**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





**[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
      OF 1934**





**For
      the quarterly period ended March 31, 2006**





**OR**





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





**For
      the transition period from ________ to ________.**





**Commission
      File Number: 000-50484**










**Marshall
      Edwards, Inc.**


(Exact
      name of registrant as specified in its charter)




**DELAWARE**
            **51-0407811**(State
                or other jurisdiction of
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)





**140
      Wicks Road, North Ryde, NSW, 2113 Australia**


(Address
      of principal executive offices) (Zip Code)





**(011)
      61 2 8877- 6196**


**Registrant’s
      telephone number, including area code:**











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 o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
                  accelerated filer o
            Accelerated
                  filer o
            Non-accelerated
                  filer**[X]**





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  o  No
**[X]**





As
      of
      April 30, 2006 the number of shares outstanding of the issuer’s common stock,
      $0.00000002 par value, was 56,938,000.
















**MARSHALL
          EDWARDS, INC.**
  **INDEX**


**PART
                I**
            **FINANCIAL
                INFORMATION**
            **Page**Item
                1:
            Financial
                Statements (Unaudited)Consolidated
                Balance Sheets as of March 31, 2006 and June 30, 2005
            3Consolidated
                Statements of Operations for the three months and nine months ended
                March
                31, 2006 and 2005 and for the period from December 1, 2000 (inception)
                through March 31, 2006
            4Consolidated
                Statements of Cash Flows for the nine months ended March 31, 2006
                and 2005
                and for the period from December 1, 2000 (inception) through March
                31,
                2006
            5Consolidated
                Statement of Stockholders’ Equity
            6Notes
                to Consolidated Financial Statements
            7Item
                2:
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation
            15Item
                3:
            Quantitative
                and Qualitative Disclosures about Market Risk
            24Item
                4:
            Controls
                and Procedures
            25**PART
                II**
            **OTHER
                INFORMATION**Item
                1A:
            Risk
                Factors
            26Item
                6:
            Exhibits
                and Reports on Form 8-K
            27**SIGNATURES**
            28








2


**PART
      I FINANCIAL INFORMATION**


Item
      1:
      Financial Statements





**MARSHALL
      EDWARDS, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      BALANCE SHEETS**


(In
      thousands, except share and per share data)


**March
                  31,**
              
              **June
                  30,****2006**
              
              **2005**(unaudited)**ASSETS**Current assetsCash and cash equivalents
              
              **$**
              **12,863**
              
              **$**
              **9,238**Short term investments
              
              
              **-**
              
              
              **10,000**Prepaid expenses and other current
                  assets
              
              
              **461**
              
              
              **126**Total current
                  assets
              
              
              **13,324**
              
              
              **19,364**Total
                  assets
              
              **$**
              **13,324**
              
              **$**
              **19,364****LIABILITIES
                  AND STOCKHOLDERS'
                  EQUITY**Current liabilitiesAccounts payable
              
              **$**
              **140**
              
              **$**
              **254**Accrued expenses
              
              
              **540**
              
              
              **403**Amount due to related company
              
              
              **2,956**
              
              
              **2,186**Total
                  current liabilities
              
              
              **3,636**
              
              
              **2,843**Stockholders' equity:Preferred stock, $0.01 par value, authorized 100,000
                  shares,none outstanding
              
              
              **-**
              
              
              **-**Common stock, $ 0.00000002 par value, 113,000,000
                  authorizedshares; shares issued and outstanding:
                  56,938,000 atMarch 31, 2006 and 56,938,000 at June 30,
                  2005
              
              
              **-**
              
              
              **-**Additional paid-in capital
              
              
              **34,636**
              
              
              **34,636**Deficit accumulated during development stage
              
              
              **(24,948**
              **)**
              
              **(18,115**
              **)**Total stockholders' equity
              
              
              **9,688**
              
              
              **16,521**Total
                  liabilities and stockholders' equity
              
              **$**
              **13,324**
              
              **$**
              **19,364**




*See
      accompanying notes to the consolidated financial statements.*





3





**MARSHALL
      EDWARDS, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(In
      thousands, except share and per share data)


(Unaudited)


**Three Months Ended March 31,**
              
              **Nine
                  Months Ended March 31,**
              
              **Period
                  from December 1, 2000 (Inception) through**
                **March
                  31,****2006**
              
              
              **2005**
              
              
              **2006**
              
              
              **2005**
              
              
              **2006**Revenues:Interest and other income
              
              **$**
              **101**
              
              $
              71
              
              **$**
              **353**
              
              $
              202
              
              $
              1,006Total
                  revenues
              
              
              **101**
              
              
              71
              
              
              **353**
              
              
              202
              
              
              1,006Operating expenses:Research and development
              
              
              **(1,033**
              **)**
              
              (494
              )
              
              **(2,088**
              **)**
              
              (1,476
              )
              
              (8,841
              )License fees
              
              
              **(2,000**
              **)**
              
              (1,000
              )
              
              **(4,000**
              **)**
              
              (2,000
              )
              
              (13,000
              )Selling, general and administrative
              
              
              **(320**
              **)**
              
              (317
              )
              
              **(1,098**
              **)**
              
              (1,071
              )
              
              (4,112
              )Total operating
                  expenses
              
              
              **(3,353**
              **)**
              
              (1,811
              )
              
              **(7,186**
              **)**
              
              (4,547
              )
              
              (25,953
              )Loss from operations
              
              
              **(3,252**
              **)**
              
              (1,740
              )
              
              **(6,833**
              **)**
              
              (4,345
              )
              
