Kazia Therapeutics Limited 20F 2003 Annual report

SECURITIES AND EXCHANGE COMMISSION

FORM 20-F


[ ]		REGISTRATION STATEMENT PURSUANT TO SECTION
		12(b)
		OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
		OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended June 30, 2003
OR
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR
		15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from..........................to................

Commission file number 0-29962

Novogen Limited

ACN 063 259 754
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
New South Wales, Australia
(Jurisdiction of incorporation or organization)
140 Wicks Road, North Ryde, New South Wales 2113, Australia
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
None
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Ordinary Shares*
American Depositary Shares, each representing five Ordinary Shares


*		Not for trading, but only in connection with the registration of American Depositary Shares.

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

Not Applicable

The number of outstanding Ordinary Shares of the issuer as at September 1, 2003 was 95,611,785.

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.

Yes [X] No [ ]

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

Item 17 [ ] Item 18[X]

TABLE OF CONTENTS


Forward Looking Statements			3
PART 1
ITEM 1. Identity of Directors, Senior Management and Advisors			4
ITEM 2. Offer Statistics and Expected Timetable			4
ITEM 3. Key Information			4
ITEM 4. Information on the Company			16
ITEM 5. Operating and Financial Review and Prospects			31
ITEM 6. Directors, Senior Management and Employees			39
ITEM 7. Major Shareholders and Related Party Transactions			48
ITEM 8. Financial Information			49
ITEM 9. Offer and Listing Details			50
ITEM 10. Additional Information			52
ITEM 11. Quantitative and Qualitative Disclosures about Market Risk			55
ITEM 12. Description of Securities other than Equity Securities			55
PART 2
ITEM 13. Defaults, Dividend Arrearages and Delinquencies			56
ITEM 14. Material Modifications to the Rights of Security Holders and the Use of Proceeds			56
ITEM 15. Controls and Procedures			56
ITEM 16. Reserved			56
PART 3
ITEM 17. Financial Statements – Not Applicable			57
ITEM 18. Financial Statements			57
ITEM 19. Exhibits			57

FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this Annual Report that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operation performance improvements, the effects of competition and the effects of future legislation or regulation. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe”, “expect”, “plan”, “intend”, “anticipate”, “estimate”, “predict”, “potential”, “continue”, “may”, “will”, “should”, “could” or the negative of these terms or similar expressions. Examples of forward-looking statements include but are not limited to:

	-		operations and prospects,

	-		growth strategy,

	-		funding needs and financing resources,

	-		general market and economic conditions, and

	-		market risk.

Forward-looking statements involve risks, uncertainties and assumptions. For a discussion of certain of these risks uncertainties and assumptions, see “Risk Factors”. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements. Other than required by applicable law or the applicable law of any exchange on which our securities are listed, we have no intention or obligation to update forward-looking statements.

PART 1

Item 1. Identity of Directors, Senior Management and Advisors

Item 1 details are not required to be disclosed as part of the Annual Report.

Item 2. Offer Statistics and Expected Timetable

Item 2 details are not required to be disclosed as part of the Annual Report.

Item 3. Key Information

Selected Financial Data

The selected financial data at June 2003 and 2002 and for the years ended June 30 2003, 2002 and 2001, have been derived from the Consolidated Financial Statements of Novogen Limited (“Company” or “Group”) included in this Annual Report and should be read in conjunction with and are qualified in their entirety by reference to those statements and the notes thereto. The selected financial data at June 30, 2001, 2000 and 1999 and for the years ended June 30, 2000 and 1999 have been derived from Consolidated Financial Statements of the Company not included in this Annual Report. The Consolidated Financial Statements in this Annual Report have been prepared in accordance with accounting principles generally accepted in Australia (Australian GAAP) which varies in certain respects from accounting principles generally accepted in the United States (US GAAP). A reconciliation of the major differences between Australian GAAP and US GAAP is included in Note 29 to the Consolidated Financial Statements. The Consolidated Financial Statements have been audited in accordance with generally accepted auditing standards in the United States by the Company’s independent public accountants.

The Company’s fiscal year ends on June 30. As used throughout this Annual Report, the word “fiscal” followed by a year refers to the 12 month period ending on June 30 of that year. For example, the term “fiscal 2003” refers to the 12 months ended June 30, 2003. Except as otherwise indicated, all dollar amounts referred to in this Annual Report are at the consolidated level and exclude inter-company accounts.

Summary of Consolidated Statement of Financial Performance
(Australian GAAP)


	1999			2000			2001			2002			2003			2003

	(A$’000)			(A$’000)			(A$’000)			(A$’000)			(A$’000)			(US$’000)

Sales Revenue		19,690			23,407			26,663			19,582			19,630			13,178
Other Revenue		3,168			6,814			10,809			10,132			13,420			9,009

Total Revenue		22,858			30,221			37,472			29,714			33,050			22,187

Net Loss from Operations		(17,406	)		(13,679	)		(21,764	)		(14,654	)		(10,454	)		(7,018	)

Net Loss		(17,406	)		(13,679	)		(21,764	)		(14,673	)		(10,666	)		(7,160	)

Net Loss from Operations per share (Cents per share)		(30.4	)		(17.1	)		(25.4	)		(15.4	)		(10.9	)		(7.3	)
Weighted average number of Ordinary shares used to calculate Loss per share		57,205,124			79,769,553			85,646,585			95,187,449			95,472,984
Number of outstanding Ordinary Shares at year end		79,685,518			84,836,262			95,069,775			95,412,714			95,611,785
Adjusted to accord with US GAAP
Sales Revenue		19,690			22,519			25,415			17,644			18,502			12,420

Total Revenue		22,867			29,333			36,224			27,776			31,922			21,429


Net (loss)		(17,860	)		(13,672	)		(21,813	)		(15,149	)		(10,259	)		(6,887	)

Net (loss) from		(31.0	)		(17.1	)		(25.4	)		(15.9	)		(10.7	)		(7.2	)
operations per share (Cents per share)

No dividends have been declared by the Company in the financial years included in this Annual Report.

Note sales revenue reported under US GAAP has been adjusted to reflect the impact of certain promotional expenditures in accordance with EITF Issue 00-14-Accounting for Certain Sales Incentives. Prior year financial statements have been reclassified where appropriate.Certain trade promotion expenditures are charged to marketing and selling expenses under Australian GAAP. These expenses are for co-operative advertising whereby the Company pays for the retailers’ promotion of the Company’s products. This would typically take the form of instore price promotions. The payment of co-operative advertising is usually made in the form of an agreed amount taken off invoice.Under US GAAP these amounts are treated as a discount to sales hence reducing the reported sales figures. See Note 30 to the Consolidated Financial Statements for the reconciliation to US GAAP.

Summary of Consolidated Statement of Financial Position at June 30, 2003
(Australian GAAP)


	1999		2000		2001		2002		2003		2003

	(A$’000)		(A$’000)		(A$’000)		(A$’000)		(A$’000)		(US$’000)

Cash and Cash
Equivalents		29,981		28,820		31,129		39,937		31,026		20,828
Total Assets		56,796		65,081		61,206		61,900		50,812		34,110
Net Assets		48,275		52,724		51,906		54,045		42,397		28,461
Capital Stock		82,148		100,276		121,222		137,249		138,206		92,778
Adjusted to accord with US GAAP
Total Assets		56,473		64,728		60,949		61,676		50,812		34,110
Shareholders Equity		47,952		52,408		50,974		51,852		41,069		27,570

The Company publishes its Consolidated Financial Statements expressed in Australian dollars. In this Annual Report, references to “US dollars” or “US$” are to the currency of the United States of America (“US”) and references to “Australian dollars” or “A$” are to the currency of Australia. For the convenience of the reader, this Annual Report contains translations of certain Australian dollar amounts into US dollars at specified rates. These translations should not be construed as representations that the Australian dollar amounts actually represent such US dollar amounts or could be converted into US dollars at the rate indicated. Unless otherwise stated, the translations of Australian dollars into US dollars have been made at the rate of US$0.6713 = A$1.00, the noon market buying rate in New York City for cable transfers in Australian Dollars as certified for customs purposes by the Federal Reserve Bank of New York (the noon buying rate) on June 30, 2003.

The noon buying rate on November 28, 2003 was US$0.7236 = A$1.00

Exchange Rates for the six months to October 2003
A$ versus US$


Month	High		Low
June	$	0.6723	$	0.6564
July	$	0.6823	$	0.6454
August	$	0.6593	$	0.6390
September	$	0.6810	$	0.6395
October	$	0.7077	$	0.6814
November	$	0.7238	$	0.6986

Exchange Rates for the Last Five Years A$ versus US$


Fiscal Year	Average
Ended June 30	Rate
1999	$	0.6246
2000	$	0.6237
2001	$	0.5320
2002	$	0.5236
2003	$	0.5836

Risk factors

The following risk factors, in addition to the other information and financial data contained in this Annual Report, should be considered carefully in evaluating the Company and its business. The risks described below and elsewhere in this Annual Report are not intended to be an exhaustive list of the general or specific risks involved, but merely identify certain risks that are now foreseen by the Company. It must be recognized that other risks, not now foreseen, might become significant in the future and that the risks which are now foreseen might affect the Company to a greater extent than is now foreseen or in a manner not now contemplated.

Unproven Technologies

The Company’s technologies are relatively new and evolving. The successful development and market acceptance of the Company’s proposed products are subject to inherent developmental risks. These include ineffectiveness or lack of safety, unreliability, failure to receive necessary regulatory clearances or approvals, high commercial cost and preclusion or obsolescence resulting from third parties’ proprietary rights or superior or equivalent products, as well as general economic conditions affecting purchasing patterns.

There can be no assurance that the Company and its marketing partners will be able to commercialize successfully or achieve market acceptance of any of the Company’s technologies or products, or that the Company’s competitors will not develop competing technologies that are less expensive or otherwise superior to those of the Company. The failure to develop and market successfully new products would have a material adverse effect on the Company’s business, financial condition and results of operations.

Failure of Phenolic Drug Development

Phenolic drug development is an entirely novel and unproven field of pharmaceutical drug development and there is limited scientific understanding of phenolic technology on which the Company’s drug program is based. There can be no assurance that any of the compounds under development by the Company will prove to be sufficiently efficacious, or sufficiently safe, or sufficiently cost-effective to be commercially viable. The commercialization process of the products currently undergoing clinical trials including the anti cancer drug candidate phenoxodiol (NV-06) being developed by Novogen’s listed subsidiary company Marshall Edwards, Inc., NV-04, the Company’s cardiovascular drug candidate and NV-07a the Company’s anti inflammatory drug candidate, may be delayed if the US Food and Drug Administration (FDA) or another regulatory authority requires the expansion in the size and scope of any clinical trial. It may take many years to complete the testing and failure can occur at any stage in the process. Negative or inconclusive results or adverse medical events during a clinical trial could cause Novogen to delay or terminate development efforts.

Clinical trials also have a high risk of failure. A number of companies have suffered significant setbacks in advanced clinical trials even after achieving promising results in earlier trials. If the Company experiences delays in the testing or approval process or if further clinical trials or clinical trials involving a larger number of patients are required the commercial prospects of the drugs under development could be impaired.

Future Capital Needs and Uncertainty of Additional Financing

The Company’s capital requirements have been and will continue to be significant. The Company anticipates that its existing resources will be adequate to fund the Company’s capital and operating requirements through at least the next 12 months based upon the Company’s current business plan. The Company’s capital and operating requirements may vary materially from those now planned due to a number of factors, including the level of expenditure required to expand its production facilities and the Company’s ability to produce its products in a cost-effective manner, the rate at which the Company can introduce its products into new markets, the market acceptance and competitive position of the Company’s products, the success of the Company’s research and development efforts and the ability of the Company to satisfy applicable regulatory requirements. The Company may need to raise additional capital to fund its future operations. There can be no assurance that additional financing will be available when needed on terms acceptable to the Company, or at all. If additional funds are raised by issuing equity securities, further dilution to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders. Insufficient funds may prevent the Company from implementing its business strategy or may require the Company to limit its operations significantly.

Supply of Raw Material

An important risk concerns the supply of raw material (red clover) used to produce Promensil, Trinovin and Rimostil. Numerous environmental factors (drought, disease, storms, etc.) can affect crop quality and quantity. Although the Company has attempted to address this risk by sourcing clover from regions of geographic diversity within Australia, and from areas of historically reliable water supply, there can be no assurance of a continual supply of sufficient quantity and quality of red clover. Interruptions in supply or material increases in the cost of supply could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company currently depends upon a number of sources within Australia to grow and to harvest the raw materials required for the clover-based isoflavone products it produces. While the Company has entered into supply contracts with many of these sources and maintains a close supervision of the clover growing, there can be no assurance that the Company will be able to obtain increased quantities of this material, if and when the Company requires. There can also be no assurance that the crops of clover required by the Company will grow at all and not be subject to certain acts of nature or other problems associated with farming a naturally produced plant. Such events would have a material adverse effect on the Company’s business, financial condition and results of operations.

The current stocks of clover, however, are adequate to cover the requirements of the Company for at least the next 12 months.

Dependence on Patents, Trade Secrets and Proprietary Rights

The Company’s success is dependent to a significant degree on whether it can obtain patents, maintain trade secret protection and operate without infringing on the proprietary rights of third parties. If the Company were determined to be infringing any third party patent, the Company could be required to pay damages, alter its products or processes, obtain licenses or to cease certain operations. If the Company is required to obtain any licenses, there can be no assurance that the Company will be able to do so on commercially favorable terms, if at all. The Company’s failure to obtain a license for any technology that it may require to

commercialize its products could have a material adverse effect on the Company’s business, financial condition and results of operations.

Litigation, which could result in substantial costs to and diversion of effort by the Company, may also be necessary to enforce any patents issued or licensed to the Company or to determine the scope and validity of third party proprietary rights. If competitors of the Company that claim technology also claimed by the Company prepare and file patent applications in the US, the Company may have to participate in interference proceedings declared by the US Patent and Trademark office to determine priority of invention, which could result in substantial cost to and diversion of effort by the Company, even if the eventual outcome is favorable to the Company. Any such litigation or interference proceedings, regardless of outcome, could be expensive and time consuming. Litigation could subject the Company to significant liabilities to third parties, requiring disputed rights to be licensed from third parties or require the Company to cease using certain technologies and, consequently, could have a material adverse effect on the Company’s business, financial condition and results of operations.

In addition to patent protection, the Company relies on un-patented trade secrets and proprietary technological expertise. There can be no assurance that others will not independently develop or otherwise acquire substantially equivalent technologies, or otherwise gain access to the Company’s trade secrets or technological expertise or disclose such trade secrets, or that the Company can ultimately protect its right to such un-patented trade secrets and technological expertise. The Company relies, in part, on confidentiality agreements with its marketing partners, employees, advisors, vendors and consultants to protect its trade secrets and proprietary technological expertise. There can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach or that the Company’s un-patented trade secrets and proprietary technological expertise will not otherwise become known or independently discovered by competitors.

Potential Adverse Effect of Competition and Technological Change

In developing its technology and products, the Company competes with many domestic and foreign competitors in various rapidly evolving and technologically advanced fields, including pharmaceutical, biotechnology and biopharmaceutical companies.

Many of the Company’s competitors and potential competitors have substantially greater financial, technological, R&D, marketing and personnel resources than the Company. There can be no assurance that the Company’s competitors will not succeed in developing alternate technologies and products that are more effective, easier to use or more economical than those which have been developed by the Company or that would render the Company’s technologies and products obsolete and non-competitive in these fields. These competitors may also have greater experience in developing products, conducting clinical trials, obtaining regulatory approvals or clearances, and manufacturing and marketing such products or technologies. Certain of these competitors may obtain patent protection, approval or clearance earlier than the Company, which could adversely affect the Company’s business, financial condition and results of operations. Furthermore, the Company will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which it currently has limited experience.

The company’s commercial opportunities will be reduced or eliminated if competitors develop and market products that are more effective, have fewer side effects or are less expensive.

Effects of International Sales

The Company and its marketing partners intend to market the Company’s current and future products in most major world pharmaceutical markets. A number of risks are inherent in international transactions. In order for the Company to market its products in the US, Europe, Australia, Canada, Japan and certain other foreign jurisdictions, the Company must obtain required regulatory approvals or clearances and otherwise comply with extensive regulations regarding safety, manufacturing processes and quality. There can be no assurance that the Company will be able to obtain or maintain regulatory approvals or clearances in such countries or that it will not be required to incur significant costs in obtaining or maintaining its foreign regulatory approvals or clearances.

Fluctuations in currency exchange rates may adversely affect the demand for the Company’s products by increasing the price of the Company’s products in the currency of the countries in which the products are sold.

The Company’s consolidated financial statements are presented in Australian dollars. In fiscal 2003, the Company’s revenue was generated approximately 44% in US dollars and approximately 32% in Australian dollars with the balance of revenue in Pounds Sterling, Euros and Canadian dollars. During that year, the Company’s expenses were generated approximately 39% in US dollars and 21% in Pounds Sterling, Euros and Canadian dollars. Substantially all of the balance of expenses was in Australian dollars. Fluctuations in the rates of exchange between US dollar and other foreign currencies may negatively impact the Company’s financial condition and results of operations. In addition, to the extent revenues and expenses are denominated in different currencies, the Company may suffer a loss upon the conversion of the revenue-denominated currency to pay expenditures. As the Company expands its presence into the US and other international markets, the Company expects the percentage of both its revenues and expenditures denominated in non-Australian dollars to increase, with particular emphasis on US dollars. For the foreseeable future, the Company expects its expenditures to be predominantly denominated in Australian dollars, resulting primarily from the Company’s R & D and manufacturing activities in Australia, and expects capital expenditures to be denominated in Australian dollars.

Dependence Upon Key Personnel

The Company is highly dependent upon the principal members of its management and scientific staff. In addition, the Company believes that its future success in developing marketable products and achieving a competitive position will depend to a significant extent on whether it can attract and retain additional qualified management and scientific personnel. Competition for such personnel is intense, and there can be no assurance that the Company will be able to continue to attract and retain such personnel. The loss of the services of one or more of the management or scientific staff, or the inability to attract and retain additional personnel and develop expertise as needed, could have a material adverse effect on the Company’s results of operations and financial condition. The Company maintains key person life insurance for Dr. Kelly, Mr Naughton and Professor Husband, currently set at A$2,226,000 each. The proceeds of such policies are payable to the Company.

Limited Manufacturing Experience

The Company currently relies on its own extraction facility to produce commercial quantities of isoflavones used in the manufacture of Promensil, Trinovin and Rimostil. The facility is expected to be sufficient to meet anticipated increases in demand

during fiscal 2003 and beyond. To the extent the Company relies on others, the Company will lose a degree of control over the manufacturing process and will be dependent on such third parties to satisfy performance and quality standards and dedicate sufficient production capacity to meet demand and delivery times. There can be no assurance that third party manufacturers will devote the resources necessary to meet demand for the Company’s products. Failure or delay in supplying isoflavones would adversely affect the Company’s ability to deliver products on a timely and competitive basis.

In addition, the manufacture of the Company’s products are subject to periodic inspection by regulatory authorities and certain marketing partners, and the Company’s manufacture of its products for human use is subject to regulation and inspection by regulatory authorities for compliance with Current Good Manufacturing Practice (cGMP). There can be no assurance that these authorities will not, during the course of an inspection of existing or future facilities, identify what they consider to be deficiencies in cGMP or other requirements and request, or seek, remedial action. Failure to comply with such regulations or delay in attaining compliance may adversely affect the Company’s manufacturing activities and could result in, among other actions, warning letters, injunctions, civil penalties, refusal to grant approvals or clearances of future or pending product submissions, fines, recalls or seizure of products, total or partial suspensions of production and criminal prosecution.

Limited Marketing Capacity; Dependence on Others

The Company relies on its own marketing staff for the marketing and sale of its current and proposed products in Australia, Canada, the US, the UK and the Netherlands. The Company presently has limited marketing and sales staff. Achieving market acceptance for the Company’s products will require extensive and substantial efforts by experienced personnel as well as expenditure of significant funds. There can be no assurance that the Company will be able to establish sufficient marketing, distribution and sales capabilities necessary to achieve market penetration in these geographical areas.

In other markets, the Company intends to appoint licensees and/or marketing partners who will be responsible in large part for sales, marketing and distribution. While the Company will endeavor to appoint licensees and/or marketing partners with proven abilities in these areas, the amount and timing of resources, which may be devoted to the performance of their contractual responsibilities by these partners, are not within the control of the Company. There can be no assurance that such marketing partners will perform their obligations as expected, pay any additional option or license fees to the Company or market any products under any agreement, or that the Company will derive any revenue from such arrangements. Moreover, the other contracting parties may have rights of termination under certain of the agreements. Exercise of such termination rights by such other parties may have an adverse effect on the Company’s business, financial condition and results of operations. There can be no assurance that the interests of the Company will continue to coincide with those of its partners or that such partners will not develop independently or with third parties products or technologies which could compete with the Company’s products, or that disagreements over rights or technologies or other proprietary interests will not occur. To the extent that the Company chooses not to or is unable to enter into future agreements, it would experience increased capital requirements to undertake the marketing or sale of its current or future products. There can be no assurance that the Company will be able to market or sell its technology, current or future products independently in the absence of such agreements.

