SEC 1852 (06-2001) Persons who potentially are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

o 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 __March 31, 2005_______________________

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ________________

Commission file number _ 0-29108____________________________

___________________Biotech Holdings Ltd.__________________________________

(Exact name of Registrant as specified in its charter)

___________________Biotech Holdings Ltd.__________________________________

(Translation of Registrant^s name into English)

______________________Alberta, Canada______________________________________

(Jurisdiction of incorporation or organization)

#160 - 3751 Shell Road

Richmond, British Columbia, Canada, V6X 2W2

______________________________________________________________________

(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_________________ _______________________________

__________________________________ _______________________________

Securities registered or to be registered pursuant to Section 12(g) of the Act.

_________NONE____________________________________________________

(Title of Class)

__________________________________________________________________

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

___________________Common Shares Without Par Value________________

(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.

90,134,310 Common Shares Without Par Value

Indicate by check mark 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.

x Yes

o No

Indicate by check mark which financial statement item the registrant has elected to follow.

x Item 17

o Item 18

(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.

p Yes

p No

PART I

Item 1. Identity of Directors, Senior Management and Advisers

This information is not required to be provided because it is an annual report filing.

Item 2. Offer Statistics and Expected Timetable

This information is not required to be provided because it is an annual report filing.

Item 3. Key Information

The table in this section sets forth selected consolidated financial data. Such data, for and as of the end of the five previous fiscal periods, are derived from the consolidated financial statements of Biotech Holdings Ltd. (the "Company"). The selected financial data are expressed in Canadian dollars.

The selected financial data should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto contained elsewhere in the Annual Report.

Critical Accounting Policies

The Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP"). Differences with generally accepted accounting principles in the United States ("U.S. GAAP") are set forth in Note 19 to the Consolidated Financial Statements of the Company (Item 17 of this Form 20F). Some accounting policies have a significant impact on the amounts reported in these financial statements. The Consolidated Financial Statements include a section describing the Company^s significant accounting policies. Note that the preparation of this Form 20-F requires the Company to make estimates and assumptions that:

• may affect the reported amount of assets and liabilities;
• may affect the contingent assets and liabilities as disclosed at the date of the financial statements and;
• may affect the reported amounts of revenues and expenses during the reported period.

There can be no assurance that actual results will not differ from those estimates.

The Company believes, as explained below, that our most critical accounting policies comprise the following:

Revenue Recognition

The Company^s principal revenue will be derived from its Type II diabetes drug currently distributed in Mexico. The Company has entered into agreements with two non-related companies in Mexico. The first company manufactures and packages the tablets from a pre-mix of active ingredients manufactured by the Company in Canada. The second company markets the drug.

Revenue from product sales will be recognized upon the delivery of the product to a retailer or final consumer when persuasive evidence of an arrangement exists, the price is fixed or determinable and collection is reasonably assured and the Company has no future performance obligations under any licensing agreement or other significant post-delivery obligations.

To March 31, 2005, the Company had not generated revenue from its Type II diabetes drug.

Patent Interests

Patent Interests consist of the cost of purchasing the Company^s rights to manufacture and sell DIAB II (also known under the trademarks Sucanon and Glucanin), a Type II Diabetes medication developed by the Company. Management is required to use its professional judgement in determining whether Patent Interests have suffered permanent impairments in value and whether carrying costs are recoverable. Under U.S. GAAP, writedown is necessary when carrying costs are not recoverable.

The Company^s last fiscal period ended March 31 of the current year. All fiscal periods are for the full year. The following table is a summary of certain selected financial information of the Company, in accordance with Canadian GAAP, for the Company^s most recently completed fiscal period and for the

four preceding fiscal periods of the Company:

Fiscal year ended
March 31,	2005	2004	2003	2002	2001
Revenues	$ nil	$ nil	$ 9,731	$ 49,981	$ 75,055
Loss from continuing
Operations	(1,755,128)	(1,460,669)	(1,679,020)	(1,960,624)	(1,574,889)
Profit (Loss) from
discontinued operations
including amortization of
goodwill and gain
from debt restructuring	239,057	(846,282)	(1,397,420)	(1,430,276)	(1,495,735)
Net loss for the year	(1,516,071)	(2,306,951)	(3,076,440)	(3,390,900)	(3,070,624)
Loss per share	(0.02)	(0.03)	(0.04)	(0.06)	(0.06)
Working Capital Deficiency	(1,644,095)	(2,156,781)	(1,859,903)	(1,029,444)	(596,188)
Total Assets	1,759,027	2,232,225	3,629,040	5,853,429	7,189,483
Long Term Debt	224,343	224,343	3,325,526	2,876,125	2,584,276
Total Liabilities	2,437,211	2,788,489	5,504,202	5,042,967	4,305,621
Shareholders^ Equity
(deficiency)	(678,184)	(556,264)	(1,875,162)	810,462	2,883,862
Number of issued common
shares at March 31	90,134,310	87,542,219	73,928,130	69,928,130	59,366,332
Dividends per share	nil	nil	nil	nil	nil

The figures below are presented in accordance with U.S. GAAP (expressed in Canadian Dollars).

	Year ended	Year ended	Year ended	Year ended	Year ended
	March 31,	March 31,	March 31,	March 31,	March 31,
	2005	2004	2003	2002	2001
Revenues	$ nil	$ nil	$ 9,731	$ 49,981	$ 75,055
Net Loss	(1,514,599)	(4,939,328)	(2,964,870)	(5,248,125)	(4,871,784)
Loss per share	(.02)	(.06)	(.04)	(.09)	(.10)
Working Capital Deficiency	(1,644,095)	(2,156,781)	(1,859,903)	(1,029,444)	(596,188)
Total Assets	1,757,555	2,230,753	2,684,492	4,902,101	6,048,696
Long Term Debt	224,343	224,343	3,325,526	2,876,125	2,584,276
Total Liabilities	2,437,211	2,788,489	5,504,202	5,042,967	4,305,621
Shareholders^ Equity
(Deficiency)	(679,656)	(557,736)	(2,819,710)	(140,866)	1,743,075
Number of issued common
Shares at March 31	90,134,310	87,542,219	73,928,130	69,928,130	59,366,332
Dividend per share	Nil	Nil	Nil	Nil	Nil

Exchange Rate Information

The Company^s accounts are maintained in Canadian dollars. In this Annual Report, all dollar amounts are expressed in Canadian dollars except where otherwise indicated.

The following table sets forth, for the periods indicated, the high and low rates of exchange of Canadian dollars into United States dollars, the average of such exchange rates on the last day of each month during the periods, and the end of period rates.

Year Ended
March 31	2005	2004	2003	2002	2001
	US$	US$	US$	US$	US$
High	.8532	.7883	.6854	.6638	.6906
Low	.7138	.6690	.6229	.6175	.6529
Average	.7842	.7403	.6458	.6393	.6657
End	.8220	.7648	.6797	.6271	.6346

The closing exchange rate as at August 29, 2005 was US$ 0.8345 and the high and low exchange rates for each of the previous six months was as follows:

	High	Low
	US$	US$
March 2005	.8347	.8001
April 2005	.8286	.7949
May 2005	.8085	.7878
June 2005	.8144	.7960
July 2005	.8318	.8038
August 2005	.8397	.8172

Capitalization and indebtedness

Capitalization and indebtedness is not required for an annual filing.

Risk Factors

This section is intended to be a summary of more detailed discussions elsewhere in this Annual Report. The risks described below are not the only ones the Company faces. Additional risks may impair the business operations and the results of operations or financial condition could be materially affected if any of these risks materialize.

In addition to the risk factors inherent in investing in any junior equity, additional risks affecting the Company fall into three principal categories that can be described as follows:

a. Financial

i) risk that the Company will not be able to raise financing sufficient to make up for its ongoing losses

ii) risk that, for the investing public, continuing issuance of equity to make up for losses significantly dilutes the per-share value of the Company^s assets and potential earnings

iii) risk that, in the event that the Company experiences financial difficulty, it may lose control of its primary marketing assets, that is, its rights to market the DIAB II product (also known under the trademarks Sucanon and Glucanin).

iv) risk of diminution or loss of liquidity in the market for the Company^s securities, due either to fluctuations in securities markets or to investor perception of the Company, thus reducing the ability of third parties to use sale of shares as a method of generating capital for funding the Company

v) risk that ongoing losses will reduce the Company^s ability to obtain credit from suppliers, thus increasing the pressure on the Company as a going concern. These concerns are expressed in the Comments by Auditors for U.S. Readers On Canada-U.S. Reporting Differences and Note 1 of the attached Audited Consolidated Financial Statements

vi) risk that major creditors of the Company could place the Company in receivership or bankruptcy by acting on their charges against the Company

b. Drug-related

i) risk that the Company^s principal product will not begin to produce significant revenue in the only markets where it is currently approved (Mexico, China and Peru)

ii) risk that other regulatory approvals will not be forthcoming

iii) risk that competitive products in the Type II Diabetes therapy field will emerge during the next few years and reduce or negate any competitive therapeutic advantages currently offered by DIAB II (also known under the trademarks Sucanon and Glucanin)

iv) risk that DIAB II or other products produced by the Company will lead to lawsuits that are not covered by the Company^s insurance

v) risk that, although the product is clearly indicated as not for pregnant women, will be taken by women who are or become pregnant and suffer or claim to suffer medical problems related to using the drug

vi) risk that a Type I or insulin-dependent diabetic will take the drug and will suffer a hypoglycemic episode

vii) risk that competitors within the market will in various ways act to reduce the commercial success of the drug

viii) risk that the drug will have unexpected side-effects which may place new constraints on its commercial viability.

c. Risk related to obtaining and enforcing patents

i) the Company relies significantly on trade secrets for the protection of its Type II Diabetes product in jurisdictions where obtaining or enforcing patent rights is either not feasible or not possible; management believes that difficulties in replicating the composition and production process for its Type II Diabetes product will continue to protect the drug from being copied in such markets but acknowledges that one or more competitors could potentially copy essential aspects of the drug, thus leading to a loss of intellectual knowledge, and potentially having an impact on revenues

d. Management-related

i) risk that management of Biotech Holdings is sharply focused on a few key managers or a single key manager and that loss of the services of these persons or this person for any reason would be severely negative for the prospects of ongoing operations

ii) risk that additional management needed for creating and guiding meaningful growth at the Company will be difficult to attract

e. Political risk

i) risk that markets in which the drug are sold or are to be sold in Latin America are politically unstable and that one or more of these markets will undergo a significant political change, such as imposition of price controls, which impacts the company^s ability to sell the drug profitably

Item 4 Information on the Company

1. History and development of the Company

Biotech Holdings Ltd. (the "Company") was incorporated in Alberta, Canada and is an integrated pharmaceutical company whose common shares traded on The Alberta Stock Exchange (the "ASE") until November 1999 at which time the ASE was merged into The Canadian Venture Exchange (the "CDNX" now called the "TSX Venture Exchange") under the symbol "BIO.V". The Company also trades on the NASD OTC-BB under the symbol "BIOHF". In 2001 the Company was listed on the Frankfurt Stock Exchange under the symbol "925970.F".

The Company^s business focus is on developing the distribution of the Company^s Type II Diabetes drug known as DIAB II (also known as Sucanon and Glucanin). The operations of the Company^s subsidiary for the development, manufacture and distribution of lotions and creams were discontinued during the year ended March 31, 2003, based on a management decision that the subsidiary had limited prospects for developing profitable operations in the near-term. The Company^s business focus remains the development and distribution of the Company^s Type II Diabetes drug, particularly in Mexico and Latin America.

The Company^s head office and principal office are located at #160 - 1501 Shell Road, Richmond, British Columbia, V6X 2W2, Telephone No. (604) 295-1119, and the registered office of the Corporation is located at 1000, 400 - 3rd Avenue S.W., Calgary, Alberta, T2P 4H2.

The Company^s discussion of its anticipated future operations and the other forward looking statements contained in this Form 20-F involve a number of material risks and uncertainties. In addition to the factors specifically discussed in context hereafter, factors that could cause actual results to differ materially are regulatory requirements imposed upon the Company^s lines of business, international political instability and changes in economic conditions, advances in development of competing products, the Company^s ability to acquire protection for its intellectual property rights, and its ability to obtain financing on acceptable terms when and as required.

History of the Company and Its Subsidiaries

The Company^s history has had the following highlights:

• The Company was originally incorporated under the name LMK Technologies Inc. ("LMK") under the provisions of the Business Corporations Act (Alberta) on August 20, 1993.

• Pursuant to a prospectus dated February 9, 1994, the Company, acting under the name of Conserve Energy Corporation ("Conserve"), made an initial public offering of 2,500,000 common shares at $0.10 per share.

• In January, 1995 the Company identified Biotech Holdings Inc. ("Holdings") as a potential acquisition. On December 14, 1995 the Company^s shareholders approved the acquisition of all of the issued and outstanding shares of Holdings in exchange for 15 million shares issued to the shareholders of Holdings and approved the Company^s name change to Biotech Holdings Ltd. to reflect its corporate direction in the biotechnology field.

• On September 11, 1998 Holdings sold its operational assets to Biotech Laboratories Inc. ("Laboratories"), another subsidiary of the Company, in exchange for Laboratories^ assumption of $2,000,000 in collateralized debts on the books of Holdings.

• In November, 2002 the Company^s primary operating subsidiary, Biotech Laboratories Inc. discontinued operations.

• On December 12, 2002, the Company filed a proposal under federal creditor protection legislation in Canada. The purpose of the filing of the proposal was to protect the interests of all stakeholders of the Company from an action taken by the landlord of Laboratories. The landlord in question undertook to seize Laboratories assets and the filing of the proposal prevented the landlord^s seizure from continuing.

• On May 21, 2003, both the Company and Laboratories received approval from the Supreme Court of British Columbia in the matter of two proposals regarding its creditors pursuant to the Bankruptcy and Insolvency Act of Canada. These proposals, accepted by the required majority of creditors, allows for the operating subsidiary to maintain operations and generate funds from those operations to pay a portion of its pre-proposal liabilities. Under the proposal, preferred creditors shall be paid in full in priority to all claims of unsecured creditors. Provision for payment of claims of unsecured creditors shall be made in the lesser amount of 10% or $25,000 on each day, which is one year, one year six months and two years, respectively, after the end of the month of court ratification.

• On November 3, 2003, the Company announced that it received formal regulatory approval for the sale of its Type II Diabetes drug in Mexico.

• On November 19, 2003, the Company announced that it had expended its distribution arrangement with its packager in Mexico to include tableting and packaging for the Mexican market and some export markets. The Company will continue to produce the active ingredients in Canada, these will be shipped to Mexico for tableting and packaging.

• In June 2004, the Company announced that it had signed an agreement for marketing its Type II Diabetes drug in Mexico

• December 1, 2004 - the Company announced that it had received its first order for Sucanon from Farmacias Benavides, the largest pharmacy chain in Mexico with 662 stores and 83,000 employees.

• December 9, 2004 - the Company announced that Sucanon had received an endorsement from the President of Club Dulce Vida, a diabetic support association in the Mexican state with the greatest number of diabetics which has invited the Company to present at the association^s next symposium meeting.

• January 20, 2005 - the Company announced that on-air radio advertising for Sucanon had begun in Mexico.

• March 3, 2005 - the Company announced that there was an expansion in the number of drugstore chains and other retail outlets carrying Sucanon in Mexico. Also, it was announced that the Company  television infomercial had received approval from Mexican regulatory authorities.

• National television and radio advertising for the sale of Sucanon in Mexico began in May 2005. Revenues from shipments made prior to the launch of the advertising were recognized in the quarter ended June 30, 2005.

Capital Expenditures

The following table details the Company  principal capital expenditures under the three categories of Property, Plant and Equipment, Patent Interests and Formulations and deferred costs since March 31, 2002:

Property Plant and Equipment for Continuing Operations
Cost March 31, 2002	$ 3,329,084
Write-down of Assets from Discontinued
Operations	(135,050)
Capital Assets Held for Resale	(2,944,043)
Cost March 31, 2003	$ 249,991
Additions
Production Equipment	46,780
Laboratory Equipment	1,610
Laboratory Equipment Reclassified from
Equipment Held for Resale	232,056
Write-off of Fully Amortized Computer
Software	(128,070)
Cost March 31, 2004	$ 402,367
Additions
Laboratory Equipment	3,169
Computer Equipment	2,254
Cost March 31, 2005	$ 407,790
Patent Interests
Cost March 31, 2003, 2004 and 2005	$ 4,461,282
Formulations and Deferred Costs
Cost March 31, 2002	$ 3,085,766
Additions:
Label Artwork Costs	1,212
Deductions:
Write off of Formulations and
trademarks with discontinued
operations	(317,753)
Write-off of label artwork from
discontinued operations	(251,499)
Cost March 31, 2003	$ 2,517,726
Write-off of fully amortized deferred
costs	(2,514,045)
Cost March 31, 2004	$ 3,681
Write-off of fully amortized deferred
costs	(3,681)
Cost March 31, 2005	$ Nil

The Company currently has no major capital expenditures in progress and has no commitments for such capital expenditures as at the date of this filing.

Public Takeover Offers

There have been no public takeover offers by third parties in respect of the Company^s shares or by the Company in respect of other companies^ shares in the last and current financial year.

B. Business Overview

The Company^s business focus is on developing the distribution of the Company^s Type II Diabetes drug known as DIAB II (also known as Sucanon and Glucanin). The operations of the Company^s subsidiary for the development, manufacture and distribution of lotions and creams were discontinued during the year ended March 31, 2003, based on a management decision that the subsidiary had limited prospects for developing profitable operations in the near-term. The Company^s business focus remains the development and distribution of the Company^s Type II Diabetes drug, particularly in Mexico and Latin America.

Sales and Revenue Activity Analysis

During the past three fiscal years, sales and revenue from the distribution of the Company^s personal care products and from the sale of its Type II Diabetes drug in China, have had the following distribution amongst activities and geographic markets:

	Fiscal	Fiscal	Fiscal
	2005	2004	2003
Drug Sales in China	$ nil	$ nil	$ 9,731
Personal Care Product Division Sales:
Canada (Discontinued Operations)	nil	163,417	1,026,610
U.S.A. (Returns) (Discontinued Operations)	nil	(65,135)	97,866
Total Sales from Discontinued Operations	nil	98,282	1,124,476
Total Sales in Year	$ nil	$ 98,282	$ 1,134,207

Note: The Personal Care product business was discontinued during the year ended March 31, 2003. . Under the terms of the lease agreement for the discontinued operations, the lessee fulfilled orders for the Company from February 1, 2003 to July 1, 2003 and paid the costs of production which were repaid by the Company from the proceeds of the orders sold. The $(65,135) US sales in fiscal 2004 resulted from returned goods that were manufactured in fiscal 2003. The consolidated statement of operations nets these sales with the expenses from these operations and reflects the losses from these discontinued operations as a single line item.