              (24,947
              )Income tax expense
              
              
              **-**
              
              
              -
              
              
              **-**
              
              
              -
              
              
              (1
              )Net loss arising during development
                  stage
              
              **$**
              **(3,252**
              **)**
              $
              (1,740
              )
              **$**
              **(6,833**
              **)**
              $
              (4,345
              )
              $
              (24,948
              )Net loss per common share:Basic and diluted
              
              **$**
              **(0.06**
              **)**
              $
              (0.03
              )
              **$**
              **(0.12**
              **)**
              $
              (0.08
              )Weighted average common shares outstanding
              
              
              **56,938,000**
              
              
              56,938,000
              
              
              **56,938,000**
              
              
              56,938,000








*See
      accompanying notes to the consolidated financial statements.*







4








**MARSHALL
      EDWARDS, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(In
      thousands)


(Unaudited)








**Nine
                  Months Ended**
                **March
                  31,**
              
              **Period
                  from December 1, 2000 (Inception) through**
                **March
                  31,****2006**
              
              **2005**
              
              **2006****Operating
                  activities**Net loss arising during development stage
              
              **$**
              **(6,833**
              **)**
              $
              (4,345
              )
              $
              (24,948
              )Adjustments to reconcile net loss to net cash(used in) provided by operating activities:Changes in operating assets and liabilities:Prepaid expenses and other current assets
              
              
              **(335**
              **)**
              
              (240
              )
              
              (461
              )Accounts payable
              
              
              **(114**
              **)**
              
              61
              
              
              140Accrued expenses
              
              
              **137**
              
              
              (128
              )
              
              540Amounts due to related company
              
              
              **770**
              
              
              64
              
              
              2,956Net cash used in operating activities
              
              
              **(6,375**
              **)**
              
              (4,588
              )
              
              (21,773
              )**Financing
                  activities**Proceeds from issuance of common stock
              
              
              **-**
              
              
              -
              
              
              34,636Proceeds from disposal of investments in short-term
                  deposits
              
              
              **10,000**
              
              
              -
              
              
              -Net cash provided by financing activities
              
              
              **10,000**
              
              
              -
              
              
              34,636Net increase (decrease) in cash and cashequivalents
              
              
              **3,625**
              
              
              (4,588
              )
              
              12,863Cash and cash equivalents at beginning of period
              
              
              **9,238**
              
              
              24,819
              
              
              -Cash and cash equivalents at end of period
              
              **$**
              **12,863**
              
              $
              20,231
              
              $
              12,863























*See
      accompanying notes to the consolidated financial statements.*








5


**MARSHALL
      EDWARDS, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY**


(In
      thousands, except share data)


(Unaudited)





**Common
                  Stock**
              
              **Additional
                  paid in capital**
              
              **Deficit
                  accumulated during development stage**
              
              **Total***(shares)***Balance
                  at June 30, 2005**
              
              
              **56,938,000**
              
              **$**
              **34,636**
              
              **$**
              **(18,115**
              **)**
              **$**
              **16,521**Net
                  loss arising during development stage
              
              
              
              
              
              
              
              
              **(6,833**
              **)**
              
              **(6,833**
              **)**Comprehensive
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              **(6,833**
              **)****Balance
                  at March 31, 2006**
              
              
              **56,938,000**
              
              **$**
              **34,636**
              
              **$**
              **(24,948**
              **)**
              **$**
              **9,688**














*See
      accompanying notes to the consolidated financial statements.*










6





**MARSHALL
      EDWARDS, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**


**March
      31, 2006**








**1.** **The
      Company and Summary of Significant Accounting Policies**





The
      accompanying financial statements have been prepared in accordance with
      generally accepted accounting principles for interim financial information
      and
      with the instructions to Form 10-Q and Article 10 of Regulation S-X.
      Accordingly, they do not include all of the information and footnotes required
      by accounting principles generally accepted in the United States for complete
      financial statements. Marshall Edwards, Inc. (“MEI”) believes all adjustments
      (consisting of normal recurring accruals) considered necessary for a fair
      presentation have been included. Operating results for the three months and
      nine
      months ended March 31, 2006 are not necessarily indicative of the results that
      may be expected for the year ending June 30, 2006 or any other period. The
      balance sheet at June 30, 2005 has been derived from the audited financial
      statements at that date. The financial statements and notes should be read
      in
      conjunction with the audited financial statements and notes thereto for the
      year
      ended June 30, 2005 which were included in the Company’s Annual Report on Form
      10-K for the year ended June 30, 2005.





MEI
      is a
      development stage company incorporated in December 2000 as a wholly-owned
      subsidiary of Novogen Limited, an Australian pharmaceutical company. MEI
      commenced operations in May 2002. MEI, including its wholly-owned Australian
      subsidiary, Marshall Edwards Pty Limited (“MEPL”) (together the “Company”) is a
      pharmaceutical company with a primary focus on the development and
      commercialization of drugs for the treatment of cancer. The Company is presently
      engaged in the clinical development and commercialization of a drug candidate
      called phenoxodiol. The Company intends to develop phenoxodiol for use in a
      number of human cancers. The Company operates primarily in Australia and the
      United States.





Novogen
      Limited and certain of its subsidiary companies (collectively “Novogen”), have
      granted to the Company an exclusive worldwide, non transferable license under
      their patents and patent applications and in their know-how to conduct clinical
      trials and commercialize and distribute all forms of administering phenoxodiol
      in the field of prevention, treatment and cure of cancer in humans, except
      topical applications. In addition, the Company has an exclusive first right
      and
      an exclusive last right to match any proposed dealing by Novogen of its
      intellectual property rights with a third party relating to synthetic
      pharmaceutical compounds (other than phenoxodiol), that have known or potential
      applications in the field of prevention, treatment or cure of cancer in humans
      in all forms other than topical applications.