Effect of Government Regulation

Pharmaceutical products, including pharmaceuticals such as the Company’s phenolic hormone drug candidates, are significantly regulated by a number of governmental entities, especially by the FDA in the US and by comparable authorities in other countries, including Australia. These agencies regulate, among other things, research and development activities and the testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising, promotion, distribution and sale of such products. Product development and approval within this regulatory framework takes a number of years and involves the expenditure of substantial resources. Many products that initially appear promising ultimately do not reach the market because they are found to be unsafe or do not demonstrate efficacy during the testing required by the regulatory process.

The Company currently has no products approved by the FDA. No assurance can be made that the Company will be able to file any New Drug Application (NDA) or that any such filings will result in FDA approval. Furthermore, the Company cannot predict with any degree of certainty when it might be in a position to file any NDA or the length of time involved between the filing of an NDA and obtaining FDA approval, if at all. The cost to the Company of conducting human clinical trials for any potential product can vary dramatically based on a number of factors, including the order and timing of clinical indications pursued and the extent of development and financial support, if any, from corporate partners. The Company may have difficulty obtaining sufficient patient populations, clinicians or support to conduct its clinical trials as planned and may have to expend substantial additional funds to obtain access to such resources, or delay or modify its plans significantly.

There can be no assurance that FDA or other regulatory authority approval for any product developed by the Company will be granted on a timely basis or at all. Any delay in obtaining or any failure to obtain such approvals would materially and adversely affect the marketing of the Company’s products and the Company’s business, financial condition and results of operations. In addition, legislation may be enacted in the future, which might adversely affect the Company’s ability to develop, manufacture or market its products.

FDA and other governmental approvals that may be granted will be subject to continual review, and later discovery of previously unknown problems may result in withdrawal of products from marketing. For example, the Company has been notified by the Therapeutic Goods Administration (TGA) that it is reviewing the current listing status of its dietary supplements products in Australia. These products are currently listed as “AUSTL” listed complementary medicine. Following the completion of this review, these products could retain this status or be delisted in Australia. The Company believes that its products qualify for their current listing status as “AUSTL” listed complementary medicine. However, no assurance can be given that the TGA will ultimately reach this conclusion. In the event of an adverse determination by the TGA, the Company will consider what further options are available to it. Moreover, if and when such approval is obtained, the marketing and manufacture of the Company’s products would remain subject to extensive regulatory requirements administered by the FDA and other regulatory bodies. Failure to comply with these regulatory requirements could, among other things, result in fines, suspensions or withdrawal of regulatory approvals, operating restrictions and criminal prosecution.

Product Failure

The Company’s dietary supplement products are based on a hypothetical concept of the biological importance of estrogenic isoflavones to human health. However, there is no certainty that this hypothesis will prove to be the case for any or all intended applications. Failure to provide any significant health benefit could be expected to have a significant adverse effect on the Company’s ability to market these products.

The Company also has taken considerable care to ensure safety and lack of adverse side effects. However, there is no assurance that extended use of the products in the wider community will not result in the occurrence of undesirable side-effects including intolerance reactions that could be expected to impede the successful marketing of the products.

Product Liability Exposure and Potential Unavailability of Insurance

The testing, manufacturing, marketing and sale of the products being developed by the Company involves inherent risk that product liability claims will be asserted against the Company, its marketing partners or licensees. There can be no assurance that the Company’s current clinical trial and commercial product liability insurance is adequate or will continue to be available. The Company currently maintains worldwide product liability coverage of up to A$20 million.

Enforceability of Civil Liabilities under the Federal Securities Laws

The Company is a public company limited by shares and is registered and operates under the Corporations Act 2001. All of the Company’s directors and officers named in this Annual Report reside outside the US. Substantially all or a substantial portion of the assets of those persons are located outside the US. As a result, it may not be possible to effect service on such persons in the US or to enforce, in foreign courts, judgments against such persons obtained in US courts and predicated on the civil liability provisions of the federal securities laws of the US. Furthermore, substantially all of the directly owned assets of the Company are outside the US, and, as such, any judgment obtained in the US against the Company may not be collectible within the US. There is doubt as to the enforceability in the Commonwealth of Australia, in original actions or in actions for enforcement of judgments of US courts, of civil liabilities predicated solely upon federal or state securities laws of the US, especially in the case of enforcement of judgments of US courts where the defendant has not been properly served in Australia.

The trading price of the shares of our common stock and ADR’s is highly volatile, your investment could decline in value and we may incur significant costs from class action litigation.

The trading price of our common stock and our ADR’s is highly volatile in response to various factors, many of which are beyond our control including:

	•		Announcements of technological innovations by us and our competitors;

	•		New products introduced of announced by us or our competitors;

	•		Changes in financial estimates by securities analysts;

	•		Actual or anticipated variations in operating results;

	•		Expiration or termination of licenses, research contracts or other collaboration agreements;

	•		Conditions or trends in the regulatory climate in the biotechnology, pharmaceutical and genomics industries;

	•		Changes in the market values of similar companies;

	•		The liquidity of any market for our securities;

	•		Additional sales by us of our shares.

In addition, equity markets in general and the market for biotechnology and life sciences companies in particular, have experiences substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the companies traded in those markets. In addition, changes in economic conditions in Australia, the United States, Europe or globally, could impact on our ability to grow profitably. Adverse economic changes are outside our control and may result in material adverse impacts on our business or our results of operations. These broad market and industry factors may materially affect the market price of our shares and ADR’s regardless of our development and operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. Such litigation, if instituted against us could cause us to incur substantial costs and divert managements attention and recources.

Item 4 – Information on the Company

History and development of the Company.

Novogen Limited, a company limited by shares, was incorporated in March 1994 under the jurisdiction of the laws of New South Wales, Australia. Novogen has its registered office at 140 Wicks Rd, North Ryde, New South Wales 2113. Its telephone number and other contact details are: Phone 61-2-9878-0088; Fax 61-2-9878-0055; and web site,www.novogen.com (the information contained in the web site does not form part of the Annual Report). The Company’s Ordinary Shares are listed on the Australian Stock Exchange (“ASX”) under the symbol “NRT” and its American Depositary Receipts (ADR’s), each representing five ordinary shares, trade on the Nasdaq Stock Market under the symbol “NVGN”.

Nature of the Business

The Company is a pharmaceutical company involved in the discovery, development, manufacture and marketing of products based on the emerging field of phenolic technology. The Company’s product development program embraces both a novel range of pharmaceuticals based on a range of phenolic hormones in humans and dietary supplements based on plant phenolic compounds known as isoflavones. A key element of the Company’s strategy is to leverage revenue generated from sales of the Company’s dietary supplements in an effort to develop novel proprietary pharmaceuticals based on phenolic hormones.

Recent Financing Activities

Since it’s inception, the Company has been financed principally by equity financing, license fees and product sales. The Company did not recognize any significant revenue from the sale of product until fiscal 1998.

In June 2000, the Company raised A$17.9 million from the issue of 5.018 million Ordinary Shares at A$3.5819. The proceeds have been used to finance clinical trials for Novogen’s anti-cancer drug candidate phenoxodiol (NV-06) which is currently in Phase I/II clinical trials in the US and Australia, and to augment Novogen’s cash flow from the international sales of its over-the-counter products.

During May 2001, 10.195 million Ordinary Shares with a value of A$20.9 million were issued to a number of international institutions at the price of A$2.05 per share, the closing price on the ASX on May 23, 2001. The equity receipts will be used to fund the ongoing clinical trials of phenoxodiol (NV-06) and to augment the cash flow from the international sales of the over-the-counter dietary supplement business.

Marshall Edwards, Inc.

Marshall Edwards, Inc. (MEI), a US subsidiary of the Company was established to provide a commercial vehicle for Novogen’s anti-cancer drug candidates, the first of which is phenoxodiol (NV-06). Novogen has licensed phenoxodiol to MEI’s Australian subsidiary Marshall Edwards Pty Limited (MEPL) which will be responsible for the continued development of phenoxodiol (NV-06) and its ultimate commercialisation under the terms of the license. Novogen will provide services, clinical trial management and drug supplies to MEI and MEPL.

During May 2002, MEI, raised US$10.1 million in a private placement to European, American and Australian investors and institutions at US$4.00 each with an attaching warrant exercisable prior to November 30, 2003 at US$4.00 per share. Shares of MEI are listed on the London Stock Exchange’s Alternative Investment Market (AIM). During fiscal 2003, 9,000 warrants were exercised at US$4.00 per share raising US$36,000. Novogen now owns 95.1% of MEI.

During April 2003, Glycotex, Inc., a US subsidiary of Novogen Inc., established to provide a commercial vehicle for Novogen’s glucan technology, raised $A500,000 in an initial private placement from Australian and international investors and institutions. Novogen now owns 97.6% of Glycotex Inc.

The shares were issued at A$10.00 each with attaching warrants to purchase a further two shares at an exercise price of A$10.00 per share. The attaching warrants are exercisable prior to 5 November, 2004. Novogen also issued to these investors a convertible security enabling investors to convert each share of Glycotex Inc. common stock to two Novogen shares at an equivalent Novogen share price of A$5.00 per share. If 50% of the holders exercise the conversion feature, then Novogen can require that the other Glycotex shareholders convert their shares to Novogen shares.

During September 2003, MEI filed a registration statement with the Securities and Exchange Commission to make a public offering of two million common stock units. The units consist of one share of common stock and one warrant to be offered in the price range of US$4.50 and US$6.50. The registration statement has not yet become effective. MEI has also applied to have its common stock and the warrants being issued as part of the Unit quoted on the Nasdaq National Market.

During November 2003, MEI received US$10,056,000 following the exercise of 2,514,000 warrants, at US$4.00 per share, which were issued as part of the AIM listing in May 2002.

Capital expenditures

The Company made no major investments of a capital nature during fiscal 2003. Future facilities will be developed as demand increases, however, current plant capacity both at the isoflavones extraction plant at Wyong NSW and at the pilot plant at North Ryde NSW are sufficient to meet demand for the short to medium term.

Business overview

The Company launched its first product, Promensil™ (“Promensil”), in September 1997 in Australia. Subsequently, the product was launched in New Zealand in February 1998, in the US in April 1998, in The Netherlands in April 1999, and in Canada in January 2000. The Company’s second product, Trinovin™ (“Trinovin”) was launched in Australia in June 1998 and is currently sold in Australia, New Zealand, the US and Canada. In June 2000, Novogen launched Rimostil in Australia and Canada. Rimostil is a new product for post-menopausal women. Rimostil is the first isoflavone supplement for the maintenance of bone and cholesterol health in women after menopause. During the fiscal year 2001 the Company launched Rimostil in the US and the Netherlands and launched Trinovin in the UK and the Netherlands. The Company also entered into agency agreements in Singapore and South Africa.

Promensil, Trinovin and Rimostil are “dietary supplements” that deliver standardized levels of all four isoflavones — daidzein, genistein, formononetin and biochanin.

Promensil, Trinovin and Rimostil are listed with the appropriate regulatory bodies in the countries in which they are sold.

In fiscal 2003, the Company earned total revenues of A$33.1 million versus A$29.7 million in fiscal year 2002, an increase of 11%. Total revenues increased due to unrealised currency gains reflecting the stronger Australian dollar and increased royalty receipts. Included in total revenues were sales of the consumer health products totalling A$19.6 million. Sales were maintained at the same level as last year despite the reduction in advertising and marketing spend, the disorientation left in the market for menopause products (especially in the United States) following the negative publicity surrounding the long term use of HRT and the impact of exchange rates. Sales have shown strong growth in all markets except the US and the Netherlands, which were 17% and 16% respectively below the corresponding period last year. Sales grew strongly in Australia, the UK and Canada which were 19%, 45% and 27% respectively above the same corresponding period last year. The strengthening of the Australian dollar versus major trading partners negatively impacted sales levels by 6% compared to last year.

The following table is an analysis of revenue from sales and other sources during the past three fiscal years by categories of activity and by geographical market. Other revenue consists principally of foreign currency gains, interest income, grants received and royalty receipts. See Note 2 to the Consolidated Financial Statements.

Category of Activity

Dietary Supplements


	Year Ended June 30

	2001		2002		2003
	(A$’000)		(A$’000)		(A$’000)
Sales Revenue		26,663		19,582		19,630
Other Revenue		10,809		10,132		13,420

Total Revenue		37,472		29,714		33,050

Geographical Markets


	Year Ended June 30

	2001		2002		2003
	(A$’000)		(A$’000)		(A$’000)
Sales Revenue
Australia		5,921		5,224		6,228
UK & Europe		2,039		2,274		2,744
US & Canada		18,703		12,084		10,658

		26,663		19,582		19,630

Other Revenue
Australia		10,809		4,806		4,696
UK & Europe		0		123		716
US & Canada		0		5203		8008

Total Revenue		37,472		29,714		33,050

Clinical Development

The Company’s product emphasis is toward the development and marketing of human therapeutics, with a particular focus on therapeutics based on phenolic drug technology. While initial sales revenue has been generated from dietary supplements, the Company has devoted, and expects to continue to devote, significant R&D resources to the development of novel pharmaceuticals based on phenolic hormones.

During fiscal 2000, Novogen’s anti-cancer drug candidate phenoxodiol (NV-06) was approved for human clinical trailing, and in June 2000 Novogen completed a Phase Ia Clinical Trial. This was a significant milestone for the Company, moving the drug candidate from the clinic to “into man” studies. In fiscal year 2001, the Company

announced that phenoxodiol (NV-06) had entered into further Phase I/II clinical trials with two trials commencing at major Australian hospitals. These trials are currently underway and are testing primarily for safety (looking for drug toxicity) and some efficacy data may also be gathered.

Additionally, the FDA has given its approval for phenoxodiol (NV-06) to be tested in humans in the US. This trial commenced in June 2001 at the Cleveland Clinic Taussig Cancer Center and is currently nearing completion. Interim results were presented from the Cleveland Cancer Clinic study showing that phenoxodiol (NV-06) had stabilised cancer progression without any significant side effects in six out of the first ten patients recruited for the trial.

Major advances were made during fiscal 2003 on the Group’s clinical development program.

The Group’s lead anti-cancer drug, phenoxodiol, continued its clinical development program through its 95.1% owned subsidiary company Marshall Edwards, Inc. Marshall Edwards, Inc commenced operation in May 2002. Prior to that time the development of phenoxodiol was conducted by Novogen. Since that time, all of phenoxodiols clinical development has been undertaken by MEI. Phenoxodiol is currently being evaluated in phase II clinical trials for the treatment of prostate cancer, ovarian cancer and squamous cell carcinomas (SCC).

Phenoxodiol and Ovarian Cancer

A phase II clinical study is being conducted by Yale University School of Medicine. The study is fully enrolled, using 40 patients with advanced, metastatic ovarian cancer that has become unresponsive to at least 2 standard chemotherapies (the average number of different drug regimes used previously in these patients is 5 per patient). Phenoxodiol is being administered as a monotherapy by bolus intravenous injection on two consecutive days per week in rising dosages (1, 3, 10 and 20 mg/kg/24-hr) to four groups, each of ten women, over treatment cycles of 12 weeks. No drug-associated toxicity has been encountered to date, and tumor response is being assessed on the basis of tumor mass, levels of the tumor marker (CA125) in the blood, survival over 12 months, and quality of life.

This clinical trial is based on laboratory studies at Yale University School of Medicine that showed phenoxodiol to be the most effective drug at killing ovarian cancer cells, including those that are resistant to all standard anti-cancer drugs.

Following analysis of the data from the current Phase II study, a decision will be made concerning the next stage.

Cisplatin is a standard drug used in the treatment of ovarian cancer, but patients’ tumors commonly become resistant to this drug after some months. A combination of phenoxodiol and cisplatin proved highly effective in stopping human ovarian cancer growth in animals with doses of phenoxodiol and cisplatin that alone were ineffective. This raises the prospect of obtaining an enhanced clinical response of phenoxodiol by combining it with standard chemotherapies, and the opportunity to conduct a combinational drug trial in ovarian cancer patients is under review currently.

A recent pre-clinical study also extended these findings by showing that phenoxodiol proved effective at restoring ovarian cancer cells’ sensitivity to standard anti-cancer drugs such as cisplatin.

Phenoxodiol and Prostate Cancer

A study is currently being conducted at two Australian hospitals testing the effect of oral phenoxodiol therapy in patients with late-stage prostate cancer that has become unresponsive to hormonal therapy. The phenoxodiol is being administered three times per day on a daily basis over treatment cycles of 12 weeks. There will be 24 patients in this trial, with patients being allocated to 7 different dose levels (from 0.72 to 9.0 mg per 24-hr). The study currently has 14 patients enrolled.

Phenoxodiol and Cutaneous Squamous Cell Carcinomas

The potential for phenoxodiol in the treatment of cutaneous squamous cell carcinomas (SCC) arose from the observation that in patients being treated for other forms of cancer who coincidentally had aggressive, malignant SCC of the skin, the SCC tumors showed objective responses within several weeks. A phase II trial is current at an Australian hospital in patients with malignant SCC of the skin. Phenoxodiol is being administered orally, three times daily for a period of 3 months. There will be 30 patients enrolled and they will be each allocated to a treatment regime of one 50 mg dose taken 3 times per day.

NV-04

During the year the Company announced the successful completion of the first human study for its cardiovascular drug program. The trial demonstrated outstanding potency of the drug and reproducibility in arterial dilation by enhancing the biochemical activities within the blood vessel wall. All patients who participated in the trial responded favourably in that intra-arterial administration of the drug led to significant increase in blood flow.

NV-07a

The Company announced that it had discovered a new mode of action for the skin repair compound NV-07a which is expected to have significant implications for the protection of human skin from sunlight induced damage.

The newly identified mode of action protects skin cells from damage to their DNA, a process which otherwise continues to occur over a period of days even after sun exposure has ceased. Human chemicals known to protect skin cells from the protracted DNA damage occurring after UV exposure were present in significantly higher levels in the skin of people treated with NV-07a after UV exposure than in their untreated skin.

Source and Availability of Raw Materials

Isoflavones

Two major manufacturing considerations are supply of raw material (red clover) and isoflavone extraction capacity.

Red clover is grown under contract by farmers experienced in red clover growing. As part of a risk reduction strategy, red clover is grown in a number of areas of geographical and climatic diversity in three Australian states (New South Wales, Victoria, and South Australia). For cost reasons, red clover is no longer grown in the South Island of New Zealand. The current growing capacity is judged to exceed projected demand for the foreseeable future.

The existing isoflavone extraction facility at Wyong NSW is currently meeting existing demand for product. The Company has moved its manufacturing facility from New Zealand to the Wyong site. The Company anticipates being able to increase output from the Wyong facility through continuing improvements in yield efficiencies, refinements in the extraction process and the use of higher isoflavone-yielding clover varieties. The Company currently uses contract formulators and packers in both Australia and the US to tablet and to pack the final product. All products sold in the US are produced by a contract formulator and packer in the US who has represented to the Company that its facilities are certified by the FDA as being in accordance with cGMP.

Phenolic Compounds

The synthetic phenolic compounds used in the Company’s pre-clinical and clinical trials are currently being manufactured at the pilot facility located at North Ryde. The facility manufactures phenoxodiol (NV-06), NV-04 program compounds and NV-07a and will provide sufficient product for pre-clinical and initial clinical trial purposes. If, in the future, clinical trials prove successful and applicable regulatory approvals are obtained, the Company intends to construct its own manufacturing facility necessary for commercial production of these compounds.

Marketing Channels

The Company is currently marketing the products — Promensil, Trinovin and Rimostil. All three products are classified as “dietary supplements” for people whose intake of isoflavones is inadequate.

The marketing strategy is for the Company to continue to be responsible for the direct marketing of its current and proposed dietary supplement products in Australia, New Zealand, North America (US and Canada) and selected European countries. The Company will rely on distributors and other third parties for the sale of the Company’s dietary supplements in other countries and regions. The company has entered into agency distribution agreements in Singapore, South Africa , Austria and Ireland.

The Company has pursued a deliberate policy of not seeking strategic alliances in the development of its line of pharmaceutical products. The Company believes that it has the expertise and will have the resources necessary to take its lead candidate pharmaceutical agents up to Phase II clinical trials. In this way, the potential value of the assets will be maximized prior to any alliance being sought.

Patent Protection

The first and most important area of the intellectual property (“IP”) of the Company is the understanding that an important function of isoflavones in the diet is to act as “pro-hormones”, leading to the formation of a previously undiscovered class of hormones known as “phenolic hormones”. The Company’s discovery that these isoflavonoid-derived phenolic compounds have biological activity is the basis of the Company’s drug discovery and development program. A number of these phenolic compounds have been identified by the Company as offering significant commercial potential as new pharmaceuticals and these are currently under development. The Company has PCT patent applications pending relating to these compounds and a wide range of therapeutic applications.

The second area of IP is the proprietary technology that allows the method of extraction of all four principal estrogenic isoflavones found in the human diet. This technology has allowed the development of Promensil and Trinovin, which are

supplement products that deliver standardized levels of all four isoflavones — daidzein, genistein, formononetin and biochanin.

The third important area of IP is an understanding of the distinctive biological functions of each of the four estrogenic isoflavones. The Company has found that while the four estrogenic isoflavones share functions in common, each has a distinctive biological profile with some even having unique functions. This is the basis of development of dietary supplements with “customized” isoflavone ratios in order to meet specific health needs.