Personal Care Products

In a process known as private label manufacturing the Company manufactured products for a number of retail chain stores using Company developed formulations under the stores^ brand names. In addition, the Company also manufactured products which were distributed direct to retailers under the Company^s brand names.

The operations of the Company^s subsidiary for the development, manufacture and distribution of lotions and creams were discontinued during the year ended March 31, 2003, based on a management decision that the subsidiary had limited prospects for developing profitable operations in the near-term.

As background information, the Company had minimal sales activity during the period from April 1995 to September 1996 so management decided to reactivate commercial production through private label manufacturing. Initially private label sales increased steadily but started to decline in the two years prior to the closure of the business. The operations did not prove profitable and, as a result, the decision was made to close.

Pharmaceutical Business

Although the pharmaceutical business has not generated material revenues, the Company has significant investment in capital and has expended considerable efforts in getting its Type II Diabetes drug registered in various countries in Latin America and Europe. The potential of the drug has enabled the Company to receive financial support from its investors.

The pharmaceutical business is divided into the following regions:

• China and other "Asia Countries" which are defined as Indonesia, Philippines, Malaysia, Kampuchia (Cambodia), Thailand, Laos, China, Mongolia, Japan, North Korea, South Korea, Vietnam, Hong Kong, Macao, and Singapore and;
• All other countries.

The following section discusses the corporate structure and the history and progress of the drug beginning with China where the drug was initially tested and sold on a test-market basis. The Company recorded drug sales in China from 1997 to 2003 but has from that time suspended its marketing efforts there and has not recorded further sales.

Structure of the Chinese Pharmaceutical Business

314202 B.C. Ltd.

314202 B.C. Ltd. ("314202") is a private British Columbia company which holds a 37.5% interest in Volkspharm (described below) and the right to appoint 50% of the board of directors of Volkspharm. On December 1, 1996, the Company acquired all of the issued and outstanding shares of 314202 and 314202 became a wholly-owned subsidiary of the Company

314202 is the largest single shareholder of Volkspharm. As a result, the Company has a direct and indirect participation of over 59.125% of Volque (described below).

Volkspharm Healthcare Incorporated

Volkspharm Healthcare Incorporated ("Volkspharm") is a private company incorporated under the laws of British Columbia on November 2, 1993, of which the President of the Company, Robert B. Rieveley, is a director. 314202 B.C. Ltd., a 100% subsidiary of the Company, holds a 37.5% interest in Volkspharm and has the right to appoint 50% of the board of directors of Volkspharm. Volkspharm owns 51% of the share capital of Volque and the right to appoint 50% of the board of directors of Volque. Pursuant to an agreement between 314202 B.C. Ltd. and Volkspharm, Robert B. Rieveley (the Company^s President) or his appointee must be appointed by Volkspharm as one of the directors of Volque.

DIAB II is the first drug that Volkspharm has developed. Volkspharm has granted to Volque an exclusive license to manufacture DIAB II, make any claims and to use all patent rights in China and other "Asia Countries" defined above.

Volkspharm has granted to Allburg Holdings Inc. (described below) an exclusive license to manufacture and sell DIAB II, make any claims and to use all patent rights in all countries other than the "Asia Countries".

Volque Pharmaceutical Company Ltd

DIAB II, the first drug to be developed by Volque is a new drug for the treatment of Type II Diabetes. This is also the first drug to be developed and marketed by Volkspharm anywhere in the world. Through a clinical trial process undertaken by Volque, it has been granted a New Drug Approval Number by the General Office of Health for Hebei Province, China to manufacture DIAB II.

Volque Pharmaceutical Company Ltd. ("Volque") is a domestic-foreign joint venture company formed under the laws of China in July, 1994. Volque was formed for the development and sale of drugs in China. The share capital is owned as follows: the Company holds 40% directly and an additional 19.125% indirectly through its holdings in Volkspharm Healthcare Incorporated which holds 51%; and Anmin Trading Company Ltd. ("Anmin"), a private trading company in China, holds the remaining 9%. Anmin received its 9% interest in consideration for work provided during the clinical trial process. This interest was originally part of the share capital provided to North China Xin Xing Pharmaceutical Co. which was one of the initial parties to the joint venture agreement. Volkspharm has received its interest in consideration for cash and technology know-how provided in accordance with the agreement.

Structure of the Other Countries Pharmaceutical Business

Associated Company

Allburg Holdings Inc.

Allburg Holdings Inc. ("Allburg"), previously known as Wanchi Inc., has been granted an exclusive license to manufacture and sell DIAB II, make any claims and to use all patent rights in all countries outside Oriental Asia. As a condition of this license Allburg must sub-license these rights, and this sub-license may only be granted to companies that are at least 50% owned by the Company (see Exhibit 3.8 to the Company^s Registration Statement previously filed with the March 31, 1996 Form 20-F). Allburg granted an exclusive license to sub-contract the manufacture and marketing of the Company^s Type II diabetes drug known variously as DIAB II, Sucanon and Glucanin make claims and to use all patent rights in countries outside Oriental Asia to Smithe Rothe Pharmaceutical, Inc. ("Smith Rothe").

During 1999, Allburg sold a 25% interest in DIAB II to Immunis Corp. for $2.43 million worth of shares in Immunis. In January 2001, the Company purchased that 25% interest from Immunis Corp. by issuing 8,613,419 of its common shares at $0.26 per share to Immunis Corp. for a total consideration of $2,239,489. The Company has a 75% interest in rights to DIAB II in countries other than the Asia Countries.

Pursuant to US GAAP, shares should be valued at the date of issue. The closing price of 26 cents per share represents a 12 percent discount of the weighted average share price before and after the date of the transaction. As per the above analysis, the number of shares issued represents a considerable discount from their intrinsic worth.

In December 2002, a Director of the Company purchased Allburg. This purchase resulted in his indirect ownership of 25% of Smith Rothe.

Current Operations and Business Structure

On February 4, 1995, a share exchange agreement was signed whereby Conserve Energy Corporation would acquire all of the issued and outstanding shares of Holdings. In addition, Landmark Corporation agreed to loan $200,000 to Holdings which was subsequently converted into 2,000,000 common shares of the Company.

The Alberta Stock Exchange^s approval of the acquisition of Holdings by Conserve, as the Company^s Major Transaction, was conditional upon the Company raising $1.8 million to finance on-going operations. On April 30, 1996, Wenroth Limited ("Wenroth") and Penne Investment Services Ltd. ("Penne"), both British Virgin Islands companies which are unaffiliated with the Company, purchased 100% of a $1.8 million private placement for cash paid to the Company. The private placement units consisted of one common share of the Company at a purchase price of $.30 and one common share purchase warrant for the purchase of an additional common share for $.30 before May 1, 1998. Following completion of this placement the ASE granted full listing status to the Company.

On July 15, 1996, the Company acquired a 40% direct interest in Volque, for total potential consideration of $1.4 million, these funds being expended to acquire shares and provide marketing support. The consideration was to be paid over twelve months with the first $200,000 paid on August 20, 1996. The remaining payments were subject to certain performance criteria. Because of Volque^s sales performance, only $510,000 total consideration was paid for the acquisition. The purchase funds were used by Volque to finance the initial marketing costs to establish sales of a new drug for the treatment of Type II Diabetes.

In order to increase its investment position in Volque, on December 1, 1996, the Company acquired all of the 6,000,000 issued and outstanding shares of 314202. In consideration the Company issued 1,750,000 common shares of the Company to RCAR Investments Ltd. ("RCAR", which is beneficially owned by the Rieveley Family Trust and have common directors with the Company) and 4,250,000 common shares to Inreg in exchange for $1,275,000. The Company then used the $1,275,000 to purchase 4,250,000 shares of 314202 from Allburg.

On August 12, 1999 Penne purchased 6 million common shares at $0.345 per share together with 3,000,000 warrants to acquire common shares at $0.65 per share expiring August 3, 2002. The total consideration received was $2,070,000. In March 2001, Penne purchased 4.5 million common shares at $0.165 per share through a private placement together with 4,500,000 warrants to acquire common shares at $0.25 per share expiring December 14, 2002. The total consideration received was $742,500. These shares could not be traded until March 6, 2002. Penne owned 9,023,500 common shares of the Company as of August 23, 2002 and the above-mentioned 4,500,000 warrants to acquire common shares at $0.25 per share remain outstanding. The 3,000,000 warrants to acquire common shares at $0.65 per share expired on August 3, 2002.

During the year ended March 31, 2003, the Rieveley Family Trust acquired notes payable by the Company from previously unrelated note holders. As of August 26, 2004 the Rieveley Family Trust owned 20,221,363 or 19.8% of the issued and outstanding common shares of the Company. In August 2003, the Rieveley Family Trust reduced the notes by $1,380,691 through the exercising warrants to purchase 13,806,907 Series I Convertible Preferred Shares at $0.10 each. Each convertible preferred share is voting, has an 8% cumulative cash dividend and is convertible into common shares on a 1:1 basis. With the preferred and common shares combined, on August 26, 2005, the Rieveley Family Trust held 33,424,272 (31.5%) of the total outstanding voting shares of the Company.

DIAB II and the Chinese Joint Venture

The first drug developed by Volque is for the treatment of Impaired Glucose Tolerance ("IGT"), an early stage of Type II Diabetes (also called Non-Insulin Dependent Diabetes Mellitus, NIDDM). All preclinical and clinical trials have been completed and on July 19, 1996 the General Office of Health for Hebei Province issued a New Drug Approval Number to Volque to begin manufacturing and marketing. In China, drug approval is granted under national health rules; however, the rights for manufacturing and marketing are granted to a specific company which is subject to rules that are administered at the provincial level. Volque has been granted the right to manufacture the drug in Hebei Province for sale throughout China.

Clinical Trials

This drug is used both as a prophylactic and a therapeutic. The clinical trials, which were undertaken under the name "DIAB II", have shown this drug to be effective and safe. Although the clinical trial protocols are similar to those required for FDA approval, the stages specified below relate to the Chinese drug approval authorities. Clinical trials were done in China because of the lower cost than would be the case in North America.

Stage I trials were conducted on rat muscle cells. Binding and internalization of insulin was evaluated as well as monitoring changes in intracellular glucose metabolism under dosage.

Stage II trials were conducted on both dogs and rats. Tests included general pharmacology, pharmokinetics, acute toxicity including establishing an LD50 rate, and long term toxicity.

Stage III trials were conducted using three hospitals and sixty doctors. Over 1,500 patients were interviewed and tested with the results from 370 patients submitted for approval in the first quarter of 1995. Trials were conducted on a double blind basis. Participation time for each applicant was six months including one month each before and after DIAB II treatment or placebos. Dietary intake was strictly controlled with breakfast, lunch and dinner provided to participants. Twice per week through the duration of the trial fasting glucose, fasting cholesterol and blood tests were conducted. Once every two weeks 100 gram oral glucose tolerance tests were conducted.

Although an approval has been received to market DIAB II in China, in Peru (during the 2001 fiscal year) and in Mexico (during the 2004 fiscal year), there can be no assurance supplemental clinical trials will demonstrate the required efficacy to obtain approval in other countries. Failure to successfully complete the existing clinical trials or other clinical trials contemplated on a timely basis could have a material adverse effect on the Company^s future business, financial condition and results of operations.

Summary of Results

DIAB II is a synthesized molecule that has significant hypoglycemic effect in Non-Insulin Dependent Diabetes Mellitus (NIDDM) patients. Animal tests and clinical trials have shown that this product increases the binding and internalization of insulin in peripheral cells. DIAB II is a promising new product for NIDDM therapy, especially for those with IGT and mild/medium NIDDM (<230 mg/dL, or <13 mmole/L).

The results of the clinical trials were positive, achieving a high patient satisfaction rate and successfully reducing the clinical symptoms and signs of diabetes. The dosage form utilized was successful, and the product has been approved for use as a drug in China, indicated for NIDDM and IGT. The following conclusions were reached by Clinical Trial Centers and approved by the Chinese Government:

• DIAB II reduces the clinical symptoms and signs of diabetes, which include polyuria, polydipsia, polyphagia, and fatigue.

• DIAB II significantly lowers fasting venous plasma glucose levels and significantly improves the 2-hour glucose tolerance in NIDDM patients.

• DIAB II is effective in 87% of the NIDDM patients in the clinical trial.

• DIAB II significantly lowers fasting venous plasma cholesterol and triglyceride levels in NIDDM patients.

• The dosage form of DIAB II is acceptable for clinical uses.

• No adverse side effect was observed in the clinical trials.

This product has also shown significant benefit in combination uses with other oral hypoglycaemics, e.g. sulfonylureas and/or biguanides. When used in combination with current hypoglycaemics, DIAB II is shown to decrease the primary and secondary failure to respond to these other agents, thus significantly improving the overall clinical success rate.

History and Structure of the DIAB II Joint Venture in China

DIAB II was discovered by Dr. Ping Sun as a result of his own research in Canada. In order to obtain the necessary resources to develop DIAB II into a commercial product, Dr. Sun assigned the rights to the product patent to Volkspharm Healthcare, a company of which he is President and a director, which then continued the development of DIAB II in China. The clinical trials required to obtain approval to market DIAB II were conducted and funded in China by North China Xin Xing Pharmaceuticals Co., of China ("Xin Xing"), a company that was controlled by the People^s Army. In the process of the clinical trials, in July 1994, Volkspharm signed a Joint Venture Agreement with Xin Xing to create Volque to develop and market new drugs.

Following completion of the clinical trial process in 1995 and prior to Volque receiving a New Drug Approval Number, Xin Xing, which had not yet met the payment conditions to acquire its shares, withdrew from the Volque Joint Venture Agreement and allowed its interest in Volque to lapse. Anmin Trading, representing certain Chinese management of Volque, received 9% of the share capital of Volque in consideration of work conducted in the organization and monitoring of the clinical trials.

Manufacturing of the Drug

DIAB II is a pressed tablet that is coated and then packaged in a blister-pack form for distribution. In order to safe-guard the proprietary information of the drug, the active ingredient in the drug is manufactured at the Company^s facility in Vancouver, British Columbia and then shipped to Mexico (and in the past to China) for tableting. The tableting and packaging of the drug in Mexico and China is being undertaken on a contract basis by unaffiliated manufacturers.

Marketing of DIAB II

It is intended that DIAB II will be marketed throughout the world under licenses granted by Volkspharm. Volque has been granted an exclusive license to market DIAB II to all Asia Countries. Allburg has been granted an exclusive license to market DIAB II to all countries other than Asia Countries. Allburg must sub-license these rights, and the sub-license may only be granted to companies that are at least 50% owned by the Company or its subsidiaries. The Company has a 75% interest in rights to DIAB II in countries other than the Asia Countries. The 25% minority interest in these rights is owned by a Company controlled by a Director of the Company.

DIAB II is an oral hypoglycemic that typically requires a doctor^s prescription (in Peru and China), though the regulatory approval received in Mexico also permits Sucanon to be dispensed by a pharmacist without prescription. Prescriptions are filled through a pharmacy or through a hospital. Pricing of the drug has been established so that it is affordable for the majority of the urban population.

The primary market for DIAB II is IGT (Impaired Glucose Tolerance) and mild-medium NIDDM (Non-Insulin Dependent Diabetes Mellitus) patients. At present, dietary therapy is the primary recommended regimen for IGT sufferers.

That regimen involves the close monitoring of a patient^s diet to reduce calorie intake in order to decrease blood sugar (glucose) levels. However, complications arise due to the difficulty in monitoring the patient^s diet in order to achieve satisfactory blood sugar, nutrient and energy levels; similarly, as IGT and NIDDM severity increases, the treatment has decreased effectiveness.

DIAB II has been tested successfully as an alternative to dietary therapy in treating IGT and mild-medium NIDDM patients, as it not only provides control of blood sugar levels but also gives patients a feeling of well being and enhances the metabolism of glucose at the cellular level.

In Mexico and Peru, where regulatory approval has been received, marketing of Sucanon (DIAB II) is to be carried out by marketing companies which are unrelated to the Company.

The Market in China and Asia Countries

The Company recorded drug sales in China from 1997 to 2002 but has from that time suspended its marketing efforts there and has not recorded further sales.

Management of Volque believes that China, with a population in excess of 1.2 billion people and World Health Organization estimates of 50 million people with Type II Diabetes, offers significant potential for the drug. The Company recorded drug sales in China from 1997 to 2002 but has from that time suspended its marketing efforts there and has not recorded further sales. China is the first country where Volque has received approval to sell DIAB II.

Sale of DIAB II Outside of Asia Countries

Allburg may grant the rights to sell DIAB II outside of Asia Countries, but only to companies in which the Company owns at least a 50% interest. The name DIAB II has been trademarked for the marketing of the drug in North America.

During the 2004 Fiscal Year, the Company located a suitable space in the Vancouver, Canada area where equipment specifically related to Sucanon tablet manufacture has been installed. The facilities are used for pre-mixing of Sucanon powder for supply to tableters. Tableting for the Mexico and Peru markets - the Company^s first markets outside China --- is to be carried out by a tableter in Mexico.

Company Highlights of Fiscal 2005

The following are highlights of the Company^s business during fiscal 2005:

• April 8, 2004 - The Company announced that it had closed its private placement funding totaling $425,639 previously announced. These funds were being applied to the completion of facilities improvements and machinery requirements at the Company^s new pre-mix facility as well as to costs associated with the launch of Sucanon in Mexico.

• April 14, 2004 - The Company announced that the commencement of the installation of pharmaceutic processing equipment required for the production of Sucanon .

• April 22, 2004 - The Company announced that production of Sucanon had begun.

• May 3, 2004 - the Company announced that it had shipped the first batch of active ingredients of Sucanon to Mexico for tableting and packaging. This shipment was for sample packages to be distributed to doctors, pharmacists and buyers for drugstores in Mexico.

• June 1, 2004 - the Company announced that it had signed an agreement for marketing Sucanon in Mexico.

• June 7, 2004 - the Company announced that it had completed the first production order of Sucanon which was sufficient to produce 1.2 million tablets or 20,000 one-month treatment packages. The value of this shipment was in the range of $240,000 US at the wholesale level.

• July 23, 2004 - the Company announced that it had tested the sample tablets from the first run of Sucanon and that the tablets had met the quality control requirements

• August 5, 2004 - the Company announced that a second batch of Sucanon (sufficient to produce 1.2 million tablets or 20,000 one-month treatment packages) was being produced. The Company^s marketing and manufacturing partners were preparing for the launch of Sucanon. A television infomercial as well as two-minute, one-minute and 30-second television commercials were in production along with Sucanon radio spots.