The
      Company’s initial business focus is to continue the clinical program currently
      under way for the development and commercialization of phenoxodiol.








7





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of Marshall Edwards,
      Inc.
      and its wholly-owned subsidiary, Marshall Edwards Pty Limited. Significant
      intercompany accounts and transactions have been eliminated on
      consolidation.





**Estimates**





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





**Revenue
      Recognition**





*Interest*





The
      only
      revenue earned to date is interest on cash balances.





**Cash
      and****Cash Equivalents and Short Term
      Investments**





Cash
      on
      hand and in banks and short-term deposits are stated at their nominal value.
      The
      Company considers all highly liquid investments with a maturity of three months
      or less when purchased to be cash equivalents. Highly liquid investments with
      stated maturities of greater than three months are classified as short-term
      investments. The Company’s cash, held in the U.S., is deposited in financial
      institutions that are FDIC insured. These deposits are in excess of the FDIC
      insurance limits. The Company also holds cash with Australian financial
      institutions.





**Income
      Taxes**





Income
      taxes have been provided for using the liability method in accordance with
      FASB
      Statement No. 109, “Accounting for Income Taxes.” Under this method, deferred
      tax assets and liabilities are recognized and measured using enacted tax rates
      in effect for the year in which the differences are expected to be recognized.
      Valuation allowances are established against the recorded deferred income tax
      assets to the extent that management believes that it is more likely than not
      that a portion of the deferred income tax assets are not
      realizable.





**Fair
      Value of Financial Instruments**





The
      carrying amounts of the Company’s financial instruments, including cash and cash
      equivalents and accounts payable approximate fair value.





**Foreign
      Currency Translation**





The
      financial statements of MEPL have been translated into U.S. dollars in
      accordance with FASB Statement No. 52, “Foreign Currency Translation.” Assets
      and liabilities are translated into U.S. dollars using the exchange rates in
      effect at the balance sheet date. Income statement amounts have been translated
      using the average exchange rate for the periods. Realized gains and losses
      from
      foreign currency transactions are reflected in the consolidated statements
      of
      operations.






8





Translation
      of MEPL’s Financial Statements into U.S dollars does not have a material impact
      on the Company’s financial position.





**Research
      and Development Expenses**





Research
      and development expenses relate primarily to the cost of conducting human
      clinical trials of phenoxodiol. Research and development costs are charged
      to
      expense as incurred.





**License
      Fees**





Costs
      incurred related to the acquisition or licensing of products that have not
      yet
      received regulatory approval to be marketed, or that are not commercially viable
      and ready for use or have no alternative future use, are charged to earnings
      in
      the period incurred.





**Stock-Based
      Compensation**





The
      Company’s stock option plan provides for the grant of options to the Company’s
      directors, employees, employees of the Company’s affiliates and certain of the
      Company’s contractors and consultants. To date no options have been issued under
      the plan.





**Basic
      and Diluted Loss Per Share**





Basic
      and
      diluted earnings or loss per share is calculated in accordance with FASB
      Statement No. 128, “Earnings Per Share.” In computing basic earnings or loss per
      share, the dilutive effect of stock options are excluded, whereas for diluted
      earnings per share they are included unless the effect is anti-dilutive. Since
      the Company has a loss for all periods presented, diluted and basic earnings
      per
      share are the same.





**Comprehensive
      Loss**





Comprehensive
      loss is comprised of net loss and other comprehensive loss. Other comprehensive
      loss includes certain changes in Stockholders’ Equity that are excluded from net
      loss. Comprehensive loss for all periods presented has been reflected in the
      Consolidated Statement of Stockholders’ Equity.





9


**2****.** **Loss
      Per Share**





The
      following table sets forth the computation of basic and diluted net loss per
      common share:


**Three Months Ended March 31,**
              
              **Nine
                  Months Ended March 31,****2006**
              
              **2005**
              
              **2006**
              
              **2005***(In Thousands,
                  except share
                  and per share data)***Numerator**Net
                  loss arising during development stage
              
              
              (3,252
              )
              
              (1,740
              )
              
              (6,833
              )
              
              (4,345
              )Effect
                  of dilutive securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -Numerator
                  for diluted earnings per share
              
              $
              (3,252
              )
              $
              (1,740
              )
              $
              (6,833
              )
              $
              (4,345
              )**Denominator**Denominator
                  for basic earnings per share -weighted-average
                  shares
              
              
              56,938,000
              
              
              56,938,000
              
              
              56,938,000
              
              
              56,938,000Effect
                  of dilutive securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -Dilutive
                  potential common shares
              
              
              56,938,000
              
              
              56,938,000
              
              
              56,938,000
              
              
              56,938,000Basic
                  and diluted earnings per share
              
              $
              (0.06
              )
              $
              (0.03
              )
              $
              (0.12
              )
              $
              (0.08
              )




During
      the period presented the Company had warrants outstanding that could potentially
      dilute basic earnings per share in the future, but were excluded from the
      computation of diluted net loss per share as the effect would have been
      anti-dilutive. Since the Company has a loss for all periods presented, diluted
      and basic earnings per share are the same. The outstanding warrants consist
      of
      the following potential common shares:




**As at March
                  31,****2006**
              
              
              **2005**Common
                  shares issuable upon exercise of outstanding warrants
              
              
              2,392,000
              
              
              2,392,000
  The
      warrants outstanding at March 31, 2006 have an exercise price of $9.00 per
      share
      and are exercisable prior to December 18, 2006.





