
Trustee are obligated to advertise the existence of unclaimed monies in the
Queensland Government Gazette.

     LIQUIDATION RIGHTS

     On a winding-up or other return of capital, holders of our ordinary shares
have the right to the payment of any capital paid up on the ordinary shares and
are entitled to participate in any surplus assets, if any, in proportion to
their shareholdings.

     VARIATION OF RIGHTS

     The rights attaching to our ordinary shares can be varied only by a special
resolution of our shareholders and, if a distinct class of shares with different
rights is established, by both a special resolution of shareholders of the class
and our shareholders generally.

     CHANGE IN CONTROL

     Our constitution does not contain any specific provisions that would have
an effect of delaying, deferring or preventing a change in control in our
company or that would operate only with respect to a merger, acquisition or
corporate restructuring involving our company.

     DISCLOSURE OF SHAREHOLDER OWNERSHIP THRESHOLDS

     Our constitution does not contain any provision relating to the disclosure
of shareholder ownership thresholds. However, under the Australian Corporations
Act, a person who holds at least 5% of the shares of an Australian company
listed on the Australian Stock Exchange is required to give us certain
information relating to such ownership.


                                       71
<PAGE>
UNITED STATES TRANSFER AGENT AND REGISTRAR

     The United States transfer agent and registrar for our ordinary shares is
Computershare Investor Services US.

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 3.  Key Information - Recent Developments" and "Item 4.
Information on the Company - Business."

EXCHANGE CONTROLS

     In the early 1980's, 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$5,000 to the Cash Transactions Reporting Agency.


                                       72
<PAGE>
     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.

TAXATION

     The following is a summary of the current tax laws of 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 deal with all possible tax consequences relating to an investment in
the ordinary shares.  In particular, the discussion does not address estate and
gift tax issues or the tax consequences under state, local and other non-federal
systems of 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.

     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.

     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 4. Information on the Company-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 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.


                                       73
<PAGE>
     The revised double tax treaty between Australia and the United States of
America was signed on August 6, 1982. The pertinent provisions of the treaty
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.

     QUEENSLAND STAMP DUTY

     Effective July 1, 2001, ordinary shares traded on the Australian Stock
Exchange and Nasdaq will not be subject to stamp duty.



ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Information about market risk as of June 30, 2003 is disclosed above in
"Item 5.  Operating and Financial Review and Prospects."



ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.


                                       74
<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

     We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission.  Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed or submitted under the Securities
Exchange Act of 1934 is accumulated and communicated to management, including
our managing director and chief financial officer, as appropriate, to allow
timely decisions regarding required disclosure.

     Our management, under the supervision and with the participation of our
managing director and chief financial officer, have evaluated the effectiveness
of our disclosure controls and procedures as of June 30, 2003 and, based on that
evaluation, our managing director and chief financial officer have concluded
that such disclosure controls and procedures were effective as of such date.

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

     There has been no significant change in our internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.


                                       75
<PAGE>
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

     Not applicable.



ITEM 16B.     CODE OF ETHICS

     Not applicable.



ITEM 16C.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Not applicable.



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

Not applicable.


                                       76
<PAGE>
                                    PART III

ITEM 17.     FINANCIAL STATEMENTS

     Not Applicable.



<TABLE>
<CAPTION>

ITEM 18.     FINANCIAL STATEMENTS

     FINANCIAL STATEMENTS - INDEX TO FINANCIAL STATEMENTS

<S>                                                                        <C>
     Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . .  F-1
     Balance Sheets as of June 30, 2002 and 2003 . . . . . . . . . . . . . . .  F-2
     Statements of Operations for the years ended June 30, 2001, 2002 and 2003  F-3
     Statements of Changes in Stockholders' Equity for the years
       ended June 30, 2001, 2002 and 2003. . . . . . . . . . . . . . . . . . .  F-4
     Statements of Cash Flow for the years ended June 30, 2001, 2002 and 2003.  F-6
     Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . .  F-8 through
                                                                                F- 24
</TABLE>


<TABLE>
<CAPTION>

ITEM 19.     EXHIBITS

     Exhibit Number   Description
     --------------   -----------
<C>                   <S>

     4(c)(iv)         Progen Industries Limited Employee Option 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 October 31, 2003
     12.1             Certification of Lewis J. Lee under Rule 13a-14(a)
     12.2             Certification of Milton S. McColl under Rule 13a-14(a)
     13               Certification of Lewis J. Lee and Milton S. McColl under Section
                      1350 of Chapter 63 of Title 18 of the United States Code
</TABLE>


                                       77
<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 11, 2003
        -----------------


                                       78
<PAGE>


REPORT  OF  ERNST  &  YOUNG,  INDEPENDENT  AUDITORS


TO  THE  BOARD  OF  DIRECTORS  OF  PROGEN  INDUSTRIES  LIMITED


We  have audited the accompanying balance sheets of Progen Industries Limited as
of  June 30, 2002 and 2003, 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, 2003.  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 auditing standards generally accepted
in  the  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.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit  also  includes  assessing  the accounting principles used and significant
estimates  made  by  management,  as  well  as  evaluating the overall financial
statement  presentation.  We  believe that our audits provide a reasonable basis
for  our  opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all  material  respects,  the financial position of Progen Industries Limited at
June 30, 2002 and 2003, and the results of its operations and its cash flows for
each  of  the  three years in the period ended June 30, 2003, in conformity with
accounting  principles  generally  accepted  in  the  United  States.



/s/ ERNST & YOUNG
ERNST & YOUNG




Brisbane, Queensland, Australia
September 11, 2003, except for Note 16, as to
which the date is November 19, 2003


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


<TABLE>
<CAPTION>
BALANCE SHEETS                                          (U.S.  DOLLARS)
===============================================================================

                                                             JUNE 30
                                                        2002           2003
                                                         $              $
<S>                                                 <C>            <C>
ASSETS:
CURRENT ASSETS:
  Cash and cash equivalents                            6,430,377     8,001,842
  Accounts receivable                                    283,093       444,618
  Investments                                          1,264,310             -
  Inventory                                                4,650        13,568
  Prepaid expenses                                       317,928        62,607
  Assets held for sale                                   216,544       535,382
                                                    -------------  ------------

TOTAL CURRENT ASSETS                                   8,516,902     9,058,017
                                                    -------------  ------------

NON-CURRENT RECEIVABLES                                    8,457        10,007

PROPERTY AND EQUIPMENT - NET                           1,340,009     1,161,993
                                                    -------------  ------------

TOTAL ASSETS                                           9,865,368    10,230,017
                                                    =============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
  Accounts payable                                       899,810     1,138,528
  Obligations under capital leases                         8,129             -
  Accrued payroll                                        137,238       174,874
  Deferred revenue                                       297,042       395,663
  Liabilities held for sale                                    -        16,010
                                                    -------------  ------------

TOTAL CURRENT LIABILITIES                              1,342,219     1,725,075
                                                    -------------  ------------

COMMITMENTS AND CONTINGENCIES                                  -             -

STOCKHOLDERS' EQUITY:
Capital stock, ordinary shares, no par value;
24,391,869 and 30,099,223 issued and outstanding
in 2002 and 2003 respectively
                                                      41,800,156    44,153,011

Accumulated deficit                                  (31,850,511)  (35,415,660)

Accumulated other comprehensive loss                  (1,426,496)     (232,409)
                                                    -------------  ------------

TOTAL STOCKHOLDERS' EQUITY                             8,523,149     8,504,942
                                                    -------------  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             9,865,368    10,230,017
                                                    =============  ============
</TABLE>


See  accompanying  notes  to  financial  statements.