The Company pursues an aggressive patent prosecution strategy, based on PCT patent applications in major global territories. All current patent applications are filed in the name of either Novogen Inc., Novogen’s wholly-owned US subsidiary, or Novogen Research Pty Ltd, one of Novogen’s wholly-owned Australian subsidiaries.

Intellectual Property Development

During fiscal 2003 a number of key patents were granted over the Company’s intellectual property.

NV-07a

In September 2002, the United States Patent Office granted a patent to Novogen for NV-07a covering protection of the skin from sun induced immunosuppression and UV-induced damage. The patent protection confirms the company’s exclusive position in this after-sun skin care technology.

In January 2003 the Australian Patent Office also granted the same patent for NV-07a.

Isoflavones to Treat Menopause and PMS

In May 2003 the US Patent Office granted Novogen a patent over the use of its isoflavone technology in the treatment of the symptoms of menopause and pre-menstrual syndrome (PMS). The patent applies to the isoflavones, genistein, daidzein, formononetin and boichanin, all of which are used commonly in health supplements such as tablets, capsules, drinks and foodstuffs for the alleviation of the adverse symptoms of menopause and PMS.

The granting of this patent will add value to the product marketing and strengthens potential for possible further licensing transactions.

Soy Hypocotyl

In January 2003 the US Patent Office granted Novogen a patent for human dietary supplements comprising soy material made from ground soy hypocotyl containing at least one isoflavone. This patent extends the cover for soy to include soy hypocotyls which are approved for food and do not need to have the isoflavones chemically extracted. Soy hypocotyls thus are a source of isoflavones for food products which might have health claims attached. The use of these alternative isoflavone sources derived from soy has been licensed from Novogen to the US company DuPont Protein Technologies and its subsequent joint venture with Bunge now called Solae LLC.

The following is a list of all patents and patent applications held by the Company.

PCT= Patent Cooperation Treaty
(1) = Novogen Research Pty Ltd
(2) = Novogen Inc


	Title	Applicant	Country

1	HEALTH SUPPLEMENTS CONTAINING PHYTO-OESTROGENS, ANALOGUES OR METABOLITES THEREOF	(1)	PCT (designating all countries)

2	PROCESS FOR GLUCAN PREPARATION THERAPEUTIC USES OF GLUCAN	(1)	PCT (designating all countries)

3	THERAPEUTIC METHODS AND COMPOSITIONS INVOLVING ISOFLAVONES	(1) + (2)	PCT (designating all countries)

4	PREPARATION OF ISOFLAVONES FROM LEGUMES	(1) + (2)	PCT (designating all countries)

5	TREATMENT OR PREVENTION OF MENOPAUSAL SYMPTOMS AND OSTEOPOROSIS	(1) + (2)	PCT (designating all countries)

6	COMPOSITIONS AND METHOD FOR PROTECTING SKIN FROM UV INDUCED IMMUNOSUPPRESSION AND SKIN DAMAGE	(1)	PCT (designating all countries)

7	THERAPY OF ESTROGEN-ASSOCIATED DISORDERS	(1)	PCT (designating all countries)

8	PRODUCTION OF ISOFLAVONE DERIVATIVES	(1)	PCT (designating all countries)

9	CARDIOVASCULAR AND BONE TREATMENT USING ISOFLAVONES	(1)	PCT (designating all countries)

10	COMPOSITIONS AND THERAPEUTIC METHODS INVOLVING ISOFLAVONES AND ANALOGUES THEREOF	(1)	PCT (designating all countries)

11	FOOD PRODUCT AND PROCESS	(1)	PCT (designating all countries)

12	REGULATION OF LIPIDS AND/OR BONE DENSITY AND COMPOSITIONS THEREFORE	(1)	PCT (designating all countries)

13	ISOFLAVONE DIMERS WITH ESTROGENIC PROPERTIES	(1)	PCT (designating all countries)

14	TREATMENT OF RESTENOSIS	(1)	PCT (designating all countries)

15	6-HYDROXY ISOFLAVONES, DERIVATIVES AND MEDICAMENTS INVOLVING THE SAME	(1)	PCT (designating all countries

16	ISOFLAVONE CONJUGATES, DERIVATIVES THEREOF AND THE THERAPEUTIC METHODS INVOLVING THE SAME	(1)	PCT (designating all countries)

17	BIOLOGICAL TARGETS AND THERAPEUTIC METHODS AND COMPOSITIONS INVOLVING COMPOUNDS BASED ON AN ISOFLAV-3-ENE STRUCTURE	(1)	PCT (designating all countries)

18	REPAIR OF DNA MUTAGENIC DAMAGE	(1)	PCT (designating all countries

19	COMPOSITIONS AND THERAPEUTIC METHODS INVOLVING PLATINUM COMPLEXES	(1)	Australia

20	AMINATED ISOFLAVONOID DERIVATIVES AND USES THEREOF	(1)	Australia

Licensing Arrangements

In 1997 the Company granted an exclusive license for the use of soy under three Novogen patent applications to Protein Technologies, Inc. (“PTI”), a wholly-owned subsidiary of Dupont Inc. Under the license agreement, PTI paid to the Company a license fee of approximately A$9 million and agreed to pay the Company royalties from the sales made by PTI of products derived under the license. In fiscal year ended June 30, 2002, PTI paid A$1.9 million in royalties to the Company. In fiscal 2003 the Company received a further A$2.3 million in royalty payments under this license agreement. See “Item 5. Operating and Financial Review and Prospects – Operating Results – Fiscal 2003 v. Fiscal 2002.” Contemporaneous with the license agreement, PTI’s then parent Ralston-Purina Inc. invested A$6.7 million into the Companies Ordinary Shares which was followed in December 1998 by an additional investment of A$3.6 million.

Trademark Protection

The Company also seeks IP protection through trademark registration of product names and corporate logos. The Company has an active program of registering all product trademarks in significant markets.

Australian Government

The activities of the Company are subject to numerous Australian laws and regulations, including those described below.

The Australian Corporations Law is the main body of law governing companies incorporated in Australia, such as Novogen and its Australian subsidiaries. The Australian Securities and Investments Commission (ASIC) is an Australian Government organisation that administratively enforces legislation covering matters such as directors’ duties and responsibilities, preparation of accounts, auditor control, issue and transfer of shares, control of shareholders’ meetings, rights of minority interests, amendments to capital structure, preparation and filing of public documents such as annual reports, changes in directors and changes to capital.

The Australian Stock Exchange (ASX) imposes listing rules on all listed companies, such as Novogen. The rules cover issues such as continuous and immediate disclosure to the market of relevant information, periodic financial reporting and the prior approval of reports to shareholders.

The Company believes that it is in material compliance with the foregoing Australian laws and regulations pertaining to public and private companies.

The Company’s products and manufacturing facilities also are regulated by various Australian federal and state instrumentalities. The Company’s manufacturing facilities hold the appropriate licenses concerning hazardous chemical use and the manufacture of health products.

In Australia, pharmaceuticals are subject to review and approval by the Therapeutic Goods Administration’s (“TGA”) Drug Evaluation Branch (“DEB”) in accordance with Section 25 of the Therapeutic Goods Act 1989. The specific data requirements for the registration of drugs have been closely aligned with the data requirements for applications for marketing authorization of a medicinal product published by the European Commission.

All drug products must comply with the legislative requirements in force in Australia. Statutory standards under the Therapeutic Goods Act 1989 include Therapeutic Goods Orders (“TGOs”) and monographs of the British Pharmacopoeia (“BP”). Where no standard is specified in a TGO or the BP, the TGA may require that the product meet a standard specified in the US Pharmacopeia.

It is also a legislative requirement that data submitted for evaluation must satisfactorily establish the quality, safety and efficacy of the product for the purposes for which it is to be used, where relevant. The approval process for new drugs requires the submission of comprehensive pre-clinical and clinical data regarding safety and efficacy. The Australian Guidelines for the Registration of Drugs (the “Guidelines”) describe the information to be provided in an application for registration of new drugs.

US Government Regulations

The Company’s research, pre-clinical development, clinical trials, and manufacturing and marketing of its products in the US are subject to extensive regulation by numerous governmental authorities including, but not limited to, the FDA. In the US, pharmaceutical products, including plant-derived pharmaceuticals such as the Company’s phenolic compound drug candidates, are subject to FDA review and approval as “drugs” under the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”).

In most cases, the steps required before a new pharmaceutical can be commercially distributed in the US include: (a) preclinical studies and adherence to good laboratory practice (“GLP”); (b) the filing of an investigational new drug application (“IND”) with the FDA summarizing preclinical development work; (c) controlled clinical trials in humans to determine safety and efficacy; (d) filing a new drug application (“NDA”) with the FDA; (e) FDA approval to market; (f) post-marketing approval requirements; and (g) manufacturing regulations.

The Company’s products, Promensil, Trinovin and Rimostil are classified as “dietary supplements”. “Dietary supplements”, although subject to the FD&C Act, are treated differently than pharmaceuticals and are the subject of recent legislation known as the Dietary Supplement Health and Education Act 1994 (the “Dietary Supplement Act”). The Dietary Supplement Act defines dietary supplements, creates a safety system for dietary supplements and their ingredients, regulates claims and labeling of dietary supplements and provides for cGMP for dietary supplements. The Company believes that Promensil, Trinovin and Rimostil, the products of the Company currently sold in the US, comply with the claims, labeling and other rules relating to dietary supplements, and are produced in accordance with applicable FDA cGMP. The products are formulated and packed by a contract manufacturer in the US who has informed the Company that it is cGMP-certified by the FDA. The active bulk ingredients for Promensil, Trinovin and Rimostil are produced by the Company at its production facility which is certified by the TGA as adhering to cGMP for Australia. The FDA does not require that the bulk ingredients used in dietary supplements sold in the US be manufactured according to the FDA’s cGMP standards. The discussion below generally relates to pharmaceutical products and not products characterized as “dietary supplements”.

Pre-clinical Studies and Good Laboratory Practice

The initial testing of a pharmaceutical product before it may be marketed in the US is called pre-clinical testing. Pre-clinical tests include formulation development, laboratory evaluation of product, chemistry and other end points and animal studies to assess the potential safety and efficacy of the product as formulated. Many pre-

clinical studies are regulated by the FDA under a series of regulations called the GLP Regulations. Violations of GLP regulations can, in some cases, lead to invalidation of the studies, requiring them to be replicated. The results of pre-clinical trials are submitted to the FDA as part of the IND and are reviewed by the FDA prior to authorizing the sponsor to conduct clinical trials in human subjects.

Investigation of New Drug Application

FDA regulations provide that human clinical trials may begin 30 days following the submissions and receipt of an IND, unless the FDA advises otherwise or requests additional information, clarification or additional time to review the IND submission. There is no assurance that the submission of an IND will eventually allow a company to commence clinical trials. Once trials have commenced, the FDA may stop the trials, or particular types of trials, by placing a “clinical hold” on such trials because of concerns about, for example, the safety of the product being tested or the adequacy of the trial design. Such holds can cause substantial delay and in some cases may require abandonment of a product. There can be no assurance that the FDA’s acquiescence to an IND constitutes any indication that the FDA will find the protocol satisfactory for a clinical trial or that authorization of one phase of clinical trials will result in authorization of other phases or that the FDA will accept any data generated from a clinical trial.

Clinical Trials

Clinical trials involve the administration of the investigational drug product to human subjects. Each protocol indicating how the clinical trial will be conducted must be submitted for review to the FDA. The FDA’s review of a study protocol does not necessarily mean that, if the study is successful, it will constitute proof of efficacy or safety. Further, each clinical trial must be conducted under the auspices of an institutional review board (“IRB”), which must be constituted and operated in conformance with FDA regulations. The IRB considers, among other factors, ethical concerns and informed consent requirements. The FDA or the IRB may require changes in a protocol both prior to and after the commencement of a trial.

Clinical trials are typically conducted in three sequential phases, although in certain cases, the phases may overlap. In Phase I trials (which constitute the initial introduction of the pharmaceutical into human subjects) the pharmaceutical is tested in healthy subjects, as opposed to patients, primarily for safety (adverse effects), side effects, metabolism, clinical pharmacology and optimal dosage. Phase II trials involve studies in a limited target patient population to (a) further evaluate optimal dosage; (b) identify possible adverse effects and safety risks; and (c) determine the efficacy of a drug for a specific indication.

These can be further classified into Phase IIa trials, which study dose ranging and schedule optimization from the perspective of efficacy, and Phase IIb trials, which study (in parallel or individually) one dose and one schedule (the frequency of dose administration) to determine length of therapy and safety versus efficacy. When a product is found to have an acceptable safety profile in Phase II evaluation, Phase III clinical trials are undertaken to evaluate clinical efficacy and to further test for safety within an expanded target patient population at geographically dispersed multiple clinical study sites. The FDA may order the temporary or permanent discontinuation of a clinical trial at any time for any reason. There can be no assurance that Phase I, Phase II or Phase III testing will be completed successfully within any specified time period, if at all, with respect to any of the Company’s products.

New Drug Application and Approval

Upon completion of clinical trials, the results of the pre-clinical studies and the human clinical trials are submitted to the FDA in an NDA, approval of which must be obtained prior to commencement of commercial sales. The NDA also includes information pertaining to the preparation of drug substances, analytical methods, drug product formulation, details of the manufacture of finished product and proposed product packaging and labeling. The interval between the filing of the IND and the filing of an NDA application can be lengthy. In general, the FDA requires at least two properly conducted and well-controlled Phase III clinical trials demonstrating efficacy. The FDA may deny an NDA if, among other reasons, clinical trial protocols are not adequate or appropriate. The FDA also may deny an NDA or require additional testing or information to assess the safety of the product if the FDA does not view the NDA as containing adequate evidence of the product’s safety and efficacy. Notwithstanding the submission of such data, the FDA may ultimately decide that the application does not satisfy its regulatory criteria for approval, and, even if the NDA is approved, the product may be required to undergo post-licensure testing and surveillance to continue to monitor its safety and effectiveness (Phase IV studies).

Post-Marketing Approval Requirements

Once an NDA has been approved, the NDA applicant remains subject to post-marketing requirements. These include manufacturing, record keeping, and reporting obligations. For instance, any adverse experiences relating to the use of the product must be reported to the FDA. Failure to comply with the FDA’s post-marketing obligations can result in the FDA’s withdrawal of approval, civil seizures, injunctions, and/or civil or criminal penalties.

In the US, in addition to patent protection, drug products containing new chemical entities (“pioneer drugs”) approved through the NDA process may be subject to periods of marketing exclusivity. After the applicable patents and periods of exclusivity expire, however, those pioneer drugs are subject to competition from generic versions (duplicate or related versions) of themselves. The FDA may approve an abbreviated NDA for the marketing of a generic drug (i.e., a duplicated or related version of an approved pioneer drug) that has been shown to be as safe and effective as a pioneer drug whose patents have expired, without requiring the submission of “full reports” of safety and effectiveness.

Manufacturing Regulations

The FDA mandates that drugs be manufactured in conformity with cGMP regulations. In complying with cGMP regulations, manufacturers must continue to expend time, money and effort in production, record keeping and quality control to ensure that the product meets applicable specifications and other requirements. The FDA periodically inspects manufacturing facilities to ensure compliance with applicable cGMP requirements. Failure to comply subjects the manufacturer to possible FDA action, such as suspension of manufacturing, seizure of the product, voluntary recall of a product, fines, injunctions, failure to approve a product, or withdrawal of approval of a product. All products sold in the US are produced by a contract formulator and packer who has informed the Company that its facilities are certified by the FDA as being in accordance with cGMP.

Organizational Structure

Corporate Structure

Novogen Limited is a company limited by shares and is incorporated and domiciled in Australia. Novogen Limited and its controlled entities “Novogen” or “Group” has prepared a consolidated financial report incorporating the entities that it controlled during the financial year, which included the following controlled entities:

Name of Entity


Ownership %	Country of Incorporation

Novogen Laboratories Pty Ltd	Australia	100
Novogen Research Pty Ltd	Australia	100
Phytosearch Pty Ltd	Australia	100
Phytogen Pty Ltd	Australia	100
Central Coast Properties Pty Ltd	Australia	100
Novogen Inc	USA	100
Glycotex Inc	USA	97.6
Novogen Limited	UK	100
Novogen BV	Netherlands	100
Novogen New Zealand Limited	New Zealand	100
Novogen Canada Limited	Canada	100
Marshall Edwards Inc	USA	95.1
Marshall Edwards Pty Limited	Australia	95.1

Property, Plants and Equipment

The Company’s major isoflavone extraction manufacturing plant is located in Wyong in NSW. This plant is used to manufacture the active raw material used in the Company’s three dietary supplement products, Promensil, Trinovin and Rimostil.

The Company owns the land and buildings at Wyong and the site covers an area of approximately 3.37 hectares. The equipment used in the extraction process, pilot plant and laboratories under lease has an amortized lease value of A$1.8 million. The equipment owned by the Company and used in the manufacturing and other processes has a written down book value of A$3.2 million. The manufacturing capacity is adequate to produce the forecast isoflavone extract requirements for at least the next two years.

The pilot plant used for the manufacture of the phenoxodiol clinical trial material is located in leased premises at North Ryde in Sydney. These premises are also used as Novogen’s corporate head office. The Company has provided mortgages over the freehold land and buildings as security over the leasing facilities. The terms of the mortgages preclude the assets being sold or being used as further security without the permission of the mortgage holder.

Assets under lease are also pledged as security for the lease liability. The book value of assets pledged as security at June 30, 2003 was A$8.2 million.

Item 5. Operating and Financial Review and Prospects

Application of Critical Accounting Policies

Our summary of significant accounting policies are described in Note 1 to the Consolidated Financial Statements under Item 18 of this Annual Report.

Revenue Recognition

We recognize revenue from product sales when goods have been dispatched to a customer pursuant to a sales order and invoice and the associated risks have passed to the customer. Royalty revenue from license agreements is recognised when earned.

Allowance for doubtful debts

We maintain an accounts receivable allowance for an estimated amount of losses that may result from the customers inability to pay for the product purchased as well as for anticipated sales returns. If the financial condition of our customers were to deteriorate resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventory Adjustments

Inventories are measured at the lower of cost or net realizable value. We review the components of inventory on a regular basis for excess, obsolete and impaired inventory based on estimated future usage and sales. The likelihood of any material inventory write-downs is dependent on rapid changes in customer demand or new product introductions by competitors.

Operating Results – Fiscal 2003 v Fiscal 2002

Revenue

The Company’s total revenue increased by A$3.3 million or 11% to A$33.1 million in fiscal 2003 from A$29.7 million in fiscal 2002. The increase was primarily as a result of foreign exchange gains resulting from the strengthening of the Australian dollar verses our major trading parties, particularly the US.

The Company’s sales of consumer healthcare products, including Promensil, Trinovin and Rimostil, increased marginally to A$19.6 million in fiscal 2003 from A$19.5 million in fiscal 2002. Sales were maintained at the level as last year despite the reduction in advertising and marketing spend, the disorientation left in the market for menopause products (especially in the United States) following the negative publicity surrounding the long term use of HRT and the impact of exchange rates. Sales have shown strong growth in all markets except the US and the Netherlands, which were 17% and 16% respectively below the corresponding period last year. Sales grew strongly in Australia, the UK and Canada which were 19%, 45% and 27% respectively above the same corresponding period last year.

As sales revenues are denominated in Australian dollars, the Company’s sales revenue is affected by fluctuations in the value of the Australian dollar relative to the

currencies of other countries in which the Company sells its products, primarily the US dollar and the UK pound. In fiscal 2003, the value of the Australian dollar increased in value relative to the US dollar (see “Item 3. Key Information – Selected Financial Data – Exchange Rates”). The strengthening of the Australian dollar versus major trading partners negatively impacted sales levels by 6% compared to last year.

Other Revenue

Other Revenue includes unrealized foreign exchange gains, revenue received from non-operating activities, such as interest received on Company loans made to persons and corporations, research grants received from the Australian government, royalties received under the Company’s license agreement with PTI (Solae) and proceeds from the sale of Company assets. The Company’s other revenue increased by A$3.3 million or 32% from A$10.1 million in fiscal 2002 to A$13.4 million in fiscal 2003, primarily as a result of an increase of A$3.4 million in foreign exchange gains, and an increase of A$0.5 million in royalties received from PTI pursuant to a license agreement between the Company and PTI. See “Item 4. Information on the Company- Business Overview – License Agreements”. These gains were partially offset by a reduction of A$0.7 million in research grants received from the Australian Government following the completion of one grant project. In fiscal 2003, the Company’s Other Revenue amounted to 40% of the Company’s Total Revenue, which is an increase from fiscal 2002 where Other Revenue amounted to 34% of the Company’s Total Revenue.

Costs and Expenses

The Company’s Costs and Expenses is comprised of Cost of Goods Sold, Research and Development, Selling and Promotions, and General and Administrative Expenses. The Company’s Total Costs and Expenses (including interest expense) decreased A$0.6 million, or 1% in fiscal 2003 to A$43.7 million from A$44.3 million in fiscal 2002, primarily due to the decrease in the Company’s Selling and Promotions Expenses offset by an increase in general and administrative expenses. The Company’s Selling and Promotions Expenses decreased A$2.5 million, or 16% in fiscal 2003 to A$12.7 million from A$15.2 million in fiscal 2002, primarily as a result of the Company’s efforts to conserve cash resources. Of this A$2.5 million decrease in Selling and Promotions Expenses, A$1.8 million represents a decrease in spending on advertising and promotions. Cost of goods sold decreased as a percentage to sales from 39% in fiscal 2002 to 37% in fiscal 2003 due to the larger production volumes being produced.