• September 22, 2004 - the Company announced that it was opening an office in Mexico to coordinate sales and marketing in the Latin American region.

• October 26, 2004 - the Company announced that it received preliminary regulatory approval to proceed with raising private placement funding totaling $1,000,000 Cdn. Shares pursuant to the funding will be issued at $0.50 Cdn with each share having a two-year warrant exercisable at $0.55 Cdn. The funds were to be applied to requirements associated with the launch of Sucanon in Mexico including advertising, in-store support and medical presentations,

• December 1, 2004 - the Company announced that it had received its first order for Sucanon from Farmacias Benavides, the largest pharmacy chain in Mexico with 662 stores and 83,000 employees.

• December 9, 2004 - the Company announced that Sucanon had received an endorsement from the President of Club Dulce Vida, a diabetic support association in the Mexican state with the greatest number of diabetics which has invited the Company to present at the association^s next symposium meeting.

• January 20, 2005 - the Company announced that on-air radio advertising for Sucanon had begun in Mexico.

• March 3, 2005 - the Company announced that there was an expansion in the number of drugstore chains and other retail outlets carrying Sucanon in Mexico. Also, it was announced that the Company^s television infomercial had received approval from Mexican regulatory authorities.

During the quarter ending June 30, 2005, the Company announced that it had made shipments to major pharmacies and distributors in Mexico including Wal-Mart, Grupo Marzam and Grupo Innova. Shipments to Farmacias Benavides and other major Mexican pharmacies and distributors were made prior to the start of the quarter under review.

In May 2005, the Company announced that it had signed an agreement for the sale of Sucanon on the internet to countries in the Western Hemisphere. The website for these sales became operational in August 2005.

National television and radio advertising for the sale of Sucanon in Mexico began in May 2005. Revenues from shipments made prior to the launch of the advertising were recognized in the quarter ended June 30, 2005.

Subsequent to June 30, 2005, the Company announced that sales of Sucanon in July 2005 exceeded the value of revenues in the preceeding seven months combined.

Research & Development - the Company^s Type II Diabetes drug

Research expenditures are expensed in the year in which they are incurred. During fiscal 2005 the company expensed $5,576 (2004 - $18,682 and 2003 - $46,135) in drug related research costs.

It is the Company^s policy to defer all costs that relate to the development of new products where management is satisfied as to the technological, commercial and financial viability of individual products. These costs are amortized on a straight-line basis over a five year period. All deferred development costs were fully amortized in the year ended March 31, 2004 and no additional amounts were capitalized.

Patents and Proprietary Information

The Company, itself and through Volque, pursues a policy of seeking patent protection for the valuable patentable subject matter of its proprietary technology. The Company believes that patent and trade secret protection is important in its business, and that its success will depend, in part, on its ability to obtain and enforce strong patents, to maintain trade secret protection and to operate without infringing the proprietary rights of others. Volkspharm has patent applications pending in Canada on DIAB II for which the Company, through Allburg (see "Associated Company" above), has been granted exclusive licensing rights to countries other than Asia Countries. See Exhibit 3.8 "Assignment of 50% Interest Rights" of the Company^s Registration Statement (previously filed with the March 31, 1996 Form 20F). The Company has been assigned the rights for patents pending in Canada on certain personal care products.

No assurance can be given that patents will issue from any pending applications or that claims now or in the future, if any, allowed under issued patents will be sufficiently broad to protect the Company^s technology. In addition, no assurance can be given that patents issued or licensed by the Company will not be challenged, invalidated, infringed or circumvented, or that the rights granted thereunder will provide competitive advantages to the Company. The commercial success of the Company will also depend in part on the Company or any of its affiliates not infringing patents or proprietary rights of others and not breaching the licenses granted to the Company.

Although the Company is presently unaware of the need for or risk of any such action, litigation, which could result in substantial cost to the Company, may also be necessary to enforce any patents issued to the Company and/or Volkspharm or to determine the scope and validity of other parties^ proprietary rights, which may affect the Company^s products and technology. If the outcome of any such litigation is adverse to the Company, the Company^s business could be materially affected. To determine the priority of invention, the Company and/or Volkspharm may also have to participate in interference proceedings declared by the United States Patent and Trademark Office, which could result in substantial cost to the Company.

Patent protection is provided in the People^s Republic of China "PRC" through the Patent Law of the People^s Republic of China of 1984 ("PRC Patent Law"). For a discussion of the differences between U.S. and PRC patent law, please refer to the Company^s Registration Statement previously filed with the March 31, 1996 Form 20F.

There has been, and the Company believes that there may be in the future, significant litigation in the industry regarding patent and other intellectual property rights and that, if the Company becomes involved in such litigation, it could consume substantial resources. Significant legal issues frequently arise regarding the extent to which patent protection is afforded in the pharmaceutical field. The Company, therefore, also relies upon trade secrets, know-how, and continuing technological advancement to develop and maintain its competitive position. Disclosure and use of the Company^s know-how is generally controlled in part under confidentiality agreements with the parties involved. In addition, the Company has confidentiality agreements or non-disclosure agreements with certain of its key employees, consultants, officers and directors. There can be no assurance, however, that all confidentiality agreements will be honored, that others will not independently develop equivalent technology, that disputes will not arise as to ownership of intellectual property, or that disclosure of the Company^s trade secrets will not occur. Furthermore, there can be no assurance that others have not obtained or will not obtain patent protection that will exclude the Company from using its trade secrets and confidential information. Non-disclosure or confidentiality agreements would be difficult and expensive to enforce, and may not be upheld by the courts, especially those of foreign nations. Inability to protect any patents or enforce its non-disclosure or confidentiality agreements, especially in foreign countries where much of the Company^s business may be established, could enable others to take advantage of the Company^s technology without compensation, causing it substantial economic loss.

The Company believes its competitive position in the diabetes therapy market has some strengths. The Company^s Sucanon (DIAB II) product is clinically effective and may have fewer side effects than competing products as a diabetes monotherapy. In addition, Sucanon may also be an effective combination therapy. The President of the Company received, during calendar year 2000, two U.S. patents covering use of an insulin-sensitizing drug in a combination with a standard therapy for Type II Diabetes. These rights, as they pertain to Sucanon, were assigned to the Company in December 2001.

Competition

The pharmaceutical and biotechnology industries are characterized by rapidly evolving technology and intense competition. The Company anticipates that it will face increased competition in the future as new products enter the market and advanced technologies become available. There can be no assurance that existing products or new products developed by the Company^s competitors will not be more effective, or be more effectively marketed and sold, than any that may be developed by the Company. Competitive products may render the Company^s products obsolete and non-competitive prior to the Company^s recovering research, development or commercialization expenses incurred with respect to any such products. The Company^s competitors include major pharmaceutical, diagnostic, chemical and biotechnology companies, many of which have financial, technical, and marketing resources significantly greater than those of the Company. Many of the Company^s existing or potential competitors, particularly large pharmaceutical companies, also have significantly greater experience than the Company in undertaking research, preclinical studies and human clinical trials of new pharmaceutical products, obtaining FDA and other regulatory approvals, and manufacturing and marketing such products. Accordingly, the Company^s competitors may succeed in commercializing products more rapidly or effectively than the Company, which could have a material adverse affect on the Company^s business, financial condition or results of operations.

In addition, many biotechnology companies have formed collaborations with large, established pharmaceutical companies to support research, development and commercialization of products that may be competitive with those of the Company. Academic institutions, government agencies and other public and private research organizations are also conducting research and seeking patent protection and may commercialize products on their own or through joint ventures. The Company is aware of certain products manufactured or under development by competitors that are used for the detection or treatment of diabetes, the markets which the Company has targeted for product commercialization. The existence of these products, or other products or treatments of which the Company is not aware, or products or treatments that may be developed in the future, may adversely affect the marketability of products developed by the Company.

Many pharmaceutical and biotechnology companies, alone and in collaboration with larger pharmaceutical companies, have developed and are marketing, or are developing, various products for the treatment of diabetes.

There are three basic classes of existing drugs for the treatment of NIDDM: sulfonylureas, biguanides and insulin sensitizers. Acarbose is being marketed at the present as a fourth class; however, for the purposes of this document it will be considered as similar to the biguanides. The primary mechanism of the sulfonylurea group of drugs is to stimulate increased insulin production from the pancreas in an attempt to enhance glucose utilization. The biguanide and acarbose group of drugs in general act to decrease glucose absorption in the digestive tract. By comparison the insulin sensitizers act to re-sensitize the cell membrane to enhance the uptake of glucose. Some drugs frequently described as biguanides, such as metformin, also have significant insulin-sensitizing characteristics and can also be classified as insulin-sensitizers.

Other than biguanides with insulin-sensitizing action, there are, in addition to DIAB II, only two insulin sensitizers which currently have regulatory approval anywhere in the world; a third one, troglitazone (brand name "Rezulin") was withdrawn from the market world-wide due to concerns regarding liver toxicity. Leaving asides the biguanides with insulin-sensitizing action and DIAB II, the existing insulin-sensitizers are all in the glitazone or TZD (thiazolidinendione) class and are generally described as peroxisome proliferator-activated receptor agonists ("PPAR agonists"). The main action of these agents is to enhance glucose uptake by peripheral cells. The activity of PPAR^s is believed to be strongest in white fat tissue. The "glitazones" have a number of side-effects reported during the trial process including increased liver dysfunction and weight gain.

The mechanism of action of DIAB II on the other hand as an insulin sensitizer is to enhance the binding of insulin to the receptor sites primarily in muscle cells, increasing the sensitivity of such cells to insulin. This increased sensitivity results in enhanced absorption and consequently, utilization of glucose in the muscle cells.

All drugs in these classes have been shown to be effective in resolving the medical condition of high blood sugar levels; however, there is a considerable variance amongst the drug classes in the degree of side effects experienced and the long term efficacy in all patients. It is intended that DIAB II will be marketed based on the benign nature of the drug as well as the subjective benefits associated with the increased utilization of glucose experienced during DIAB II usage.

The management of Volque estimates that in China the highest market segment that is currently under drug therapy is the mild-medium NIDDM (140-230 mg/dL serum glucose). Generally, sulfonylureas and biguanides are prescribed to NIDDM patients with serum blood glucose levels above 140 mg/dL only after dietary regimens fail to control the condition. Diabetes Mellitus is a prolonged disease, and it is clinically difficult to administer sulfonylureas for too long a period. The difficulties for long term use arise from a wide variety of side-effects and drug resistance.

For Sucanon (DIAB II), an important factor in competition may be the timing of market introduction of the Company^s or competitors^ products. Accordingly, the relative speed with which the Company^s competitors can develop products, complete the clinical trials and approval processes, and supply commercial quantities of the product to the market are key factors for competitiveness. The Company^s competition will be determined in part by the potential indications for which the Company^s products receive approval by regulatory authorities. The development by competitors of new treatment methods for diabetes could render the Company^s drug non-competitive or obsolete. The Company expects that competition among products approved for sale will be based, among other things, on product efficacy, safety, reliability, availability, price and intellectual property protection.

The Company^s competitive position also depends upon its ability to secure market acceptance for its Type II Diabetes drug. There can be no assurance that Sucanon (DIAB II) will achieve market acceptance. The degree of market acceptance will depend upon a number of factors, including the receipt of regulatory approvals, the establishment and demonstration in the medical community of the clinical efficacy and safety of Sucanon (DIAB II), and the establishment and demonstration of the potential advantages over existing and new treatment methods and reimbursement policies of government and third party payors. There can be no assurance that physicians, patients, payors or the medical community in general will accept and utilize Sucanon (DIAB II). Additionally, the Company^s competitive position depends upon its ability to attract and retain qualified personnel, obtain patent or other proprietary protection, establish collaborative relationships and secure manufacturing.

As noted above in reference to TZD drugs, the principal competitors to Sucanon (DIAB II) for diabetes therapy are "Avandia" from GlaxoSmithKline and "Actos" from Eli Lilly. The Company believes that its Sucanon (DIAB II) product will be able to compete effectively in the marketplace based on studies that have been carried out showing that Sucanon is clinically effective and may have fewer side effects than the competitor drugs.

Government Regulation

Regulation by governmental authorities in Canada, the United States and other countries is a significant factor in the production and marketing of Sucanon (DIAB II) and the Company^s ongoing research and development activities. Sucanon (DIAB II) has received approval for sale in China, Peru and Mexico. In November 3, 2003 the Company announced that it received formal written approval from the Mexican national regulator for the sale of Sucanon in Mexico.

The drug approval procedure in China is set out as a guide to the applicant for new drug approval in China. For a discussion of the approval process in China and comparison to the United States, see "Government Regulation" in the Company^s Registration Statement, previously filed with the March 31, 1996 Form 20F.

Pharmaceutical and biological products intended for therapeutic or prophylactic use for humans are governed by the FDA in the United States, by the Health Protection Branch ("HPB") in Canada and by comparable agencies in other countries. For most of these products, the regulations require extensive clinical trials and other testing and government review and final approval prior to marketing the product. This procedure is likely to take a number of years and involves the expenditure of substantial resources. For example, before obtaining regulatory approval for the commercial sale of Sucanon (DIAB II) in Canada and the United States, the Company must demonstrate through preclinical studies and clinical trials that the product is safe and efficacious. The results from the Company^s preclinical studies and early clinical trials may not be predictive of results obtained in large-scale clinical trials, and there can be no assurance that the Company^s or its collaborators^ clinical trials will demonstrate safety and efficacy even though the results indicating safety and efficacy were achieved in human clinical trials results in China. There can be no assurance that regulatory approval will be received for any countries other than those already received (China, Peru and Mexico). A number of companies in the biotechnology industry have suffered significant setbacks in advanced clinical trials, even after achieving promising results in earlier trials. In addition, government regulations specify standards for manufacturing and marketing pharmaceutical products. Any failure by the Company or its collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals, could adversely affect the marketing of Sucanon (DIAB II) and its ability to receive product or royalty revenue. There can be no assurance that Sucanon (DIAB II) will be approved by the FDA, HPB or any other government agency on a timely basis, if at all.

Sales of therapeutic products outside Canada and the United States are subject to regulatory requirements that vary widely from country to country. Whether or not FDA or HPB approval has been obtained, final approval of a product by comparable regulatory authorities of other countries must be obtained prior to the commencement of marketing the product in those countries. The time required to obtain any such approval may be longer or shorter than that required by FDA or HPB approval.

In November 3, 2003 the Company announced that it received formal written approval from the Mexican national regulator for the sale of Sucanon in Mexico.

International Operations

It is management^s intention that marketing of Sucanon (DIAB II) will be conducted through a partnership with either local distributors or through the creation of a strategic alliance with a large multi-national pharmaceutical company. To that end, management of the Company has had preliminary discussions with a number of multi-national corporations. These discussions have involved licensing of the product for distribution in selected areas of the world. The Company has also received a number of enquiries from distribution firms around the world with respect to the licensing of this drug.

Most of the Company^s sales of Sucanon (DIAB II) are expected to be made in international markets. The Company will require regulatory approval prior to undertaking sales activity in a particular country. Sales of Sucanon (DIAB II) in international markets are subject to certain risks common to such sales, including government regulation, export and import license requirements, risks of tariffs or trade barriers and political and economic instability. There can be no assurance that these risks will not materially adversely affect the Company in the future.

The Company expects to price sales of its products in the currency of the country in which it is sold. Accordingly, the prices of its products in Canadian dollars will vary as the value of the Canadian dollar fluctuates against such local currencies. In addition, any royalty payments to be made to the Company will be made as a percentage of sales denominated in the currency of the country where sales are made. There can be no assurance that there will not be increases in the value of the Canadian dollar against such currencies, reducing the Canadian dollar return to the Company on the sales of its products. Furthermore, there can be no assurance that significant fluctuations in foreign currency values will not occur that will create sufficient differences in the relative prices of the products in different countries, such that the Company will find it necessary to reduce its prices in certain local currencies in order to bring the relative cost of its products into line. Although the Company may seek to implement hedging techniques with respect to its foreign currency transactions in the future, it does not currently do so, and there can be no assurance that such techniques, if employed, would be successful.

In Mexico, where the Company initiated sales of Sucanon (DIAB II) in the first quarter of fiscal 2006, marketing of DIAB II under the trade name Sucanon is carried out by an independent Mexican marketing group. The company opened an office in Mexico to co-ordinate the marketing efforts and the supply of Sucanon to the market in Mexico. The Company does not plan to be involved in the sales and marketing of Sucanon in Peru and other countries and plans to engage the services of third-party marketing companies to achieve its marketing goals.

Product Liability

The use of any of the Company^s products in clinical trials, and the sale of any approved products, may expose the Company to liability claims resulting from the use of its products. These claims might be made directly by consumers, healthcare providers or by pharmaceutical companies or others selling such products. The Company currently has liability insurance which includes all products sold by the Company in Canada and the United States. The Company^s product liability insurance does not cover liability claims with respect to clinical trial products or for any product sold by Volque. There can be no assurance that the Company will be able to obtain or maintain sufficient, commercially reasonable product liability insurance for any products approved for marketing. A product liability claim brought against the Company could have a material adverse effect on its business, financial condition or results of operations.

C. Organizational Structure

The following table provides details of the Company^s significant subsidiaries:

			Percent	Biotech^s
		Percent	of Direct	Proportion
	Country of	of Direct	& Indirect	of Voting
Subsidiary Name	Incorporation	Ownership	Ownership	Power
Biotech Laboratories Inc.	Canada	100.0%	100.0%	100.0%
401718 B.C, Ltd. (formerly
Biotech Holdings Inc.)	Canada	100.0%	100.0%	100.0%
314202 B.C. Ltd	Canada	100.0%	100.0%	100.0%
Volkspharm Healthcare Incorporated	Canada	0.0%	37.5%	50.0%
Volque Pharmaceutical Company Ltd. Smith Rothe Pharmaceutical, Inc.	China Barbados	40.0% 75.0%	59.1% 75.0%	59.1% 75.0%

D. Description of Property

Manufacturing Facility

During the fiscal year ended March 31, 2004 the Company leased a location in the Vancouver, BC area, totaling approximately 2,400 square feet, for housing equipment and facilities for production of pre-mix powder for Sucanon (DIAB II), which is at present the Company^s sole product.

The equipment in the former manufacturing facility was moved out of the former production facilities and equipment not related to the production of the Type II Diabetes drug has been stored and is held for resale. The proceeds from the equipment sale will be applied to secured outstanding debts of the Company.

There are a number of long term related party notes payable issued which have been collateralized by the assets of this facility totaling approximately $0.45 million (2004: $0.6 million). (See Note 7 of the Consolidated Financial statements attached.)