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


<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS                                                     (U.S. DOLLARS)
==================================================================================================

                                                                        YEARS ENDED
                                                                          JUNE 30
                                                             2001           2002          2003
<S>                                                      <C>            <C>           <C>
REVENUE FROM SALE OF SERVICES                                 198,331       704,044     1,051,695

COST OF SERVICES                                              156,467       200,794       424,065


COST OF OPERATIONS:

      Research and development                              2,374,319     2,185,066     2,435,896
      Depreciation                                            253,392       297,901       449,596
      Rentals on operating leases                              72,367        48,217        56,126
      Selling, general and administrative costs               862,031     1,214,771     1,958,355
      Other costs of operations                               195,806       358,589       119,010
                                                         -------------  ------------  ------------

      TOTAL COST OF OPERATIONS                              3,757,915     4,104,544     5,018,983
                                                         -------------  ------------  ------------

GROSS LOSS                                                 (3,716,051)   (3,601,294)   (4,391,353)
                                                         -------------  ------------  ------------

OTHER INCOME (EXPENSES):

      Share of net losses of associate
        accounted for using the equity method                 (86,345)     (509,606)            -
      Interest income                                         575,279       380,088       288,289
      Interest expense                                         (2,745)       (3,051)       (7,377)
      Grant income                                                  -       123,781       434,829
      Other income                                              8,637        73,493        28,143
      Unrealised (loss) gain on investments                   (92,298)      101,899             -
      Realised (loss) gain on investments                           -       251,054      (205,893)
                                                         -------------  ------------  ------------

TOTAL OTHER INCOME                                            402,528       417,658       537,991
                                                         -------------  ------------  ------------

NET LOSS FROM CONTINUING OPERATIONS                        (3,313,523)   (3,183,636)   (3,853,362)

DISCONTINUED OPERATIONS

       Income from operations of Life Sciences segment         41,341       104,421       288,213
                                                         -------------  ------------  ------------

NET LOSS                                                 $ (3,272,182)  $(3,079,215)  $(3,565,149)
                                                         =============  ============  ============

NET LOSS PER ORDINARY SHARE (BASIC AND DILUTED)

     CONTINUING OPERATIONS                               $      (0.14)  $     (0.13)  $     (0.16)
                                                         =============  ============  ============

     DISCONTINUED OPERATIONS                                     - $$             -   $      0.01
                                                         =============  ============  ============

     NET LOSS PER ORDINARY SHARE                         $      (0.14)  $     (0.13)  $     (0.15)
                                                         =============  ============  ============

WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING USED IN
THE CALCULATION OF NET LOSS PER SHARE                      23,404,883    24,391,869    24,391,869
                                                         =============  ============  ============
</TABLE>


See accompanying notes to financial statements.


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


<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY        (U.S. DOLLARS)
==========================================================================================


                                  NUMBER OF      AMOUNT      ACCUMULATED     ACCUMULATED
                                   ORDINARY   ------------     DEFICIT          OTHER
                                    SHARES                  -------------   COMPREHENSIVE
                                  ----------                                   INCOME
                                                                               (LOSS)
                                                                           ---------------
<S>                               <C>         <C>           <C>            <C>
BALANCE - JULY 1, 2000            21,641,869   35,737,563    (25,499,114)        (770,169)

Other comprehensive income:
Translation adjustment                     -            -              -       (1,424,866)
Net loss                                   -            -     (3,272,182)               -

Comprehensive loss                         -            -              -                -

Receipt of shares from associate                  594,108              -                -
Issuance of ordinary shares        2,750,000    5,756,300              -                -
Share issue costs                          -     (287,815)             -                -
                                  ----------  ------------  -------------  ---------------

BALANCE - JUNE 30, 2001           24,391,869  $41,800,156   $(28,771,296)  $   (2,195,035)


Other comprehensive income:
Translation adjustment                     -            -              -          885,498
Less: unrealised investment loss           -            -              -         (116,959)
Net loss                                   -            -     (3,079,215)               -

Comprehensive loss                         -            -              -                -

Receipt of shares from associate           -            -              -                -
Issuance of ordinary shares                -            -              -                -
Share issue costs                          -            -              -                -
                                  ----------  ------------  -------------  ---------------

BALANCE - JUNE 30, 2002           24,391,869  $41,800,156   $(31,850,511)  $   (1,426,496)
                                  ==========  ============  =============  ===============
</TABLE>


See  accompanying  notes  to  financial  statements.


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


<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)                (U.S. DOLLARS)
========================================================================================


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


Other comprehensive income:
Translation adjustment                   -            -              -        1,077,128
Reclassification of investment           -            -              -          116,959
losses included in net income
Net loss                                 -            -     (3,565,149)               -

Comprehensive loss                       -            -              -                -

Issuance of ordinary shares      5,707,354    2,436,663              -                -
Share issue costs                        -      (83,808)             -                -
                                ----------  ------------  -------------  ---------------

BALANCE - JUNE 30, 2003         30,099,223  $44,153,011   $(35,415,660)  $     (232,409)
                                ==========  ============  =============  ===============
</TABLE>


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 balances 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.


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


<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS                                                  (U.S. DOLLARS)
=====================================================================================================



                                                                           YEARS ENDED
                                                                             JUNE 30
                                                                 2001          2002          2003
<S>                                                          <C>           <C>           <C>
      OPERATING ACTIVITIES:

      Receipts from customers                                  1,520,687     2,543,590     3,520,272
      Payments to suppliers and employees                     (4,990,516)   (5,407,231)   (6,658,976)
      Proceeds from trading investments                          465,875       125,260     1,222,363
      Payments for trading investments                          (182,114)            -             -
      Interest received                                          593,447       380,218       288,289
      Interest paid (net of interest capitalized)                 (2,906)       (3,051)       (7,377)
      Other operating cash receipts                                    -       276,175         8,047
                                                             ------------  ------------  ------------

      NET CASH - OPERATING ACTIVITIES                         (2,595,527)   (2,085,039)   (1,627,382)
                                                             ------------  ------------  ------------

      INVESTING ACTIVITIES:
      Proceeds from sale of property, plant and equipment          6,227        14,151        15,724
      Proceeds from sale of available for sale investments             -       215,965             -
      Purchase of property, plant and equipment                 (106,356)     (759,435)      (98,552)
      Loan - note receivable                                     120,391             -             -
                                                             ------------  ------------  ------------

      NET CASH - INVESTING ACTIVITIES                             20,262      (529,319)      (82,828)
                                                             ------------  ------------  ------------

      FINANCING ACTIVITIES:

      Proceeds from share issues                               5,756,300             -     2,436,663
      Share issue costs                                         (287,815)            -       (83,808)
      Repayment of capital lease liabilities                     (15,716)      (20,478)       (8,431)
                                                             ------------  ------------  ------------

      NET CASH - FINANCING ACTIVITIES                          5,452,769       (20,478)    2,344,424
                                                             ------------  ------------  ------------

      EFFECT OF EXCHANGE RATE ON CASH                         (1,015,711)      673,438       937,251
                                                             ------------  ------------  ------------

      NET INCREASE IN CASH AND CASH
      EQUIVALENTS                                              1,861,793    (1,961,398)    1,571,465

      CASH AND CASH EQUIVALENTS BEGINNING OF
      YEAR                                                     6,529,982     8,391,775     6,430,377
                                                             ------------  ------------  ------------

      CASH AND CASH EQUIVALENTS END OF YEAR                  $ 8,391,775   $ 6,430,377   $ 8,001,842
                                                             ============  ============  ============
</TABLE>


See  accompanying  notes  to  financial  statements.