**3.** **Expenditure
      Commitments**





At
      March
      31, 2006, the Company had contractual obligations for the conduct of clinical
      trials, pre clinical research and development and manufacturing process
      development of approximately $2,410,000. Of the expenditure commitments,
      clinical trial amounts are based on the assumption that all patients enrolled
      in
      clinical trials will complete the maximum number of allowed treatment cycles.
      The amounts, assuming all treatment cycles are completed, are expected to be
      incurred as follows:







10






(In
                  thousands)
              
              
              
              Payment
                  due by period**Contractual
                  Obligations**
              
              **Total**
              
              less
                  than 1 Year
              
              1
                  -
                  3 Years
              
              3
                  -
                  5 Years
              
              More
                  than 5 YearsPurchase
                  Obligations
              
              $
              2,410
              
              $
              2,410
              
              $
              -
              
              $
              -
              
              $
              -Total
              
              $
              2,410
              
              $
              2,410
              
              $
              -
              
              $
              -
              
              $
              -






No
      amounts have been included for future payments to Novogen which may arise in
      connection with the license agreement, the services agreement or the
      manufacturing license and supply agreement as future payments under the terms
      of
      the agreements are subject to termination provisions. Payments in connection
      with these agreements are detailed in Note 5 “Related Party
      Transactions”.





The
      Company is not currently a party to any material legal proceedings.





The
      Company’s certificate of incorporation provides that it will indemnify Novogen
      in connection with certain actions brought against Novogen by any of the
      Company’s stockholders or any other person.





The
      Company has guaranteed the payment and performance of the obligations of its
      subsidiary, Marshall Edwards Pty Limited, to Novogen and its subsidiaries,
      Novogen Laboratories Pty Limited and Novogen Research Pty Limited, under the
      license agreement, the manufacturing license and supply agreement and the
      services agreement. Novogen has guaranteed the performance of the obligations
      of
      Novogen Research Pty Limited under the license agreement and the obligations
      of
      Novogen Laboratories Pty Limited under the manufacturing license and supply
      agreement to Marshall Edwards Pty Limited. Each of the Company and Novogen’s
      obligations in the guarantee and indemnity agreement are absolute, unconditional
      and irrevocable.





The
      Company has issued a letter of support to the Directors of Marshall Edwards
      Pty
      Limited guaranteeing financial support, for a period of twelve months ending
      October 7, 2006, should it be unable to meet any of its financial
      commitments.




**4.** **Segment Information**





The
      Company’s focus is to continue the clinical program currently underway for the
      development and commercialization of phenoxodiol. The business contains two
      major segments based on geographic location.







11








**Three
                  Months Ended March 31,**
                **2006**
              
              **Three
                  Months Ended March 31,**
                **2005***(In
                  Thousands)*USA
              
              
              Australia
              
              
              USA
              
              
              AustraliaLoss
                  from operations
              
              $
              (40
              )
              $
              (3,212
              )
              $
              (81
              )
              $
              (1,659
              )Segment
                  assets
              
              
              7,452
              
              
              5,872
              
              
              15,175
              
              
              5,326**Nine
                  Months Ended March 31,**
                **2006**
              **Nine
                  Months Ended March 31,**
                **2005***(In
                  Thousands)*USA
              
              
              Australia
              
              
              USA
              
              
              AustraliaLoss
                  from operations
              
              $
              (138
              )
              $
              (6,695
              )
              $
              (259
              )
              $
              (4,086
              )






**5.** **Related
      Party Transactions**





**License
      Agreement**





The
      license agreement is an agreement under which Novogen’s subsidiary, Novogen
      Research Pty Limited, grants to MEPL a worldwide non-transferable license under
      its patents and patent applications and in its know-how to conduct clinical
      trials and commercialize and distribute phenoxodiol products. The agreement
      covers uses of phenoxodiol in the field of prevention, treatment or cure of
      cancer in humans delivered in all forms except topical applications. The license
      is exclusive until the expiration or lapsing of the last relevant Novogen
      patents or patent applications in the world and thereafter is non-exclusive.
      MEPL may terminate the agreement by giving three months’ notice to Novogen. MEPL
      paid $5,000,000 to Novogen in February 2004 which was the first lump sum license
      fee payment due under the terms of the license agreement. Also, MEPL paid
      $2,000,000 to Novogen in January 2005 which was the annual milestone license
      fee
      payment due under the license agreement. MEPL paid $4,000,000 to Novogen in
      January 2006 which was the annual milestone license fee payment due under the
      license agreement. Future amounts payable to Novogen under terms of the license
      agreement are as follows:





1.
      A
      second lump sum license fee of $5,000,000 is payable to Novogen on the later
      of
      November 1, 2003 or such date when the cumulative total of all funds received
      from debt or equity issuances and revenue received from commercialization
      (income other than sales) and sales of phenoxodiol products exceeds $50,000,000.
      The Company has not yet reached these preconditions for payment.





2.
      In
      addition to the amounts above, until the expiration of the exclusivity period
      of
      the license, MEPL must pay Novogen 2.5% of all net sales and 25% of
      commercialization income. After the exclusivity period of the license, 1.5%
      of
      net sales must be paid to Novogen.





3.
      In
      addition to the amounts above, beginning in 2006, an $8 million annual milestone
      license fee is payable under the license agreement for each calendar year ended
      December 31 during the exclusivity period of the license.





Milestone
      license fees of $2,000,000 have been accrued as at the end of March 31, 2006
      in
      connection with the annual milestone payment due within 30 days following the
      end of the calendar year December 31, 2006.