Tableting, Filling and Packaging

When the Company discontinued its lotions and creams operation in fiscal 2003, the Company retained critical pieces of equipment for manufacture of DIAB II pre-mix powder and for quality control of ingredients and the final product. This equipment, plus the purchase of additional equipment in fiscal 2004 is adequate to meet production requirements of DIAB II (Sucanon) in the Mexico and Peru markets.

Sales and Administration Office

The sales and administration office is a 2,600 square foot leased premises located in suburban Vancouver. The use of this office is expected to be meet the Company^s requirements at least for the next three years.

Item 5 Operating and Financial Review and Prospects

A. Operating Results

US Generally Accepted Accounting Principles

The Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP"). Differences with generally accepted accounting principles in the United States ("U.S. GAAP"), are set forth in Note 19 to the Consolidated Financial Statements of the Company (Item 17 of this Form 20F). Some accounting policies have a significant impact on the amounts reported in these financial statements. The Consolidated Financial Statements includes a section describing the Company^s significant accounting policies

Year Ended March 31, 2005 Compared

With Year Ended March 31, 2004

Operating Results

During the year ended March 31, 2005, the Company^s business focus was on the development and the distribution of the Company^s Type II Diabetes drug variously known as DIAB II, Sucanon and Glucanin (hereinafter referred to as Sucanon). The Company^s business focus remains the development and distribution of Sucanon, particularly in Mexico and Latin America. Approval for the sale of the diabetes drug was received from Mexico in November, 2003.

The manufacture of Sucanon began in the fiscal year ended March 31, 2005. The Company manufactures a pre-mix of the active ingredients in British Columbia. The pre-mix is shipped to a non-related manufacturer in Mexico for tableting and packaging. Quality control of the tablets manufactured in Mexico is carried out by a random selection of coated and uncoated tablets which are sent to Vancouver for quality control tests by the Company^s production facilities and other facilities in the Vancouver area.

In December 2004, the Company began shipping its Type II Diabetes drug Sucanon to Mexican retailers. Shipments in the month had a wholesale value of $29,147 and were previously reported in the Company^s third quarter financial statements. The Company reviewed its accounting policy for revenue recognition and at that time was satisfied that the conditions for revenue recognition were met.

In July 2005, management met with the Company^s Audit Committee and the Company^s auditors to discuss the year end financial statements. The question of revenue recognition was discussed at length. It was noted that collections for these shipments did not commence until June 2005, which was beyond their credit terms. Upon further investigation, it was determined that there were unexpected delays in the launch of the TV advertising campaign for Sucanon until May 26, 2005. It was felt that a retailer would have had a reasonable expectation that the advertising should have started sooner and that as at December 31, 2004, the Company therefore had future performance obligations to meet prior to recognizing the $29,147 sales previously reported. In retrospect, with regards to conservatism, the shipments of December and subsequent shipments were not recognized until May 26, 2005 (the first quarter of the fiscal year ended March 31, 2006) when the TV advertising campaign began.

The third quarter financial statements of fiscal 2005 were amended and restated to satisfy this more stringent approach to the Company^s revenue recognition policy. The overall effect that the restatement on the third quarter results had assets reduced by $23,358, liabilities reduced by $3,743, non-controlling interest reduced by $4,432 and the net loss and deficit for the quarter and 9 month period was increased by $17,183. Although the overall effect of these adjustments may not be considered material, the fact that sales were being eliminated from the Consolidated Statements of Operations may be perceived as material.

The Company would like to emphasize that the product was shipped in the period and deferred the recognition of these sales until the quarter ended June 30, 2005. The Company believes that it has set in place safeguards to ensure the collection of these receivables.

Operating expenses increased from $1,460,669 in 2004 to $1,755,128 in 2005. The $294,459 increase represents a 20.2% increase over the prior year. Expenses with significant increases include stock based compensation increased $315,323, plant set-up costs increased $105,311. Interest on current debt was reduced by $131,454.

The net loss for the year was $1,516,071 which was $790,880 (34.3%) less than the $2,306,951 loss incurred in the year ended March 31, 2004.

Financial Highlights

Operating activities used $964,746 (2004: $225,003) in cash while financing activities provided $1,007,647 (2004: $564,851) in cash flow and investing activities provided $21,072 (2004: $19,172) in cash. As a result cash increased $63,973 (2004: $359,020) in the year. As at March 31, 2005, the working capital deficiency was $1,644,095 (2004: $2,156,781).

Management plans to raise debt and equity capital on a private placement basis to finance the operating and capital requirements of the Company. It is management^s intention to continue using debt and equity to finance planned capital expansion and initial market development in Latin America and other markets and operations until such time as the Company^s operations are self-sustaining.

During the year ended March 31, 2005, the Company issued a total of 2,592,091 common shares for consideration of $1,007,647. After taking into account the $1,516,071 loss in the year, and adding back the $386,504 in stock-based compensation expense and the common share issuances, the shareholders^ deficiency has increased from $556,264 as at March 31, 2004 to $678,184 as at March 31, 2005.

Year Ended March 31, 2004 Compared

With Year Ended March 31, 2003

Operating Results

During the year ended March 31, 2004, the Company^s business focus was on the development and the distribution of the Company^s Type II Diabetes drug variously known as DIAB II, Sucanon and Glucanin. The Company^s business focus remains the development and distribution of the Company^s Type II Diabetes drug, particularly in Mexico and Latin America. Approval for the sale of the diabetes drug was received from Mexico in November, 2003.

With the discontinuation, during the year ended March 31, 2003, of the operations of the Company^s subsidiary for the development, manufacture and distribution of lotions and creams, the Company had no revenues in the year ended March 31, 2004. Operating expenses for the year ended March 31, 2004 totaled $1,460,669 representing a $97,132 (6.2%) reduction from the $1,557,801 expenses incurred in 2003. With a change in Accounting Policy (see Note 2) the Company recognized $71,181 Stock-based compensation expense in 2004. Amortization expenses were reduced by $149,020 and interest expenses decreased $70,033. The loss from continuing operations was $1,460,669 in the year which was a $218,351 (13%) improvement from the $1,679,020 loss in 2003.

Note 22 of the Company^s audited financial statements summarizes the discontinued operations of the Company^s primary operating subsidiary, Biotech Laboratories Inc. ("Laboratories"). The discontinued operations had a $54,515 (2003: $684,667) loss from operations and a $870,327 (2003: $712,753) write-down of capital assets and inventories (in 2003).

The net loss for the year was $2,306,951 which was $769,489 (25%) less than the $3,076,440 loss incurred in the year ended March 31, 2003.

Financial Highlights

Operating activities used $225,003 (2003: $589,554) in cash while financing activities provided $564,851 (2003: $557,851) in cash flow and investing activities provided $19,172 (2002: used $1,212) in cash. As a result cash increased $359,020 (2003: $33,085 decrease) in the year. As at March 31, 2004, the working capital deficiency was $2,156,781.

Notes payable were reduced $2,830,691 (2003: $200,000) through the issuance of common and preferred shares.

Management plans to raise debt and equity capital on a private placement basis to finance the operating and capital requirements of the Company. It is management^s intention to continue using debt and equity to finance planned capital expansion and initial market development in Latin America and other markets and operations until such time as the Company^s operations are self-sustaining.

During the year ended March 31, 2004, the Company issued a total of 13,614,089 common shares for cash and non-cash consideration of $2,173,977. Also, 13,806,907 Series 1 Convertible Preferred Share warrants at $0.10 per share were exercised for a total consideration of $1,380,691. These preferred shares are voting and are convertible into Common Shares on a 1:1 basis. They have a cumulative cash dividend of 8% of the original amount contributed plus accrued interest. These two events had the effect of reducing the Company^s working capital deficiency and shareholders^ deficiency. After taking into account the $2,306,951 loss in the year and the above share issuances, the Shareholders^ deficiency has been reduced from $1,875,162 as at March 31, 2003 to $556,264 as at March 31, 2004.

Management believes it is highly probable that it will continue to meet its current cash requirements through debt and equity financing.

Foreign Currency Fluctuations

The Company^s main source of revenues and purchases are from Canada and the United States. The Canadian dollar has not been subjected to wide fluctuations when compared to the US dollar. As a result, foreign exchange has not had a material effect on the Company^s operations.

Legal Proceedings

On December 12, 2002, the Company filed a proposal under federal creditor protection legislation in Canada. The purpose of the filing of the proposal was to protect the interests of all stakeholders of the Company from an action taken by the landlord of Laboratories. The lease of the plant was in the Company^s name. The landlord in question undertook to seize Laboratories assets and the filing of the proposal prevented the landlord^s seizure from continuing.

On May 21, 2003, both the Company and Laboratories received approval from the Supreme Court of British Columbia in the matter of two proposals regarding its creditors pursuant to the Bankruptcy and Insolvency Act of Canada. These proposals, accepted by the required majority of creditors, allows for the operating subsidiary to maintain operations and generate funds from those operations to pay a portion of its pre-proposal liabilities. Under the proposal, preferred creditors shall be paid in full in priority to all claims of unsecured creditors. Provision for payment of claims of unsecured creditors shall be made in the lesser amount of 10% and $25,000 on each day, which is one year, one year six months and two years, respectively, after the end of the month of court ratification. The proposals also allow the companies to provide ongoing business to its suppliers. Creditors of the subsidiary after the filing of the proposal will be paid in full, in priority to preferred and general unsecured creditors.

The Company is the subject of legal disputes arising from the normal course of business. In 1998, Cheron Holdings Ltd., one of Holdings^ previous suppliers, filed a claim against Biotech Holdings Inc. in B.C. Supreme Court, Kamloops Division, for $711,000 which exceeds the payable amount on Holdings^ books by approximately $250,000. This supplier is claiming non-payment of outstanding amounts. Management has issued a $1 million counter claim to this suit. On September 11, 1998 Holdings sold the operational assets to Biotech Laboratories Inc., another subsidiary of Biotech, in exchange for the assumption of $2,000,000 in collateralized debts on the books of Holdings. This action was taken in order to continue operations until settlement of both the claim and the counter suit. The operations of Holdings are now being carried on by Laboratories. The outcome of the legal disputes is not determinable; however, in the opinion of management, they would not have a material adverse financial impact on the Company. There has been no legal activity on this claim since the filing of the Company^s $1 million counter claim.

Governmental, Economic, Fiscal and Political Influences

None of the above influences have materially affected the operations of the Company in the past. Canada is an original partner in the North American Free Trade Agreement (NAFTA) and as a result enjoys the economic benefits that this agreement provides.

B. Liquidity and Capital Resources

As referred to previously, the Company has incurred operating losses in each of the last three fiscal years and has an accumulated deficit of $27,658,798 and a Shareholders^ Deficiency of $678,184 at March 31, 2005. These factors, among others, raise substantial doubt about the Company^s ability to be able to continue as a going concern. The future of the Company and the realization of its asset values will depend upon the Company^s ability to obtain adequate financing and continuing support from shareholders and creditors including refinancing and to attain profitable operations.

Management plans to raise equity capital on a private-placement basis and debt to finance the operations and capital requirements of the Company. It is management^s intention to continue using debt and equity to finance its operations until such time as the Company^s operations are self-sustaining.

During the year ended March 31, 2005, the Company issued a total of 2,592,091 common shares for consideration of $1,007,647. After taking into account the $1,516,071 loss in the year, and adding back the $386,504 in stock-based compensation expense and the common share issuances, the Shareholders^ deficiency has increased from $556,264 as at March 31, 2004 to $678,184 as at March 31, 2005.

Operating activities used $964,746 (2004: $225,003) in cash while Financing activities provided $1,007,647 (2004: $564,851) in cash flow and Investing activities provided $21,072 (2004: $19,172) in cash. As a result cash increased $63,973 (2004: $359,020) in the year. As at March 31, 2005, the working capital deficiency was $1,644,095 (2004: $2,156,781).

Commitments for Capital Expenditures

The Company has not made any material commitments for capital expenditures during the year or during the subsequent interim period.

3. Research and Development

Research expenditures are expensed in the year in which they are incurred. During fiscal 2005 the company expensed $5,576 (2004 - $18,682 and 2003 - $46,135) in drug related research costs.

It is the Company^s policy to defer all costs that relate to the development of new products where management is satisfied as to the technological, commercial and financial viability of individual products. These costs are amortized on a straight-line basis over a five year period. All deferred development costs were fully amortized in the year ended March 31, 2004 and no additional amounts were capitalized.

D. Trend Information

The Company intends to maintain fixed monthly overhead in the $150,000 range during the balance of the 2006 fiscal year, while focusing strictly on advancing Sucanon (DIAB II) production and marketing for markets in Latin America. Maintenance of overhead at these relatively low levels is expected to be achieved by limiting any expansion of head-office overhead and sub-contracting sales and marketing to arms^ length companies in the Latin American markets where Sucanon is planned to be launched.

Mexico is a significant pharmaceutical market, the eighth largest in the world. The Mexico and Peru markets together comprise approximately 150 million people, with a higher prevalence of Type II Diabetes than in North America. Given that sales in these markets are projected to have relatively high profit margins for the Company, entry into these markets would be likely to have a significantly positive effect on the Company^s revenues. Furthermore, the Company plans to submit essentially the same regulatory application package, that has received approval in Mexico, in a number of other Latin American countries where the Company has distribution agreements, specifically, Chile, Argentina, Venezuela and Colombia.

On May 26, 2005 Biotech began television advertising of Sucanon in Mexico with a 28-minute infomercial about Type II Diabetes and Sucanon. Biotech spent $232,319 US on TV and radio broadcast costs during the quarter, an amount which is recoverable from the marketing company in Mexico, from ongoing sales of Sucanon. By agreement with the company^s marketing company in Mexico, Biotech^s advertising expenditures are refundable from the marketing company^s profits.

Given Sucanon sales growth during June and July, following the beginning of television advertising at the end of May, the decision was taken in July to continue television advertising. Accordingly, an additional $184,500 US was spent after the end of the period to continue broadcasting of the infomercial as well as radio broadcasts and/or 1-minute and 2-minute advertisements based on the infomercial.

Sucanon sales have continued to do well since the end of the period. July revenues were $124,974, more than double the revenues of the preceding month.

Since the end of June 2005, the Company has added Costco Mexico as a distributor and the Company^s sales through one of its other distributors, Grupo Marzam, have expanded to include deliveries to a government branch known as ISSSTE ("Instituto de seguridad y servicios Sociales de Trabajadores del Estado" or Governmental Workers, Social Security and Services Institute) whose mandate includes assisting Mexicans who cannot afford to obtain medications at normal market prices. ISSSTE outlets serve approximately 10 million Mexicans. Selling through Marzam to ISSSTE does not affect Biotech^s margins.

Discussions regarding expanding of Sucanon distribution in Latin America have continued with some distributors and initiated with others, focusing on distribution of Sucanon in Peru (where approval has been received), Venezuela, Chile, Argentina and Brazil. The Company^s aim is to distribute Sucanon through national distributors in the majority of Latin American markets.

Item 6 Directors, Senior Management and Employees

1. Directors , senior management and key employees

The following is a list of the current directors, senior officers and key employees of the Company, their municipalities of residence, their current position with the Company and their principal occupations during the past five years:

Name and Municipality of	Positions and Offices Held	Principal Occupation
Residence	with the Corporation
Robert B. Rieveley	President and Chief	President and Chief
Vancouver, BC	Executive Officer, director	Executive Officer of Biotech
	and member of the audit	Holdings Ltd., President of
	Committee since 1995	Biotech Laboratories Inc.;
		Vancouver, BC, Canada
Johan de Rooy, FCA	Director and Chairman of	Lecturer in the Faculty of
Vancouver, BC	the Audit Committee since	Commerce and Business
	1998	Administration at the
		University of British
		Columbia since 1984. He has
		served as a National
		Director for the Canadian
		Cancer Society, as the
		President of the British
		Columbia Cancer Agency
		and as a Member of Council
		for the Institute of
		Chartered Accountants of
		B.C.
Dr Geoff Herring	Scientific advisor to the	Now retired, Dr Herring was a
Vancouver, BC	Company since 1998	Professor of Chemistry at
	Director and member of the	the University of British
	Audit Committee since 1999	Columbia since 1982. Dr.
	Member of Medical	Herring has over 100
	Advisory Committee	refereed publications and
		the author of a textbook on
		chemistry
Gale Belding	Executive Vice-President	Executive Vice-President of
Vancouver, BC	and director since 1995	Biotech Holdings Ltd. and
		Biotech Laboratories Inc.
Cheryl Rieveley	Director since 1995	Treasurer of the Company
Vancouver, BC		and RCAR Investments
		Limited, Vancouver, BC
Lorne Brown	Chief Financial Officer since	Chief Financial Officer for
Langley, BC	June, 1999	the Company; prior thereto
		Controller and Director A&A
		International Industries Inc.,
		Port Coquitlam, BC

There are no arrangements or understandings between any of the officers or directors of the Company as to their election or employment, and no family relationships other than Robert and Cheryl Rieveley, who are husband and wife.

B. Compensation of Directors and Officers

The Company has three executive officers, Mr. Rieveley, Mrs. Belding and Mr. Brown (since June 1999). See "Directors and Officers of Company" above.

The compensation paid to the Company^s directors, officers and senior management during the fiscal period ended March 31, 2005 was $271,032.

In addition to the foregoing, all of the executive officers of the Company are also entitled to reimbursement of all reasonable business expenses and, from time to time, the grant of stock options (see "Options to Purchase Securities from Company or Subsidiaries - Stock Options", below).

No plan exists, and no amount has been set aside or accrued by the Company or any of its subsidiaries, to provide pension, retirement or similar benefits for directors and officers of the Company, or any of its subsidiaries.

Other than as herein set forth, the Corporation did not pay any additional compensation to the executive officers or directors (including personal benefits and securities or properties paid or distributed, which compensation was not offered on the same terms to all full time employees) during the last fiscal year.

C Board Practices

The directors of the Company are elected by the shareholders at each Annual General Meeting and typically hold office until the next Annual General Meeting at which time they may be re-elected or replaced.

The articles of the Company permit the directors to appoint directors to fill any vacancies that may occur on the board. The articles of the Company also permit the directors to add additional directors to the board between successive Annual General Meetings so long as the number appointed does not exceed by more than one third of the number of directors appointed at the last Annual General Meeting. Individuals appointed as directors to fill vacancies on the board or added as additional directors hold office like any other director until the next Annual General Meeting at which time they may be re-elected or replaced.

Stock options was the only form of directors compensation in fiscal 2005 (see "Options to Purchase Securities from Company or Subsidiaries - Stock Options").

Apart from the above, the Company does not have any service contracts with any Director or provide any benefits upon termination of employment.