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


<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS                                                    (U.S. DOLLARS)
=====================================================================================================




                                                                            YEARS ENDED
                                                                              JUNE 30
                                                                   2001         2002         2003
<S>                                                            <C>           <C>          <C>
RECONCILIATION OF OPERATING LOSS AFTER INCOME TAX TO NET CASH
USED IN OPERATING ACTIVITIES:


     Operating loss after income tax                            (3,272,182)  (3,079,215)  (3,565,149)

     Depreciation                                                  263,335      309,455      457,047
     Diminution in investments                                      92,298       15,061            -
     (Gain) / loss on sale of investments                           32,968     (251,054)     205,893
     Share of associate's net losses                                86,345      509,606            -
     Foreign currency gains                                        (51,283)           -            -
     Provision for doubtful debts                                    2,375            -            -
     (Gain) / loss on sale of property, plant and equipment           (523)      10,888       (7,372)
     Other non cash items                                                -      153,359            -

     Net change in operating assets and liabilities:

     (Increase)/decrease in assets:
          Accounts receivable                                      (53,553)     113,149      (96,048)
          Investments                                              283,761      125,260    1,222,363
          Prepaid expenses                                           1,570       39,830       37,466
          Inventory                                                 22,502       20,083     (220,157)
          Non-current receivables                                        -        6,476            -

     Increase/(decrease) in liabilities:
          Accounts payable                                         (24,072)     (57,937)     299,988
          Accrued payroll                                           20,932            -       38,587
                                                               ------------  -----------  -----------

NET CASH USED IN OPERATING ACTIVITIES                           (2,595,527)  (2,085,039)  (1,627,382)
                                                               ============  ===========  ===========
</TABLE>


See  accompanying  notes  to  financial  statements.


--------------------------------------------------------------------------------
                                      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  biopharmaceutical company committed to the discovery, development
and  commercialization  of small molecule pharmaceuticals for the treatment of a
variety  of  diseases for which there is a significant demand for new therapies.
The  Company's  drug discovery efforts are focused on the development of potent,
selective  inhibitors of carbohydrate-protein interactions implicated in a range
of  different  diseases.  Progen  is  also  engaged  in the distribution of life
science  products,  contract  manufacturing  to  Australian  code  of  Good
Manufacturing  Practice  standards  and  bioprocess  technology  development and
product  manufacturing  services.

Progen's  lead  drug  candidate  is  PI-88,  a  small  molecule  semi-synthetic
oligosaccharide  (short  sugar  chain) with anti-angiogenic, anti-metastatic and
anti-thrombotic  properties,  which  is being developed as a cancer compound and
investigated  as  a cardiovascular product.  PI-88's first Phase I/II trial with
cancer  patients  is  now  under  way  in the United States at the University of
Colorado Health Sciences Center under  an  Investigational  New Drug application
filed  with  the United States Food and Drug Administration. A number of Phase I
trials  with  PI-88 have already been completed with both healthy volunteers and
cancer  patients.

The  Company  maintains  and  operates  an  approximately  11,200  square  foot
fully-integrated  pharmaceutical  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  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  that  they  present  insignificant risk of changes in value because of
changes  in  interest  rates.

INVENTORY
Inventory  is  stated  at  the  lower  of  cost or market. Costs are assigned to
individual  items  of  inventory  mainly  on  the  basis of average costs, which
approximates  the  first-in,  first-out  ("FIFO")  costing  method.

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
     Machinery and equipment under capital leases      4-10
</TABLE>


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


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE  RECOGNITION
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.

Revenues  from  services  rendered  are  recognized as the service is performed.

The  Company  receives  a  non-refundable  government  grant,  which  funds  the
Company's efforts in specific research and development projects, as discussed in
note 10. The grant provides for reimbursement of approved costs incurred.  Grant
payments  are  recognised  as  revenue as eligible expenditure is made.  Advance
payments received in excess of amounts earned are classified as deferred revenue
until  earned.

RESEARCH  AND  DEVELOPMENT  EXPENDITURE
All  research  and  development  costs  are charged as an expense when incurred.

PATENTS
Costs  incurred  in  filing,  defending  and  protecting patent applications are
expensed  as research and development as incurred. Costs to acquire patents from
third  parties  are recorded as research and development expense unless approval
has  been  obtained from the relevant governmental agency for products developed
using  the  underlying  technology  of  the  patent.

STOCK-BASED  COMPENSATION

The Company has elected to account for its stock option plan 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 to the extent that the estimated fair value of the 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.


The Company's pro forma information under SFAS 123 is as follows:

<TABLE>
<CAPTION>
                                            2001          2002          2003
<S>                                     <C>           <C>           <C>
Net Loss, as reported                   $(3,272,182)  $(3,079,215)  $(3,565,149)

Deduct: Total stock-based employee         (215,306)     (163,946)      (11,439)
compensation expense determined under
fair value based method for all awards


Pro forma net loss                      $(3,487,488)  $(3,243,161)  $(3,576,588)
                                        ============  ============  ============

Earnings per share
      Basic - as reported               $     (0.14)  $     (0.13)  $     (0.15)
      Basic - pro forma                 $     (0.15)  $     (0.13)  $     (0.15)

     Diluted - as reported              $     (0.14)  $     (0.13)  $     (0.15)
     Diluted - pro forma                $     (0.15)  $     (0.13)  $     (0.15)
</TABLE>


For  the  years  ended  30  June  2001, 2002 and 2003, there was no compensation
expense  recognised in the statement of operations under APB 25 as the estimated
fair  value  of the stock did not exceed the exercise price of the option at the
measurement  date.


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


1.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

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  antidilutive.  For  additional
disclosures  regarding  stock  options  see  Notes  11  and  12.

FOREIGN  CURRENCY  TRANSACTIONS
Foreign  currency transactions are initially translated into 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 translated 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  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.  Gains or losses resulting from such translation
are  included  as  a  component  of  stockholders'  equity.

ACCOUNTING  ESTIMATES
The  preparation  of  financial statements in conformity with generally accepted
accounting  principles accepted in the United States 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.

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 15 for further
details.

INVESTMENTS
Management  determines the appropriate classification of its investments in debt
and  equity  securities  at  the  time  of  purchase  and  re-evaluates  such
determination at each balance sheet date.  Debt securities for which the Company
does  not  have  the  intent  or  ability  to hold to maturity are classified as
available  for  sale,  along with certain of the Company's investments in equity
securities.  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  shareholders'  equity  until  realized.  Trading  securities  are
securities  bought  and  held principally for the purpose of selling them in the
near  term  and  are  reported  at  fair value, with unrealized gains and losses
included  in  operations  for  the  year.  Held-to-maturity  debt securities are
reported  at  amortized  cost.