12





**License
      Option Deed**





The
      license option deed grants MEPL an exclusive right to accept and an exclusive
      right to match any proposed dealing by Novogen of its intellectual property
      rights with a third party relating to synthetic compounds (other than
      phenoxodiol) that have known or potential applications in the field of
      prevention, treatment or cure of cancer in humans in all forms other than
      topical applications.





**Services
      Agreement**





The
      Company does not currently intend to directly employ any staff. Under the terms
      of the services agreement, Novogen Limited or its subsidiaries have agreed
      to
      provide services reasonably required by the Company relating to the development
      and commercialization of phenoxodiol. Novogen has agreed to provide these
      services at cost plus a 10% mark-up. The Company may terminate the agreement
      on
      three months written notice to Novogen.





Transactions
      giving rise to expenditures amounting to $971,000 and $799,000 were made under
      the services agreement with Novogen during the nine months ended March 31,
      2006
      and 2005, respectively. Of these amounts, $441,000 and $287,000 related to
      service fees paid to Novogen for research and development services provided
      in
      the nine months ended March 31, 2006 and 2005, respectively, reflecting
      increased time spent by Novogen research staff on the development of
      phenoxodiol. Additionally, $530,000 and $512,000 of the total expenditure during
      the nine months ended March 31, 2006 and 2005, respectively related to costs
      incurred for administration and accounting services provided by Novogen.





At
      March
      31, 2006 and 2005, $114,000 and $101,000, respectively, were due and owing
      to
      Novogen under the services agreement and are included in amounts due to parent
      company.





**Manufacturing
      License and Supply Agreement**





Under
      the
      terms of the manufacturing license and supply agreement, MEPL has granted to
      one
      of Novogen’s subsidiaries an exclusive, non-transferable sub license to
      manufacture and supply phenoxodiol in its primary manufactured form. Novogen’s
      subsidiary has agreed to supply phenoxodiol to MEPL for the clinical trial
      development program and phenoxodiol’s ultimate commercial use. Novogen will
      supply phenoxodiol at cost plus a 50% markup.





Transactions
      giving rise to expenditures amounting to $362,000 and $372,000 were made under
      the manufacturing license and supply agreement with Novogen during the nine
      months ended March 31, 2006 and 2005, respectively.





At
      March
      31, 2006 and 2005, $76,000 and $50,000, respectively, were due and owing to
      Novogen under the manufacturing license and supply agreement and are included
      in
      amounts due to parent company.








**6.
      Equity**





MEI
      is a
      development stage company incorporated in December 2000 that commenced
      operations in May 2002 coinciding with its listing on the Alternative Investment
      Market of the London Stock Exchange.






13





In
      May
      2002, the Company sold 2,523,000 shares of its common stock and 2,523,000
      warrants, raising proceeds of $9,022,000, net of $1,070,000 of transaction
      costs. The warrants were exercisable prior to November 30, 2003 at an exercise
      price of $4.00 per share. The common stock was listed for trading on the
      Alternative Investment Market of the London Stock Exchange. Following the
      listing, Novogen Limited retained 95.1% of the Company’s common stock.





In
      June
      2003, 9,000 warrants were exercised, resulting in proceeds to the Company of
      $36,000. In November 2003 the remaining 2,514,000 warrants were exercised at
      an
      exercise price of $4.00 per share with proceeds to the Company of
      $10,056,000.





In
      December 2003, the Company sold 2,392,000 common stock units at a public
      offering price of $7.50 per unit. Each common stock unit consisted
      of:





·
            one
                share of common stock; and




·
            one
                warrant to purchase a share of common stock, exercisable prior to
                December
                18, 2006 at an exercise price equal to
                $9.00.




In
      connection with the December 2003 offering, the Company’s common stock and
      warrants commenced trading separately on the Nasdaq National Market. The Company
      received proceeds of $15,522,000, net of $2,431,000 transaction costs in the
      December 2003 offering. Following the offering, Novogen Limited retained 86.9%
      of the Company’s common stock.





In
      January 2006, the Company voluntarily cancelled the trading of its common stock
      on the Alternative Investment Market of the London Stock Exchange.








14


Item
      2:
 Management’s Discussion and Analysis of Financial Condition and Results of
      Operation





**Special
      Note Regarding Forward-Looking Statements**




This
      quarterly report on Form 10-Q includes forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended and Section
      21E
      of the Security Exchange Act of 1934, as amended. All statements other than
      statements of historical facts contained in this quarterly report, including
      statements regarding the future financial position, business strategy and plans
      and objectives of management for future operations, are forward-looking
      statements. The words “believe,” “may,” “will,” “estimate,” “continue,”
“anticipate,” “intend,” “should,” “plan,” “expect,” and similar expressions, as
      they relate to the Company, are intended to identify forward-looking statements.
      The Company has based these forward-looking statements largely on current
      expectations and projections about future events and financial trends that
      it
      believes may affect financial condition, results of operations, business
      strategy and financial needs. These forward-looking statements are subject
      to a
      number of risks, uncertainties and assumptions, including, among other
      things:




·
            the
                Company’s inability to obtain any additional required financing or
                financing available to us on acceptable
                terms; ·
            the
                Company’s failure to successfully commercialize its product
                candidates; ·
            costs
                and delays in the development and/or receipt of FDA or other required
                governmental approvals, or the failure to obtain such approvals,
                for the
                Company’s product candidates; ·
            uncertainties
                in clinical trial results; ·
            the
                Company’s inability to maintain or enter into, and the risks resulting
                from its dependence upon, collaboration or contractual arrangements
                necessary for the development, manufacture, commercialization, marketing,
                sales and distribution of any products; ·
            continued
                cooperation and support of Novogen, the Company’s parent
                company; ·
            competition
                and competitive factors; ·
            the
                Company’s inability to protect its patents or proprietary rights and
                obtain necessary rights to third party patents and intellectual property
                to operate its business; ·
            the
                Company’s inability to operate its business without infringing the patents
                and proprietary rights of others; ·
            general
                economic conditions; ·
            the
                failure of any products to gain market
                acceptance; ·
            technological
                changes; ·
            government
                regulation generally and the receipt of the regulatory
                approvals; ·
            changes
                in industry practice; and ·
            one-time
                events.