The Company^s audit committee consists of two independent Directors Mr. Johan de Rooy, FCA, Committee Chairman and Dr. Geoff Herring together with Mr. Robert Rieveley, the Company^s President and Chief Executive Officer. The audit committee meets with the Company^s independent auditors annually where the role and responsibilities of both the auditor and the committee are reviewed. The independent Directors also meet with the auditor separately from management to discuss any outstanding issues. The Committee also meets on a quarterly basis to review and discuss the quarterly financial statements. All financial statements are approved by the Committee and their recommendations for approval are passed on to the Board of Directors for final approval.

The Company does not have a remuneration committee. Executive remuneration issues are decided at the full Board level.

D Employees

At March 31, 2005 the Company had 5 (2004 - 5; 2003 - 4) employees in Canada. Temporary employees are periodically required in periods of high volume production. The Company is not unionized.

E Share Ownership

The following is a list of Common Shares held by the directors, officers and employees referred to in Item 6 A. above as at the Company^s record date August 12, 2005:

Directors, Officers and Employees		Common	Percent	Series I	Percent	Total	Percent
		Shares Held	of	Convertible	of	Voting	of
		or Controlled	Common	Preferred	Preferred	Shares Held	Voting
			Shares	Shares Held	Shares	or Controlled	Shares
Robert Rieveley, C.E.O. (1)	19,617,365		21.2%	13,806,907	100.0%	33,424,272	31.5%
Gale Belding, Director, Executive V.P.	310,000		0.3%			310,000	0.3%
Johan de Rooy, Director	352,500		0.4%			352,500	0.4%
Dr. Geoff Herring, Director	167,000		0.2%			167,000	0.2%
Cheryl Rieveley, Director (1)
Lorne Brown, C.F.O.	50,000		0.1%			50,000	0.0%
Total Held	20,496,865		22.2%	13,806,907	100.0%	34,303,772	32.4%
Shares outstanding at Record Date	92,229,512			13,806,907		106,036,419

(1) Shares held directly and indirectly by the Rieveley Family Trust. Robert and Cheryl Rieveley are directors and officers of Biotech Holdings Ltd. They also have a beneficial interest in the Rieveley Family Trust which is owed over $450,000

The following is a summary of how the outstanding common share stock options have been allocated amongst the directors and officers, employees and consultants of the Company as of March 31, 2005:

				Total	Directors
Grant	Exercise	Expiry	Option	Options	and	Employees	Consultants
Date	Date	Date	Price	Outstanding	Officers
15-Aug-03	15-Dec-03	15-Dec-05	$ 0.14	50,000	-	-	50,000
03-Nov-03	03-Mar-04	03-May-05	$ 0.23	75,000	-	-	75,000
02-Jan-04	02-May-04	02-Jan-06	$ 0.25	896,000	560,000	-	336,000
11-Aug-04	11-Feb-05	11-Aug-06	$ 0.54	25,000	-	25,000	-
11-Aug-04	11-Aug-05	11-Aug-06	$ 0.54	25,000	-	25,000	-
11-Aug-04	11-Feb-06	11-Aug-06	$ 0.54	25,000	-	25,000	-
26-Aug-04	26-Feb-05	26-Aug-06	$ 0.66	50,000	-	-	50,000
26-Aug-04	26-Aug-05	26-Aug-06	$ 0.66	50,000	-	-	50,000
26-Aug-04	26-Feb-06	26-Aug-06	$ 0.66	50,000	-	-	50,000
24-Nov-04	24-Apr-05	24-Mar-06	$ 0.55	545,000	430,000	40,000	75,000
24-Nov-04	24-Apr-06	24-Mar-07	$ 0.55	770,000	570,000	100,000	100,000
24-Nov-04	24-Apr-07	24-Mar-08	$ 0.55	1,290,000	1,000,000	160,000	130,000
		Total		3,851,000	2,560,000	375,000	916,000

The allocation of options outstanding to Directors and Officers as of March 31, 2005 is as follows:

Grant Date	02-Jan-04	24-Nov-04	24-Nov-04	24-Nov-04
Exercise Date	02-May-04	24-Apr-05	24-Apr-06	24-Apr-07
Expiry Date	02-Jan-06	24-Mar-06	24-Mar-07	24-Mar-08
Option Price	$ 0.25	$ 0.55	$ 0.55	$ 0.55	Total
Robert Rieveley	190,000	150,000	200,000	500,000	1,040,000
Cheryl Rieveley	90,000	70,000	90,000	120,000	370,000
Johan de Rooy	90,000	50,000	70,000	100,000	310,000
Gale Belding	-	70,000	90,000	120,000	280,000
Geoff Herring	-	50,000	70,000	100,000	220,000
Lorne Brown	190,000	40,000	50,000	60,000	340,000
Total	560,000	430,000	570,000	1,000,000	2,560,000

There are no arrangements involving the employees in the capital of the company, including any arrangement involving the issue or granting of options or shares or securities of the Company.

Private Placements and Common Share Warrants

During the year ended March 31, 2005, the Company completed with both third party and related party investors ("the Investors") a $764,240 private placement of 1,528,480 common shares for cash. The allocation between related and third party investors was 480,000 common shares for the related parties and 1,048,480 common shares for third parties. The Investors also received 1,528,480 warrants to acquire common shares at $ 0.55 per share, expiring on October 26, 2006.

During the year ended March 31, 2004, the Company completed with both third party and related party investors ("the Investors") a $425,828 private placement of 1,826,777 common shares for cash of $325,828 and settlement of debt of $100,000. The allocation between related and third party investors was 1,179,185 common shares for the related party and 647,592 common shares for third parties. The Investors also received 1,826,777 warrants to acquire common shares at $0.375 per share, expiring on January 27, 2006. Also during the year ended March 31, 2004, the Company issued 544,014 common shares for the reduction of $106,387 in outstanding debts due to third parties.

Warrants to Purchase Common Shares

The following table summarizes the number of fully exercisable common share warrants outstanding and the exercise price thereof:

	2005	2004	2003
Outstanding, beginning of year	1,826,777	9,561,798	15,061,798
Issued at $0.10 per share
expiring May 15,2003	-	-	2,000,000
Issued at $0.375 per share
expiring January 27,2006	-	1,826,777	-
Issued at $0.55 per share
expiring October 26,2006	1,528,480	-	-
Expired August 3, 2002 $0.65	-	-	(3,000,000)
Expired December 14, 2002 $0.25	-	-	(4,500,000)
Exercised $0.375	(111,111)	-	-
Exercised $0.14	-	(561,798)	-
Exercised $0.16	-	(4,000,000)	-
Exercised $0.17	-	(3,000,000)	-
Exercised $0.10	-	(2,000,000)	-
Outstanding, end of year	3,244,146	1,826,777	9,561,798

Preferred Share Warrants

At March 31, 2005 and 2004, 13,806,907 convertible preferred shares were outstanding from the exercise of preferred share warrants during 2004. No cash dividend had been declared to date. However, the 8% per annum dividend on these shares for the year ended March 31, 2005 would have amounted to $110,455 (2004: $67,900; 2003: $Nil). The cumulative effect to March 31, 2005 of the dividend at 8% per annum from date of issuance would have amounted to $178,355. This would have an insignificant effect on net loss or on basic and diluted loss per share.

The following table summarizes the Company^s preferred share warrants outstanding at March 31, 2005, 2004 and 2003, and the changes for the years then ended:

	Exercise
	Price	2005	2004	2003
Balance outstanding,
beginning of year	$ 0.21	-	5,700,000	5,700,000
	$ 0.10	-	13,806,907	-
		-	19,506,907	5,700,000
Issued	$ 0.10	-	-	10,000,000
Issued	$ 0.10	-	-	3,806,907
Exercised	$ 0.10	-	(13,806,907)	-
Expired	$ 0.21	-	(5,700,000)	-
Balance outstanding and
exercisable, end of year		-	-	19,506,907

Item 7 Major Shareholders and Related Party Transactions

A Major Shareholders

On December 14, 1995, the shareholders of Conserve, now the Company, approved the acquisition of Holdings. Control of the Company changed upon the closing of the share exchange on January 25, 1996 (see Exhibit 3.1 previously filed with the March 31, 1996 Form 20F). With the issuance of 15,000,000 of a total of 18,241,665 common shares, the shareholders of Holdings then held approximately 82% of the issued and outstanding shares of the Company. As at the Annual General Meeting record date (August 12, 2005), the Company had a total of 92,229,512 (2004: 87,542,219) common shares issued and outstanding. Also, there were 13,806,907 Series I Convertible Preferred Shares issued and outstanding on March 31, 2005 and 2004. These preferred shares are voting and are convertible into Common Shares on a 1:1 basis. They have a cumulative cash dividend of 8% of the original amount contributed plus accrued interest.

				Percent		Percent
Class of Shares		Shares Owned	Percent of	Held in		Held in
		Aug 12, 2005	Class	2004		2003
Common	Rieveley Family Trust	19,617,365	21.3%	23.8%		23.0%
	Immunis Holdings Corp.	8,613,419	9.3%	9.8%		11.7%
		28,230,784	30.6%	33.6%		34.7%
	Total Outstanding Shares		92,229,512	87,542,219		73,928,130
Preferred	Rieveley Family Trust	13,806,907	100.0%	100.0%	0.0%
		13,806,907	100.0%	100.0%	0.0%
Total Voting	Shares:
	Rieveley Family Trust	33,424,272	31.5%	23.0%	29.8%
	Immunis Holdings Corp.	8,613,419	8.1%	11.7%	12.3%
	Total	42,037,691	39.6%	34.7%	42.1%
	Total Outstanding Shares		106,036,419	73,928,130	69,928,130

During the year ended March 31, 2003, the note holders were acquired by the Rieveley Family Trust. As a result, the shareholdings of Penne Investment Services Ltd., Wenroth Limited and RCAR Investments Limited have been consolidated into the holdings of the Rieveley Family Trust for comparison purposes.

The major shareholders of the Company do not have different voting rights in comparison with other shareholders.

U.S. Shareholders

The following table indicates the approximate number of registered holders of common shares with United States addresses and the portion and percentage of common shares so held in the United States. On August 12, 2005 (the record date for the Annual General Meeting), 92,229,512 common shares were outstanding.

Total Number Of Registered Holders 244 Number of U.S. Registered Holders 201 Number of Registered Common Shares Held in the U.S. 6,586,426 Percentage of Registered Common Shares Held in the U.S. 7.1%

The computation of the number and percentage of common shares held in the United States is based upon the number of common shares held by record holders with United States addresses and by trusts, estates or accounts with United States addresses as disclosed to the Company following inquiry to all record holders known to the trustees, executors, guardians, custodians, or the fiduciaries holding common shares for one or more trusts, estates or accounts. United States residents may beneficially own common shares held of record by non-United States residents.

Control

Except as disclosed above, to the best of the Company^s knowledge, the Company is not directly or indirectly owned or controlled by another corporation(s), any foreign government, or by any other natural or legal person(s) severally or jointly. Furthermore, the company is not aware of any arrangements for the change of control of the Company or subsequent arrangements that would result in a change of its control.

B Related Party Transactions

Allburg Holdings Inc. ("Allburg"), previously known as Wanchi Inc., has been granted an exclusive license to manufacture and sell the Company^s Type II Diabetes drug DIAB II (Sucanon), make any claims and to use all patent rights in all countries outside Oriental Asia. As a condition of this license Allburg must sub-license these rights, and this sub-license may only be granted to companies that are at least 50% owned by the Company (see Exhibit 3.8 to the Company^s Registration Statement previously filed with the March 31, 1996 Form 20-F). During 1999, Allburg sold a 25% interest in DIAB II (Sucanon) to Immunis Corp. In January 2001, the Company purchased that 25% interest from Immunis Corp. by issuing 8,613,419 of its common shares at $0.26 per share to Immunis Corp. Pursuant to US GAAP, shares should be valued at the date of issue. The closing price of 26 cents per share represents a 12 percent discount of the weighted average share price before and after the date of the transaction. As per the above analysis, the number of shares issued represents a discount from their intrinsic worth.

Note 11 to the Consolidated Financial Statements highlights the following amounts paid or payable to related parties based on exchange values which represented the amounts agreed upon by the related parties:

	2005	2004	2003
Management fees paid to an officer	$ 144,000	$ 144,000	$ 144,000
Salaries and benefits paid to a director and officer	127,032	125,368	124,958
Interest accrued on Notes Payable	63,239	117,119	250,362
Rent and services paid to companies controlled by
Directors	98,795	36,860	1,000
Net sales to (returns from) a company controlled by a director	-	(65,135)	70,813
Purchase of equipment from a significant
Shareholder	-	13,438	-
Directors fees paid in year	-	-	2,000

Due to Related Parties

The following amounts were due to related parties on March 31 of each year:

	2005	2004	2003
Due to Related Parties - Unsecured
Amounts due to a director and companies controlled by a
director are unsecured, payable on demand and bear no
interest.	$ 33,097	$ 38,119	$ 0
Notes payable to a company controlled by the Company^s
president, are unsecured, payable on demand and bear interest
at 8% per annum compounded annually. During 2005 $18,950
(2004 - $17,547; 2003 - $16,247) in interest was accrued.	255,829	236,879	219,332
Total Unsecured	$ 288,926	$ 274,998	$ 219,332
Due to Related Parties - Secured
Notes payable bearing interest at the rate of 8% per annum
compounded annually and due on demand. Collateralized by a
general security agreement providing a charge over the assets
of the Company.
During the year ended March 31, 2003, the note holders were
acquired by a related party. During that year $100,000 in notes
payable were settled through a third party investor.
Further, cash advances of $7,080 were received in connection
with these notes payable.
During the year ended March 31, 2003, the Company received
an extension for the due date of these notes payable by one
year to April 1, 2003 in consideration of issuing 10,000,000
convertible preferred share warrants to the holders of the notes.
The Company then received a further extension for the due
date of these notes payable by one year to April 1, 2004 in
consideration of issuing 13,806,907 convertible preferred share
warrants to the holders of the notes. Each convertible preferred
Share warrant entitled the holder to purchase one voting, 8%
cumulative preferred share, which is convertible into one
common share at $0.10 per share until June 4, 2004.
During the year ended March 31, 2004, the notes were reduced
through the exercising of 9,000,000 common share warrants for
$1,350,000 and the exercising of 13,806,907 convertible
preferred share warrants for $1,380,637. Also during the year,
the amount was reduced by $37,997 from payments received
from equipment sales.
During 2005, the notes were reduced by $200,000 paid directly
to the lender.
During 2005, $44,289 (2004 - $159,572 2003 - $234,115) in
interest was accrued	451,166	605,777	3,101,183
Total Secured	$ 451,166	$ 605,777	$3,101,183

Item 8 Financial Information

Audited Consolidated Financial Statements for March 31, 2005, together with the report of the auditors are attached at the end of this filing. The Consolidated Balance Sheets provide a two year comparison, all other statements provide three year comparative statements.

Sales and capital assets by geographic region are summarized in Note 15 of the Audited Consolidated Financial Statements.

Legal Proceedings

On December 12, 2002, the Company filed a proposal under federal creditor protection legislation in Canada. The purpose of the filing of the proposal was to protect the interests of all stakeholders of the Company from an action taken by the landlord of Laboratories. The lease of the plant was in the Company^s name. The landlord in question undertook to seize Laboratories assets and the filing of the proposal prevented the landlord^s seizure from continuing.

On May 21, 2003, both the Company and Laboratories received approval from the Supreme Court of British Columbia in the matter of two proposals regarding its creditors pursuant to the Bankruptcy and Insolvency Act of Canada. These proposals, accepted by the required majority of creditors, allows for the operating subsidiary to maintain operations and generate funds from those operations to pay a portion of its pre-proposal liabilities. Under the proposal, preferred creditors shall be paid in full in priority to all claims of unsecured creditors. Provision for payment of claims of unsecured creditors shall be made in the lesser amount of 10% and $25,000 on each day, which is one year, one year six months and two years, respectively, after the end of the month of court ratification. The proposals also allow the companies to provide ongoing business to its suppliers. Creditors of the subsidiary after the filing of the proposal will be paid in full, in priority to preferred and general unsecured creditors.

The Company is the subject of legal disputes arising from the normal course of business. In 1998, Cheron Holdings Ltd., one of Holdings^ previous suppliers, filed a claim against Biotech Holdings Inc. in B.C. Supreme Court, Kamloops Division, for $711,000 which exceeds the payable amount on Holdings^ books by approximately $250,000. This supplier is claiming non-payment of outstanding amounts. Management has issued a $1 million counter claim to this suit. On September 11, 1998 Holdings sold the operational assets to Biotech Laboratories Inc., another subsidiary of Biotech, in exchange for the assumption of $2,000,000 in collateralized debts on the books of Holdings. This action was taken in order to continue operations until settlement of both the claim and the counter suit. The operations of Holdings are now being carried on by Laboratories. The outcome of the legal disputes is not determinable; however, in the opinion of management, they would not have a material adverse financial impact on the Company. There has been no legal activity on this claim since the filing of the Company^s $1 million counter claim.

Dividend Policy

The Company has not paid dividends on the common shares in any of its last three fiscal years. The directors of the Company will determine if and when dividends should be declared and paid in the future based on the Company^s financial position at the relevant time. All of the common shares of the Company are entitled to an equal share in any dividends declared and paid.

Significant Changes

There have been no significant changes to the Company^s operations since March 31, 2005.

Item 9 The Offer and Listing

Biotech Holdings Ltd. (the "Company") was incorporated in Alberta, Canada and is an integrated pharmaceutical company whose common shares traded on The Alberta Stock Exchange (the "ASE") until November 1999 at which time the ASE was merged into The Canadian Venture Exchange (the "CDNX", now the TSX Venture Exchange) under the symbol "BIO.V". The Company also trades on the NASD OTC-BB under the symbol "BIOHF". In 2001 the Company was listed on the Frankfurt Stock Exchange under the symbol "925970.F".