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.


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


1.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

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 the recoverability of its long-lived assets at least annually.
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 or projected discounted cash flows from related operations.
Management  also  re-evaluates  the periods of amortization to determine whether
subsequent  events  and circumstances warrant revised estimates of useful lives.

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

NEW  ACCOUNTING  STANDARDS

In  August  2001,  the  Financial Accounting Standards Board issued SFAS No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets." The provisions
of  SFAS  No.  144  are  effective  for  financial  statements  for fiscal years
beginning  after December 15, 2001. SFAS No. 144 supersedes SFAS 121, in that it
excludes  goodwill from its impairment scope and allows for different approaches
to cash flow estimation. However SFAS No. 144 retains the fundamental provisions
of  SFAS  No.  121  for  recognition  and  measurement  of the impairment of (a)
long-lived  assets  to be held and used and (b) long-lived assets to be disposed
of other than by sale. SFAS No. 144 also supersedes the business segment concept
in  Accounting  Principles  Board  Opinion  No.  30,  "Reporting  the Results of
Operations-  Reporting  the  Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transaction," ("APB
30")  in  that  it  permits  presentation  of  a component of an entity, whether
classified  as  held  for  sale  or  disposed  of,  as a discontinued operation.
However,  SFAS  No. 144 retains the requirement of APB 30 to report discontinued
operations  separately  from  continuing  operations.

The  Company  adopted  the  provisions of SFAS No. 144 effective July 1 2002. In
accordance  with the provisions of SFAS No. 144, the assets and liabilities sold
in  connection  with  the sale of the Company's Life Sciences business have been
classified  in the balance sheet as held for sale, as an active plan to sell the
business  had  been initiated prior to June 30, 2003 and the Company was engaged
in  marketing  the  business to potential buyers. Based on the expected proceeds
from  the  sale,  the  carrying  values  of  the assets and liabilities sold are
considered  to  be  less  than  their  fair  values. Accordingly, the assets and
liabilities  sold  have been measured at their carrying values. In addition, the
results  of  operations  from  the  Life Science Business has been reported as a
discontinued operation for all years presented, as the operations and cash flows
of  the  business  will be eliminated from the ongoing operations of the company
and  the  company  will  not  have  significant  continuing  involvement  in the
operations  of  the  business.  The  adoption of SFAS No.144 did not result in a
difference  from  the  accounting  for  this  transaction  under  APB  30.

In  December  2002, the Financial Accounting Standards Board issued SFAS No. 148
"Accounting  for  Stock-Based Compensation -Transition and Disclosure." SFAS No.
148  amends  SFAS  No. 123, "Accounting for Stock-Based Compensation" to provide
alternative methods of transition for a voluntary change to the fair value based
method  of  accounting for stock-based employee compensation.  In addition, SFAS
No.  148 amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures  in  financial  statements  about  the  method  of  accounting  for
stock-based  employee compensation and the effect of the method used on reported
results.  The  provisions of SFAS No. 148 are effective for financial statements
for  fiscal  years ending after December 15, 2002. The adoption of this standard
did  not  have  a  material  impact  on  the  financial  statements.


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


1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING STANDARDS (CONTINUED)

In  January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46 (FIN46), "Consolidation of Variable Interest Entities." FIN 46 requires a
variable  interest  entity  to  be  consolidated by a company if that company is
subject  to  a  majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns or
both.  A  variable  interest  entity is a corporation, partnership, trust or any
other  legal structures used for business purposes that either (a) does not have
equity  investors  with  voting  rights  or (b) has equity investors that do not
provide sufficient financial resources for the entity to support its activities.
Currently,  entities  are  generally consolidated by an enterprise when it has a
controlling  financial  interest through ownership of a majority voting interest
in  the  entity.  The  consolidation requirements of FIN 46 apply immediately to
variable  interest  entities  created after January 31, 2003.  The consolidation
requirements  apply  to  older entities in the first fiscal year beginning after
June  15,  2003.  Certain  of the disclosure requirements apply to all financial
statements  issued  after  January  31,  2003,  regardless  of when the variable
interest  entity  was  established.

As  discussed  in  Note  5,  the  Company is party to an alliance agreement with
Medigen  Biotechnology  Corporation  (MBC).  The Company anticipates that equity
invested  in  MBC  will  be  sufficient  to  complete  the intended research and
development  activities  and  there  are no further funding commitments required
from  the Company. The Company's exposure to loss related to its interest in MBC
was  limited to the value it had recorded for receipt of a 19.9% equity interest
in MBC, which has already been charged to expense. As part of the agreement, MBC
will  be  entitled  to  receive  15%  of  Progen's  future  PI-88  revenues.

The Company is currently evaluating the effects of the issuance of FIN 46 on the
accounting  for  its  ownership  interest  in  MBC.


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.     INVESTMENTS

<TABLE>
<CAPTION>
                                                                    JUNE 30
                                                            ------------------------
                                                               2002         2003
<S>                                                         <C>          <C>
Available for sale securities:
Zaxis International Inc - at cost  (i)                      $  166,879   $  166,879
Realised loss on investment                                   (125,798)   ( 166,879)
                                                            -----------  -----------
                                                                41,081            -

Trading securities:
 Suncorp-Metway Floating Rate Capital Notes - at cost (ii)   1,409,250            -
Unrealised loss on investment                                 (186,021)           -
                                                            -----------  -----------
                                                             1,223,229            -

                                                            -----------  -----------
                                                            $1,264,310            -
                                                            ===========  ===========
</TABLE>


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


3.      INVESTMENTS  (CONTINUED)

(i)  At  June  30,  2003  the investment in Zaxis International Inc ("Zaxis") is
comprised  of  common  shares. Zaxis is a company based in Cleveland, Ohio whose
principal activity is the manufacture and sale of electrophoresis gels.  At June
30,  2003  the  Company  holds  587,645  (2002:  587,645)  shares  in  Zaxis.

Progen  had  also invested a total of $790,572 in Zaxis convertible notes, which
bore  interest at 9.5 percent per annum.  The notes were repayable in US dollars
on  maturity  dates  between  December  31,  1999  and August 10, 2001, however,
through  June  30,  2000  no  principal repayments or interest payments had been
made.  Based  on  an  assessment made by the directors, these notes were written
down  to  zero  in  2000.  The write down in the investment was considered other
than  temporary  and  accordingly  was  recognized as a loss in the statement of
operations.

During  2001,  there were no realised or unrealised losses on available for sale
securities.

During  the  year  ended  June  30, 2002, the Company reached an agreement  with
Zaxis  whereby, in return for the convertible notes held by Progen in Zaxis, the
Company  would receive $200,000 and an additional 240,741 shares in Zaxis.  As a
result  of  this  agreement, the Company recorded a realized gain of $245,289 in
2002. During the financial year ended June 30, 2002, the Company also sold 5,000
shares of Zaxis common stock. The proceeds received and gain recognized were not
significant.

At June 30, 2002, the directors assessed the carrying value of the common shares
in Zaxis based on the quoted market price at year-end and, accordingly, recorded
an  unrealised  loss  of  $116,959  in  accumulated  other comprehensive income.