General and Administrative Expenses increased by A$2.1 million or 16% in fiscal 2003 to A$15.0 million from A$12.9 million in fiscal 2002, primarily due to unrealized foreign exchange losses on inter company payables. The offsetting unrealized foreign exchange gains are reported separately under Other Revenues. Unrealised foreign exchange losses reported in General and Administrative expenses inceased by A$3.6 million in fiscal 2003. These losses were partially offset by reduction in the provision for inventory loss verses fiscal 2002.

Net Loss

The Company’s Net Loss decreased by A$4.1 million, or 29%, in fiscal 2003 to A$10.5 million from A$14.6 million in fiscal 2002, as a result of the Company’s continuing strategy of conserving cash by managing expenses and improving margins.

Operating Results – Fiscal 2002 v Fiscal 2001

Revenue

The Company’s Total Revenue decreased by A$7.8 million or 21% to A$29.7 million in fiscal 2002 from A$37.5 in fiscal 2001 primarily as a result of a decrease in sales of the Company’s consumer health products in the US and Australia. The Company’s sales of consumer health products decreased A$7.1 million or 27% to A$19.6 million in fiscal 2002 from A$26.7 million in fiscal 2001, which management believes is primarily attributable to the decrease in advertising and promotional spending in the major markets, discussed below in “Operating Expenses”, competition and the general slowdown in economic activity in the US.

Sales of consumer health products in the US in fiscal 2002 were down 39% from fiscal 2001. Sales of consumer health products in Australia in fiscal 2002 were down 15% from fiscal 2001. These decreases were partially offset by increases in sales in consumer health products in Europe and Canada of 12% and 15% respectively, which management believes is primarily attributable to maintaining product promotional spending in these newer markets.

As sales revenues are denominated in Australian dollars, the Company’s sales revenue is affected by fluctuations in the value of the Australian dollar relative to the currencies of other countries in which the Company sells its products, primarily the US dollar and the UK pound. In fiscal 2002, the value of the Australian dollar increased in value relative to the US dollar (see “Item 3. Key Information – Selected Financial Data – Exchange Rates”). In fiscal 2002, the value of the Australian dollar also decreased relative to the UK pound. In 2002, the net effect of fluctuations in currency values on the Company’s reported sales revenue was less than 1%.

Other Revenue

Other Revenue includes revenue received from non-operating activities, such as interest received on Company loans made to persons and corporations, research grants received from the Australian government, royalties received under the Company’s license agreement with PTI and proceeds from the sale of Company assets. The Company’s other revenue decreased A$0.7 million or 6% from A$10.8 million in fiscal 2001 to A$10.1 million in fiscal 2002. Included in the other revenue for 2002 was A$1.9 million in royalties received from PTI pursuant to a license agreement between the Company and PTI. See “Item 4. Information on the Company- Business Overview – License Agreements”. In fiscal 2002 the Company’s Other Revenue amounted to 34.1% of the Company’s Total Revenue, which is an increase from fiscal 2001 where Other Revenue amounted to 28.8% of the Company’s Total Revenue.

Costs and Expenses

The Company’s Costs and Expenses is comprised of Cost of Goods Sold, Research and Development, Selling and Promotions, and General and Administrative Expenses. The Company’s Total Costs and Expenses (including interest expense) decreased A$14.9 million, or 25.1% in fiscal 2002 to A$44.3 million from A$59.2 million in fiscal 2001, primarily due to the decrease in the Company’s Selling and Promotions Expenses. The Company’s Selling and Promotions Expenses decreased A$9.4 million, or 38% in fiscal 2002 to A$15.2 million from A$24.6 million in fiscal 2001, primarily as a result of the Company’s efforts to conserve cash resources. Of this A$9.4 million decrease in Selling and Promotions Expenses, A$8.2 million represents a decrease in spending on advertising and promotions. Cost of goods

sold increased as a percentage to sales from 32% in fiscal 2001 to 39% in fiscal 2002 due to the smaller production volumes being produced inline with the reduction in sales demand. The provision for the diminution in inventory value increased in fiscal 2002 by A$0.8 million to A$1.7 million due to lower isoflavone levels in some of the varieties of stored red clover raw materials which may be uneconomic to process through the production plant.

During 2002, the Company closed its New Zealand production facilities and transferred production to its Wyong plant. Although the majority of the New Zealand property, plant and equipment has been transferred to the Wyong facility A$0.486 million relating to property plant and equipment was written off in fiscal 2002.

General and Administrative Expenses decreased by A$3.8 million or 22.6% in fiscal 2002 to A$12.9 million from A$16.6 million in fiscal 2001, primarily due to the absence of the non-recurring expenses of A$2.1 million incurred in fiscal 2001 associated with the unsuccessful capital raising by MEI and the Clarkel Pty Limited settlement costs.

Net Loss

The Company’s Net Loss decreased by A$7.1 million, or 48%,in fiscal 2002 to A$14.7 million from A$21.8 million in fiscal 2001, as a result of the Company’s strategy of conserving cash by cutting expenses, primarily advertising and promotion expenses.

Liquidity and cash resources

The Company has continued to finance its operations from equity capital and cash flow from the over-the-counter dietary supplements business.

At the end of fiscal 2003 the Company had cash resources of A$31.0 million versus A$39.9 million at the end of fiscal 2002.

During fiscal 2003 the Company undertook no major cash raising activities. However, during fiscal 2003, the company raised $1.0 million by Novogen options converting into shares contributing A$0.4 million, 9000 Marshall Edwards, Inc warrants being converted into shares contributing A$0.1 million and the Glycotex Inc raising contributing A$0.5 million.

The Company invests its cash and cash equivalents in interest bearing facilities with various maturity dates. At the end of fiscal 2003, deposits amounting to A$18.6 million had a weighted average interest rate of 4.67% and cash deposits of A$12.4 million had a weighted average interest rate of 1.38%.

At the end of fiscal 2003, the Company had outstanding interest bearing liabilities in the form of lease liabilities of A$2.3 million. These leases have an average lease term of 4 years. The average interest rate implicit in the leases is 8.42% (2002:8.39%).

The Company has arranged finance lease facilities of A$4.0 million of which, A$0.8 million was unused at the end of fiscal 2003.

The Company does not hedge its foreign exchange exposures, however, the Company continues to minimise foreign exchange risk by decentralising sales and marketing expenses being denominated in local currencies. See “Item 11 Quantitative and Qualitative Disclosures About Market Risk – Foreign Currency Risk”.

During fiscal 2003 the Company had net cash outflows from operating activities of A$5.8million. Included in this amount are cash receipts of A$1.2 million interest received from investing cash balances, A$0.6 million from the proceeds of Government grants being primarily the START Grants for research and development and A$2.3 million royalty received from PTI pursuant to a license agreement between the Company and PTI. See “Item 4. Information on the Company- Business Overview – License Agreements”.

It is the opinion of the Company that the current level of working capital is sufficient to meet present requirements. The Company’s subsidiary, Marshall Edwards, Inc. filed a registration statement with the Securities and Exchange Commission to make a public offering of two million common stock units. The units consist of one share of common stock and one warrant to be offered in the price range of US$4.50 and US$6.50. The registration statement has not yet become effective. MEI has also applied to have its common stock and the warrants being issued as part of the Unit quoted on the Nasdaq National Market.

Table of Contractual Obligations


					Payments due by period
In $000’s	Total		Less than 1 year		1-3 years		4-5 years		After 5 years

Operating Leases		810		432		378		—		—
Finance Leases		2,457		776		1,666		15
Other Expenditure Committments		2,519		2,373		146

Total Contractual Cash Obligations		5,786		3,581		2,190		15		—

There are no commitments for capital expenditure outstanding at the end of the financial year.

Research and Development

Major advances were made during the year on the Company’s clinical development program.

Phenoxodiol

The Group’s lead anti-cancer drug, phenoxodiol, continued its clinical development program through its 95.1% owned subsidiary company Marshall Edwards, Inc. Phenoxodiol is currently being evaluated in phase II clinical trials for the treatment of prostate cancer, ovarian cancer and squamous cell carcinomas (SCC).

Phenoxodiol and Ovarian Cancer

A phase II clinical study is being conducted by Yale University School of Medicine. The study is fully enrolled, using 40 patients with advanced, metastatic ovarian cancer that has become unresponsive to at least 2 standard chemotherapies (the average number of different drug regimes used previously in these patients is 5 per patient). Phenoxodiol is being administered as a monotherapy by bolus intravenous injection on two consecutive days per week in rising dosages (1, 3, 10 and 20 mg/kg/24-hr) to four groups, each of ten women, over treatment cycles of 12 weeks. No drug-associated toxicity has been encountered to date, and tumour response is being assessed on the basis of tumor mass, levels of the tumor marker (CA125) in the blood, survival over 12 months, and quality of life.

Following analysis of the data from the current Phase II study, a decision will be made concerning the next stage.

A recent pre-clinical study also extended these findings by showing that phenoxodiol proved effective at restoring ovarian cancer cells’ sensitivity to standard anti-cancer drugs such as cisplatin.

Phenoxodiol and Prostate Cancer

A study is current at two Australian hospitals testing the effect of oral phenoxodiol therapy in patients with late-stage prostate cancer that has become unresponsive to hormonal therapy. The phenoxodiol is being administered three times per day on a daily basis over treatment cycles of 12 weeks. There will be 24 patients in this trial, with patients being allocated to 7 different dose levels (from 0.72 to 9.0 mg per 24-hr). The study currently has 14 patients enrolled.

Phenoxodiol and Cutaneous Squamous Cell Carcinomas

NV-04

NV-07a

The Company increased its gross R&D expenditure during fiscal 2003 to A$8.3 million from A$7.9 million in fiscal 2002.

Due to the nature and uncertainty of the R&D projects being undertaken by the Company, it is not possible to reasonably estimate the cost and timing of project completion. The R&D projects are not costed on a project by project basis and to analyse costs between projects could only be performed on an arbitrary and subjective basis.

The progress on research and development projects and expenses is monitored and controlled in a number of ways.

All third party research and development including the conduct of clinical trials are carried out under contract. The contract details include project milestones and expenditure budgets. Senior Novogen research and development staff monitor the projects to ensure that milestones are achieved in a timely manner.

In house research and development is managed by the Research and Development Director and senior research and development staff. Budgets are prepared annually and agreed by the Novogen Board. Expenses are monitored monthly, actual versus budget by expense line and in total.

Item 6. Directors, Senior Management and Employees.

The names of the Company’s Directors during the fiscal year and up to the date of this report are as follows:

Mr P A Johnston (Non-executive Chairman)
Mr C Naughton (Managing Director)
Dr G E Kelly (Executive Director)
Mr P B Simpson
Prof P J Nestel AO
Prof L C Read (appointed September 11, 2003)

All Directors were in office from the beginning of the financial year until the date of this report, unless otherwise stated.

Information on Directors

Philip A JohnstonNon-Executive Chairman
Dip Eng (Production)

Non-Executive Director since 1997, Mr Johnston was elected chairman of the Company with effect from January 1, 2001. Mr Johnston has extensive experience in the pharmaceutical industry including 9 years as an Executive Director of Wellcome Australia Limited. He was previously a Director of two subsidiary Companies of GlaxoWellcome. He has had responsibility for production, distribution, quality assurance and consumer product development and has been directly involved in the establishment of strategic alliances and joint ventures. He has completed a number of executive development programs including the University of NSW and the London Business School.

Christopher NaughtonManaging Director
BEc, LLB

Managing Director since March 1997, Mr Naughton joined Novogen in 1996 as Commercial Director. Mr Naughton has degrees in Economics from the Australian National University and in Law from the University of New South Wales. He has completed the Program for Management Development at the Harvard Business School, and is an Attorney in New South Wales. After working in merchant banking, he has spent the last 18 years in the pharmaceutical industry, including appointments as a Director of Wellcome Australia Limited and in worldwide business development with The Wellcome Foundation Limited in the UK.

Dr Graham E. KellyExecutive Director
BSc(Vet), BVSc, PhD

Executive Director since 1994, Dr Kelly is founder and was the first Managing Director of Novogen Limited. Dr Kelly was Chairman of the Company until December 31, 2000, a position he had held since March 1997. He is also Chairman of the AIM listed subsidiary company Marshall Edwards Inc. He has spent nearly 30 years in medical research involving drug development, immunology, surgery and cancer. Dr Kelly was Senior Research Fellow in Experimental Surgery in the Faculty of Medicine at the University of Sydney. He developed the ß-1, 3-Glucan and Isoflavonoid intellectual property now owned by the Company.

Peter B SimpsonNon-Executive Director
MPharm, PhC, MPS

Non-Executive Director since 1994, Mr Simpson has extensive experience in the development of pharmaceutical products for international markets. He was Research and Development Manager with David Bull Laboratories for 8 years prior to being appointed Chief Executive Officer of Biota Holdings Limited in 1987. At Biota he oversaw the research and development of a potential cure for influenza and the licensing of that discovery to Glaxo Limited.

Professor Paul J NestelNon-Executive Director
AO MD, FTSE, FRACP, FAHA.

Professor Nestel is currently Senior Principal Research Fellow and Head of the Cardiovascular Nutrition Laboratory at the Baker Medical Research Institute, Victoria. Professor Nestel is also a Consultant Physician at the Alfred Hospital, Melbourne.He is president of the International Life Sciences Institute (Australiasia) and is a member of the board of directors of ILSI South East Asia; He was formerly Clinical Professor in Medicine, The Flinders University of South Australia. Professor Nestel has been and remains a member of many national and international committees research and policy on cardiovascular disease. He has published over 370 scientific and medical papers and he is a Fellow of the Australian Academy of Technological Sciences and Engineering and Fellow of the American Heart Association. Professor Nestel is an Officer of the Order of Australia.

Professor Leanna C ReadNon-Executive Director

BagSc(Hons), PhD, FTSE

Professor Read is founder and Managing Director of TGR BioSciences Pty Ltd an early stage biotech company that discovers novel bioactives by high-throughput screening. She has 15 years of experience in leading and managing commercially-related Research organisations, including the CRC for Tissue Growth and Repair, and the Child Health research Institute. Professor Read holds a professional appointment at Flinders University and has published over 90 scientific papers. Board appointments currently include the Prime Ministers Science and Engineering Council and the Australian Proteome Analysis facility Inc. Professor Read was a member of the Industry Research and Development Board for six years until 2002 and chaired its Biological Committee. She is a Fellow of the Australian Academy of Technological Sciences and Engineering and has been awarded the inaugural Biotechnology Industry Service Award.

Executive Officers’ profiles

Alan James Husband – Research Director
BScAgr, PhD, DSc, FASM

Professor Husband is recognized internationally for his research in the areas of immunology and pathology in veterinary and medical sciences. Professor Husband has published several books and over 200 scientific articles and is a member of the editorial boards of several international scientific journals. Professor Husband has been with the Company since October 1996.

Warren Lancaster – Vice President Commercial and Corporate Development
BSc, MBA

A graduate in physics as well as holding an MBA from the Australian Graduate School of Management (Sydney), Mr. Lancaster worked as a business strategy and management consultant with an Australian consulting firm before joining the Company in March 1997, specifically to assume the role of Vice President- North America.

Ronald Lea Erratt – Company Secretary
FNIA

Mr Erratt is a qualified accountant. Prior to joining the Company in September 1994, he was Director, Superannuation Fund Administration at Towers Perrin and held various management positions at CSR Ltd.

David Ross Seaton – Chief Financial Officer
B Bus KCAE, M Com UNSW, CPA

Mr Seaton is a graduate in Business Studies as well as holding a Master of Commerce degree from the University of NSW. He has completed Management Development programs at Northwestern University in Chicago as well as at Duke University and the London Business School. He has had 16 years experience in the pharmaceutical industry and prior to joining Novogen in 1999 was the Finance Director of GlaxoWellcome Australia Ltd. Mr Seaton was also Finance Director of Wellcome Australia Limited prior to its merger with Glaxo in 1995.

Craig Kearney – General Manager Consumer Business
BMS Waikato.

Craig Kearney joined Novogen in December 2001 as the General Manager of the Consumer Business. He has a Bachelor of Management Studies from Waikato University in New Zealand and has subsequently completed managerial development programmes at London School of Business and Duke University in USA. He has worked 18 years in the Over The Counter (OTC) consumer pharmaceutical category including 10 years for Wellcome New Zealand and Wellcome Australia, 6 years for Parke Davis/Warner Lambert Australia and prior to Novogen he worked for Pfizer Australia. He held senior sales, marketing and business management roles for all three companies.

Compensation

The Remuneration & Corporate Governance Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors, the Managing Director and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefits such as the use of motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.

Details of the nature and amount of each element of the emolument of each Director of Novogen Limited and the five Executive Officers included in the Company’s senior management are as follows:

Compensation of Directors of Novogen Limited July 1, 2002 – June 30, 2003


	Annual Emoluments						Long term Emoluments

							Termination &		Options Granted
			Committee				Similar									Super-
	Base Fee		Fee		Other		Payments				Amortised Cost		Remuneration			annuation		Total
	A$		A$		A$		A$		Number		A$		%			A$		A$

PA Johnston		53,724		16,000		—		—		3,128		891		1.16	%		6,276		76,891
C Naughton		400,621		—		42,513		—		700,000		31,749		6.21	%		36,056		510,939
GE Kelly		278,952		—		63,010		—		—		—		0.00	%		25,106		367,068
PJ Nestel		30,000		12,000		—		—		20,000		5,100		10.83	%		—		47,100
PB Simpson		26,364		14,000		—		—		3,128		891		1.98	%		3,634		44,889

		789,661		42,000		105,523		—		726,256		38,631					71,072		1,046,887

Novogen’s Constitution provides that the directors who are not executive officers shall be paid an ordinary remuneration which may not exceed the maximum amount fixed by the shareholders of the Company in general meetings from time to time. Directors fees are higher for the role of Company Chairman.

No Director has received or become entitled to receive, during or since the end of the fiscal year, a benefit because of a contract made by Novogen Limited, a controlled entity, or a related body corporate with a Director, a firm of which a Director is a member or an entity in which a Director has a substantial financial interest.

Compensation of the Executive Officers of the Company and the consolidated entity July 1, 2002 – June 30, 2003.


	Annual Emoluments				Long term Emoluments

					Termination &		Options Granted
					Similar						Super-
	Base Fee		Other		Payments				Amortised Cost		annuation		Total
	A$		A$		A$		Number		A$		A$		A$

WJ Lancaster (USA)		229,866		6,167		—		90,196		14,164		23,824		274,021
AJ Husband		211,388		50,813		—		122,284		21,180		19,025		302,406
DR Seaton		222,372		27,173		—		96,988		13,847		20,013		283,405
CD Kearney		141,234		32,279		—		23,812		2,697		12,711		188,921
RL Erratt		137,471		35,708		—		90,936		14,462		12,372		200,013

		942,331		152,140		—		424,216		66,350		87,945		1,248,766

The terms ‘Director’ and ‘Officer’ have been treated as mutually exclusive for the purposes of this disclosure. Executive Officers are those directly accountable and responsible for the operational management and strategic direction of the Company.

Arrangements and Relationships

There are no arrangements (other than standard employment remuneration arrangements) by which any Director or Executive Officer was appointed to his position. There are no family relationships between any of the Directors or Executive Officers.

Pension Benefits

The Company has paid A$604,000 during fiscal 2003 for employee superannuation benefits and pension benefits.

Board Practices

Novogen Board of Directors


		Year First		Current Term
Name	Position Held	Appointed		Expires

P A Johnston	Chairman		1997	October-2003
C Naughton	Managing Director		1997	—
G E Kelly	Executive Director		1994	October-2005
P B Simpson	Director		1994	October-2006
P J Nestel	Director		2001	October-2006
L C Read	Director		2003	October-2006

Term of Directors

The term for each director (excluding the Managing Director) is three years at which time that director retires from office and offers himself/herself for re-election at the next annual general meeting. The term of office of the directors of Novogen are staggered, such that in any given year at least one-third (or the nearest lower whole number) of the directors (excluding the Managing Director) must retire and stand for re-election at each year’s annual general meeting.

The Managing Director’s appointment as a director of the Company is not subject to the rotation provisions of Novogen’s Constitution. In accordance with the terms of his employment contract, Mr Naughton’s term as Managing Director continues until terminated upon six months prior notice. Mr Naughton would also cease to be managing director if he ceased to be eligible to be a director of a company under the relevant provisions of the Australian Corporations Law.

Ms Leanna Read was appointed to the board on September 11, 2003.

The Board has the power to appoint any person to be a director either to fill a casual vacancy or as an additional director (up to a maximum of 10). Any director so appointed may hold office only until the next annual general meeting when he or she shall be eligible for election.

Board of Directors

The Novogen Limited Board of Directors is elected by and accountable to shareholders. It monitors and directs the business and is responsible for the corporate governance of the Company. Responsibility for managing the development of the Company consistent with the objective of enhancing long term shareholder value is with the Managing Director, who is accountable to the Board.

The Board comprises six Directors of whom four are non-executive Directors. The two executive Directors are the Managing Director, Mr Christopher Naughton and Dr Graham Kelly. In addition the Board has established the following Committees - Audit, Corporate Governance and Remuneration, and Capital Projects Committees.