The following summarizes the high and low prices and the combined trading volume of the Company^s common shares on the TSX Venture Exchange:

Calendar Period	High (Cdn$)	Low (Cdn$)	Volume
Monthly Data (last six months)
August 2005	0.42	0.19	3,113,700
July 2005	0.42	0.31	1,165,600
June 2005	0.50	0.39	1,183,800
May 2005	0.56	0.40	1,122,650
April 2005	0.59	0.38	1,634,100
March 2005	0.49	0.35	1,554,650
Calendar Period	High (Cdn$)	Low (Cdn$)	Volume
Quarterly Data
June 30, 2005	0.59	0.38	3,940,550
March 31, 2005	0.68	0.35	3,759,600
December 31, 2004	0.75	0.45	4,623,700
September 30, 2004	0.79	0.45	4,692,600
June 30, 2004	1.23	0.54	17,739,700
March 31, 2004	1.03	0.22	21,085,000
December 31, 2003	0.34	0.24	4,416,810
September 30, 2003	0.34	0.05	16,009,300
June 30, 2003	0.07	0.04	6,540,900
Calendar Period	High (Cdn$)	Low (Cdn$)	Volume
Past 5 Years Annual Data
Year ended March 31,
2005	1.23	0.35	30,815,600
2004	1.03	0.04	48,052,010
2003	0.14	0.02	14,685,088
2002	0.46	0.04	11,513,753
2001	0.90	0.22	4,686,401

The following summarizes the high, low and closing prices of the Company^s common shares on the NASD - OTC-BB:

Monthly Data (last six months):

Date	High (US$)	Low (US$)	Close (US$)
August 2005	0.2800	0.1700	0.2500
July 2005	0.3300	0.2300	0.2400
June 2005	0.3900	0.2900	0.3200
May 2005	0.4600	0.3000	0.3300
April 2005	0.4800	0.3100	0.4500
March 2005	0.4200	0.2900	0.3700

Quarterly Data:

Date Range	High (US$)	Low (US$)	Close (US$)
April - June 2005	0.4800	0.2900	0.3200
January - Mar. 2005	0.5500	0.2900	0.3700
October - Dec. 2004	0.6400	0.3600	0.5000
July - Sept. 2004	0.6100	0.3400	0.4700
April - June 2004	0.9300	0.3900	0.4400
January - Mar. 2004	0.7700	0.1700	0.6800
October - Dec. 2003	0.2600	0.1700	0.2000

On August 12, 2005, 88,035,719 common shares and 13,806,907 Series I Convertible Preferred Shares were outstanding.

There have been no significant trading suspensions in the past three years.

Item 10 Additional Data

A Share Capital

This information is not required to be provided because it is an annual report filing.

B Memorandum and Articles of Association

The Company^s Articles of Incorporation. Bylaws and other agreements were filed with the Company^s original 20-F filing received by the SEC on March 11, 1997.

C Material Contracts

The Company has not entered into any material contracts in the past two years other than during the ordinary course of business or have been previously disclosed in this filing.

D Exchange Controls

Canada has no system of currency exchange controls. There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including but not limited to, foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-resident holders of the Company^s securities.

There is no limitation on the right of non-resident or foreign owners to hold such securities or vote, imposed by Canadian law or by the charter or other constituent documents of the Company, as to the common shares of the Company to be registered hereunder.

The Company^s accounts are maintained in Canadian dollars. In this Annual Report, all dollar amounts are expressed in Canadian dollars except where otherwise indicated.

E Taxation

Under the Canada-United States Tax Convention Act of 1984, dividends paid by a Canadian company to residents of the United States are subject to a 15% withholding tax in Canada. However, the withholding tax is reduced to 10% of the gross amount if the beneficial owner in the United States is a company which owns at least 10% of the voting stock of the Canadian company.

F Dividends and Paying Agents

This information is not required to be provided because it is an annual report filing.

G Statement of Experts

This information is not required to be provided because it is an annual report filing.

H Documents on Display

The Company^s Articles of Incorporation. Bylaws and other agreements were filed with the Company^s original 20-F filing received by the SEC on March 11, 1997.

Item 11 Quantitative and Qualitative Disclosures About Market Risk

Not applicable at this time.

Item 12 Description of Securities Other than Equity Securities

Not applicable.

Item 13 Defaults, Dividend Arrearages and Delinquencies

No Preference shares have been issued by the Company and therefore has not had any dividends.

Item 14 Material Modifications to the Rights of Security Holders and Use of Proceeds

There have been no material modifications to the rights of Security Holders.

Item 15 [Reserved]

Not applicable.

Item 16 [Reserved]

Not applicable.

CONTROLS AND PROCEDURES

As of March 31, 2005, we, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information we are required to disclose in the reports we file under the Securities Exchange Act of 1934, within the time periods specified in the SEC^s rules and forms. Our management necessarily applied its judgement in assessing the costs and benefits of those controls and procedures, which by their nature can provide only reasonable assurance regarding management^s control objectives.

There have been no changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 17 Financial Statements

The financial statements of the Company are annexed hereto and have been prepared by the Company in accordance with generally accepted accounting principles in Canada, which differ in certain respects from generally accepted accounting principles in the United States as outlined in the financial statements. The table of contents to the consolidated financial statements and accompanying notes to the consolidated financial statements is attached to this Form 20-F.

The Consolidated Financial Statements are filed as part of this registration statement.

Financial Statements

The following financial statements are attached to and form part of this Annual Report:

Consolidated Financial Statements of the Company	Page(s)
Report of Independent Registered Chartered Accountants	54
Comments by Independent Registered Chartered Accountants for U.S. Readers
on Canada-United States of America Reporting Differences	55
Consolidated Balance Sheets as of fiscal years ended 31 March 2005 and 2004	56
Consolidated Statements of Operations for the fiscal years ended March 31, 2005, 2004
and 2003	57
Consolidated Statements of Changes in Shareholders^ Deficiency for the fiscal years
ended March 31, 2005, 2004 and 2003	58
Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2005, 2004
and 2003	59
Summary of Significant Accounting Policies and Notes to the Financial Statements	60 - 83

All financial statement schedules described in Regulation S-X are omitted because the information is not required, is not material or is otherwise included in the financial statements or the related notes thereto.

Item 19 Exhibits

No Exhibits are attached to this filing

CERTIFICATION required by Rule 13a-14(b) (17 CFR 240.13a-14(a)) or Rule 15d-14(a)
(17 CFR 240.15d-14(a)) under the Securities and Exchange Act of 1934, as amended

I, Robert B. Rieveley, the President and Chief Executive Officer of Biotech Holdings Ltd., certify that:

1. I have reviewed this Annual Report ("report")on Form 20-F for the fiscal year ended March 31, 2005 of Biotech Holdings Ltd. (the "Company")
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company^s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3. Evaluated the effectiveness of the company^s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by his report based on such evaluation; and
4. Disclosed in this report any change in the company^s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company^s internal control over financial reporting; and

1. The company^s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company^s auditors and the audit committee of the company^s board of directors (or persons performing the equivalent functions):

1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company^s ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company^s internal control over financial reporting.

Date: 12 September, 2005

/s/ Robert B. Rieveley

Robert B. Rieveley,

President and Chief Executive Officer

CERTIFICATION required by Rule 13a-14(b) (17 CFR 240.13a-14(a)) or Rule 15d-14(a)
(17 CFR 240.15d-14(a)) under the Securities and Exchange Act of 1934, as amended

I, Lorne D. Brown, the Chief Financial Officer of Biotech Holdings Ltd., certify that:

1. I have reviewed this Annual Report ("report")on Form 20-F for the fiscal year ended March 31, 2005 of Biotech Holdings Ltd. (the "Company")
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company^s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3. Evaluated the effectiveness of the company^s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by his report based on such evaluation; and
4. Disclosed in this report any change in the company^s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company^s internal control over financial reporting; and

1. The company^s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company^s auditors and the audit committee of the company^s board of directors (or persons performing the equivalent functions):

1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company^s ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company^s internal control over financial reporting.

Date: 12 September, 2005

/s/ Lorne D. Brown

Lorne D. Brown,

Chief Financial Officer

CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350 as adopted pursuant to Section 906
Of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Biotech Holdings Ltd. (the "Company") on Form 20-F for the year ended March 31, 2005, as filed with the Securities Exchange Commission on the date hereof (the "REPORT"), I, Robert B. Rieveley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: September __12___, 2005

/s/ Robert B. Rieveley

______________________________________

Robert B. Rieveley, President and C.E.O.

CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350 as adopted pursuant to Section 906
Of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Biotech Holdings Ltd. (the "Company") on Form 20-F for the year ended March 31, 2005, as filed with the Securities Exchange Commission on the date hereof (the "REPORT"), I, Lorne D. Brown, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: September _12__, 2005

/s/ Lorne D. Brown

______________________________________

Lorne D. Brown, C.F.O.

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.

Date _12 September, 2005 Biotech Holdings Ltd.

/s/ Robert B. Rieveley

__________________________

Robert B. Rieveley, President

and Chief Executive Officer

Biotech Holdings Ltd.

Consolidated Financial Statements

(Expressed in Canadian Dollars)

For the years ended March 31, 2005 and 2004

Biotech Holdings Ltd.

Consolidated Financial Statements

(Expressed in Canadian Dollars)

For the years ended March 31, 2005 and 2004

Contents

Report of Independent Registered Chartered Accountants 3

Comments by Independent Registered Chartered Accountants for U.S. Readers

On Canada-United States of America Reporting Differences 4

Consolidated Financial Statements

Balance Sheets 5

Statements of Operations 6

Statement of Changes in Shareholders^ (Deficiency) 7

Statements of Cash Flows 8

Summary of Significant Accounting Policies 9 - 13

Notes to the Financial Statements 14 - 32

Report of Independent Registered Chartered Accountants

To the Shareholders of

Biotech Holdings Ltd.

We have audited the Consolidated Balance Sheets of Biotech Holdings Ltd. as at March 31, 2005 and 2004 and the Consolidated Statements of Operations, Changes in Shareholders^ (Deficiency) and Cash Flows for each of the years in the three year period ended March 31, 2005. These consolidated financial statements are the responsibility of the Company^s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance 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 consolidated 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.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2005 and 2004 and the results of its operations and its cash flows for each of the years in the three year period ended March 31, 2005 in accordance with Canadian generally accepted accounting principles.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company^s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ SADOVNICK TELFORD + SKOV

Sadovnick Telford + Skov

Independent Registered Chartered Accountants

Vancouver, British Columbia, Canada

July 14, 2005

Comments by Independent Registered Chartered Accountants for U.S. Readers On Canada-United States of America Reporting Differences

To the Shareholders of

Biotech Holdings Ltd.

The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company^s ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements. Our report to the shareholders dated July 14, 2005 is expressed in accordance with Canadian reporting standards which do not require a reference to such events and conditions in the Report of Independent Registered Chartered Accountants when these are adequately disclosed in the financial statements.

/s/ SADOVNICK TELFORD + SKOV

Sadovnick Telford + Skov

Independent Registered Chartered Accountants

Vancouver, British Columbia, Canada

July 14, 2005

Biotech Holdings Ltd.

Consolidated Balance Sheets

(Expressed in Canadian Dollars)

March 31		2005		2004
Assets
Current
	Cash and cash equivalents	$ 440,604	$ 376,631
	Amounts receivable (Note 2)	89,317	19,284
	Inventory (Note 3)	38,852	-
	Deposits and prepaid expenses	-	11,450
		568,773	407,365
Property, plant and equipment
	Continuing operations (Note 4)	141,098	154,025
	Held for resale (Notes 4 and 15)	33,506	60,000
Patent interests (Note 5)		1,015,650	1,609,363
Deferred costs (Note 6)		-	1,472
		$ 1,759,027	$ 2,232,225
Liabilities and Shareholders^ (Deficiency)
Liabilities
Current
	Accounts payable and accrued liabilities (Note 18)	$ 1,472,776	$ 1,683,371
	Due to related parties (Note 7)	740,092	880,775
		2,212,868	2,564,146
Notes payable (Note 8)		224,343	224,343
		2,437,211	2,788,489
Shareholders^ (deficiency)
	Share capital (Note 9) - common voting shares	25,089,637	24,043,775
	- convertible preferred shares	1,380,691	1,380,691
	Contributed surplus	510,286	161,997
	Deficit	(27,658,798)	(26,142,727)
		(678,184)	(556,264)
		$ 1,759,027	$ 2,232,225

Commitments (Note 13); Contingency (Note 14); Subsequent events (Note 20)

Approved by the Board: /s/ Robert Rieveley Director /s/ Gale Belding Director

The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.

Biotech Holdings Ltd.

Consolidated Statements of Operations

(Expressed in Canadian Dollars)

For the years ended March 31		2005	2004	2003
Sales		$ -	$ -	$ 9,731
Cost of sales		-	-	40,134
Gross profit		-	-	(30,403)
Expenses
	Amortization	612,430	610,206	759,226
	Stock-based compensation	386,504	71,181	90,816
	General and administrative	438,704	457,651	406,538
	Interest - long-term debt	-	-	272,122
	- current debt and other	71,005	202,459	370
	Professional fees	41,528	61,082	47,879
	Plant set-up costs	112,519	7,208	-
	Office rent, utilities and maintenance	92,438	50,882	71,666
		1,755,128	1,460,669	1,648,617
Loss from continuing operations		(1,755,128)	(1,460,669)	(1,679,020)
Gain from settlement of debt and restructuring		240,161	78,560	-
Loss from discontinued operations
	- results of operations (Note 17)	-	(54,515)	(684,667)
	- write-down of assets	(1,104)	(870,327)	(712,753)
Net loss for the year		$ (1,516,071)	$ (2,306,951)	$ (3,076,440)
Basic and diluted loss per common share
	From continuing operations	$ (0.02)	$ (0.02)	$ (0.02)
	From discontinued operations	(0.00)	(0.01)	(0.02)
Net loss for the year		$ (0.02)	$ (0.03)	$ (0.04)
Weighted average number of common shares outstanding		88,691,806	77,523,091	71,785,664

The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.

Biotech Holdings Ltd.

Consolidated Statement of Changes in Shareholders^ (Deficiency)

(Expressed in Canadian Dollars)

For the years ended March 31, 2005, 2004 and 2003
		Share	Capital
		Convertible		Convertible			Total
	Common	Preferred	Common	Preferred	Contributed		Shareholders^
	Shares	Shares	Shares	Shares	Surplus	Deficit	(Deficiency)
	Number	Number	Amount	Amount
Balance, March 31, 2002	69,928,130	-	$ 21,569,798	$ -	$ -	$ (20,759,336)	$ 810,462
Common shares issued for:
Settlement of secured debt Reduction in outstanding debt	2,000,000 2,000,000	-     -	100,000 200,000	-     -	-     -	-     -	100,000 200,000
Stock-based compensation	-	-	-	-	90,816	-	90,816
Net loss	-	-	-	-	-	(3,076,440)	(3,076,440)
Balance, March 31, 2003	73,928,130	-	21,869,798	-	90,816	(23,835,776)	(1,875,162)
Common shares issued:
For cash -
by private placement	1,397,592	-	325,828	-	-	-	325,828
by stock options exercised	1,681,500	-	213,110	-	-	-	213,110
by warrants exercised	561,798	-	78,652	-	-	-	78,652
For debt settlement -
by private placement	973,199	-	206,387	-	-	-	206,387
by warrants exercised	9,000,000	-	1,350,000	-	-	-	1,350,000
Convertible preferred shares issued:
For debt settlement -
by warrants exercised	-	13,806,907	-	1,380,691	-	-	1,380,691
Stock-based compensation	-	-	-	-	71,181	-	71,181
Net loss	-	-	-	-	-	(2,306,951)	(2,306,951)
Balance, March 31, 2004	87,542,219	13,806,907	24,043,775	1,380,691	161,997	(26,142,727)	(556,264)
Common shares issued:
For cash -
by private placement	1,528,480	-	764,240	-	-	-	764,240
by stock options exercised	952,500	-	201,740	-	-	-	201,740
by warrants exercised	111,111	-	41,667	-	-	-	41,667
Stock-based compensation	-	-	-	-	386,504	-	386,504
Options exercised for which stock-based compensation
has been recorded	-	-	38,215	-	(38,215)	-	-
Net loss	-	-	-	-	-	(1,516,071)	(1,516,071)
Balance, March 31, 2005	90,134,310	13,806,907	$ 25,089,637	$ 1,380,691	$ 510,286	$ (27,658,798)	$ (678,184)

The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.

Biotech Holdings Ltd.

Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

For the years ended March 31		2005	2004	2003
Cash provided by (used in)
Operating activities
	Net loss from continuing operations	$ (1,755,128)	$ (1,460,669)	$ (1,588,204)
	Items not involving cash:
	Amortization	612,430	610,206	759,226
	Stock-based compensation	386,504	71,181	-
	Changes in non-cash operating working capital items (Note 10)	(208,552)	496,571	188,728
	Net cash (used in) operating activities from
	continuing operations	(964,746)	(282,711)	(640,250)
	Cash flows from discontinued operations	-	57,708	50,706
		(964,746)	(225,003)	(589,544)
Financing activities
	(Increase) in due from related parties	-	(21,036)	(104,430)
	(Decrease) increase in due to related parties	-	(31,703)	2,875,764
	(Reduction) of notes payable	-	-	(2,545,731)
	Issuance of notes payable	-	-	332,068
	Issuance of common shares	1,007,647	617,590	-
		1,007,647	564,851	557,671
Investing activities
	Purchase of property, plant and equipment	(5,422)	(34,091)	(1,212)
	Proceeds on disposal of property, plant and equipment held for resale	26,494	53,263	-
		21,072	19,172	(1,212)
Increase (Decrease) in cash and cash equivalents		63,973	359,020	(33,085)
Cash and cash equivalents, beginning of year		376,631	17,611	50,696
Cash and cash equivalents, end of year		$ 440,604	$ 376,631	$ 17,611
Cash and cash equivalents are comprised of: Cash Short-term investments		$ 179,621 260,983	$ 176,631 200,000	$ 17,611 -
		$ 440,604	$ 376,631	$ 17,611
Supplemental disclosure of cash flow information and non-cash transactions (Note 10)

The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.

Biotech Holdings Ltd.

Summary of Significant Accounting Policies

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"), which in these circumstances conform in all material respects with United States generally accepted principles ("US GAAP") except as described in Note 19.

Basis of Consolidation

These consolidated financial statements include the accounts of Biotech Holdings Ltd. ("Biotech") (the "Company") and its subsidiaries: 401718 B.C. Ltd. (formerly Biotech Holdings Inc.) ("Holdings"), Biotech Laboratories Inc. ("Laboratories"), 314202 B.C. Ltd. ("314202"), Biotech Pharmaceutical Ltd., Echo Health & Beauty Ltd. ("Echo"), Volque Pharmaceutical Company Ltd. ("Volque"), and 75% of Smith Rothe Pharmaceutical, Inc. ("Smith Rothe"). Smith Rothe has been granted an exclusive license to sub-contract the manufacture and marketing of the Company^s Type II diabetes drug known variously as DIAB II, Sucanon and Glucanin make claims and to use all patent rights in countries outside Oriental Asia. The 25% non-controlling interest of Smith Rothe is held by a company that is controlled by a Director of Biotech. All significant intercompany transactions and balances have been eliminated on consolidation.

Use of Estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ from those estimates.

Going Concern

These consolidated financial statements have been prepared on a going concern basis which contemplates that Biotech will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. The Company^s ability to continue as a going concern is dependent upon the raising of additional financing, if, as, and when required, and, ultimately, the attainment of profitable operations.

These consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classifications of assets and liabilities should the Company be unable to continue as a going concern.