During  the  year ended June 30, 2003, Zaxis filed for Chapter 7 Liquidation. At
June 30, 2003, the directors assessed the carrying value of the common shares in
Zaxis  based on the quoted market price at year-end and wrote down the remaining
balance  to  nil.  The  write  down  in the investment was considered other than
temporary and, accordingly, is recognised as a realised loss in the statement of
operations,  together  with  $116,959  of  previously recorded unrealised losses
which  have been reclassified out of accumulated other comprehensive income into
earnings.  The  total  realized  loss  for  Zaxis  during  2003  is  $159,566.

(ii)  During  the  year  ended  June  30,  2003,  the Company sold its remaining
trading securities and received proceeds of $1,222,363. The loss realized on the
sale was $46,327.  During the years ended June 30 2002 and 2001, realized losses
were  $5,765  and  $nil,  respectively.

The  net unrealised holding gain / (loss) related to traded securities in  2003,
2002  and  2001  were  $nil,  $101,899  and  $(92,298)  respectively.


4.     INVENTORY

Inventory  consists  of  the  following:

<TABLE>
<CAPTION>
                                JUNE 30
                            ----------------
                             2002     2003
<S>                         <C>      <C>
Raw materials and supplies   81,458   99,467
Finished goods              129,192  431,771
                            -------  -------
                            210,650  531,238
                            =======  =======
</TABLE>


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


5.     INVESTMENTS  ACCOUNTED  FOR  USING  THE  EQUITY  METHOD

The  carrying  value of investments in associate as of June 30, 2003 and 2002 is
$nil.

Effective  May  31,  2000,  Progen  entered  into  an  agreement  with  Medigen
Biotechnology  Corporation  ('MBC'),  a  company incorporated in Taiwan, for the
development  of  a  strategic  alliance  for  the commercialisation of PI-88 (an
oligosaccharide  based  compound  which  inhibits  heparanase, extravasation and
thrombosis)  (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  and  will  be  in  areas  where  MBC  has significant experience and
expertise.  MBC  will  be  entitled  to  receive  15%  of  Progen's future PI-88
revenues  generated from cancer and cardiovascular diseases subject to the joint
venture  alliance.  In  addition, MBC has the right to negotiate the funding and
conduct  of  several  Phase  III  clinical trials.  Progen will supply PI-88 and
technical  expertise  for  the  designated  trials  to  be undertaken by MBC and
provide technical know-how to assist MBC 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.  The Company also
authorised  issue  to  Everspring Industry Co (an associate of MBC) an option to
purchase  1  million  ordinary shares exercisable on or before December 31, 2002
with an exercise price of A$8.00 per share.  On  December 31, 2002 the 1 million
options  expired. During the period on issue, none of the 1 million options were
exercised.  The  funds  raised  from the issue of these shares are to be used to
expand  or  accelerate  the  development of PI-88 for the potential treatment of
cancer  and  cardiovascular  disease.  In addition, under the Alliance Agreement
Progen  was issued 19.9% equity in MBC at no cost and with certain anti-dilution
rights.

Stanley  Chang,  a  director  of  Progen,  was  also  a  director  of  Medigen
Biotechnology  Company  during  the  years  ended  June 30, 2001, 2002 and 2003.

In  April  2001,  MBC  sold  shares  of its stock to a third-party for $0.29 per
share.  As  a  result of the anti-dilution provision granted to the Company, MBC
issued  2,039,700  additional  shares with a value of $0.29 per share to Progen.
The  issuance of these additional shares was recorded as an increase in Progen's
investment  in  MBC  and  an  increase  in  shareholders'  equity.


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


5.         INVESTMENTS  ACCOUNTED  FOR  USING  THE  EQUITY  METHOD
            (CONTINUED)

<TABLE>
<CAPTION>
SUMMARY OF ASSOCIATE'S FINANCIAL INFORMATION                                         JUNE  30
                                                                             --------------------------
                                                                                 2002          2003
<S>                                                                          <C>           <C>
 ASSOCIATE'S STATEMENT OF OPERATIONS
- net sales                                                                  $         -   $         -
- operating losses before income tax                                          (3,414,045)   (3,090,209)
- income tax attributable to operating profits                                         -             -
                                                                             ------------  ------------
- operating losses after income tax                                          $(3,414,045)  $(3,090,209)
                                                                             ============  ============

ASSOCIATE'S BALANCE SHEET
- current assets                                                             $ 9,358,045   $ 5,459,732
                                                                             ============  ============
- non-current assets                                                         $ 1,838,472   $   444,606
                                                                             ============  ============
- current liabilities                                                        $   478,654   $   129,993
                                                                             ============  ============
- non-current liabilities                                                    $    40,617   $    68,587
                                                                             ============  ============
        Net Assets                                                           $10,677,246   $ 5,705,758
                                                                             ============  ============

CARRYING AMOUNT OF INVESTMENT IN ASSOCIATE
Balance at the beginning of the financial year                               $   509,606   $         -
Issue of shares in associate                                                           -             -
Share of associate's net profits for the financial year                         (509,606)            -
                                                                             ------------  ------------
Carrying amount of investment in associate at the end of the financial year  $         -   $         -
                                                                             ============  ============
</TABLE>


Progen  has a 19.9% equity interest in MBC, which it received under the alliance
agreement  described  above.  Based  on  the  lack  of fair value evidence,  the
initial  investment  was  recorded at  no value by Progen  This accounts for the
difference  between  the underlying equity in net assets and the amount at which
the  investment  in  associate  is  carried.


6.      PROPERTY  AND  EQUIPMENT

Property  and  equipment  consists  of  the  following:

<TABLE>
<CAPTION>
                                                            JUNE 30
                                                   --------------------------
                                                       2002          2003
<S>                                                <C>           <C>
     Machinery and equipment                         2,416,353     2,922,605
     Furniture and fixtures                            225,266       298,315
     Leasehold improvements                            295,187       351,426
     Machinery and equipment under capital leases       18,960             -
                                                   ------------  ------------
                                                     2,955,766     3,572,346
     Accumulated depreciation and amortization      (1,605,213)   (2,392,641)
                                                   ------------  ------------
     PROPERTY AND EQUIPMENT, NET                   $ 1,350,553   $ 1,179,705
                                                   ============  ============
</TABLE>

Depreciation  expense related to property and equipment (including machinery and
equipment under capital leases) amounted to $263,335, $309,431, and $457,047 for
the  years  ended  June  30,  2001,  2002,  and  2003  respectively.


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


7.      CAPITAL  LEASES

The  Company  was  the lessee of equipment under capital leases which expired in
2003.  The assets and liabilities under capital leases are recorded at the lower
of  the  present  value  of  the minimum lease payments or the fair value of the
assets.  The assets are depreciated over the lesser of their related lease terms
or  their  estimated  productive  lives.  Amortization  of  assets under capital
leases  is  included  in  depreciation  expense.