There is also the International Scientific Advisory Board whose membership includes the Executive Directors and which advises the Board on clinical and scientific strategy and direction.

Audit Committee

It is the Board’s responsibility to ensure that an effective internal control framework exists within the Company. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes. This includes the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information. The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the Company to the Audit Committee.

The Audit Committee discusses and reviews any issues arising from external audits and reviews. It is charged with assessing the adequacy of the Company’s financial and operating controls. It also reviews compliance with legal requirements affecting the Company and matters affecting corporate governance practices. The committee comprises Peter Simpson (Chairman), Philip Johnston and Paul Nestel.

Corporate Governance and Remuneration Committee

The Corporate Governance and Remuneration Committee has been formed in order to review the controls at the business group level that safeguard the shareholders and Company’s interests and ensures its integrity. It also reviews the remuneration of the Executive Directors by reference to independent data, external professional advice and the requirements to retain high calibre management. The committee comprises Peter Simpson (Chairman), Paul Nestel and Philip Johnston.

Capital Projects Committee

The Capital Projects committee reviews capital investment proposals, assesses the project tenders and reviews progress against timetables and cost estimates. The committee comprises Philip Johnston (Chairman), Peter Simpson, Paul Nestel and Christopher Naughton.

Executive Directors’ Employment Contracts

Each of Dr. Graham Kelly and Mr. Christopher Naughton have entered into employment agreements with the Company.

The agreements, each dated June 25, 2003, are similar in terms, other than as to the description of the position held (Executive Director in the case of Dr. Graham Kelly and Managing Director in the case of Mr. Christopher Naughton), the responsibilities attached to that position, remuneration and the term of the agreement.

Dr Kelly’s agreement provides for an initial term of appointment of three years. Mr Naughton’s agreement provides for an initial term of five years. After the expiration of the term either party may give to the other not less than six months notice of termination.

The agreements may be terminated by the Company immediately in the event of matters such as serious breach of faith, serious neglect or default of duties, fundamental breach of agreement, or commission of criminal offence or dishonesty. The agreements are terminated automatically on the death or total or permanent disability of the employee.

The employment agreements require that the employee must carry out his employment in the manner and at the time that the Company reasonably determines. He must comply with and carry out the proper and reasonable directions, orders and instructions of, and is directly responsible to, the Board.

There are provisions in each agreement as to annual leave, sick leave and long service leave.

Provisions dealing with confidentiality and the obligation to assist the Company in securing the Company’s ownership of all intellectual property developed by the employee are contained in the agreement. In addition, each employee is restrained from competing with the Company during the term of the agreement, with a non-solicitation limitation for a period of five years after such term expires.

Under each agreement, the Company must indemnify the employee, within the limits set in the Corporations Law and the Constitution of the Company, against any liability: (a) incurred in connection with the performance of his position, unless the liability arises out of conduct involving a lack of good faith; (b) incurred in defending any proceedings in connection with the performance of his duties, whether civil or criminal and in which judgment is given in his favor or in which he is acquitted; or (c) in connection with any application in relation to any proceedings in which relief under the Corporations Law is granted.

The Company also agrees to pay insurance premiums for policies covering liabilities incurred by the employee in connection with the performance of his duties, excluding liabilities arising out of conduct involving a willful breach of duty or a contravention of certain provisions of the Corporations Law relating to an improper use of position or improper use of information acquired by virtue of his position.

Employees

The Company employed 61 people at June 30, 2003 (June 30, 2002 : 57 people).

Share Ownership

Directors’ holdings of shares and options in the Company

The table below shows the number of ordinary shares and options to purchase ordinary shares held directly or indirectly by the Directors of the Company as of November 28, 2003.


	Ordinary						Options
	Shares Fully				Number		Exercise		Expiry
	Paid		%		Outstanding		Price		Date
G E Kelly		8,579,119		8.9		—		—		—
C Naughton		758,511		0.3		—		—		—
P A Johnston		43,594		—		3,128		4.01	Oct 27 2005
P B Simpson		500		—		3,128		4.01	Oct 27 2005
P J Nestel		12,000		—		20,000		3.58	July 20 2005

The named Executive Officers own shares in the Company, and have options issued under the Novogen Limited Share Option Plan.

Employee Share Option Plan

The Employee Share Option Plan provides for the issue of options to eligible employees being either an employee or Director of the Company or an associated company. Each option entitles its holder to acquire one fully paid ordinary share and is exercisable at a price equal to the average price of such shares at the close of trading on the Australian Stock Exchange for the five days prior to the date of issue. Options are not transferable. The option lapses if the employee ceases to be an employee during the vesting period. There are currently 41 employees eligible for this scheme.

Item 7. Major Shareholders and Related Party Transactions

Major Shareholders

The names of the substantial shareholders disclosed to the Company are as follows at August 18, 2003:

Bende Holdings Pty Ltd - holding 6,635,538 Ordinary Shares representing 6.94% of the outstanding Ordinary Shares. Bende Holdings Pty Ltd is a company controlled by G E Kelly.

Oppenheimer Funds Inc – holding 13,462,783 Ordinary Shares representing 14.1% of the outstanding Ordinary Shares.

The substantial shareholders do not have any different voting rights than other shareholders of the Company.

At December 1, 2003 there were 5,690,806 ADR’s outstanding, representing 28,454,030 Ordinary Shares (or 29.5% of the then outstanding Ordinary Shares). At December 1, 2003 there were 44 registered holders of Novogen ADRs.

Item 8. Financial Information

Consolidated financial statements are included in “Item 18 – Financial Statements” on pages 59 through 108.

Export Sales

Export sales to third parties from Australia are not a significant portion of total sales. The details of sales by geographic region are contained in Item 4.

Legal Proceedings

There are no pending legal proceedings which either individually or in the aggregate, will have a significant effect on the Company’s financial position or profitability, nor have any such proceedings had any such effect in the recent past.

Dividends

The Company has incurred losses since its inception and as a result has not declared any dividends. Any dividends declared in the future will be paid in Australian dollars.

Item 9. Offer and Listing Details

Trading Markets

The principal listing of Novogen and quotation of its Ordinary Shares and listed options to purchase Ordinary Shares is on the Australian Stock Exchange (“ASX”). As of January 7, 1999, the Company’s American Depositary Receipts each representing five ordinary shares (ADRs) began trading on the Nasdaq Small Cap Market. On May 12, 2000 Novogen’s ADR’s began trading on the Nasdaq national market. The trading symbol on Nasdaq is “NVGN”. The trading symbol on ASX is “NRT”.

American Depositary Receipts

Novogen’s Ordinary Shares trade in the US in the form of ADRs. Novogen has entered into a Deposit Agreement with the Bank of New York under which the Bank of New York, acting as depositary, issues the ADRs

The following table sets forth, for the calendar periods indicated, the high and low market quotations for Novogen’s Ordinary Shares, as quoted on the ASX, and Novogen’s ADRs, as quoted on the Nasdaq.

NOVOGEN LIMITED SHARE PRICE HISTORY


Period	Per Ordinary Share (A$)				Per ADR (US$)
Year Ended	High		Low		High		Low
June 1999		3.25		2.15		11.10		7.01
June 2000		5.00		2.42		18.00		8.00
June 2001		4.62		2.02		14.25		5.35
June 2002		3.34		0.83		10.50		1.98
June 2003		5.59		1.18		19.59		3.15
Quarter Ended
September 2000		4.62		3.57		14.25		9.65
December 2000		4.19		2.86		11.63		7.75
March 2001		3.90		2.65		12.00		6.88
June 2001		2.97		2.02		10.50		5.35
September 2001		2.31		0.83		4.95		3.35
December 2001		3.21		1.03		8.42		2.50
March 2002		3.16		2.42		8.45		6.50
June 2002		3.34		1.80		9.37		4.25
September 2002		2.18		1.18		6.34		4.25
December 2002		3.36		1.76		9.77		4.83
March 2003		3.89		2.48		11.55		7.23
June 2003		5.59		3.05		19.59		9.36
September 2003		5.53		4.00		19.10		12.30
Month Ended
June 2003		5.59		4.18		19.59		13.60
July 2003		5.18		4.00		17.75		12.30
August 2003		4.98		4.47		16.91		14.01
September 2003		5.53		4.66		19.10		15.33
October 2003		6.50		5.33		23.70		17.63
November 2003		8.10		6.40		29.49		22.40

Item 10. Additional Information

Memorandum and Articles of Association

The Company’s Memorandum and Articles of Association are incorporated by reference to the Registration Statement on Form 20-F filed with the Securities and Exchange Commission on December 24, 1998 (File No. 0-29962).

Material Contracts

There have been no material contracts entered into in the last two years by the Company or any of its subsidiaries other than in the normal course of business.

Exchange Controls

Australia has largely abolished exchange controls on investment transactions. The Australian dollar is freely convertible into US dollars. In addition, (other than certain restrictions imposed under Australian law in relation to dealings with the assets of a number of persons connected with terrorism) there are currently no specific rules or limitations regarding the export from Australia of profits, dividends, capital, or similar funds belonging to foreign investors, except that certain payments to non-residents must be reported to the Australian Cash Transaction Reports Agency, which monitors such transactions. However, the Reserve Bank of Australia does retain a discretion to prevent foreign exchange dealings in certain circumstances under the Australian Banking (Foreign Exchange) Regulations 1959.

Under Australian law, foreign persons are prohibited from acquiring more than a limited percentage of the shares in an Australian company without approval from the Australian Treasurer or in certain other limited circumstances. These limitations are set forth in the Australian Foreign Acquisitions and Takeovers Act (the “Foreign Takeovers Act”).

Under the Foreign Takeovers Act, as currently in effect, any foreign person, together with associates, is prohibited from acquiring 15% or more of the outstanding shares of Novogen (or else the Treasurer may make an order requiring the acquirer to dispose of those shares within a specified period of time). In addition, if a foreign person acquires shares in Novogen and as a result the total holdings of all foreign persons and their associates exceeds 40% in aggregate without the approval of the Australian Treasurer, then the Treasurer may make an order requiring the acquirer to dispose of those shares within a specified time. The same rule applies if the total holdings of all foreign persons and their associates already exceeds 40% and a foreign person (or its associate) acquires any further shares, including in the course of trading in the secondary market of the ADRs.

Under the current Australian foreign investment policy, it is unlikely that the Treasurer would make such an order in relation to an acquisition that contravenes the Foreign Takeovers Act where the level of foreign ownership exceeds 40% in the ordinary course of trading, unless the Treasurer is satisfied that the acquisition is contrary to the national interest. The Foreign Takeovers Act allows foreign persons to seek prior approval of acquisitions of Novogen shares which could otherwise result in the Treasurer making an order requiring the foreign person to dispose of the shares.

If a foreign person holds more than 15% of the shares of Novogen or if the level of aggregate foreign ownership of Novogen exceeds 40% at any time, Novogen would be considered a foreign person under the Foreign Takeovers Act. In such event, Novogen would be required to obtain the approval of the Treasurer for Novogen, together with its associates, to acquire: (i) more than 15% of an Australian company

or business with assets totaling over A$50 million; or (ii) any direct or indirect ownership interest in Australian urban land.

The percentage of foreign ownership of Novogen would also be included in determining the foreign ownership of any Australian company or business in which it may choose to invest. Novogen has no current plans for any such acquisitions and the Company only owns commercial property which falls within the exceptions to the prohibition on acquiring Australian urban land. The Company’s Constitution does not contain any additional limitations on a non-resident’s right to hold or vote the Company’s securities.

No stamp duty will be payable in Australia on the transfer of ADRs provided that any instrument by which the ADRs are transferred is executed outside Australia.

Taxation

The following discussion is a summary of the Australian taxes generally applicable to US holders of ADRs. For purposes of this discussion, “US Holder” means a beneficial owner of ADRs who: (a) for US federal income tax purposes is a US resident, a US citizen, a domestic corporation, a domestic partnership, or a non-foreign estate or trust; and (b) does not own directly, indirectly or constructively, 10% or more of the voting stock of the Company. Prospective investors are urged to consult their own tax advisers regarding the US and Australian tax consequences of owning and disposing of Ordinary Shares and ADRs. Further, prospective investors who are residents of jurisdictions other than the US should consult their tax advisers as to the tax consequences of investing in the ADRs or shares under the laws of their jurisdictions of residence.

The taxation discussion is intended only as a descriptive summary and does not purport to be a complete technical analysis or listing of all potential tax effects to US holders, and does not address the Australian taxes applicable to special classes of US holders. Except as otherwise noted, the statements of Australian tax laws set out below are based on the laws as of the date of this Annual Report, including the bilateral taxation convention between Australia and the US (the “Treaty”) and are subject to any changes in law occurring after that date.

Distributions

Under Australian law non-residents may be subject to withholding tax in respect of dividends received from shares in Australian companies depending on the extent to which the dividends are franked. In accordance with the treaty, dividends derived by a non-resident of Australia who is a resident of the US may be taxed in Australia, but such withholding tax is limited to 15% of the gross amount of dividends (unless the dividend is derived by a non-resident who has or is deemed to have a permanent establishment of fixed base in Australia, in which case, a 30% rate may apply) However in some instances withholding tax may not apply.

The Australian Government introduced a dividend imputation system, effective from July 1, 1987. Under this system, to the extent that dividends are paid out of income on which Australian income tax has been levied, such dividends are considered as “franked” dividends to that same extent. Where an Australian resident shareholder receives a franked dividend, he or she receives a tax rebate which can be offset against the Australian income tax payable by the shareholder. The amount of the rebate is dependent upon the extent to which the dividend paid is a franked dividend. Non-resident shareholders, rather than receiving a rebate, are exempt from dividend withholding tax in respect of the franked portions of the dividends received.

Dispositions

Non-residents of Australia who do not hold and have not at any time in the five years preceding the date of disposal held (for their own account or together or together with associates) 10% or more of the issued share capital of a listed public Australian company are not liable for Australian capital gains tax on the disposal of shares or ADRs of such company. However, under Australian law the disposal of shares or ADRs will be held to be a disposal of a taxable Australian asset and subject to capital gains tax if they have at any time been used by a taxpayer in carrying on a trade or business wholly or partly at or through a permanent establishment in Australia. In such circumstances, non-residents of Australia are subject to Australian capital gains tax on the disposal of shares or ADRs where the disposal consideration exceeds the cost base (indexed for inflation where the shares or ADRs are held for 12 months or more). Non-residents of Australia who are subject to Australian tax on capital gains made on the disposal of shares or ADRs are required to file an Australian income tax return for the year in which the disposal occurs.

Non-residents who are securities dealers or in whose hands a profit on disposal of ADRs or shares is regarded as ordinary income and not as a capital gain (such ADRs and shares are referred to as “revenue assets”) will be subject to Australian income tax on Australian source profits arising on the disposal of the ADRs or shares, unless such profits are exempt from Australian tax under the Treaty by reason of the profits not being attributable to the carrying on of a trade or business through a permanent establishment of the non-resident in Australia. Prospective investors should consult their own tax advisers as to whether the ADRs or shares are revenue assets because such a conclusion depends on the particular facts and circumstances of the individual investor concerned.

Non-residents with no taxable capital gains or income from sources in Australia other than dividends with respect to the shares or ADRs are not required to file an Australian income tax return.

Estate and Gift Tax

Australia does not impose any estate, inheritance or gift taxes. Therefore, no Australian estate tax, inheritance tax or gift tax will be imposed on the death of, or upon a lifetime gift by, a US shareholder. However, the transfer by a US resident of ordinary shares or ADRs by way of gift or upon death may have Australian income tax and stamp duty implications.

Documents on Display

The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are applicable to a foreign private issuer. Under the Exchange Act, the Company is required to file periodic reports and other information with the Securities and Exchange Commission (the “Commission”). These materials, including this Annual Report and the exhibits thereto, may be inspected without charge and copied at established rates at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C., 20549, and at the Commission’s regional offices located at Suite 1400, Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois, 60661-2551 and 233 Broadway, New York, New York 10279. For more information on the public reference rooms, call the Commission at 1-800-SEC-0330.

Item 11. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

The Company has cash reserves and places funds on deposit with financial institutions for periods not exceeding three months.

The Company does not use derivative financial instruments. The Company places its deposits with high credit quality financial institutions, and, by policy, limits the amount of credit exposure to any single counter party. The Company is averse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk, and reinvestment risk.

The Company mitigates default risk by depositing funds with only the safest and highest credit quality financial institutions and by constantly positioning its portfolio to respond appropriately to a significant reduction in a credit rating of any financial institution.

The Company has no interest rate exposure due to rate changes for long-term debt obligations because all of the Company’s long-term borrowings relate to lease agreements that contain fixed rates of interest. The Company primarily enters into debt obligations to support general corporate purposes including capital expenditures and working capital needs.

The Company does not consider the effects of interest rate movements to be a material risk to its financial condition.

Foreign Currency Risk

The Company conducts a portion of its business in various foreign currencies, primarily in the US and the UK. As of June 30, 2003 the Company had not established a foreign currency hedging program. The Company has mitigated and will continue to mitigate a portion of its currency exposure through decentralized sales, marketing and support operations in which all costs are local currency based. Net foreign currency losses in fiscal year 2003 were A$516,000 compared with net foreign currency losses of A$482,000 in fiscal year 2002.

The Company does not consider the effects of foreign currency movements to be a material risk to its financial condition.

Item 12. Description of Securities Other than Equity Securities

Item 12 details are not required to be disclosed as part of the Annual Report.

PART 2

Item 13. Defaults, Dividend Arrearages and Delinquencies

This item is not applicable.

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

This item is not applicable.

Item 15. Controls and Procedures

An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2003 was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures have been designed to provide, and are effective in providing, reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported with in the time periods specified in the SEC’s rules and forms. A controls system, no matter how well designed and operated cannot provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. Subsequent to the date of the most recent evaluation of the internal controls, there were no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 16. Reserved

PART 3

Item 17. Not Applicable

Item 18. Financial Statements

The financial statements filed as part of this Annual Report are included on pages 59 through 108 hereof.

Item 19. Exhibits

(a)

Exhibits


Exhibit No.		Exhibit Description
1.1		Constitution of Novogen Limited (formerly known as the Memorandum of Association and Articles of Association). (1)

2.1		Deposit Agreement, dated as of February 23, 1998, among Novogen Limited, the Bank of New York, as Depositary, and owners and holders from time to time of ADRs issued thereunder. (2)

4.1		Employment contract between the Company and Mr C Naughton (3)

4.2		Employment Contract between the Company and Professor Alan Husband (3)

4.3		Employment Contract between the Company and Dr G E Kelly (3)

4.4		Lease between Kendall Glen Pty Limited (Lessor) and Novogen Laboratories Pty Ltd for the Company’s corporate headquarters at 140 Wicks Road, North Ryde, New South Wales. (3)

8.1		Company Subsidiaries

12.1		Certifications

13.1		Section 906 Certification by the Chief Executive Officer and Chief Financial Officer (4)

(1)

Incorporated by reference to the Registration Statement on Form 20-F filed with the Securities and Exchange Commission on December 24, 1998 (File No. 0-29962).

(2)		Incorporated by reference to the Registration Statement on Form F-6 filed with the Securities and Exchange Commission on February 12, 1998 (File No. 333-8346).

(3)		Incorporated by reference to the Annual Report on Form20-F filed with the Securities and Exchange Commission on November 27, 2000 (File No. 0-29962)

(4)		Attached as Exhibit 13.1

Report of Independent Auditors

To the Shareholders and Board of Directors of Novogen Limited

We have audited the accompanying consolidated statements of financial position of Novogen Limited and its subsidiaries (the Group) as of 30 June 2003 and 2002 and the related consolidated statements of financial performance, cash flows and changes in contributed equity for each of the three years in the period ended 30 June 2003. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

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

Accounting principles generally accepted in Australia vary in certain respects from accounting principles generally accepted in the United States. The application of the accounting principles generally accepted in the United States would have affected the determination of consolidated net loss for each of the three years in the period ended 30 June 2003 and the determination of the consolidated shareholders’ equity at 30 June 2003 and 2002 to the extent summarised in note 30 to the consolidated financial statements.