Cash and Cash Equivalents

Cash and cash equivalents consist of deposits in banks and highly liquid money market securities and investment deposits issued by banks with an original maturity of three months or less.

Biotech Holdings Ltd.

Summary of Significant Accounting Policies

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

Property, Plant and Equipment

Property, plant and equipment are recorded at cost.

Amortization of property, plant and equipment used in continuing operations is provided over the estimated useful lives of the assets using the following bases and annual rates:

Furniture and fixtures	- 10% declining-balance basis
Laboratory equipment	- 10% declining-balance basis
Production equipment	- 10% declining-balance basis
Computer equipment	- 30% declining-balance basis

No amortization is provided for property, plant and equipment held for resale.

The Company reviews the carrying value of its property, plant and equipment on a regular basis and where these carrying values are estimated to exceed the net receivable recoverable amounts, provision is made for these decreases in value.

Revenue Recognition

The Company^s principal revenue will be derived from its Type II diabetes drug currently distributed in Mexico. The Company has entered into agreements with two non-related companies in Mexico. The first company manufactures and packages the tablets from a pre-mix of active ingredients manufactured by the Company in Canada. The second company markets the drug.

Revenue from product sales will be recognized upon the delivery of the product to a retailer or final consumer when persuasive evidence of an arrangement exists, the price is fixed or determinable and collection is reasonably assured and the Company has no future performance obligations under any licensing agreement or other significant post-delivery obligations.

To March 31, 2005, the Company had not generated revenue from its Type II diabetes drug.

Inventory

Inventory is valued at the lower of cost and market. The market value is determined based on the net realizable value of finished goods and the replacement cost for raw materials. Cost is determined on a first-in, first-out basis.

Advertising Expenses

Advertising costs are expensed as incurred. No advertising costs were incurred in fiscal years 2005, 2004 or 2003.

Biotech Holdings Ltd.

Summary of Significant Accounting Policies

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

Foreign Exchange Translation

The Company^s and its subsidiaries^ functional currency is the Canadian dollar. Monetary assets and liabilities denominated in foreign currencies are translated to Canadian dollars at the year-end exchange rate and all income and expenses are translated at average exchange rates prevailing during the period. Non-monetary assets and liabilities are translated at the rates prevailing at the dates the assets were acquired or liabilities incurred. Exchange gains and losses arising on translation are included in earnings.

Exchange rates between the United States dollar and the Canadian dollar for the years reported in these financial statements are as follows:

	2005	2004	2003
Average for year^s end	$ 1.2787	$ 1.3532	$ 1.5497
As at end of year	$ 1.2173	$ 1.3081	$ 1.4716

Patent Interests

Amortization of patent interests is being recorded on a straight-line basis over the shorter of the estimated useful lives or ten years. The Company evaluates the recoverability of these interests when facts and circumstances suggest the asset could be impaired.

Biotech Holdings Ltd.

Summary of Significant Accounting Policies

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

Impairment of Long-Lived Assets

Property, plant and equipment and other long-lived assets are regularly reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Impairment is assessed by comparing the carrying amount of an asset to be held and used with the sum of undiscounted cash flows expected from its use and disposal. If such assets are considered impaired, the impairment loss to be recognized is measured by the amount by which the carrying amount of the assets exceeds its fair value generally determined on a discounted cash flow basis. Any impairment results in a write-down of the asset and a charge to income during the year.

Loss Per Share

The Company uses the "Treasury Stock Method" to calculate loss per common share. Under this method, the basic loss per share is calculated based on the weighted average aggregate number of common shares outstanding during each period. The diluted loss per share assumes that the outstanding stock options and share purchase warrants had been exercised at the beginning of the period.

Common equivalent shares (consisting of shares issuable on exercise of stock options and warrants) totaling 4,550,277 (2004 - 4,550,277) were not included in the computation of diluted earnings per share because the effect was anti-dilutive.

Undeclared 8% cumulative dividends on convertible preferred shares, aggregating $178,355 to March 31, 2005, have no significant effect on loss per share calculations

Fair Value of Financial Instruments

Financial instruments include cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities and amounts due to related parties. Management of the Company does not believe that the Company is subject to significant interest, currency or credit risks arising from these financial instruments. Unless otherwise stated, the respective carrying values of financial instruments approximate their fair values. Fair values were assumed to approximate carrying values since they are short-term in nature or they are receivable or payable on demand. The fair values of the amounts due to/from related parties, promissory notes, notes payable and loan payable were not practicable to determine. The Company does not use any derivative instruments to reduce its exposure to fluctuations in interest rates and foreign currency exchange rates.

Biotech Holdings Ltd.

Summary of Significant Accounting Policies

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

Stock-Based Compensation

The Company applies the fair value method for valuing stock option grants. Under this method, compensation costs, attributable to share options granted to employees, contractors, officers and directors, are measured at fair value at the grant date and recorded to stock compensation expense over the vesting period of the related option with a corresponding increase to contributed surplus. Upon the exercise of the stock options, consideration paid, together with the amount previously recognized in contributed surplus, is recorded as an increase to share capital.

Change in Accounting Policy

Effective April 1, 2004, the Company adopted the new Canadian accounting standard for stock-based compensation to employees, officers and directors on a retroactive basis without restatement of prior years. This change resulted in an increase to accumulated deficit of $nil, and an increase to share capital and contributed surplus of $nil. The effect on the current year^s financial statements was an increase of $102,604 to net loss and a corresponding increase to contributed surplus.

The Company had adopted this standard for stock-based compensation to non-employees in the prior year.

Future Income Taxes

Income taxes are accounted for by the asset and liability method. Under this method, future income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. Management believes that it is not sufficiently likely that the Company will generate sufficient taxable income to allow the realization of future tax assets and therefore the Company has fully provided for these assets.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

1. Nature of Business and Ability to Continue Operations

The Company^s business focus is on developing the distribution of the Company^s Type II diabetes drug known variously as DIAB II, Sucanon and Glucanin. The operations of the Company^s subsidiary for the development, manufacture and distribution of lotions and creams were discontinued during the year ended March 31, 2003, based on a management decision that the subsidiary had limited prospects for developing profitable operations in the near-term. The Company^s business focus remains the development and distribution of the Company^s Type II diabetes drug, particularly in Mexico and Latin America.

These consolidated financial statements are stated in Canadian dollars and have been prepared in accordance with generally accepted accounting principles in Canada, on a going-concern basis, which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. They do not include any adjustments to the recoverability and classification of recorded asset amounts and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has incurred recurring operating losses and has an accumulated deficit of $27,658,798 and a Shareholders^ Deficiency of $678,184 at March 31, 2005. These factors, among others, raise substantial doubt about the Company^s ability to be able to continue as a going concern. The future of the Company and the realization of its asset values will depend upon the Company^s ability to obtain adequate financing and continuing support from shareholders and creditors including refinancing and to attain profitable operations.

Management plans to raise debt and equity capital on a private placement basis to finance the operating and capital requirements of the Company. It is management^s intention to continue using debt and equity to finance planned capital expansion and initial market development in Mexico and Latin America and other markets and operations until such time as the Company^s operations are self-sustaining.

While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for operations.

2. Amounts Receivable

	2005	2004
Advances to marketing company	$ 82,425	$ -
Other	6,892	19,284
	$ 89,317	$ 19,284

3. Inventory

	2005	2004
Finished goods	$ 38,852	$ -

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

4. Property, Plant and Equipment

a) Continuing Operations

		Accumulated	Net Book
2005	Cost	Amortization	Value
Production equipment	$ 46,779	$ 4,678	$ 42,101
Laboratory equipment	236,835	153,190	83,645
Furniture and fixtures	6,000	1,140	4,860
Computer equipment	118,176	107,684	10,492
	$ 407,790	$ 266,692	$ 141,098

		Accumulated	Net Book
2004	Cost	Amortization	Value
Production equipment	$ 46,779	$ -	$ 46,779
Laboratory equipment	233,666	144,072	89,594
Furniture and fixtures	6,000	600	5,400
Computer equipment	115,922	103,670	12,252
	$ 402,367	$ 248,342	$ 154,025

b) Held for Resale

		Accumulated	Net Book
2005	Cost	Amortization	Value
Production equipment	$ 1,097,441	$ 1,063,935	$ 33,506

2004	Cost	Accumulated Amortization	Net Book Value
Production equipment	$ 1,123,935	$ 1,063,935	$ 60,000

During the year ended March 31, 2005, amortization expense for the continuing operations was $18,350 (2004: $8,110, and 2003: $9,572) and $Nil (2004: $Nil, and 2003: $7,871) for property, plant and equipment held for resale.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

5. Patent Interests

		Accumulated	Net Book
2005	Cost	Amortization	Value
	$ 4,461,282	$ 3,445,632	$ 1,015,650

		Accumulated	Net Book
2004	Cost	Amortization	Value
	$ 4,461,282	$ 2,851,919	$ 1,609,363

During the year ended March 31, 2005, amortization expense for patent interests was $593,713 (2004: $593,713, and 2003: $593,713).

6. Deferred Costs

		Accumulated	Net Book
2005	Cost	Amortization	Value
Incorporation costs	$ -	$ -	$ -

		Accumulated	Net Book
2004	Cost	Amortization	Value
Incorporation costs	$ 3,681	$ 2,209	$ 1,472

During the year ended March 31, 2005, amortization expense for deferred costs was $368 (2004: $8,383, and 2003: $148,070) and the balance of $1,104 was written off in 2005.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

7. Due to Related Parties

		2005	2004
a)	Unsecured
	(i) Notes payable to RCAR Investment Ltd., a company
	controlled by the Company^s president, are unsecured,
	payable on demand and bear interest at 8% per annum
	compounded annually. During 2005 $18,950 (2004 -
	$17,547, 2003 - $16,247) in interest was accrued	$ 255,829	$ 236,879
	(ii) Amounts payable to a Director are unsecured,
	payable on demand and bears no interest.	25,499	23,433
	(iii) Amounts payable to companies controlled by a
	Director are unsecured, payable on demand and bear no
	interest	7,598	14,686
		288,926	274,998

b) Secured

Notes payable bearing interest at the rate of 8% per
annum compounded annually and due on demand.
Collateralized by a general security agreement
providing a charge over the assets of the Company.
(i) During the year ended March 31, 2004, the notes
were reduced through the exercising of 9,000,000
Common share warrants for $1,350,000 and the
exercising of 11,269,434 convertible preferred
share warrants for $1,126,943. Also during the
year, the amount was reduced by $37,997 from
payments received from equipment sales.
During the year ended March 31, 2005, the notes
were reduced by $200,000 paid directly to the
lender.
During the year, interest expense of $44,289 was
accrued (2004: $159,572; 2003: $234,115)	451,166	605,777
Total	$ 740,092	$ 880,775

The fair value of these notes was not practicable to determine.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

8. Notes Payable - long term

These amounts are unsecured, non-interest bearing and
repayable only from a pro-rata share of profits
commencing January 26, 2001. Payments will be limited
to the principal amounts of the notes outstanding and no
principal repayments are anticipated in 2006. The fair
value of these notes was not practicable to determine.	$ 224,343	$ 224,343

9. Share Capital

Authorized

The Company is authorized to issue an unlimited number of Series Convertible Preferred shares and common shares without par value. The preferred shares are voting and are convertible into common shares on a 1:1 basis. They have a cumulative cash dividend of 8% of the original amount contributed plus accrued interest. The Company^s Articles of Incorporation were amended in 2005 to amend the cumulative cash dividend rate of the Series I Convertible Preferred shares from $0.0368 per share to 8% per annum.

1. Private Placements of Common Shares

During the year ended March 31, 2005, the Company completed with both third party and related party investors ("the Investors") a $764,240 private placement of 1,528,480 common shares for cash. The allocation between related and third party investors was 480,000 common shares for the related parties and 1,048,480 common shares for third parties. The Investors also received 1,528,480 warrants to acquire common shares at $ 0.55 per share, expiring on October 26, 2006.

During the year ended March 31, 2004, the Company completed with both third party and related party investors ("the Investors") a $425,828 private placement of 1,826,777 common shares for cash of $325,828 and settlement of debt of $100,000. The allocation between related and third party investors was 1,179,185 common shares for the related party and 647,592 common shares for third parties. The Investors also received 1,826,777 warrants to acquire common shares at $ 0.375 per share, expiring on January 27, 2006. Also during the year ended March 31, 2004, the Company issued 544,014 common shares for the reduction of $106,387 in outstanding debts due to third parties.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

9. Share Capital (continued)

2. Warrants to Purchase Common Shares

The following table summarizes the number of fully exercisable common share warrants outstanding and the exercise price thereof:

	2005	2004	2003
Outstanding, beginning of year	1,826,777	9,561,798	15,061,798
Issued at $0.10 per share
expiring May 15, 2003	-	-	2,000,000
Issued at $0.375 per share
expiring January 27, 2006	-	1,826,777	-
Issued at $0.55 per share
expiring October 26, 2006	1,528,480	-	-
Expired August 3, 2002 $0.65		-	(3,000,000)
Expired December 14, 2002 $0.25		-	(4,500,000)
Exercised $0.375	(111,111)
Exercised $0.14	-	(561,798)	-
Exercised $0.16	-	(4,000,000)	-
Exercised $0.17	-	(3,000,000)	-
Exercised $0.10	-	(2,000,000)	-
Outstanding, end of year	3,244,146	1,826,777	9,561,798

Outstanding warrants to purchase common shares at March 31, 2005 were as follows:

Exercise Price	Number	Expiry
$0.375	1,715,666	January 27, 2006
$0.550	1,528,480	October 26, 2006
	3,244,146

3. Stock Options - Common Shares

(i) In August 2002, the TSX Venture Exchange amended its policies in respect of incentive stock options such that all issuers are required to have stock option plans and approve them annually. As a result, in 2003, the shareholders approved a replacement stock option plan ("2003 Plan") pursuant to which stock options are granted to directors, officers, employees, consultants and other personnel of the Corporation or any of its subsidiaries.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

9. Share Capital (continued)

c) Stock Options - Common Shares (continued)

The number of authorized but unissued shares that may be issued upon the exercise of options granted under the 2003 Plan at any time plus the number of shares reserved for issuance under outstanding incentive stock options otherwise granted by the Corporation shall not exceed 5,370,000 common shares of the issued and outstanding shares on a non-diluted basis at any time. The options granted under the 2003 Plan together with all of the Corporation^s other previously established stock option plans or grants shall not result at any time in:

1. the number of shares reserved for issuance pursuant to options granted to insiders exceeding 10% of the issued and outstanding shares;
2. the grant to insiders within a 12 month period, of a number of options exceeding 10% of the outstanding shares; or
3. the grant to any one optionee within a 12-month period, of a number of options exceeding 5% of the issued and outstanding shares (or 2% in the case of an optionee who is a consultant or an employee conducting investor relations activities).

The option period during which an optionee may exercise an option is determined by the Board of Directors, but may not exceed 10 years from the date the option is granted.

At the Company^s Annual General Meeting held September 30, 2004, shareholders approved a new Stock Option Plan for the Company ("2004 Plan). The approved 2004 Plan is different in following three important respects from the 2003 Plan:

a) the 2004 Plan permits options to be issued to a maximum of 10% of the aggregate number of Common Shares and Convertible Preferred Shares of the Corporation outstanding, as opposed to a maximum of 5,370,000 shares under the 2003 Plan;

b) on dismissal or voluntary severance from the Company, under the 2004 Plan, the Optionee has no further right to exercise any options, as opposed to 90 days under the 2003 Plan;

c) on death of the Optionee, under the 2004 Plan, the estate of the Optionee has 90 days from death for exercising any applicable options, as opposed to 12 months under the 2003 Plan.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

9. Share Capital (continued)

c) Stock Options - Common Shares (cont^d)

1. The following table summarizes the number of shares under option and the exercise price thereof:

		2005		2004		2003
Balance, beginning of year		2,723,500		3,455,000		4,570,000
Granted (per share)
	$0.12 (expiring May 21, 2004)	-		-		1,315,000
	$0.14 (expiring Dec. 15, 2005)	-		800,000		-
	$0.23 (expiring May 3, 2005)	-		300,000		-
	$0.25 (expiring January 2, 2006)	-		1,350,000		-
$0.54 (expiring August 11, 2006)*		75,000		-		-
$0.66 (expiring August 26, 2006) *		150,000		-		-
$0.55 (expiring March 24, 2006) *		545,000		-		-
$0.55 (expiring March 24, 2007) *		770,000		-		-
$0.55 (expiring March 24, 2008) *		1,290,000		-		-
Exercised in year (per share)
$0.12 (expiring May 21, 2004)		(90,000)		(1,115,000)		-
$0.14 (expiring Dec. 15, 2005)		(183,500)		(566,500)		-
$0.23 (expiring May 3, 2005)		(225,000)		-		-
$0.25 (expiring January 2, 2006)		(454,000)		-		-
Expired (per share) $0.88			(750,000)		(750,000)		(1,070,000)
Expired (per share) $0.40			-		-		(660,000)
Expired (per share) $0.45			-		(100,000)		-
Expired (per share) $0.32			-		(600,000)		-
Cancelled (per share) $0.88			-		(50,000)		(590,000)
Cancelled (per share) $0.12			-		-		(110,000)
Balance, end of year			3,851,000		2,723,500		3,455,000
Exercisable, end of year			1,096,000		2,723,500		2,680,000
Weighted average exercise price			$ 0.47		$ 0.41		$ 0.40

^* Subject to regulatory approval

Using the fair value method to value stock options, $386,504 was recorded to stock-based compensation expense. This amount was determined using a Black-Scholes option pricing model assuming no dividends are to be paid, vesting occurring on the date of grant, exercising on the last day before expiry, a weighted average volatility of the Company^s share price of 100% (2004 - 100%; 2003 - 100%) and a weighted average risk free rate of 3.03% (2004 - 1.95%; 2003 - 2.30%).

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

9. Share Capital (continued)

c) Stock Options - Common Shares (cont^d)

Stock options outstanding at March 31, 2005 were as follows:

Exercise Price	Number	Expiry
$0.23	75,000	May 3, 2005
$0.14	50,000	December 15, 2005
$0.25	896,000	January 2, 2006
$0.54	75,000	August 11, 2006*
$0.66	150,000	August 26, 2006*
$0.55	545,000	March 24, 2006*
$0.55	770,000	March 24, 2007*
$0.55	1,290,000	March 24, 2008*
	3,851,000

* Subject to regulatory approval

2. Convertible Preferred Shares and Warrants to Purchase Preferred Shares

At March 31, 2005 and 2004, 13,806,907 convertible preferred shares were outstanding from the exercise of preferred share warrants during 2004. No cash dividend had been declared to date. However, the 8% per annum dividend on these shares for the year ended March 31, 2005 would have amounted to $110,455 (2004: $67,900; 2003: $Nil). The cumulative effect to March 31, 2005 of the dividend at 8% per annum from date of issuance would have amounted to $178,355. This would have an insignificant effect on net loss or on basic and diluted loss per share.