Following is a summary of property held under capital leases as of June 30, 2002
and  2003  respectively:

<TABLE>
<CAPTION>
                                     JUNE 30
                                 ---------------
                                   2002    2003
<S>                              <C>       <C>
Machinery and equipment          $18,960   $   -
Less:  accumulated depreciation   (7,999)      -
                                 --------  -----
TOTALS                           $10,961   $   -
                                 ========  =====
</TABLE>


8.      INCOME  TAXES

At  June  30,  2003  the  Company  has  net  operating  loss  carryforwards  of
approximately  $34,506,411  (2002:  $30,490,892), which are indefinite as to use
under  Australian  tax law.  As a result of these carryforwards, the Company has
deferred  tax  assets  of  approximately  $10,351,923  at  June  30, 2003 (2002:
$9,147,268).  Because  of the Company's lack of earnings history, realization of
these  deferred tax assets is not reasonably assured; therefore the deferred tax
assets  have  been  fully  offset  by  a  valuation allowance of $10,351,923 and
$9,147,268  at  June  30,  2003  and  2002,  respectively.

The  change  in  the  valuation  allowance  and  the corresponding change in the
deferred  tax  asset  amounted  to  $1,204,655, $1,206,262 and $301,978, for the
years  ended  June  30,  2003,  2002  and  2001  respectively.

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.


9.      RELATED  PARTY  DISCLOSURES

There were no transactions with related parties or other related entities during
the  2003  financial  year.

During  the 2002 financial year Progen Industries Limited sold product totalling
$20,178  to  Starrate  Holdings  Pty  Ltd.  Dr  Malvin Eutick, a director of the
Company,  is  also  a  director  of  Starrate  Holdings  Pty  Ltd.

During  the  2001  financial  year  Progen Industries Limited purchased services
totalling  $4,962  from  Bioquest  Limited.  Dr Malvin Eutick, a director of the
Company,  is  also  a  director  of  Bioquest  Limited.


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


10.      COMMITMENTS  AND  CONTINGENCIES

ANUTECH  PTY.  LTD.

In  October  1993,  the Company entered into an agreement with ANUTECH Pty. Ltd.
and  other  parties  to provide research funding, subject to certain conditions,
for  novel  Anti-cancer  and  Anti-inflammatory drugs.  Progen agreed to provide
funds totalling $4.1 million over a five-year period, for research purposes.  In
exchange,  Progen  was  issued  an  exclusive  world-wide license/sub-license to
manufacture,  market  and  distribute  products  arising out of the intellectual
property  developed  from this research.  In May 1999, Progen entered into a new
agreement  with  ANUTECH Pty. Ltd. to fund further research projects relating to
the synthesis of heparinoid mimetics and development of the heparanase enzyme as
a  diagnostic  and therapeutic target.  Progen agreed to provide funds totalling
approximately  $1.3  million over a three-year period for research purposes.  In
exchange,  Progen  was  issued  an  exclusive  world-wide licence/sub-licence to
manufacture,  market  and  distribute  products  arising out of the intellectual
property developed from this research.  As at June 30, 2003, no revenue has been
earned  from  these  agreements.  During  2003,  2002  and 2001, Progen incurred
expenses  of  $nil,  $117,340  and $350,966 respectively under these agreements.

GRIFFITH  UNIVERSITY

In March 2001, Progen entered into an agreement with Griffith University to fund
research  aimed at designing specific inhibitors of the enzyme heparanase. Based
on  previous  research  by  Progen,  it is proposed that these inhibitors may be
effective  as  drug  leads for treatment of anti-inflammatory disease. Professor
Mark  von  Itzstein will lead this program at Griffith University and Progen has
agreed  to  provide  funds  totalling  $0.8  million over a three year period to
support  the  study.  During  2003,  2002  and 2001, Progen incurred expenses of
$289,273,  $209,658  and  $52,798  respectively  under  this  agreement.

CLINICAL  TRIALS

In  addition to the PI-88 melanoma Phase I/II study initiated in Colorado in the
United  States  of  America,  Progen  has completed a Phase II trial in patients
suffering advanced multiple myeloma and a PI-88 Phase I clinical trial exploring
the  combination of PI-88 with chemotherapy (Taxotere(R)). Medigen Biotechnology
Corporation  is  also  embarking  on  a  PI-88  Phase  II clinical trial in post
resection  liver  cancer,  to  be  conducted  in Taiwan and funded by Medigen. A
PI-166  Phase  I  clinical trial was also initiated by Progen in January 2003 in
unresectable  liver  cancer.  Progen's  total estimated commitment for the PI-88
trials  is  $355,504  and PI-166 trials is $163,243. During 2003, 2002 and 2001,
Progen  incurred expenses of $172,897, $69,620 and $nil respectively under these
agreements.  Progen  had  exclusive  worldwide  licenses  relating  to PI-88 and
PI-166.  In  connection  with  these  licenses,  the  Company is required to pay
royalties  on  sales  as  well  as  any  fees  received  from  sub licensing the
technology. As at 30 June 2003, no sales have been made.

R&D  START  GRANT

In  September 2001, Progen was awarded a $2.0 million grant under the Australian
Federal Government's AusIndustry R&D START program (R&D START) to develop a drug
discovery  research  platform  based  on  the  role of carbohydrates in disease.
Progen  will  use  this  technology  platform  to  discover new compounds for an
in-house  clinical  trials  program  and  /  or  to form partnerships with other
pharmaceutical and biotechnology companies at then drug discovery phase. The new
R&D  START grant project, will build on existing Intellectual Property developed
through  collaborative research with the Australian National University. It will
be  supported  by a $2.3 million commitment from the Company over the three-year
span  of  the  grant. During 2003 and 2002, Progen incurred expenses of $790,912
and  $207,461  respectively  under  this agreement, and received grant income of
$434,829  and  $123,781  respectively,  which  is  included  in the Statement of
Operations.  Progen  has  an  exclusive  worldwide  license  relating  to  this
Intellectual  Property. In connection with this license, the Company is required
to  pay  royalties  on sales as well as any fees received from sub licensing the
technology. As at 30 June 2003, no sales have been made.


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


10.      COMMITMENTS  AND  CONTINGENCIES  (CONTINUED)

The  total  remaining  commitment  payable  in  respect  of all of the Company's
agreements  at  June  30,  2003  are  as  follows:

     YEAR ENDING
     JUNE 30

       2004                                $  1,954,603
       2005                                $    583,397
                                           ------------
                                           $  2,538,000
                                           ============


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

OPERATING  LEASES

The operating lease commitments include the rental of office premises. The lease
agreement  expired  in  March  2002 at which time the Company signed a new lease
agreement  extending the current lease to March 2004 with an option to renew for
a  further  3  year  period.

During  the  fiscal  years  ended June 30, 2003, 2002 and 2001, rent expense was
$56,126,  $48,138,  and  $72,367  respectively.

Total  minimum  annual rentals under non-cancellable operating leases subsequent
to  June  30,  2003  are  as  follows:

      YEAR ENDING
        JUNE 30

        2004                                $     48,367
                                            ============


CAPITAL  LEASES

Information relating to future commitments of capital leases is detailed in Note
7.


11.      STOCK  OPTION  PLANS

All  options  are  granted  in  stock  trading  on the Australian Stock Exchange
('ASX')  and  are  exercisable  only in Australian dollars, therefore amounts in
this  note  are  expressed  in  Australian  dollars  vs  U.S.  dollars.