/s/ Ernst & Young

Sydney, Australia
August 27 , 2003

Novogen Limited, Consolidated Financial Statements

STATEMENT OF FINANCIAL PERFORMANCE

Year ended June 30 2003


			Consolidated

			2001			2002			2003			2003
	Notes		A$'000			A$'000			A$'000			US$’000
Revenue
Sales Revenue				26,663			19,582			19,630			13,178
Other Revenue		2		10,809			10,132			13,420			9,009

Total Revenue				37,472			29,714			33,050			22,187

Costs and Expenses
Cost of Goods Sold				(8,653	)		(7,583	)		(7,200	)		(4,833	)
Research & Development				(8,419	)		(7,853	)		(8,252	)		(5,540	)
Selling and Promotions				(24,627	)		(15,207	)		(12,713	)		(8,534	)
Shipping and Handling				(533	)		(480	)		(468	)		(314	)
General and Administrative				(16,628	)		(12,874	)		(14,958	)		(10,041	)

Total Costs and Expenses				(58,860	)		(43,997	)		(43,591	)		(29,262	)

Interest Expense				(346	)		(345	)		(132	)		(89	)

Operating Loss Before Abnormal Items and Income Tax		2		(21,734	)		(14,628	)		(10,673	)		(7,164	)

Income Tax Expense		3		(30	)		(45	)		7			5

Net Loss				(21,764	)		(14,673	)		(10,666	)		(7,159	)

Net Loss Attributable to Outside Equity Interests				—			(19	)		(212	)		(142	)

Net Loss Attributable to Members of Novogen				(21,764	)		(14,654	)		(10,454	)		(7,017	)

Basic Loss per share (cents per share)				(25.4	)		(15.4	)		(10.9	)		(7.3	)

STATEMENT OF FINANCIAL POSITION
As at 30 June 2003


			Consolidated

			2002			2003			2003
	Notes		A$’000			A$’000			US$’000
CURRENT ASSETS
Cash		4		39,937			31,026			20,828
Receivables		5		4,505			4,438			2,979
Inventories		6		6,907			6,399			4,296
Other		7		517			588			395

Total Current Assets				51,866			42,451			28,498

NON-CURRENT ASSETS
Inventories		6		597			78			52
Property, plant and equipment		8		9,213			8,283			5,560
Intangibles		9		224			—			—

Total Non-Current Assets				10,034			8,361			5,612

TOTAL ASSETS				61,900			50,812			34,110

CURRENT LIABILITIES
Payables		10		4,280			5,656			3,797
Interest bearing liabilities		11		845			679			456
Provisions		12		279			271			182

Total Current Liabilities				5,404			6,606			4,435

NON-CURRENT LIABILITIES
Interest bearing liabilities		11		2,287			1,608			1,079
Provisions		12		164			201			135

Total Non-Current Liabilities				2,451			1,809			1,214

TOTAL LIABILITIES				7,855			8,415			5,649

NET ASSETS				54,045			42,397			28,461

EQUITY
Parent Equity Interest
Contributed equity		14		137,249			138,206			92,778
Reserves		15		—			(1,956	)		(1,313	)
Accumulated losses		15		(83,970	)		(94,424	)		(63,387	)

Total parent equity interest in equity				53,279			41,826			28,078
Total outside equity interest		16		766			571			383

TOTAL EQUITY				54,045			42,397			28,461

STATEMENT OF CHANGES IN CONTRIBUTED EQUITY


	Number of Fully		Amount
Issued Share Capital	Paid Ordinary Shares		A$’000

Balance June 30, 1999		79,685,518		82,148

Options converted into shares		132,744		154
Share issue- June 30, 2000		5,018,000		17,974

Balance June 30, 2000		84,836,262		100,276

Options converted into shares		38,513		46
Share issue - May 23,2001		10,195,000		20,900

Balance June 30, 2001		95,069,775		121,222

Options converted into shares		342,939		617
Subsidiary Share issue - May 22, 2002		n/a		15,410

Balance June 30, 2002		95,412,714		137,249

Options converted into shares		199,071		421
Subsidiary Share issue - May 5, 2003		n/a		536

Balance June 30, 2003		95,611,785		138,206

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2003


			Consolidated

			2001			2002			2003			2003
	Notes		A$’000			A$’000			A$’000			US$’000
Cash flows from operating activities
Receipts from customers				27,200			18,350			19,324			12,972
Payments to suppliers and employees				(46,947	)		(28,811	)		(29,275	)		(19,652	)
Interest received				987			1,114			1,177			790
Interest paid				(358	)		(345	)		(132	)		(89	)
Grants received				1,746			1,295			632			424
Income tax paid				(30	)		(45	)		7			5
Royalties Received				—			1,878			2,324			1,560
Goods and services tax paid to the ATO				(40	)		(115	)		96			64

Net cash flows used in operating activities		22		(17,442	)		(6,679	)		(5,847	)		(3,926	)

Cash flows from investing activities
Acquisition of property, plant and equipment				(956	)		(144	)		(758	)		(509	)
Proceeds from sale of plant and equipment				169			40			35			23

Net cash flows used in investing activities				(787	)		(104	)		(723	)		(486	)

Cash flows from financing activities
Proceeds from the issue of ordinary shares				20,946			617			421			283
Proceeds from the issue of subsidiary shares				—			18,127			553			371
Payment of share issue costs				—			(1,932	)		—			—
Proceeds from borrowings				846			2,418			—			—
Repayment of borrowings				(1,298	)		(3,157	)		(844	)		(567	)

Net cash flows from financing activities				20,494			16,073			130			87

Net increase/(decrease) in cash held				2,265			9,290			(6,440	)		(4,323	)
Cash at the beginning of year				28,820			31,129			39,937			26,810
Effect of exchange rate changes on opening cash				44			(482	)		(2,471	)		(1,659	)

Cash at end of year				31,129			39,937			31,026			20,828

NOVOGEN LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with the historical cost convention. These general purpose consolidated financial statements have been prepared in accordance with the requirements of the Corporations Act 2001 which includes applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. Comparative information is changed where appropriate to enhance comparability.

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates

Changes in Accounting Policy

The accounting policies adopted are consistent with those of the previous year except for the accounting policy with respect to employee benefits.

The consolidated entity has adopted the revised Accounting Standard AASB 1028 “Employee Benefits”, which has resulted in a change in the accounting policy for the measurement of employee benefit liabilities. Previously the consolidated entity measured the provision for employee benefits based on remuneration rates at the date of recognition of the liability. In accordance with the requirements of the revised Standard, the provision for employee benefits is now measured based on the remuneration rates expected to be paid when the liability is settled. The change has no significant effect on the provision.

The consolidated entity has adopted the revised Accounting Standard AASB 1044 “Provisions, Contingent Liabilities and Contingent Assets”. The change has no significant effect.

Principles of Consolidation

The consolidated financial statements are those of the consolidated entity, comprising of Novogen Limited and all entities controlled by Novogen Limited from time to time during the year and at balance date. Novogen Limited and its controlled entities together are referred to in this financial report as the economic entity or Group. The effects of all transactions between entities in the economic entity are eliminated in full.

The financial statements of controlled entities are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.

Subsidiary acquisitions are accounted for using the purchase method of accounting.

Inventories

Inventories are measured at the lower of cost and net realisable value. Amounts shown in the income statement reflects the actual cost of production for the reporting period.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

Raw Material–purchase cost on a first-in, first-out basis; and

Finished Goods and Work-in-Progress– cost of direct material, and a proportion of manufacturing overheads.

Recoverable Amount of Non-Current Assets

Non-current assets are measured at cost, provided that their carrying value does not exceed their recoverable amount. Where the carrying amount of an individual non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. In determining recoverable amounts of non-current assets the expected net cash flows have not been discounted to their present values.

Research and development

Costs incurred on research and development projects are expensed as incurred, unless future recoverability is assured beyond a reasonable doubt, to exceed those costs. Where research and development costs are deferred such costs are amortised over future periods on a basis related to expected benefits. Unamortised costs are reviewed at each reporting date to determine the amount (if any) that is no longer recoverable and any amount identified is written off. To date, due to the uncertainty of the development program all research and development costs have been expensed.

Advertising expenses

Costs incurred on Advertising expenditure is expensed as incurred. The company incurred $16,351,000 in fiscal 2001 , $8,020,000 in fiscal 2002 and $6,100,000 in fiscal 2003.

Intangible Assets

(i) Patents and Trademarks

Costs incurred in respect to registering and defending patents and trademarks are expensed as incurred unless future recoverability is assured beyond a reasonable doubt.

(ii) Goodwill

Goodwill has been fully amortised in the year to June 2003 in accordance with AASB 1013. Unamortised goodwill was reviewed by Directors at the reporting date. In their opinion no future benefits were considered probable and therefore goodwill was recognised in the profit and loss account as an expense.

Property, Plant & Equipment

Cost and Valuation

All property, plant and equipment are brought to account at cost.

Depreciation

Depreciation is calculated on a straight-line basis to write off the depreciable amount of each item of property, plant and equipment (excluding land) over its expected useful life to the economic entity. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items.

Major depreciation periods are:


	2002	2003

Buildings	20 years	20 years
Plant and equipment	3-10 years	3-10 years
Leasehold Improvements	the lease term	the lease term

Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating Leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis.

Contingent rentals are recognised as an expense in the financial year in which they are incurred.

Finance Leases

Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the Group are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term.

Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to the Statement of Financial Performance.

The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter.

Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met:

Sale of Goods

Goods have been dispatched to a customer pursuant to a sales order and invoice and the associated risks have passed to the carrier or customer. The company estimates returns and allowances against the revenues and records the estimated returns and allowances in the same period in which the revenue is recorded. These estimates are based upon historic analysis, customer agreements and/or currently known factors that arise in the normal course of business.

Advertising and Promotion

The company expenses advertising and promotional costs as incurred and these costs are included as selling, general and administrative expenses. Cooperative advertising expenses are classified as a reduction of revenue.

Interest

Control of a right to receive consideration for the investment in assets has been attained.

Grant Income

Control of a right to receive grant funds has been attained, evidenced by confirmation from the relevant government or other body.

Payments received under the Australian Government START Grants are recognised as revenue when received. The payments are made by the Australian Government for expenses already incurred when agreed milestones are achieved. The only circumstances where funds received by Novogen are contingently returnable are if Novogen is in breach of the START grant contract or if it fails to implement its agreed commercialization plan included as part of the contract. The risk of this happening is considered to be minimal as it is within Novogen’s control.

Royalties

Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.

Trade and Other Receivables

Trade receivables are recognised and carried at original invoice value less a provision for any un-collectable debts. Debts, which are known to be un-collectable, are written off. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable.

Receivables from related parties are recognised and carried at the nominal amount due.

All trade debtors are recognised at the amount receivable as they are predominantly due for settlement no more than 30 days from the date of recognition.

Foreign Currency Translation

Translation of Foreign Currency Transactions

Foreign currency transactions are converted into Australian currency at the rate of exchange at the date of the transaction. At balance date amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at balance date. Resulting exchange differences are brought to account in determining the profit or loss for the financial year.

Translation of Financial Reports of Overseas Operations

All foreign controlled entities (with the exception of the Marshall Edwards Group (which includes Marshall Edwards, Inc. and Marshall Edwards Pty Ltd) and Glycotex, Inc.) are deemed to be fully integrated with the Company as they are not financially or operationally independent of Novogen Limited. The financial reports of overseas operations are, therefore, translated using the temporal method, with resulting losses or gains taken to the profit and loss account.

The Marshall Edwards Group (which includes Marshall Edwards, Inc. and Marshall Edwards Pty Ltd) and Glycotex, Inc. are elf sustaining as they are financially and operationally independent of Novogen Limited. The financial reports of these companies are translated using the current rate method, and any exchange differences are taken directly to the foreign currency translation reserve.

Trade and Other Payables

Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity.

Payables to related parties are carried at the principal amount.

Cash and Cash Equivalents

Cash on hand and in banks and short term deposits are stated at the lower of cost and net realisable value. For the purposes of the statement of cash flows, cash includes deposits at call readily convertible into cash within two working days and which are used in the cash management function on a day-to-day basis net of outstanding bank overdrafts.

Loans and Borrowings

Finance lease liability is determined in accordance with the requirements of AASB 1008 – “Leases”.

Employee Entitlements

Wages and Salaries, Annual Leave

Liabilities for wages, salaries and annual leave are recognised, and are measured as the amount unpaid at the reporting date at expected future pay rates in respect of employees’ services up to that date. The value of the employee share option scheme described in Note 14 is not being charged as an expense.

Long Service Leave

The amounts expected to be paid to employees for their pro rata entitlement to long service leave, including ‘on-costs’, are accrued annually at expected future

pay rates having regard to experience of employee departures and period of service. These entitlements are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rate attaching to government guaranteed securities, which have terms to maturity approximating the terms of the related liability are used.

Share Option Plans

The value of share option plans described in Note 14 is not charged as an employee entitlement expense.

Earnings per Share

Basic EPS is calculated as net profit/(loss) attributable to members adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, if any, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted EPS is calculated as net profit attributable to members, adjusted for:

•		costs of servicing equity (other than dividends) and preference share dividends (if any);

•		the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

•		other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares,

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares adjusted for any bonus element.

Contributed Equity

Ordinary share capital is recognised at the fair value of consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in the share proceeds received.

Taxes

Income tax

Tax effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related tax benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax.

The future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised.

Goods and Services Tax (GST) and overseas equivalents

Revenues, expenses, and assets are recognised net of the amount of GST except:

- where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the expense item as applicable; and

- Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable or payable to the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from or payable to the taxation authority.

Comparatives

Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures as a result of the first time application of revised accounting standards.

Note 2. Profit/(Loss) from Ordinary Activities


	Consolidated

	2001		2002		2003
	A$’000		A$’000		A$’000
(a) Revenues from operating activities
Revenue from the sale of goods		26,663		19,582		19,630

		26,663		19,582		19,630

(b) Other Revenues
Interest - other persons/corporations		1,057		1,203		1,266
Grants received		1,746		1,295		632
Royalties received		—		1,879		2,362
Revenue from sale of assets		169		40		35
Currency gains - (refer to 2(d))		7,240		5,426		8,794
Other		597		289		331

		10,809		10,132		13,420


Total revenues		37,472		29,714		33,050


		Consolidated

		2001			2002		2003
		$’000			$’000		$’000
(c) Expenses
Depreciation of non-current assets
	Plant and equipment		951			659		861
	Buildings		290			290		290
	Leasehold improvements		71			96		66
Amortisation of non-current assets
	Plant and equipment under lease		952			775		447
	Goodwill		33			33		224

Total depreciation and amortisation expenses			2,297			1,853		1,888

Bad and doubtful debts — trade			146			661		52
Inventory write offs (including provision for diminution in value 2003:6; 2002:1402; 2001:943)			407			2,561		617
Provision for employee entitlements			39			26		44
Rental expense relating to operating leases			738			693		677
Borrowing costs expensed
	Interest expense on finance lease		346			345		132

Total borrowing costs expensed			346			345		132

(d) Losses/(Gains)
Net loss/(gain) on disposal of property, plant and equipment			(112	)		494		(12	)
Foreign currency losses — (refer to 2(b))			7,196			5,908		9,310
(e) Significant Items
Profit from ordinary activities before income tax expense includes the following expenses disclosure of which is relevant in explaining the financial performance of the entity:
Litigation Settlement			750			—		—
Marshall Edwards, Inc. prospectus costs			1,358			—		—

			2,108			—		—

Note 3. Income Tax


	Consolidated

	2001			2002			2003
	$’000			$’000			$’000
(a) The prima facie tax, using tax rates applicable in the country of operation, on profit and extraordinary items differs from the income tax provided in the financial statements as follows:
Prima facie tax on loss from ordinary activities		(7,390	)		(4,388	)		(3,202	)
Tax effect of permanent differences:
Non deductible depreciation and amortisation		11			10			67
Non deductible expenses		1,113			213			67
Research and development allowance		(102	)		207			(261	)
Sundry items		(40	)		62			89

Income Tax adjusted for permanent differences		(6,408	)		(3,896	)		(3,240	)
Australian income taxes					1			—
United States state income taxes		—			3			—
New Zealand income tax		27			41			(7	)
Canadian Provincial taxes		3			—			—
Current year tax losses not brought to account		6,408			3,896			3,240

Income tax expense attributable to operating loss		30			45			(7	)

(b) Future income tax benefit not brought to account at balance date as realisation of the benefit is not regarded as virtually certain arising from:
(i) tax losses carried forward		20,843			17,758			20,861
(ii) timing differences		(836	)		1,838			1,698

		20,007			19,596			22,559

This future income tax benefit will only be obtained if:

		(i) the relevant companies derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised;

		(ii) the relevant companies continue to comply with the conditions for deductibility imposed by tax legislation; and

		(iii) no changes in tax legislation adversely affect the relevant companies in realising the benefit from the deductions for the losses.

(c) The balance of the franking account at the end of the financial year for the economic entity and the parent entity is Nil (2002: Nil; 2001: Nil).

(d) Pretax loss for the year ended June 30, 2003 was taxed in the following jurisdictions:


	Consolidated

	2001			2002			2003
	$’000			$’000			$’000
Domestic		(2,496	)		(9,477	)		(14,317	)
Foreign		(19,238	)		(5,151	)		3,644

		(21,734	)		(14,628	)		(10,673	)

Tax effected carry forward losses amounting to $8,716 may be carried forward indefinitely and tax losses of $12,145 expire over the period 2007 through 2023.

Tax Consolidation

Effective 1 July 2002, for the purposes of income taxation, Novogen Limited and its 100% owned subsidiaries have formed a tax consolidated group. The head entity of the tax consolidated group is Novogen Limited. Novogen Limited has not formally notified the Australian Tax Office of its adoption of the tax consolidation regime.

Note 4. Cash


	CONSOLIDATED

	2002 $’000		2003 $’000
Cash at bank and on hand		17,674		12,387
Deposits at call		22,263		18,639

		39,937		31,026

Short term deposits have an average maturity of 30 days and have a fixed or floating interest rate for the term of the deposit.

Note 5. Receivables


	CONSOLIDATED

	2002			2003
	$’000			$’000
Current
Trade debtors		4,644			4,517
Provision for doubtful debts		(783	)		(350	)

		3,861			4,167
Other debtors		644			271

		4,505			4,438


	Consolidated

	2001			2002			2003
	$’000			$’000			$’000
Provision for doubtful accounts:
Beginning Balance		(67	)		(204	)		(783	)
Provisions charged to income		(146	)		(579	)		—
Amounts charged net of recovery		9			—			433

Ending Balance		(204	)		(783	)		(350	)

(a) Australian dollar equivalents

Australian dollar equivalent of amounts receivable in foreign currencies not effectively hedged:


United States dollars	2,675	2,033
Great British pounds	373	592
Euros	166	131
Canadian dollars	279	218
New Zealand dollars	—	—

(b) Terms and conditions

(i) Trade debtors are non interest bearing and generally on 30 day terms

(ii) details of the terms and conditons of the related party receivables are set out in Note 19.

(iii) other debtors are non-interest bearing and have repayment terms between 7 and 30 days.

Note 6. Inventories


	Consolidated

	2002			2003
	$’000			$’000
Current
Raw materials - at cost		398			479
Work in progress - at cost		4,674			3,652
Finished goods - at cost		1,976			2,228
Provision for diminution in value		(153	)		—

		6,895			6,359
Other inventory - at cost		12			40

		6,907			6,399

Non - Current
Other inventory - at cost		235			53
Raw materials - at cost		1,889			979
Work in progress - at cost		—			—
Provision for diminution in value		(1,527	)		(954	)

		597			78


	Consolidated

	2001			2002			2003
	$’000			$’000			$’000
Provision for diminution in value
Beginning balance		(471	)		(878	)		(1,680	)

Provisions charged to income		(943	)		(1,402	)		(6	)
Amounts charged net of recovery		536			600			732

Ending balance		(878	)		(1,680	)		(954	)

Note 7. Other Current Assets


	Consolidated

	2002		2003
	$’000		$’000
Prepayments		517		588

Note 8. Property Plant & Equipment


	Consolidated

	2002			2003
	$’000			$’000
Land at cost		1,545			1,545

Buildings at cost		3,459			3,459
Accumulated depreciation		(1,424	)		(1,714	)

		2,035			1,745

Total Land and Buildings		3,580			3,290

Plant and equipment under lease - at cost		6,446			3,199
Accumulated amortisation		(3,448	)		(1,453	)

		2,998			1,746

Plant and equipment - at cost		4,971			8,814
Accumulated depreciation		(2,440	)		(5,619	)

		2,531			3,195

Leasehold improvements - at cost		329			343
Accumulated depreciation		(225	)		(291	)

		104			52

Total Property Plant and Equipment - at cost		16,750			17,360
Accumulated amortisation and depreciation		(7,537	)		(9,077	)

Total Property Plant and Equipment		9,213			8,283

a) Assets pledged as security

Included in the balances of freehold land and buildings are assets over which mortgages have been granted as security over leasing facilities. The terms of the mortgages preclude the assets being sold or being used as further security without permission.

Assets under lease are pledged as security for the associated lease liabilities.

The book value of assets pledged as security are:


Freehold Land	1,545	1,545
Freehold Buildings	2,035	1,745
Plant & Equipment under Lease	2,998	1,746
Plant & Equipment at cost	2,550	3,164

b) Reconciliations

Reconciliations of the carrying amounts of plant, property and equipment at the beginning and end of the current and previous financial year.


	Consolidated

	2003
	$’000
Freehold Land
Carrying amount at beginning		1,545

		1,545

Buildings on Freehold Land
Carrying amount at beginning		2,035
Additions		—
Depreciation Expense		(290	)

		1,745

Plant and Equipment under Lease
Carrying amount at beginning		2,998
Additions		—
Disposals *		(805	)
Depreciation Expense		(447	)

		1,746

Plant and Equipment
Carrying amount at beginning		2,531
Additions *		1,548
Disposals		(23	)
Depreciation Expense		(861	)

		3,195

Leasehold Improvements
Carrying amount at beginning		104
Additions		14
Depreciation Expense		(66	)

		52

Certain plant and equipment under lease were purchased during 2003 and the net book value of the assets was transferred to plant and equipment.

Note 9. Intangibles


	Consolidated

	2002			2003
	$’000			$’000
Goodwill		492			—
Accumulated amortisation		(268	)		—

		224			—

Goodwill was written off during the year

Note 10. Payables


		Consolidated

		2002		2003
		$’000		$’000
Current
Trade creditors			2,425		2,571
Accrued Trade creditors			1,771		1,842
Accrued Clinical Trial Payments			84		1,243

			4,280		5,656

Australian dollar equivalents of amounts payable in foreign currencies not effectively hedged:
	- United States dollars		1,467		972
	- Great British pounds		49		127
	- Euro		194		56
	- Canadian dollars		177		147
	- New Zealand dollars		51		7

Terms and Conditions relating to the above creditors.