The following table summarizes the Company^s preferred share warrants outstanding at March 31, 2005, 2004 and 2003, and the changes for the years then ended:

	Exercise
	Price	2005	2004	2003
Balance outstanding,
beginning of year	$ 0.21	-	5,700,000	5,700,000
	$ 0.10	-	13,806,907	-
		-	19,506,907	5,700,000
Issued	$ 0.10	-	-	10,000,000
Issued	$ 0.10	-	-	3,806,907
Exercised	$ 0.10	-	(13,806,907)
Expired	$ 0.21	-	(5,700,000)	-
Balance outstanding and
exercisable, end of year		-	-	19,506,907

No preferred share purchase warrants were outstanding or exercisable as of March 31, 2005.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

10. Supplemental Disclosure of Cash Flow Information and Non-Cash Transactions

a) Changes in non-cash operating working capital items:

	For the years ended March 31
	2005	2004	2003
Amounts receivable	$ (70,033)	$ (9,794)	$ 8,716
Inventory	(38,852)	-	43,600
Deposits and prepaid expenses	11,450	(11,450)	-
Due from related parties	-	215,775	-
Accounts payable and accrued liabilities	29,566	42,133	136,412
Due to related parties	(140,683)	407,907	-
Loan payable	-	(148,000)	-
	$ (208,552)	$ 496,571	$ 188,728

b) Other Supplemental Information

	For the years ended March 31
	2005	2004	2003
Interest paid	$ -	$ 9,555	$ 14,474
Non-cash financing and investing activities:
Issuance (reversal) of preferred shares through the exercising of preferred share warrants for settlement of debt due to related parties	(1,380,691)	1,380,691	-
Issuance of common shares on settlement of accounts payable	-	15,000	-
Promissory notes payable	-	91,837	200,000
Due to related party debt (Note 6)	-	100,000	-
Issuance of common shares through the exercising of common share warrants for settlement of debt due to related parties	-	1,350,000	-

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

11. Related Party Transactions

Amounts paid to related parties were based on exchange amounts which represented the amounts agreed upon by the related parties. Amounts paid or payable to related parties not disclosed elsewhere include:

	2005	2004	2003
Management fees paid to an officer	$ 144,000	$ 144,000	$ 144,000
Salaries and benefits paid to a director and officer	127,032	125,368	124,958
Interest accrued on Notes Payable (Note 7)	63,239	117,119	250,362
Rent and services paid to companies controlled by
Directors	98,795	36,860	1,000
Net sales to (returns from) a company controlled
by a director	-	(65,135)	70,813
Purchase of equipment from a significant
Shareholder	-	13,438	-
Directors fees paid in year	-	-	2,000

12. Income Taxes

The provision for income taxes differs from the amount estimated using the Canadian federal and provincial statutory income tax rates for fiscal years ended as follows:

	2005	2004	2003
Provision (benefit) at Canadian statutory rate	$ (632,000)	$ (555,000)	$ (1,183,000)
Stock-based compensation	139,000	27,000	-
Effect of changes in effective tax rates	31,000	246,000	-
Expiry of loss carry forwards	543,000	515,000	279,000
Permanent differences and other	3,000	35,000	270,000
(Decrease) increase in valuation allowance	(84,000)	(270,000)	634,000
	$ -	$ -	$ -

The tax effects of temporary differences that give rise to the Company^s future income tax assets are as follows:

	2005	2004
Tax loss carry forwards	$ 4,232,000	$ 4,629,000
Property, plant and equipment	569,000	412,000
Patent interests	1,240,000	1,073,000
Deferred costs	256,000	267,000
Valuation allowance	(6,297,000)	(6,381,000)
	$ -	$ -

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

12. Income Taxes (continued)

The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management^s judgment about the recoverability of future income tax assets, the impact of the change on the valuation allowance is reflected in current income.

The Company has non-capital losses carry forward available from prior years to reduce future taxable income. These losses expire as follows:

2006	$ 1,099,478
2007	1,855,841
2008	2,014,621
2009	1,993,713
2010	1,378,313
2011	2,265,294
2015	1,149,702
	$ 11,756,962

No benefit (if any) of these tax losses has been recorded in these financial statements.

13. Commitments

The Company pays rent on a month-to-month basis to a related party.

During the year ended March 31, 2002, the Company entered into a world-wide patent licensing agreement with the President of the Company regarding the use of DIAB II (also known under the trademarks Sucanon and Glucanin) as a combination therapy. Combination therapies as defined in the agreement include those therapies for Type II Diabetes in which DIAB II is combined with or used together with other Type II Diabetes drugs. This agreement would require payment by the Company, to the President, of 25% of such royalty revenue received by the Company, either from licensing such combinations to third parties or from the Company itself producing such a combination. The payment of this royalty for combination therapy use was determined by agreement between outside directors and the President. This agreement will have no impact on revenues received by the Company on sales of DIAB II as a monotherapy, and, in the opinion of the management, this agreement is not anticipated to have a significant impact on expected total revenues.

14. Contingency

The Company is the subject of legal disputes which have arisen in the normal course of business. In June 1998, one of the Company^s suppliers issued a claim that exceeds the amount accrued by approximately $250,000. The Company has filed a counter claim against the supplier and the matter is presently in litigation. In the opinion of management, the outcome of the legal disputes is not presently determinable. However, it is the opinion of management that this will not have a material adverse financial impact on the Company.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

15. Segmented Information

The Company^s personal healthcare product business was operated in Canada and the United States of America and its pharmaceutical business is operated in Canada, South America and China. The Company has no reportable segments.

Sales (returns) by geographic region are summarized as follows:

	For the years ended March 31
	2005	2004	2003
Canada (discontinued operations)	$ -	$ 163,417	$ 1,026,610
U.S.A. (discontinued operations)	-	(65,135)	97,866
China	-	-	9,731
	$ -	$ 98,282	$ 1,134,207

Property, plant and equipment by geographic region are summarized as follows:

	2005	2004
Canada (continuing operations)	$ 141,098	$ 154,025
Canada (held for resale)	33,506	60,000
	$ 174,604	$ 214,025

Major Customers

One customer from the discontinued operations accounted for Nil% of total sales before returns during the year ended March 31, 2005 (2004 - 66%; 2003 - 61%) and for Nil% of total receivable as of March 31, 2005 (2004 - Nil%). Revenues as a percent of total Company sales by each major customer were Overwaitea Food Group Nil% of total sales (2004 - 66%; 2003 - 20%) and London Drugs Limited Nil% (2004 - Nil%; 2003 - 19%). The operations were halted in December, 2003.

16. Reclassifications

Certain comparative figures have been reclassified to conform to the current year^s financial statement presentation.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

17. Discontinued Operations

The Company^s primary operating subsidiary, Biotech Laboratories Inc., discontinued operations during the year ended March 31, 2003. By agreement dated February 5, 2003, it leased its plant equipment from February 1, 2003 to August 1, 2003 for $10,000 per month. Under the terms of this agreement, the lessee fulfilled orders for the subsidiary from February 1, 2003 to July 1, 2003 and paid the costs of production which were repaid by the subsidiary from the proceeds of the orders sold, on or before August 1, 2003. Profits on these orders accrued to the subsidiary.

A general security agreement registered as a first charge, was granted to the subsidiary, subject to collateral, including inventory, equipment, accounts receivable, intangibles and other personal property of the lessee, to secure payment or performance of obligations and indebtedness of the subsidiary.

As a result of impairment of certain assets, the following were written down during the years ended March 31, 2005, 2004 and 2003:

	For the years ended March 31
	2005	2004	2003
Inventory	$ -	$ -	$ 278,345
Property, plant and equipment	-	870,327	102,260
Formulations and deferred costs	-	-	149,558
Goodwill	-	-	182,590
	$ -	$ 870,327	$ 712,753

On August 1, 2003 the lessee of the plant equipment exercised its option to purchase the laboratory and production equipment of Biotech Laboratories Inc. for $1,500,000, payment to be made monthly beginning August 1, 2003 for 120 equal monthly payments of $14,421, including interest at 3% per year, calculated monthly. Further, on August 1, 2003, this subsidiary assigned all funds due to it under the sale of plant equipment, to a related party having a registered charge against the equipment.

In December, 2003, the lessee who had exercised an option to purchase the laboratory and production equipment as of August 1, 2003, had abandoned its intended operations involving the utilization of the laboratory and production equipment, having made payments totaling only $43,263. As a result of this abandonment of the operations, the subsidiary received back title to the laboratory and production equipment and arranged for the removal of this equipment to a site where it was stored in preparation for sale. The removal of the equipment resulted in the write-off of leasehold improvements of $450,421 in the year ended March 31, 2004.

The remaining assets and liabilities of the discontinued operations at March 31, 2005 are as follows:

Current assets	$ -
Property, plant and equipment - net book value	33,506
	33,506
Less: current liabilities	(596,011)
	$ (562,505)

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

17. Discontinued Operations (continued)

Revenue for the year ended March 31, 2005 from the discontinued operations was $Nil, (2004 - $98,282; 2003 - $1,124,476) resulting in an operating loss of $Nil (2004 - $54,515; 2003 - $684,667).

18. Proposal to Creditors

On May 21, 2003, the Company^s primary operating subsidiary, Biotech Laboratories Inc., as well as the Company, received approval from the Supreme Court of British Columbia in the matter of two proposals regarding its creditors pursuant to the Bankruptcy and Insolvency Act of Canada. These proposals, accepted by the required majority of creditors, allows for the operating subsidiary to maintain operations and generate funds from those operations to pay a portion of its pre-proposal liabilities. For Biotech Laboratories Inc., secured creditors, all being related parties, claimed $9,808,057 of which the net value of the security was estimated to be $568,096. Unsecured creditors claimed $9,605,170, which included $9,239,961 unsecured debt by secured creditors. For the Company, all being related parties, claimed $2,702,961. Unsecured creditors claimed $153,560. Under the proposal, preferred creditors shall be paid in full in priority to all claims of unsecured creditors. Provision for payment of claims of unsecured creditors shall be made in the lesser amount of 10% and $25,000 on each day, which is one year, one year six months and two years, respectively, after the end of the month of court ratification. The proposals also allow the companies to provide ongoing business to its suppliers. Creditors of the subsidiary after the filing of the proposal will be paid in full, in priority to preferred and general unsecured creditors.

On August 1, 2003, the lessee of the plant equipment (see Note 16 - Discontinued Operations, exercised its option to purchase the laboratory and production equipment of Biotech Laboratories Inc. for $1,500,000, payment to be made monthly beginning August 1, 2003 for 120 equal monthly payments of $14,421, including interest at 3% per year, calculated monthly.

Further, on August 1, 2003, this subsidiary assigned all funds due to it under the sale of plant equipment, to a related party having a registered charge against the equipment.

19. Reconciliation of Certain Differences Between U.S and Canadian Generally Accepted Accounting Principles

The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") which, in the case of the Company, conform in all material respects with those of the United States ("US GAAP") and with the requirements of the Securities and Exchange Commission ("SEC"), except as follows:

1. The Company capitalizes a portion of development costs which relate to the development of proprietary formulas for the Company^s healthcare product line. Additionally, in prior years, the Company capitalized incorporation costs. US GAAP would require these expenditures to be expensed in the year incurred.

The effect of the above on total assets (per US GAAP) would be to reduce total assets at March 31, 2005 by $1,472 (2004 - $1,472).

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

19. Reconciliation of Certain Differences Between U.S and Canadian Generally Accepted Accounting Principles (continued)

2. (i) Under US GAAP, the Company applied Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related interpretation No. 44 in accounting for all stock options granted to employees and directors. Effective April 1, 2004, the Company adopted the new Canadian accounting standard for stock-based compensation to employees, officers and directors on a retroactive basis without restatement of prior years. Accordingly, commencing April 1, 2004, adoption of the new Canadian GAAP eliminated the difference between U.S. and Canadian GAAP.

(ii) Under US GAAP, stock based compensation to non-employees must be recorded at the fair market value of the stock option grants on the earlier of the date at which a performance commitment is reached or the vesting date of the options. Under Canadian GAAP, this policy was adopted April 1, 2003 and applies to options granted on or after April 1, 2000. For purposes of reconciliation to US GAAP, the Company recorded additional compensation recovery of approximately $53,974 for 2003 in respect of options granted to non-employees prior to April 1, 2003 and earned during the year ended March 31, 2003 and granted during the year ended March 31, 2003. In 2005 and 2004, there is no difference between US and Canadian GAAP due to the change of accounting policy to record the stock options granted to non-employees.

3. The Company had adopted Financial Accounting Standards Board Statement No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB No. 13 and Technical Corrections" ("SFAS No. 145"). SFAS No. 145 requires any gain or loss on early extinguishment of debt to be included in income from continuing operations instead of being classified as an extraordinary item. Accordingly, under US GAAP, the Company would record in 2005 a loss totaling $Nil (2004 - $2,640,760) on the early extinguishment of debt in continuing operations relating to preferred purchase share warrants and common shares and warrants.
Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

19. Reconciliation of Certain Differences Between U.S and Canadian Generally Accepted Accounting Principles (continued)

(i) Under Canadian GAAP, no accounting recognition is given to the preferred share purchase warrants granted to note holders in 2005, 2004 and 2003 (Note 7 b)). Under US GAAP, the preferred share purchase warrants would be valued in accordance with SFAS No. 123 using the Black-Scholes option pricing model with the following weighted average assumptions:

	2005	2004	2003
Risk-free interest rate	2.33%	1.26%	2.31%
Dividend yield	0.00%	0.00%	0.00%
Volatility factor of the expected market price
Of the Company^s common shares	100%	100%	100%
Weighted average expected life of the options
(months)	12	12	12

According to EITF 96-19, "Debtor^s Accounting for a Modification or Exchange of Debt Instruments", a restructuring will be considered an extinguishment of debt if the present value of the new debt instrument is substantially different from the old instrument. In this case, the difference between the fair value of the old debt instrument and the new instrument is recognized as a gain or a loss.

Accordingly, under US GAAP, loss on extinguishment of debts for restructuring of debt instrument totaling $Nil, (2004 - $944,093; 2003 - $100,000) would be charged to the Statement of Operations in 2005, 2004 and 2003, respectively.

(ii) Under Canadian GAAP, no gain or loss is recorded on the extinguishment of debt for common shares and warrants issued by the Company (Note 9 b)). Under US GAAP, a gain or loss is recorded based on the difference between the net book value of the debt and the fair value of the common shares and warrants on the date of issuance. Such a gain or loss under US GAAP would be presented as loss on extinguishment of debt in the Statement of Operations. Under US GAAP, the total value of common shares and warrants issued in 2005 as an extinguishment of debt was $Nil (2004 - $3,138,507) resulting in a net loss of $1,696,667 (2004 - $1,696,667). The fair value of the common shares is based upon the trading price of the Company^s common shares on the issuance dates. The warrants are valued using the Black-Scholes option pricing model with the following weighted average assumptions:

	2005	2004
Risk-free interest rate	3.03%	1.95%
Dividend yield	0.00%	0.00%
Volatility factor of the expected market price
of the Company^s common shares	100%	100%
Weighted average expected life of the options
(months)	24	24

The value of the warrants based on the Black-Scholes calculation using the above assumptions was $Nil in 2005 and 2004. There are no issued warrants for common shares in 2005 and 2004.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

19. Reconciliation of Certain Differences Between U.S. and Canadian Generally Accepted Accounting Principles (continued)

4. The Company uses the term of the lease plus one renewal term to determine the amortization rate for leasehold improvements. Under US GAAP the amortization rate cannot exceed the term of the lease. Accumulated amortization for leasehold improvements under US GAAP would be $Nil (2004 - $Nil; 2003 - $1,348,488) rather than $Nil (2004 - $Nil; 2003 - $934,693), and the current year amortization expense under US GAAP would be $Nil (2004 - $Nil; 2003 - $Nil) rather than $Nil (2004 - $Nil; 2003 - $134,849).
5. Recent accounting pronouncements

In November 2004, FASB issued Statement of Financial Accounting Standards No. 151 ("SFAS 151"), "Inventory Costs". The Company has determined that the adoption of SFAS 151 does not have an impact on its results of operations or financial position.

In December 2004, FASB issued Statement of Financial Accounting Standards No. 153 ("SFAS 153"), "Exchanges of Non-monetary Assets - an amendment of APB Opinion No. 29". The Company has determined that the adoption of SFAS 153 does not have an impact on its results of operations or financial position.

In December 2004, FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004) ("SFAS 123"), "Share-Based Payment". The Statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The Company adopted this policy, effective April 1, 2004.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, could have a material effect on the accompanying financial statements.

Biotech Holdings Ltd.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars)

March 31, 2005 and 2004

19. Reconciliation of Certain Differences Between U.S and Canadian Generally Accepted Accounting Principles (continued)

The impact of these differences is as follows:
	2005	2004	2003
Net loss per Canadian GAAP	$ (1,516,071)	$ (2,306,951)	$ (2,985,624)
Amortization and write-off of deferred costs,
net of development expenses during
the year (a)	1,472	8,383	141,629
Stock option compensation recovery (b)	-	-	53,974
(Loss) on extinguishment of debt (c)	-	(2,640,760)	(40,000)
Amortization of leasehold improvements (d)	-	-	(134,849)
Net loss and comprehensive loss
per US GAAP	$ (1,514,599)	$ (4,939,328)	$ (2,964,870)
Loss per share in accordance with US
GAAP	$ (0.02)	$ (0.06)	$ (0.04)

The impact of the above-noted differences on total shareholders^ deficiency is as follows:
	2005	2004	2003
Shareholders^ equity (deficiency) per
Canadian GAAP	$ (678,184)	$ (556,264)	$ (1,875,162)
Unamortized balance of deferred costs (a)	(1,472)	(1,472)	(9,855)
Accumulated amortization leasehold
improvements (d)	-	-	(934,693)
Shareholders^ (capital deficit)
per US GAAP	$ (679,656)	$ (557,736)	$ (2,819,710)

20. Subsequent Events

a) In June 2005, the Company received $500,000 US in private placement funding. Pursuant to the private placement announced in April 2005, and subject to receipt of regulatory approval, a total of 2,020,200 shares will be issued at $0.2475 US, each share having a warrant to purchase one additional share at $0.33 US. A finder^s fee totaling $50,000 US (10% of the amount raised) was paid as part of the transaction.

1. In May 2005, the Company announced that it advanced $183,500 USD to an unrelated Mexican marketing company for a six-week advertising national television and radio advertising program of Biotech^s Sucanon diabetes drug. The advertising began on May 26, 2005.