15




These
      risks are not exhaustive. Other sections of this quarterly report may include
      additional factors which could adversely impact business and financial
      performance. In addition, the Company’s business and financial performance may
      be affected by the factors that are discussed under “Risk Factors” in the Annual
      Report on Form 10-K for the year ended June 30, 2005. Moreover, the Company
      operates in a very competitive and rapidly changing environment.




You
      should not rely upon forward-looking statements as predictions of future events.
      The Company cannot assure you that the events and circumstances reflected in
      the
      forward-looking statements will be achieved or occur. Although it believes
      that
      the expectations reflected in the forward-looking statements are reasonable,
      the
      Company cannot guarantee future results, levels of activity, performance or
      achievements.




The
      following discussion is qualified in its entirety by, and should be read in
      conjunction with, the more detailed information set forth in the financial
      statements and the notes thereto appearing elsewhere in this
      report.




**Overview**





MEI
      is a
      development stage company incorporated on December 1, 2000 as a wholly-owned
      subsidiary of Novogen. The Company commenced operations in May 2002 and its
      business purpose is the development and commercialization of drugs for the
      treatment of cancer. The Company is presently engaged in the clinical
      development of the anti-cancer drug candidate called phenoxodiol. Novogen’s
      subsidiary has granted to the Company’s subsidiary, a worldwide non-transferable
      license under its patent right and patent applications and its relevant know-how
      to conduct clinical trials and commercialize and distribute all forms of
      phenoxodiol for uses in the field of prevention, treatment, and cure of cancer
      in humans, except topical applications. Novogen currently owns approximately
      86.9% of the outstanding shares of the Company’s common stock.





The
      Company’s main focus during fiscal year ended June 30, 2005 and in the nine
      months ended March 31, 2006 was to undertake human clinical testing of
      phenoxodiol. During the nine months ended March 31, 2006, the Company continued
      to recruit patients into the existing clinical trial programs. The Company
      is
      also in the planning phase of its phase III multinational ovarian cancer
      efficacy study. The Company is discussing trial design with the FDA to develop
      a
      trial protocol, including the number of treatment arms needed to be completed
      and the number of patients required to be tested in each arm. The Company has
      not completed discussions with the FDA and has not finally determined the cash
      resources needed to complete the trial.




The
      Company has agreed to novate Novogen's contracts with third parties which
      focus on manufacturing process development for phenoxodiol. This work is being
      undertaken to develop a scaleable manufacturing process which will facilitate
      larger scale production quantities of phenoxodiol while concurrently developing
      analytical methods and documentation required for the future submission of
      an
      NDA (New Drug Application). An NDA is needed in order to market phenoxodiol
      and
      will be required if the planned phase III study were to be successful.





The
      Company believes that it will have to raise additional cash resources to fund
      these planned operations. The Company is currently assessing the financing
      alternatives available to it.







16




The
      Company does not employ any staff directly but obtains services from Novogen
      under a services agreement. The Company has incurred losses since inception
      and
      expects to incur operating losses and generate negative cash flows from
      operations for the foreseeable future as it expands research and development
      activities and moves phenoxodiol into later stages of development. As of March
      31, 2006, the Company had accumulated losses of $24,948,000.





The
      Company has not generated any revenues from operations since inception other
      than interest on cash assets.





Expenses
      have consisted primarily of costs associated with conducting the clinical trials
      of phenoxodiol and costs incurred under the license agreement, the services
      agreement and the manufacturing license and supply agreements with Novogen
      and
      its subsidiaries, including the costs of the clinical trial drug
      supplies.





To
      date,
      operations have been funded primarily through the sale of equity
      securities.





The
      Company expects that quarterly and annual operating results of operations will
      fluctuate for the foreseeable future due to several factors including the timing
      and extent of research and development efforts and the outcome and extent of
      clinical trial activities. The Company’s limited operating history makes
      accurate prediction of future operating results difficult or
      impossible.





**Critical
      Accounting Estimates**





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





*Development
      Expenses*




Research
      and development costs incurred since inception through March 31, 2006 aggregate
      to $8,841,000.





Research
      and development costs include clinical trial expenses and are expensed as they
      are incurred and are expected to increase in the future as the phenoxodiol
      clinical program progresses. The planned phase III trial will require large
      patient numbers resulting in significantly increased costs.





Historical
      research and development costs and clinical trial costs have not been documented
      on a project by project basis. In addition, research and development resources
      are supplied by Novogen across several projects. As a result, the costs incurred
      for each clinical project cannot be stated precisely on a project by project
      basis.





The
      Company expects that a large percentage of research and development expenses
      in
      the future will be incurred in support of current and future clinical
      development programs. These expenditures are subject to a number of
      uncertainties in timing and cost to completion.







17




The
      duration and cost of clinical trials may vary significantly over the life of
      a
      project as a result of:


• the
      number of sites included in the trials;





• the
      length of time required to enroll suitable patients;





• the
      number of patients that participate in the trials;





• the
      end points and analyses required for regulatory approval; and





• the
      efficacy and safety profile of the product.