- Trade creditors are non-interest bearing and normally settled on 30 day terms.

- Other creditors are non-interest bearing and normally settled on 30 day terms.

Note 11. Interest Bearing Liabilities


	Consolidated

	2002		2003
	$’000		$’000
Current
Lease Liabilities (secured) (Note 24b)		845		679

Non - Current
Lease Liabilities (secured) (Note 24b)		2,287		1,608

Secured Lease Liability - Finance Leases		3,132		2,287

Terms and Conditions relating to the above financial instruments.

- Finance leases have an average lease term of 4 years with the option to purchase the asset at the completion of the lease term for the residual value. The average interest rate implicit in the leases is 8.42% (2002: 8.39%). Lease liabilities are secured by a fixed and floating charge over the assets of the Closed Group. Terms and Conditions relating to the above borrowings - see note 23.

Note 12. Provisions


	Consolidated

	2002		2003
	$’000		$’000
Current
Employee Entitlements		279		271

Non - Current
Employee Entitlements		164		201

		443		472

Note 13. Financing Arrangements


	Consolidated

	2002		2003
	$’000		$’000
(a) Financing arrangements
Unrestricted access was available at balance date to the following lines of credit
Total facilities
Lease facilities		4,000		4,000

		4,000		4,000

Used at balance date
Lease facilities		3,722		3,155

		3,722		3,155

Unused at balance date		278		845

Lease facilities		278		845

(b) The finance lease facilities are secured by a fixed and floating charge over all the assets of the group as well as a registered mortgage over the land and buildings.

(c) Novogen Limited has entered into a Cross Deed of Covenant where it has guaranteed the bank facilities of wholly owened controlled entities, Novogen Research Pty Ltd, Novogen Laboratories Pty Ltd and Central Coast Properties Pty Ltd, should any of these companies be unable to meet the repayments of these facilities. The maximum amount potential future payments is $4,000,000.

Note 14. Contributed Equity


	Consolidated
	2002		2003
	$’000		$’000
Novogen Limited
95,611,785 (2002: 95,412,714) ordinary shares		121,839		122,260
Marshall Edwards Inc *
52,032,000 (2002: 52,023,000) ordinary shares		15,410		15,458
Glycotex Inc *
2,050,000 (2002: 2,000,000) ordinary shares		—		488

		137,249		138,206

Terms and conditions of contributed equity

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

(a) During April 2003, Glycotex Inc., raised $500,000 in an initial private placement from Australian and international investors and institutions. Novogen now owns 97.6% of Glycotex Inc.

The shares were issued at $10.00 each with attaching warrants to purchase a further two shares at an exercise price of $10.00 per share. The attaching warrants are exercisable prior to 5 November, 2004. Novogen also issued to these investors a convertible security enabling investors to convert their investment in Glycotex Inc. to Novogen shares at an equivalent Novogen share price of $5.00 per share. These ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. If 50% of the holders exercise the conversion feature, then Novogen can require that the other Glycotex shareholders convert their shares to Novogen shares.

(b) Marshall Edwards Inc a subsidiary of Novogen Limited issued 49,500,000 ordinary shares in April 2001 for a total issue price of US$1.00 and a further 2,523,000 ordinary shares in May 2002 to parties outside the economic entity. Each of the 2,523,000 shares was issued with an attaching warrant to purchase an additional share for an exercise price of US$4.00. These ordinary shares have the right to receive dividends from Marshall Edwards Inc as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

* The consolidated entity accounts for the difference between the carrying value per share of the parent entity’s investments in subsidiary shares and the proceeds from sales of new shares by subsidiaries as capital transactions.


			Issue
	Number of		Price
	Shares		$		$’000
On issue 1 July 2002		95,412,714				121,839
Options converted to shares		30,026		1.53		46
Options converted to shares		51,734		2.00		103
Options converted to shares		101,595		2.23		227
Options converted to shares		15,716		2.84		45
Total options exercised during the period		199,071				421
On issue 30 June 2003		95,611,785				122,260

as follows:

(d) Movements in issued and paid up ordinary share capital of Marshall Edwards, Inc. are as follows:


			Issue
	Number of		Price
	Shares		$		$’000
On issue 1 July 2002		52,023,000				15,410
Warrants converted to shares		9,000		5.89		53
less Outside Equity Interest						(5	)

Total warrants exercised during the period		9,000				48
On issue 30 June 2003		52,032,000				15,458

(e) Movements in issued and paid up ordinary share capital of Glycotex, Inc. are as follows:


			Issue
	Number of		Price
	Shares		$		$’000
On issue 1 July 2002		2,000,000				0
New shares issued		50,000		10.00		500
less Outside Equity Interest						(12	)

Total new shares issued during the period		50,000				488
On issue 30 June 2003		2,050,000				488

(f) Particulars of options issued by Novogen Limited are as follows:


												Converted		Options
Calendar								On issue		Issued		to		forfeited		On issue
Year		Exercise		Expiry		Original		1 July		During		fully paid		during the		30 June
Granted		Price		Date		issue		2002		The year		shares		year		2003
1998 (i)		$	2.23		25/03/03		180,728		94,732		—		85,911		8,812		—
1998(ii)		$	2.23		25/03/03		15,684		15,684		—		15,684		—		—
1998(iii)		$	2.91		24/09/03		700,000		700,000		—		—		—		700,000
1999 (i)		$	2.84		26/03/04		217,000		99,508		—		15,716		4,356		79,436
1999(ii)		$	2.84		26/03/04		38,572		38,572		—		—		—		38,572
1999(ii)		$	2.00		22/12/03		104,734		51,734		—		51,734		—		—
1999(v)		$	2.9460		23/06/04		20,000		20,000		—		—		—		20,000
1999(v)		$	2.7725		23/06/04		85,000		85,000		—		—		—		85,000
2000(i)		$	4.00		13/03/05		221,028		137,364		—		—		11,884		125,480
2000(ii)		$	4.00		13/03/05		27,360		27,360		—		—		—		27,360
2000(v)		$	3.5819		20/07/05		50,180		50,180		—		—		—		50,180
2000(i)		$	4.00		30/11/05		238,220		175,636		—		—		16,088		159,548
2000(ii)		$	4.00		30/11/05		7,248		7,248		—		—		—		7,248
2000(iv)		$	4.01		27/10/05		9,384		6,256		—		—		—		6,256
2001(i)		$	1.53		10/08/06		695,528		596,448		—		30,026		66,617		499,805
2001(ii)		$	2.05		13/07/06		101,950		101,950		—		—		—		101,950
2002(i)		$	2.10		30/11/07		526,332		—		526,332		—		22,416		503,916
2002(ii)		$	2.10		30/11/07		37,200		—		37,200		—		—		37,200
	Total						3,276,148		2,207,663		563,532		199,071		130,173		2,441,951

	(i)		Options issued under the Employee Share Option Plan. Options vest in four equal annual instalments over the vesting period

	(ii)		Options issued to consultants. Options vest in four equal annual instalments over the vesting period.

	(iii)		Options issued to the Managing Director by resolution of shareholders on 24 September 1998. Options vest upon achievement of certain share price performance hurdles.

	(iv)		Option issued to non-executive Directors by resolution of shareholders on 27 October 2000. Options vest in four equal annual instalments over the vesting period

	(v)		Options issued to consultants Options vest twelve months after grant date.

The last trade of Novogen Limited shares on the Australian Stock Exchange on 30 June, 2003 was $5.36.

(g) Capital shares reserved for future issuance are 2,541,951, being 367,510 for consultant options, 2,074,441 for employee options and 100,000 for the conversion of Glycotex shares.

Share Option Plans

Employee Share Option Plan

The Employee Share Option Plan provides for the issue of options to eligible employees being an employee or Director of the Company or related company. Each option entitles its holder to acquire one fully paid ordinary share and is exercisable at a price equal to the weighted average price of such shares at the close of trading on the Australian Stock Exchange Limited for the five days prior to the date of issue. Options are not transferable. The option lapses if the employee ceases to be an employee during the vesting period. There are currently 42 employees eligible for this scheme.

Typically employee options vest in equal amounts per year over four years. Options are exercisable once vested.

Consultant Options

The Company has also granted options by way of compensation to consultants that perform services for Novogen and its controlled entities.

Typically consultant options vest in equal amounts per year over four years or at some other rate as determined by the Board of Directors. Options are exercisable once vested.

ADR Program

Novogen’s common stock trades on NASDAQ under an ADR program. One ADR is equal to five shares of common stock. All stock traded under the ADR program has the same voting and attached rights as ordinary common stock.

Note 15. Reserves and Retained Profits/(Accumulated Losses)



	Consolidated						Novogen Limited
	2003			2002			2003			2002
	$’000			$’000			$’000			$’000
Balance at the beginning of the year		(83,970	)		(69,316	)		(19,852	)		(19,220	)

Accumulated losses		(10,454	)		(14,654	)		(78,234	)		(632	)

Balance at the end of the year		(94,424	)		(83,970	)		(98,086	)		(19,852	)



	Consolidated					Novogen Limited
	2003			2002		2003		2002
(a) Foreign currency translation	$’000			$’000		$’000		$’000
(i) Nature and purpose of reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of self-sustaining foreign operations
(ii) Movements in reserve Balance at beginning of year		—			—		—		—
Gain (loss) on translation of overseas controlled entities net of loss on hedge		(1,956	)		—		—		—

Balance at end of year		(1,956	)		—		—		—

Note 16. Outside Equity Interest


		Consolidated

		2002			2003
		$’000			$’000
Reconciliation of outside equity interest in controlled entities
Opening Balance			—			766
Additions to outside equity interest by way of share issue
	- Marshall Edwards Inc.		785			5
	- Glycotex Inc.					12
Add Share of operating losses of controlled entities
	- Marshall Edwards Inc.		(19	)		(211	)
	- Glycotex Inc.					(1	)

Closing Balance			766			571

Note 17. Segment Information

Segment accounting policies

The group generally accounts for intercompany sales and transfers as if the sales or transfers were to third parties at current market prices. Revenues are attributed to geographic areas based on the location of the assets producing the revenues.

Segment accounting policies are the same as the consolidated entity’s policies described in Note 1. During the financial year there were no changes in the segment accounting policies that had a material effect on the segment information.

SEGMENT INFORMATION - PRIMARY SEGMENT


	Australasia									North America								Europe
	2003			2002			2001			2003		2002			2001			2003			2002			2001
	$’000			$’000			$’000			$’000		$’000			$’000			$’000			$’000			$’000
Geographical Segments
Revenue
Sales to customers outside the consolidated entity		6,228			5,224			5,921			10,658		12,084			18,703			2,744			2,274			2,039
Other revenues from customers outside the consolidated entity		3,430			3,603			9,752			8,008		5,203			—			716			123			—
Intersegment Revenues		6,457			4,571			13,539			71		258			399			—			—			—

Total segment revenue		16,115			13,398			29,212			18,737		17,545			19,102			3,460			2,397			2,039

Unallocated revenue

Total Consolidated Revenue

Results

Segment result		(11,539	)		(11,946	)		(19,374	)		3,146		(3,431	)		(17,353	)		(376	)		(1,269	)		(1,866	)

Unallocated expenses
Consolidated entity profit from ordinary activities before income tax
Income tax expense
Net Loss

[Additional columns below]

[Continued from above table, first column(s) repeated]


	Elimination									Consolidated
	2003			2002			2001			2003			2002			2001
	$’000			$’000			$’000			$’000			$’000			$’000
Geographical Segments
Revenue
Sales to customers outside the consolidated entity		—			—			—			19,630			19,582			26,663
Other revenues from customers outside the consolidated entity		—			—			—			12,154			8,929			9,752
Intersegment Revenues		(6,528	)		(4,829	)		(13,938	)		—			—			—

Total segment revenue		(6,528	)		(4,829	)		(13,938	)		31,784			28,511			36,415

Unallocated revenue											1,266			1,203			1,057

Total Consolidated Revenue											33,050			29,714			37,472

Results

Segment result		(1,772	)		2,363			17,216			(10,541	)		(14,283	)		(21,377	)

Unallocated expenses											(132	)		(345	)		(357	)
Consolidated entity profit from ordinary activities before income tax											(10,673	)		(14,628	)		(21,734	)

Income tax expense											7			(45	)		(30	)

Net Loss											(10,666	)		(14,673	)		(21,764	)


	Australasia							North America							Europe
	2003			2002		2001		2003			2002		2001		2003		2002		2001
	$’000			$’000		$’000		$’000			$’000		$’000		$’000		$’000		$’000
Geographical Segments
Assets

Segment assets		87,912			98,466		127,972		19,436			22,913		13,510		1,947		1,477		1,542

Liabilities
Segment Liabilities		12,187			11,082		12,994		47,505			52,699		56,058		10,067		9,221		8,017
Other segment information
Acquisition of property plant and equipment, intangible assets and other non current assets		1,502			236		1,496		54			26		56		6		15		13
Depreciation		1,156			907		1,187		49			125		116		12		13		9
Amortisation		447			775		952		—			—		—		—		—		—
Non cash expenses other than depreciation and amortisation		(572	)		827		273		(634	)		615		309		78		2		2
Long Lived Assets		8,200			9,624		11,605		70			65		164		13		19		17

[Additional columns below]

[Continued from above table, first column(s) repeated]


	Elimination									Consolidated
	2003			2002			2001			2003			2002		2001
	$’000			$’000			$’000			$’000			$’000		$’000
Geographical Segments
Assets

Segment assets		(58,483	)		(60,956	)		(81,818	)		50,812			61,900		61,206

Liabilities
Segment Liabilities		(61,344	)		(65,147	)		(67,769	)		8,415			7,855		9,300
Other segment information
Acquisition of property plant and equipment, intangible assets and other non current assets		—			—			—			1,562			277		1,565
Depreciation		—			—			—			1,217			1,045		1,312
Amortisation		224			33			33			671			808		985
Non cash expenses other than depreciation and amortisation		(3	)		35			—			(1,131	)		1,479		584
Long Lived Assets		—			(495	)		(495	)		8,283			9,213		11,291

Note:

The Novogen Group operates subsidiary companies in 3 major geographical areas being Australiasia, North America including the USA and Canada and Europe including the UK and the Netherlands. The subsidiaries are all involved in the selling and marketing of Novogen’s dietary supplements including Promensil, Trinovin and Rimostil. The US company is also responsible for manufacturing and packaging products for the domestic US market. The other countries products are supplied from Australia in fully finished form.

All of the Group’s sales revenues are sales of Novogen’s dietary supplements. The Novogen Group operates in one business segment being to manufacture, market and sell dietary supplements.

Note 18. Remuneration of Directors


	Consolidated
	2003		2002
	$		$
Income paid or payable, or otherwise made available in respect of the financial year, to all Directors of each entity in the consolidated entity and in connection with the management of affairs of the parent entity or its controlled entities.		1,099,747		951,728

The number of Directors of Novogen Limited whose total income (including superannuation contributions) falls within the specified bands is:


				Novogen Limited
				2003		2002
$ 10,000	—	$	19,999		—		1
$ 30,000	—	$	39,999		—		1
$ 40,000	—	$	49,999		2		1
$ 70,000	—	$	79,999		1		1
$320,000	—	$	329,999		—		1
$360,000	—	$	369,999		1		—
$450,000	—	$	459,999		—		1
$510,000	—	$	519,999		1		—

Note 19. Remuneration of Executives


	Consolidated
	2003		2002
	$		$
Remuneration received, or due and receivable, by Executive Officers of the consolidated entity whose remuneration is $100,000 or more from entities in the consolidated entity or a related parties, in connection with the management of the affairs of the entities in the consolidated entity whether as an Executive Officer or otherwise		2,813,243		2,361,897

The number of Executive Officers (including Directors) of the consolidated entity whose remuneration from entities in the economic entity and related parties was within the specified bands is as follows:


				Consolidated
				2003		2002
$100,000	-	$	119,000		2		3
$120,000	-	$	129,999		1		—
$130,000	-	$	139,999		1		1
$140,000	-	$	149,999		1		1
$150,000	-	$	159,999		1		1
$160,000	-	$	169,999		—		1
$170,000	-	$	179,999		—		1
$180,000	-	$	189,999		2		—
$200,000	-	$	209,999		1		—
$240,000	-	$	249,999		—		1
$250,000	-	$	259,999		—		1
$280,000	-	$	289,999		1		—
$300,000	-	$	309,999		1		—
$320,000	-	$	329,999		—		1
$360,000	-	$	369,999		1		—
$450,000	-	$	459,999		—		1
$510,000	-	$	519,999		1		—

Executive Officers are defined as those involved in the management of the affairs of Novogen Limited and the consolidated entity.

Note 20. Related Party Disclosures

Directors

The Directors of Novogen Limited at any time during the financial year are as follows:

Philip A Johnston
Christopher Naughton
Graham E Kelly
Paul Nestel AO
Peter B Simpson

Equity Interests of Directors

Interests in the Equity of Novogen Limited held by current Directors and
their Director Related Entities



	Ordinary Shares Fully Paid				Options
	2003		2002		2003		2002
	Number		Number		Number		Number
P A Johnston		43,594		43,594		3,128		3,128
C Naughton		318,511		318,511		700,000		700,000
G E Kelly		8,736,519		9,131,256		—		—
P J Nestel		14,000		16,000		20,000		20,000
P B Simpson		500		500		3,128		3,128

		9,113,124		9,509,861		726,256		726,256

Movements in Directors Equity Holdings

During the year Directors and Director Related Entities disposed of 396,737 shares.

All equity dealings with Directors have been entered into with terms and conditions no more favourable than those that the entity would have adopted if dealing at arms length.

Other Transactions With Directors and Director-Related Entities

Sale of redundant red clover hay stock was made to Mr P. Johnston totalling $7,019.98 (2002: $6,341; 2001: NIL). The net carrying value of this inventory was nil.

Ultimate Parent

Novogen Limited, a company incorporated in Australia, is the ultimate parent entity.

Note 21. Remuneration of Auditors


	Consolidated

	2002		2003
	$		$
a) Amounts received or due and receivable by Ernst & Young Australia for:
(a) an audit or review of the financial report of the entity and any other entity in the consolidated entity;		80,500		129,500
(b) other services in relation to the entity and any other entity in the consolidated entity		65,677		58,027

		146,177		187,527
Amounts received or due and receivable by a related practice of Ernst & Young Australia for: other services in relation to any entity in the economic group.		225,819		30,970
Amounts received or due and receivable by auditors of other subsidiaries in the economic entity for an audit/review, which are not already disclosed.		42,942		28,308

		414,938		246,805

22. Statement of Cash Flows


	Consolidated

	2001			2002			2003
	A$’000			A$’000			A$’000
*(a) Reconciliation of Operating Loss after Income Tax to Net Cashflows from Operationing Activities*
Operating loss after income tax		(21,764	)		(14,673	)		(10,666	)
Depreciation and amortisation		2,297			1,853			1,888
(Profit)/loss on sale of fixed assets		(112	)		494			(12	)
Changes in assets and liabilities:
(increase)/decrease in trade debtors		400			67			127
(increase)/decrease in prepayments		127			638			(71	)
(increase)/decrease in other debtors		(173	)		(33	)		373
(increase)/decrease in inventories		3,824			3,950			1,753
increase/(decrease) in accounts payable		(2,583	)		(868	)		1,376
increase/(decrease) in provisions		586			1,411			(1,130	)
exchange rate change on opening cash		(44	)		482			515

Net cash (outflow) from operating activities		(17,442	)		(6,679	)		(5,847	)

b) Finance Leases

No plant and equipment was acquired during the year by means of finance leases (2002: $133,000; 2001: $608,000).

Note 23. Earnings per Share


	Consolidated

	2002			2003
	$’000			$’000
The following reflects the income and share data used in calculating basic and diluted earnings per share
Net loss		(14,673	)		(10,666	)
Adjustments:
Net loss attibutable to outside equity interests		(19	)		(212	)

Earnings used in calculating basic and diluted earnings per share		(14,654	)		(10,454	)


	Number of			Number of
	Shares			Shares
Weighted average number of ordinary shares used in calculating basic and diluted earnings per share		95,187,449			95,472,984

Basic and Diluted loss per share - (cents)		(15.4	)		(10.9	)

Diluted earnings per share:

The notional issue of potential ordinary shares resulting from the exercise of options detailed in note 16(c) does not result in diluted earnings per share that shows a different view of the earnings performance of the Company, therefore the information has not been disclosed.

Conversions, call subscriptions or issues after 30 June 2003

There have been 4,343 conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report.

Note 24. Financial Instruments

	(a)		Interest Rate Risk Exposures

			The economic entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and liabilities is set out below.