EMPLOYEE  OPTION  PLAN

In  September  1995,  the Company shareholders approved an employee option plan.
All  employees  (including  directors)  who  are  at  least  18 years of age are
eligible  to  participate in the plan.  Pursuant to the plan, no options will be
granted  if,  after such issuance, the number of options issued to non-executive
directors  and 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.  The Board of Directors
may  impose any conditions upon the vesting or exercise of options granted under
the  plan.  All  grants of options to directors pursuant to the plan require the
prior  approval  from  the  shareholders.

There were no options granted under this plan for the years ended June 30, 2003,
2002  or  2001.  For  the year ended June 30, 1999, 400,000 options were granted
under this plan.  Each option is exercisable into one ordinary share at any time
on  or before the fifth anniversary of the date of the grant at a fixed price of
A$5.34.

As  of 30 June 2003 there are 186,200 options outstanding under the plan with an
expiration  date  of  30  November  2003.


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


11.      STOCK  OPTION  PLANS  (CONTINUED)

NEW  EMPLOYEE  OPTION  PLAN

The  Progen Board of Directors adopted a new employee option plan on October 24,
2000.  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 and thereafter a minimum exercise price of the greater
of  A$4.00  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,
2003.

During  2002,  22,000  options were granted to employees under this plan with an
exercise  price  of A$4.00, the options vest on the first anniversary of date of
grant  and  expire  on  the  fifth  anniversary  of  the  date  of  grant.

During  2001,  378,020 options were granted to employees under this plan with an
exercise  price  of A$4.00, the options vest on the first anniversary of date of
grant  and  expire  on  the  fifth  anniversary  of  the  date  of  grant.

During  2001, 350,000 options were granted to non-executive directors under this
plan with an exercise price of A$4.00, the options vest on the first anniversary
of  date  of  grant  and  expire  on the fifth anniversary of the date of grant.

For future options issued under the new employee option plan, the exercise price
is  to be the greater of $4.00 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.  If no shares are sold on the ASX during that
period,  the  exercise  price  per  share  will be equal to the weighted average
market  price of the shares sold on the ASX on the last trading day on which the
shares  were  traded.

No  option will be issued under the new employee option plan if, after the issue
of  the  option,  the  number which is equal to the sum of all options issued to
non-executive  directors  and  non-executive  employees  pursuant  to the plans'
during  the previous 5 years and which have been exercised or remain unexercised
(but  which  have not terminated or expired) would exceed 5% of the total number
of  shares  on  issue  at  that  time.



EXECUTIVE  DIRECTORS'  OPTION  PLAN

In  November  1999,  the  Company 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 previous abovementioned first employee
option  plan.

The exercise price of the options will be 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
<C>                                                           <S>

100,000 options exercisable no earlier than February 8, 2001       A$4.46
200,000 options exercisable no earlier than February 8, 2002       A$6.24
100,000 options exercisable no earlier than February 8, 2003       A$8.91
</TABLE>


The  400,000  options  above  expire  on  8  February  2005.


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


11.      STOCK  OPTION  PLANS  (CONTINUED)

Information with respect to the number of options granted under the option plans
is  as  follows:

<TABLE>
<CAPTION>
                                     NUMBER OF        WEIGHTED        NUMBER OF        WEIGHTED
                                      OPTIONS     AVERAGE EXERCISE     OPTIONS     AVERAGE EXERCISE
                                    OUTSTANDING       PRICE (I)      EXERCISABLE      PRICE (I)
<S>                                 <C>           <C>                <C>          <C>
Options outstanding, July 1, 2000       813,953              A$5.32      413,953             A$5.32
- granted                               728,020              A$4.00
- forfeited                            (108,458)             A$5.32
- expired                                     -                   -
- exercised                                   -                   -
                                    ------------
Options outstanding, June 30, 2001    1,433,515              A$4.97      705,495             A$5.10
                                    ------------
- granted                                22,000              A$4.00
- forfeited                            (214,745)             A$4.73
- expired                                     -                   -
- exercised                                   -                   -
                                    ------------
Options outstanding, June 30, 2002    1,240,770              A$4.97    1,118,770             A$4.68
                                    ------------
- granted                                     -                   -
- forfeited                             (22,000)             A$4.18
- expired                               (50,550)                  -
- exercised                                   -                   -
                                    ------------
Options outstanding, June 30, 2003    1,168,220              A$5.06    1,168,220               $5.06
                                    ------------
<FN>

(i)  Options  were  issued  in  Australian  dollars  (the  functional  currency  for  the  Company).
</TABLE>


There were no options granted during 2003. The equivalent market price per share
at grant date for options granted during 2002 was A$1.20 (2001: A$1.30- A$1.73).


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


11.      STOCK  OPTION  PLANS  (CONTINUED)

The following table summarises information about options outstanding at June 30,
2003:

<TABLE>
<CAPTION>
       EXERCISE PRICE (i)   OPTIONS       OUTSTANDING              EXERCISABLE

                                       WEIGHTED     WEIGHTED    NUMBER OF  WEIGHTED
                                        AVERAGE      AVERAGE     OPTIONS   AVERAGE
                                       REMAINING    EXERCISE               EXERCISE
                                      CONTRACTUAL     PRICE                 PRICE
                                         LIFE
<S>                        <C>        <C>          <C>          <C>        <C>
                   A$5.34    186,200    0.4 years  A$5.34         186,200  A$5.34
                   A$4.46    100,000    1.6 years  A$4.46         100,000  A$4.46
                   A$6.24    200,000    1.6 years  A$6.24         200,000  A$6.24
                   A$8.91    100,000    1.6 years  A$8.91         100,000  A$8.91
                   A$4.00    350,000    2.5 years  A$4.00         350,000  A$4.00
                   A$4.00    232,020    2.7 years  A$4.00         232,020  A$4.00
                           ---------                            ---------
                   Total   1,168,220                            1,168,220
                           =========                            =========
<FN>
(i)  Options  were  issued  in  Australian dollars (the functional currency for the
Company).
</TABLE>


In September 2002, 22,000 options were forfeited due to the employee leaving the
Company.

OTHER  INFORMATION

The Company has adopted the disclosure only alternative of SFAS 123 for employee
options  granted  which states that stock based compensation must be recorded at
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 $11,439
for the year ended June 30, 2003 (2002: $163,946, 2001: $215,306).

The  fair  value of options granted in 2002, and 2001 were estimated at the date
of grant using the Black Scholes method, assuming no dividends, an expected life
of 3 years, volatility of 60.7% for 2002 and 76.8% for 2001 and a risk free rate
of 5.24% in 2002 and 5.25% in 2001. The Black-Scholes option valuation model was
developed  for use in estimating the fair value of 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 do 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  $.45  in  2001and  $  .16  in  2002.


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


12.      SUMMARY  OF  OTHER  STOCK  OPTIONS

Other  than  those  disclosed  below  and  in  Note  11,  there  were no options
outstanding  as  at  June  30,  2003.

In  connection with the sale of shares to MBC as more fully described in Note 5,
on November 6, 2000, the Company granted to Everspring Industry Co (an affiliate
of  MBC),  an  option  to  purchase 1 million ordinary shares, exercisable on or
before  December  31,  2002  with  an  exercise  price of A$8.00 per share.  The
equivalent  market  price  per  share  at  grant  date for options issued during
2001was  A$2.80.  On  December  31,  2002  the  1  million  options  granted  to
Everspring  Industry  Company  expired and are not included in the total options
outstanding  at  June  30,  2003.