The
      Company’s strategy also includes the option of entering into collaborative
      arrangements with third parties to participate in the development and
      commercialization of phenoxodiol. In the event third parties have control over
      the clinical development process, the completion date would largely be under
      the
      control of that third party.





As
      a
      result of these uncertainties, the Company is unable to determine the duration
      of or completion costs for research and development projects or when and to
      what
      extent it will receive cash inflows from the commercialization and sale of
      phenoxodiol.





The
      Company intends to continue the clinical development of phenoxodiol and to
      assess the opportunity to license other cancer drugs developed by Novogen as
      the
      opportunities arise.





*Clinical
      Trial Expenses*





Estimates
      have been used in determining the expense liability under certain clinical
      trial
      contracts where services have been performed but not yet invoiced. The actual
      costs of those services could differ in amount and timing from the estimates
      used in completing the financial results.





Clinical
      trial expenses of $335,000 have been accrued at March 31, 2006. These estimates
      are based on the number of patients in each trial and the patient treatment
      cycles completed or milestones achieved.





Clinical
      research contracts may vary depending on the clinical trial design and protocol.
      Generally the costs, and therefore estimates, associated with clinical trial
      contracts are based on the number of patients, patient treatment cycles, the
      type of treatment and the outcome being measured. The length of time before
      actual amounts can be determined will vary depending on length of the patient
      cycles and the timing of the invoices by the clinical trial
      partners.








**Results
      of Operations**





**Three
      Months Ended March 2006 and 2005**





The
      Company recorded a consolidated loss of $3,252,000 and $1,740,000 for the three
      months ended March 31, 2006 and 2005, respectively.







18




**Revenues:**
      The Company received interest on cash assets and cash equivalents and short
      term
      investments of $101,000 for the three months ended March 31, 2006 versus $71,000
      for the three months ended March 31, 2005. The increase was due to an increase
      in interest rates earned by its cash deposits.





**Research
      and Development:** Research and Development expenses increased $539,000
      to $1,033,000 for the three months ended March 31, 2006 compared to $494,000
      for
      the three months ended March 31, 2005. The increase was primarily due to third
      party contract costs associated with the production scale-up activities of
      the
      manufacturing process of phenoxodiol and the initial development of the NDA
      (New
      Drug Application) documentation. Costs incurred under these agreements and
      totaling $506,000 have been charged to the Company in the three months ended
      March 31, 2006. The Company expects research and development clinical trial
      expenses to increase in the future in accordance with the planned phase III
      clinical trial program together with increased production scale up
      costs.





**License
      Fees:**Milestone license fees of $2,000,000 have been expensed in the
      three months ended March 31, 2006 in connection with the annual milestone
      license fee of $8,000,000 that is payable to Novogen, within 30 days after
      December 31, 2006 under the terms of the license agreement with Novogen.
      Milestone license fees of $1,000,000 were expensed in the three months ended
      March 31, 2005 in connection with the annual milestone license fee of $4,000,000
      due to Novogen December 31, 2005. Milestone license fees continue at $8 million
      per year under the terms of the license agreement with Novogen.





**Selling,
      General and Administrative:**Selling, general and administrative
      expenses increased by $3,000 to $320,000 for the three months ended March 31,
      2006 compared to $317,000 for the three months ended March 31, 2005. Foreign
      exchange gains/(losses) are included in selling, general and administrative
      expenses and occur when revaluing cash denominated in foreign currencies and
      upon consolidation of MEI’s wholly owned Australian subsidiary Marshall Edwards
      Pty Ltd (“MEPL”). MEPL uses U.S. dollars as its functional currency and also
      engages in transactions in foreign currencies. Further, MEPL’s accounts and
      financial statements are denominated in Australian dollars. Translation of
      MEPL’s financial statements into U.S. dollars did not have a material impact on
      the Company’s financial position. Net foreign exchange losses during the three
      months ended March 31, 2006 were $12,000 compared with net foreign exchange
      gains of $35,000 during the three months ended March 31, 2005.





**Nine
      Months Ended March 2006 and 2005**





The
      Company recorded a consolidated loss of $6,833,000 and $4,345,000 for the nine
      months ended March 31, 2006 and 2005, respectively.





**Revenues:**
      The Company received interest on cash assets and cash equivalents and short
      term
      investments of $353,000 for the nine months ended March 31, 2006 versus $202,000
      for the nine months ended March 31, 2005. The increase was due to an increase
      in
      interest rates combined with the Company investing some of its cash in short
      term investment deposits which yield a greater rate of return than cash
      accounts.





**Research
      and Development:** Research and Development expenses increased by
      $612,000 to $2,088,000 for the nine months ended March 31, 2006 compared to
      $1,476,000 for the nine months ended March 31, 2005. The increase was primarily
      due to third party contact costs






19




associated
      with the production scale-up activities of the manufacturing process of
      phenoxodiol and the initial development of the NDA documentation incurred in
      the
      quarter ending March 31, 2006, together with additional costs incurred under
      the
      services agreement reflecting the increased time spent by Novogen research
      staff
      on the development of phenoxodiol. The Company expects research and development
      clinical trial expenses to increase in the future in accordance with the planned
      phase III clinical trial program.