			Floating				Fixed				Fixed
			Interest Rate				1 year or less				Over 1 to 5 years
			2002		2003		2002		2003		2002			2003
	Note		$’000		$’000		$’000		$’000		$’000			$’000

Financial assets
Cash		4		17,500		11,246		—		—		—			—
Deposits		4		1,718		1,245		20,543		17,394		—			—
Receivables		5		—		—		—		—		—			—

				19,218		12,491		20,543		17,394		—			—

Financial liabilities
Payables		10		—		—		—		—		—			—
Interest bearing liabilities		11		—		—		845		679		2,287			1,608

				—		—		845		679		2,287			1,608

Net financial assets/(liabilities)				19,218		12,491		19,698		16,715		(2,287	)		(1,608	)

[Additional columns below]

[Continued from above table, first column(s) repeated]


	Non-interest									Weighted
	bearing					Total				Average Rate
	2002		2003			2002		2003		of Interest
	$’000		$’000			$’000		$’000		2002			2003

Financial assets
Cash		176		1,141			17,676		12,387		1.80	%		1.38	%
Deposits		—		—			22,261		18,639		4.79	%		4.67	%
Receivables		4,505		4,438			4,505		4,438		N/A			N/A

		4,681		5,579			44,442		35,464

Financial liabilities
Payables		4,280		5,656			4,280		5,656		N/A			N/A
Interest bearing liabilities		—		—			3,132		2,287		8.39	%		8.42	%

		4,280		5,656			7,412		7,943

Net financial assets/(liabilities)		401		(77	)		37,030		27,521

	(b)		Net fair value of financial assets and liabilities The net fair value of financial assets and liabilities with the exception of lease liabilities approximates their carrying value in the balance sheet, because they are short term and at market rates of interest.

			The book value of lease liabilities approximates the fair value because the weighted average interest rate implicit in discounting these liabilities approximates the current market rate.

	(c)		Credit risk exposures

			The consolidated entities maximum exposures to credit risk at balance date in relation to each class or recognised assets is the carrying amount of those assets as indicated in the balance sheet.

			Concentration of credit risk

			The Company minimises concentration of credit risk in relation to trade receivables by undertaking transactions with a large number of customers.

			Credit risk is managed in the following way:

	(i)		payment terms are 30 days except for some customers who have 60 day terms; and

	(ii)		a risk assessment processes is used for all customers.

The company has three individual debtors with balances representing greater than 10% of total receivables balances. Two of these trade

receivables have arisen in the USA and one has arisen in the UK. The total of these three receivables are $1,521,000. These balances are unsecured.

Note 25. Expenditure Commitments


	Consolidated

	2002			2003
	$’000			$’000
(a) Lease Commitments *
Commitments in relation to operating leases contracted for at the reporting date but not recognised as liabilities payable:
Not later than 1 year		444			432
Later than 1 year but not later than 2 years		443			354
Later than 2 year but not later than 3 years		352			24
Later than 3 year but not later than 4 years		17			—
Later than 4 year but not later than 5 years		—			—

		1,256			810

(b) Finance leases **
Commitments in relation to finance leases are payable as follows:
Not later than 1 year		976			776
Later than 1 year but not later than 2 years		776			899
Later than 2 year but not later than 3 years		899			767
Later than 3 year but not later than 4 years		767			15
Later than 4 year but not later than 5 years		15			—

Minimum lease payments		3,433			2,457
Less: Future finance charges		(301	)		(170	)

		3,132			2,287

Representing lease liabilities:
Current - (note 11)		845			679
Non-current - - (note 11)		2,287			1,608

		3,132			2,287

(c) Other Expenditure Committments
Research and development contracts for service to be rendered:
Not later than one year		1,441			2,373
Later than 1 year but not later than 2 years		43			146

		1,484			2,519

* Operating leases represent payments for property and equipment rental. Leases for property include an annual review for CPI increases.

** Finance lease commitments have an average term of 4 years with an average interest rate of 8.39%. Assets which are subject to finance leases include building, plant and equipment.

There are currently no renewal options contained in these leases.

There are no commitments for capital expenditure outstanding at the end of the financial year.

Note 26. CONTINGENT LIABILITIES

Parent Entity Guarantees

(a)		The parent company has unconditionally guaranteed Novogen BV’s obligations under an agreement with a sales broker dated 10 March 1999, for the performance of commercial services in Netherlands. There is no limit on the amount guaranteed.

(b)		The parent company has unconditionally guaranteed financial support for Novogen Limited (UK) should it be unable to meet its financial obligations. There is no limit on the amount guaranteed.

(c)		The parent company has guaranteed in a deed dated 16 May 2002 the performance of the Novogen subsidiaries arising in connection with the License Agreement and the Manufacturing and Supply Agreement with Marshall Edwards Pty Limited. There is no limit on the amount guaranteed.

(d)		As a condition of the Class Order, Novogen Limited and the controlled entities subject to the Class Order, entered into a Deed of Cross Guarantee on 28 May 1999. The effect of the deed is that Novogen Limited has guaranteed to pay any deficiency in the event of winding up of the controlled entities. The controlled entities have also given a similar guarantee in the event that Novogen Limited is wound up.

Note 27. SUBSEQUENT EVENTS

Apart from the following there have been no significant events occurring after balance date which have had a material impact on the business.

During December 2003, MEI completed an initial public offering of 2,392,000 common stock units. The units consist of one share of common stock and one warrant and were priced at US $7.50. MEI has also applied to have its common stock and the warrants being issued as part of the Unit quoted on the Nasdaq National Market.

During November 2003, MEI received US$10,056,000 following the exercise of 2,514,000 warrants which were issued as part of the AIM listing in May 2002.

Following exercise of the warrants, and the MEI public offering Novogen holds 86.94% of MEI’s common stock, excluding the possible exercise of the warrants forming part of the public offering.

The Company has been notified by the Therapeutic Goods Administration (TGA) that it is reviewing the current listing status of its dietary supplements products in Australia. These products are currently listed as “AUSTL” listed complementary medicine. Following the completion of this review, these products could retain this status or be delisted in Australia. The Company believes that its products qualify for their current listing status as “AUSTL” listed complementary medicine. However, no assurance can be given that the TGA will ultimately reach this conclusion. In the event of an adverse determination by the TGA, the Company will consider what further options are available to it.

Note 28. PENSION PLANS

The company and employees contribute various percentages of gross income to defined contribution pension plans nominated by employees for the provision of benefits to employees on retirement, death or disability. Benefits provided under the plans are based on contributions for each employee.

The pension plans comply with Australian regulatory provisions set by the Insurance and Superannuation Commission. The company has complied with the provisions of the Superannuation Guarantee Charge Act.

Contributions expensed by the company for each of the periods were as follows:

2001

2002

2003

A$’000

Contribution expense

330

325

604

Note 29. DIVIDENDS

The company has incurred losses since its inception and, as a result, has not declared any dividends. Any dividends in future periods will be declared in Australian dollars.

Note 30. DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP

Australian GAAP varies in certain respects from accounting principles generally accepted in the United States (US GAAP). The differences relate principally to the following items and the adjustments necessary to reconcile the consolidated net loss for the years ended June 30, 2001, 2002 and 2003 in accordance with US GAAP are shown below.

The US GAAP capitioned statements of operations for the years ended June 30, 2001, 2002 and 2003 are as follows:


	US GAAP

	2001			2002			2003			2003
	A$’000			A$’000			A$’000			US’$’000
Operating Revenue
Sales Revenue		25,415			17,644			18,502			12,420
Other Operating Revenue		2,343			3,463			3,325			2,232

Total Operating Revenue		27,758			21,107			21,827			14,652

Costs and Expenses
Cost of Goods Sold		(8,653	)		(7,583	)		(7,200	)		(4,833	)
Research & Development		(8,419	)		(7,853	)		(8,252	)		(5,540	)
Selling and Promotions		(23,379	)		(13,744	)		(11,585	)		(7,777	)
Shipping and Handling		(533	)		(480	)		(468	)		(314	)
Bad & Doubtful Debts Expense		(146	)		(661	)		(52	)		(35	)
General and Administrative		(9,278	)		(5,791	)		(5,378	)		(3,610	)

Total Costs and Expenses		(50,408	)		(36,112	)		(32,935	)		(22,109	)

Loss from operations		(22,650	)		(15,005	)		(11,108	)		(7,457	)

Other Income (Expense)
Interest Expense		(346	)		(345	)		(132	)		(89	)
Exchange Gains/(Losses)		44			(482	)		(516	)		(346	)
Other		1,169			709			1,278			858

Total Other Income (Expense)		867			(118	)		630			423

Loss Before Income Tax		(21,783	)		(15,123	)		(10,478	)		(7,034	)

Income tax		(30	)		(45	)		7			5
Minority Interest		0			19			212			142

Net loss		(21,813	)		(15,149	)		(10,259	)		(6,887	)

Loss per share - basic and diluted		(25.4	)		(15.9	)		(10.7	)		(7.2	)


			Year ended 30 June

			2001			2002			2003
			A$’000			A$’000			A$’000

Consolidated Net Loss
Net loss reported under Australian GAAP				(21,764	)		(14,673	)		(10,666	)
Adjustments required to accord with US GAAP:
Amortization of goodwill		(i)		33			33			—
Goodwill written off				—			—			224
Stock based compensation cost	(ii)			(82	)		(53	)		(29	)
Minority interest in net losses of subsidiaries	(vi)			—			19			212
Adjustment for sales returns		(v)		—			(475	)		—

Net loss under US GAAP				(21,813	)		(15,149	)		(10,259	)

Basic and diluted (loss) per share according to US GAAP (cents)				(0.25	)		(0.16	)		(0.11	)
Weighted average number of ordinary shares outstanding during the year used in calculation of basic and diluted (loss) per share				85,646,585			95,187,449			95,472,984
Comprehensive Income
Net loss according to US GAAP				(21,813	)		(15,149	)		(10,259	)
Other comprehensive income resulting from foreign currency translation				—			—			(1,956	)

Total comprehensive income				(21,813	)		(15,149	)		(12,215	)

In 2001, 2002 and 2003, exercise of the options issued by the Company would have been anti-dilutive and, therefore, was not considered in the computation of diluted earnings per share. Details of options are set out in note 14. Outstanding options at the end of the financial years are, 2,025,076 in 2001, 2,207,663 in 2002 and 2,441,951 in 2003.

100

The following is a reconciliation of the adjustments necessary to reconcile shareholders’ equity in accordance with Australian GAAP to the amounts determined under US GAAP as at June 30, 2002 and 2003:


			At 30 June

			2002			2003
			A$’000			A$’000

Shareholders’ Equity
Shareholders’ equity reported using Australian GAAP				54,045			42,397
Cumulative adjustments required to accord with US GAAP:
Reversal of recognition of goodwill		(i)		(492	)		—
Amortization of goodwill		(i)		268			—
Stock based compensation cost	(ii)			(728	)		(757	)
Minority interest equity	(vi)			(766	)		(571	)
Adjustment for sales returns		(v)		(475	)		—

Shareholders’ equity according to US GAAP				51,852			41,069

A description of the differences between Australian GAAP, as followed by Novogen, and US GAAP is provided below:

(i) Goodwill, Patents and Trademarks

Novogen Limited (“Novogen” formerly Norvet Limited) was incorporated on March 18, 1994. An Australian prospectus was issued in August 1994 for a proposed public issue of 13 million shares and options by Novogen. At that time, Novogen was a cash-less shell that had not carried on any business except to enter into an underwriting agreement for the offering and agreements to acquire Norvet Research Pty Ltd.

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(“Research”) and Norvet Laboratories Pty Ltd (“Laboratories”). The agreements indicated that Novogen would purchase all of the issued shares of Research in exchange for an issue of new Novogen equity that was valued at A$7.0 million and that Novogen would acquire all of the issued shares of Laboratories in exchange for a cash payment of A$400,000 from the IPO proceeds. Novogen successfully completed the public offering and listed on the Australian Stock Exchange on September 1, 1994. Concurrent with the closing of the IPO, the transfers of Research and Laboratories into Novogen were completed.

For the purposes of Australian GAAP, Novogen accounted for both acquisitions as purchase transactions with the cost of acquisition being based on a valuation performed before the acquisition of A$7 million for Research and A$400,000 for Laboratories. For the purposes of U.S. GAAP, the transfer of Research into Novogen (a shell with no assets) represents a re-capitalization of Research and, accordingly, no revaluation of Research’s assets is appropriate under US GAAP and no goodwill was recognised under US GAAP. The purchased fair values of Research’s assets, principally intangible assets, have therefore been eliminated in the reconciliation to US GAAP. No US GAAP adjustment was required, however, in relation to the acquisition of Laboratories.

Goodwill has been fully written off in 2003 based on the Directors assessment that no future benefits were considered probable from this intangible asset.

(ii) Stock Based Compensation

In accordance with Australian GAAP, no compensation expense has been recognised in respect of options issued by the company. Particulars of options issued by Novogen are summarised in Note 14.

(a) For US GAAP purposes, in respect of the options issued to executive officers and employees, as permitted by SFAS 123, Novogen follows the provisions of Accounting Principles Board Opinion No. 25 (APB 25) “Accounting for Stock Issued to Employees” and related interpretations in accounting for compensation expense related to the issuance of stock options. No stock-based compensation cost is included in the determination of net loss, as reported, as none of the options granted to employees are compensatory as measured under ABP25 and related interpretations. Under APB 25, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the grant date over the exercise price, multiplied by the number of options issued. The total compensation cost is amortized over the service (vesting) period. Had compensation cost related to issues of options to executive officers and other employees been recorded at fair value on the date of grant in accordance with SFAS 123 “Accounting for Stock Based Compensation” (SFAS 123), Novogen’s net loss and loss per share amounts (calculated in accordance with US GAAP) would have been reduced to the pro forma amounts indicated below:

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		2001			2002			2003
		A$’000			A$’000			A$’000

Net loss after income tax (US GAAP)
	- As reported		(21,813	)		(15,149	)		(10,259	)
	- Stock-based employee compensation – fair value method		(217	)		(271	)		(411	)
	- Pro forma		(22,030	)		(15,420	)		(10,670	)
Basic and diluted loss per share (US GAAP)
	- As reported		(0.25	)		(0.16	)		(0.11	)
	- Pro forma		(0.26	)		(0.16	)		(0.12	)

(b) The company has also granted options to consultants, who are not employees of the company, for services to Novogen and its controlled entities. Under US GAAP, compensation cost for the issue of these options has been determined based on the methodology of SFAS 123. Under SFAS 123, compensation cost is determined based upon the fair value at the measurement date of the consideration received or the fair value of the option issued, whichever is more reliably measurable.

103

The following table summarises non-employee stock options issued to consultants who perform services for Novogen:

Consultant Options

2001

2002

2003

Weighted

average

exercise

Options

price A$

Options

price A$

Options

price A$

Outstanding at the beginning of the year

326,350

A$2.28

348,778

A$2.28

397,728

A$2.28

Granted

57,428

A$3.63

101,950

A$2.05

37,200

A$2.10

Exercised

35,000

A$1.00

53,000

A$2.00

67,418

A$2.05

Outstanding at the end of the year

348,778

A$2.28

397,728

$2.69

367,510

$2.75

Exercisable at the end of the year

58,860

A$2.90

265,207

A$2.83

316,222

A$2.77

Weighted average fair value of options granted during the year

A$1.43

A$0.52

A$0.78

Employee Options

2001

2002

2003

Weighted

average

exercise

Options

price A$

Options

price A$

Options

price A$

Outstanding at the beginning of the year

1,502,467

A$3.02

1,676,298

A$3.02

1,809,935

A$3.01

Granted

247,604

A$4.00

695,528

A$1.53

526,332

A$2.10

Exercised

3,513

A$1.93

289,939

A$1.77

131,653

A$2.14

Expired

70,260

A$3.32

271,952

A$2.83

130,173

A$2.25

Outstanding at the end of the year

1,676,298

A$2.99

1,809,935

A$2.61

2,074,441

A$2.02

Exercisable at the end of the year

732,917

A$2.27

585,321

A$3.01

1,069,757

A$2.94

Weighted average fair value of options granted during the year

A$0.92

A$0.39

A$0.78

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The fair value of these options was estimated at the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2001, 2002 and 2003 respectively. Risk free interest rate 6.17% and 5.09% and 5.71%. Dividend yields of 0% in each of the three years, volatility factors of 0.216 in 2001, 0.273 in 2002 and 0.362 in 2003, and a weighted average life of 4 years.

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

(iii) Cash Flow Statement

Cash for the purposes of the cash flow statement includes A$2,500,000 held as a minimum deposit by the lessor (note 13). Under US GAAP this would be treated as ‘restricted cash’ and would be removed from cash and cash equivalents and included in cash flows from investing activities.


	2001			2002			2003
	A$’000			A$’000			A$’000

Cash and cash equivalents under Australian GAAP		31,129			39,937			31,026
Restricted cash (note 13)		(2,500	)		(2,500	)		(2,500	)

Cash and cash equivalents under US GAAP		28,629			37,437			28,526

(iv) Income Tax

The Novogen Group has adopted SFAS 109 for US GAAP purposes. SFAS 109 requires a ‘liability approach’ to accounting for income taxes, which as it applies to the company is very similar to that adopted under Australian GAAP.

Under Australian GAAP, the deferred tax asset in respect of income tax losses carried forward disclosed in note 3 is not recognised unless the benefit is virtually certain of realisation. Under US GAAP, the benefit is not recognised unless realisation is more likely than not.

The components of the US GAAP net deferred tax asset at June 30, 2002 and 2003, are as follows:

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			2002			2003
			A$’000			A$’000

Deferred tax asset (at Australian statutory rate of 30%)
	Depreciation			649			771
	Provisions Accruals			674			851
	Exchange Losses			1,661			166
	Other			731			629
	Losses carried forward	– Australian		1,789			6,229
		– United States		13,154			10,428
		– other		2,815			4,204

Total deferred tax assets				21,473			23,278
Deferred tax liability
	Exchange Gains			—			—
	Other			(1,934	)		(718	)
	Prepayments			(6	)		(1	)

Total Deferred Tax Liability				(1,940	)		(719	)

Net deferred tax asset				19,533			22,559

Valuation Allowance				(19,533	)		(22,559	)
Net Recorded Deferred Taxes				—			—

Deferred taxes have not been separated between current and non current. All deferred taxes are expected to be non current since there is no current tax liability and no current tax liability is anticipated for the next financial year.


	2001			2002			2003

Components of Income Tax Expense	A$’000			A$’000			A$’000

Current Expense		30			45			(7	)
Deferred Expense		8,261			(474	)		3,026
Movement in Valuation Allowance		(8,261	)		474			(3,026	)

Income Tax Expense		30			45			(7	)

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(v) Revenue


	2001			2002			2003
	(A$’000)			(A$’000)			(A$’000)
Sales Revenue reported using Australian GAAP		26,663			19,582			19,630
Trade Promotions		(1,248	)		(1,463	)		(1,128	)
Adjustment for sales returns		—			(475	)		—

Sales Revenue reported using US GAAP		25,415			17,644			18,502

Trade Promotions

EITF Issue 00-14 - Accounting for certain sales incentives required trade promotion expenditure to be deducted from sales revenue. Prior period financial information presented for comparative purposes have been reclassified where appropriate. Certain trade promotion expenditures are charged to selling and marketing expenses under Australian GAAP. These expenses are for retail price discounts whereby Novogen makes a contribution to the retailers’ promotional costs of Novogen’s products. Under US GAAP, these amounts are treated as a discount reducing the reported sales figures.

Sales Returns

Historically, the company did not sell its products with rights of return, however during 2002 as a result of disappointing sales of one product the company accepted returns totalling A$2.1 million. Under US GAAP, SFAS 48, “Revenue Recognition When Right of Return Exists”, requires that an allowance be recorded for an implied right of return, regardless of whether that right exists on a contractual basis. Accordingly, an adjustment for estimated sales returns was recorded under US GAAP in 2002. The Company has granted rights of return to specific customers in 2003. Consequently AUD369,000, has been included in the Australian accounts, in 2003 to recognise the estimated amount of sales returns expected at year end based on managements assessment of additional returns expected in 2004.

(vi) Minority interests

Under Australian GAAP, equity in consolidated subsidiaries issued outside the economic entity is referred to as “Outside Equity Interests” and is included as a component of equity but excluded from the determination of net loss. Under U.S. GAAP, Outside Equity Interests are referred to as “Minority Interests” and are separately classified between the liabilities and equity sections of the Statement of Financial Position. Net loss, in the statement of operations, is presented net of the minority’s share of the subsidiary’s net loss.

Refer Note 16 for subsidiaries full detail of minority interest equity.

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(vii) Recent Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS No. 123’s fair value method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions in SFAS No. 123 and Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. The Company adopted the disclosure provisions in 2003. The adoption of SFAS No. 148 did not have a significant impact on the Company’s consolidated results of operations or financial position.

In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities.” The primary objective of FIN No. 46 is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights; such entities are known as variable interest entities. FIN No. 46 requires variable interest entities to be consolidated by the primary beneficiary of the variable interest entities and expands disclosure requirements for variable interest entities that are consolidated as well as those within which an enterprise holds a significant variable interest. FIN No. 46 is effective immediately for all variable interest entities created after January 31, 2003, and is effective no later than the beginning of the first interim or annual reporting period beginning after June 15, 2003 for all variable interest entities created prior to February 1, 2003. The Company is currently in the process of evaluating any effect the adoption of FIN No. 46 will have on our consolidated financial position, results of operations and cash flows.

Accounting pronouncement issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or not significant to the consolidated financial statements.

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SIGNATURES

The registrant hereby certifies that it meets all 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.

NOVOGEN LIMITED

/s/ CHRISTOPHER NAUGHTON

Mr Christopher Naughton
Managing Director

Date: December 23, 2003

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Kazia Therapeutics Limited (KZIA) 20-F2003 FY Annual report (foreign)

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