13.      SEGMENT  DISCLOSURES

The  Company  is  organized  based  on the products and services that it offers.
Under  this  organizational  structure, there are three reportable segments: (i)
research  and development, (ii) life science and (iii) contract manufacture. The
research  and  development  segment  is focussed on the development of PI-88 and
PI-166.  PI-88  is  the  Company's lead cancer product candidate, which is being
developed  as  a  small  molecule inhibitor of both angiogenesis and metastasis.
PI-166  is  a  novel  combination  of  a  small  organic molecule and a regional
delivery  mechanism,  with  special  suitability for clinical application in the
treatment  of  hepatoma.  The  aim  of  these products is to develop a non-toxic
therapy applicable to a broad range of solid tumors as well as haematological or
non-solid  cancers  (tumors  of the blood) such as multiple myeloma (bone marrow
cancer)  and  leukaemia.  The life science segment encompasses the sales of life
science  research  products  manufactured  by a number of U.S. and European life
sciences  companies as well as the Company's own range of fine chemical products
that are sold under the Progen brand name.  The Company's life sciences products
are  marketed  to research and diagnostic laboratories in private and government
institutions, including universities, hospitals and biotechnology companies. 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."


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


13.      SEGMENT  DISCLOSURES  (CONTINUED)

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.


<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 2003
                                 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

Segment loss                      (3,226,808)      (184,532)   (3,411,340)
Interest income                            -              -       288,289
Interest expense                           -              -        (7,377)
Other non-segment revenues                                        462,972
Other non-segment expenses                                     (1,185,906)
                                                              ------------
Consolidated net loss 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
                                                              ============


YEAR ENDED JUNE 30, 2002
                                 RESEARCH &      CONTRACT        TOTAL
                                 DEVELOPMENT    MANUFACTURE

Sales to external customers     $          -   $    704,044   $   704,044
Grant Income                         123,781              -       123,781
Depreciation and amortization         88,049        209,640       297,689

Segment profit/(loss)             (2,446,829)       366,626    (2,080,203)
Interest income                            -              -       380,088
Interest expense                           -              -        (3,051)
Other non-segment revenues                                        550,227
Other non-segment expenses                                     (2,030,697)
                                                              ------------
Consolidated loss from
continuing operations                                         $(3,183,636)
                                                              ============

Total assets for reportable
segments                             474,407        822,623   $ 1,297,030
Other assets                                                    8,568,338
Consolidated assets                                           $ 9,865,368
                                                              ============

Purchase of long lived assets        366,346        393,075   $   759,421
                                =============  =============  ============


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


13.      SEGMENT  DISCLOSURES  (CONTINUED)

YEAR ENDED JUNE 30, 2001

                                 RESEARCH &      CONTRACT        TOTAL
                                 DEVELOPMENT    MANUFACTURE

Sales to external customers     $          -   $    198,331   $   198,331
Depreciation and amortization         71,169        182,108       253,277

Segment profit/(loss)             (2,374,319)        72,215    (2,302,104)
Interest income                            -              -       575,279
Interest expense                           -              -        (2,745)
Other non-segment revenues                                          8,637
Other non-segment expenses                                     (1,592,590)
                                                              ------------
Consolidated net loss from
continuing operations                                         $(3,313,523)
                                                              ============

Total assets for reportable
segments                             163,269        727,910   $   891,179
Other assets                                                   10,758,557
Consolidated assets                                           $11,649,736
                                                              ============

Purchase of long lived assets              -        106,230       106,230
                                =============  =============  ============
</TABLE>


There  were  no  inter-segment  sales.

In 2003,  $480,666 of quality assurance and facility maintenance costs have been
allocated  to  the Contract Manufacture division.  In 2001 and 2002, these costs
were  included  in  other  non-segment  expenses  as comparable records were not
maintained  by  the  company  allowing  consistent  allocations.

In  2001,  2002  and 2003, the Company operated in one geographical segment with
all  of  its  assets  and operations located in Australia. During 2001, 2002 and
2003,  the  Company's  revenues  were  primarily  derived  in  Australia.


14.     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, 2000         $   (770,169)              -   $  (770,169)


Currency translation adjustment    (1,424,866)              -    (1,424,866)
                                 -------------  --------------  ------------

Balance at June 30, 2001         $ (2,195,035)              -   $(2,195,035)

Unrealised loss                                      (116,959)     (116,959)
Currency translation adjustment       885,498               -       885,498
                                 -------------  --------------  ------------

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


Currency translation adjustment     1,077,128         116,959     1,194,087
                                 -------------  --------------  ------------

Balance at June 30, 2003         $   (232,409)              -   $  (232,409)
                                 =============  ==============  ============
</TABLE>


--------------------------------------------------------------------------------
                                      F-24
<PAGE>
PROGEN  INDUSTRIES  LIMITED


15.     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

<TABLE>
<CAPTION>
                                                      JUNE 30,
                                                      --------
                                     2003        2003         2002        2002
                                   Carrying    Estimated    Carrying    Estimated
                                    Amount    fair value     Amount    fair value
                                              -----------              -----------
<S>                               <C>         <C>          <C>         <C>
ASSETS
Cash and cash equivalents          $8,001,842  $ 8,001,842  $6,430,377  $ 6,430,377
Accounts receivable                   444,618      444,618     283,093      283,093
Investments                                 -            -   1,264,310    1,264,310

LIABILITIES
Accounts payable                    1,138,528    1,138,528     899,810      899,810
</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.


16.     SUBSEQUENT  EVENTS

In July 2003, Progen signed an agreement to fund the company's insurance premium
for the year end June 30, 2004. The terms of the agreement state that the amount
funded  is  to  be  repaid in ten equal instalments of $38,059 including finance
charges.  The first payment was made in July 2003 and the interest rate is 3.15%
per  annum.

On  31 October 2003, the shareholders approved a  $3.72 million placement of 3.8
million  fully  paid  ordinary  shares  with Australian institutional investors.

On  10  November  2003,  Progen  signed  an agreement to sell the assets used in
connection with its Life Sciences business for proceeds of  $867,432 (subject to
an  adjustment  for inventory on hand as of the completion date).   The carrying
values  of  the assets and liabilities sold as reflected in the balance sheet as
of  June  30,  2003  are  as  follows:

<TABLE>
<CAPTION>
<S>                                           <C>
Inventory                                     $517,670
Property Plant and Equipment                    17,712
Employee Entitlements                           16,010
</TABLE>

The  results  of  operations for the Life Sciences business have been separately
stated  as  discontinued operations in the Statement of Operations for the years
ended  June  30,  2001,  2002  and  2003.  Total  revenues for the Life Sciences
business  were $1,075,479, $1,313,670 and $1,742,206 for the years ended June 30
2001, 2002 and 2003, respectively.

On  19 November 2003, Progen filed a prospectus to issue 4,512,402 bonus options
to existing shareholders. One bonus option will be issued for every eight shares
held.  Each  bonus  option  is  exercisable  into one share of Progen's ordinary
shares.  The options are exercisable at $2.50 a share and expire on 31 May 2005.


--------------------------------------------------------------------------------
                                      F-25
<PAGE>