**License
      Fees:**Milestone license fees of $4,000,000 were expensed in the nine
      months ended March 31, 2006. Of this milestone license fee expense, $2,000,000
      is in connection with the annual milestone license fee of $8,000,000 that is
      payable to Novogen, within 30 days, after December 31, 2006 under the terms
      of
      the license agreement with Novogen. The balance of the milestone license fee
      expense of $2,000,000 was in connection with the annual milestone license fee
      of
      $4,000,000 that was paid to Novogen in January
      2006.****





Milestone
      license fees of $2,000,000 were expensed in the nine months ended March 31,
      2005. Of this milestone license fee expense, $1,000,000 was in connection with
      the annual milestone license fee of $4,000,000 that was payable to Novogen
      in
      January 2006 under the terms of the license agreement with Novogen. The balance
      of the milestone license fee expense of $1,000,000 was in connection with the
      annual milestone license fee of $2,000,000 that was paid to Novogen in January
      2005.





**Selling,
      General and Administrative:**Selling, general and administrative
      expenses increased by $27,000 to $1,098,000 for the nine months ended March
      31,
      2006 compared to $1,071,000 for the nine months ended March 31, 2005. The
      increase was primarily due to an increase in foreign exchange losses, additional
      cost of compliance and additional fees charged under the services agreement
      with
      Novogen partially offset by a reduction in legal fees. Foreign exchange
      gains/(losses) are included in selling, general and administrative expenses
      and
      occur when revaluing cash denominated in foreign currencies and upon
      consolidation of MEI’s wholly owned Australian subsidiary Marshall Edwards Pty
      Ltd (“MEPL”). MEPL uses U.S. dollars as its functional currency and also engages
      in transactions in foreign currencies. Further, MEPL’s accounts and financial
      statements are denominated in Australian dollars. Translation of MEPL’s
      financial statements into U.S. dollars did not have a material impact on the
      Company’s financial position. Net foreign exchange losses during the nine months
      ended March 31, 2006 were $31,000 compared with net foreign exchange losses
      of
      $5,000 during the nine months ended March 31, 2005.





**Liquidity
      and Capital Resources**





At
      March
      31, 2006, the Company had cash resources of $12,863,000 compared to $19,238,000
      at June 30, 2005. Funds are invested in short term market accounts, pending
      use.
      The Company believes that it will have to raise additional cash resources to
      fund its planned operations.





**Source
      and Uses of Cash**




*Cash
      Used in Operating Activities*





Cash
      used
      in operating activities for the nine months ended March 31, 2006 was $6,375,000
      compared to $4,588,000 for the same period in 2005. The increase in cash outflow
      of $1,787,000 for the nine months ended March 31, 2006 was due primarily to
      the
      license fee






20




paid
      to
      Novogen increasing from $2,000,000 to $4,000,000 for three months ended March
      31, 2005 and 2006 respectively.





*Cash
      Requirements*





The
      Company believes that it will have to raise additional cash resources to fund
      its planned operations, and the Company is currently assessing the financing
      alternatives available to it.





The
      Company is planning to conduct a phase III clinical study to support marketing
      approval of phenoxodiol for ovarian cancer. The trial will use phenoxodiol
      in
      combination with an existing chemotherapeutic and will assess phenoxodiol’s
      safety and efficacy for late stage ovarian cancer patients who are refractory
      to
      standard chemotherapies. The Company is discussing trial design with the FDA
      to
      develop a trial protocol, including the number of treatment arms needed to
      be
      completed and the number of patients required to be tested in each arm. The
      Company has not completed the final trial design and has not determined the
      final cost of the trial, however, the Company has determined that additional
      cash resources will most likely be required to complete the trial and the other
      planned initiatives.





Novogen
      has notified the Company that its new anti-cancer compound NV-196 (previously
      referred to as NV-18) is now an “option compound” under the terms of the license
      option deed and that Novogen has commenced phase I clinical trials. The Company
      has commissioned an independent evaluation report on NV-196, has reviewed
      initial clinical results and has commenced license negotiations with Novogen.
      The Company is also in discussions with Novogen regarding a possible license
      for
      the anti-cancer compound NV-143. Additional cash resources will be required
      to
      undertake the clinical development program for those compounds.





Ongoing
      operations through the conduct of the clinical trial program will continue
      to
      consume cash resources without generating revenues and the Company will require
      additional cash resources to expand the clinical trial program for phenoxodiol
      in the treatment of prostate cancer.





Novogen,
      which currently provides phenoxodiol for use in clinical trials, has taken
      the
      strategic decision not to manufacture on a large scale Active Pharmaceutical
      Ingredients (API) for cancer drugs, including phenoxodiol, as these can be
      more
      economically supplied by third parties with particular expertise in this area.
      The contract facilities that have been identified are FDA licensed, have a
      track
      record of large scale API manufacture and have already invested in capital
      and
      equipment. The Company has agreed to novate Novogen's contracts with third
      parties which develop a scalable manufacturing method to ensure that sufficient
      quantities of phenoxodiol can be manufactured in compliance with cGMP (Current
      Good Manufacturing Practices) and to complete the analytical and stability
      work
      necessary for an NDA submission. An NDA is needed in order to market phenoxodiol
      and would be required if the planned phase III study were to be successful.





The
      Company is also required to make payments under the terms of the license
      agreement with Novogen as follows:





1.
      A
      second lump sum license fee of $5,000,000 is payable to Novogen on the later
      of
      November 1, 2003 or such date when the cumulative total of all funds received
      from debt or equity issuances and revenue received from commercialization
      (income other than sales) and






21




sales
      of
      phenoxodiol products exceeds $50,000,000. The Company has not yet reached these
      preconditions for payment.





2.
      In
      addition to the amounts above, until the expiration of the exclusivity period
      of
      the license, MEPL must pay Novogen 2.5% of all net sales and 25% of
      commercialization income. After the exclusivity period of the license, 1.5%
      of
      net sales must be paid to Novogen.





3.
      In
      addition to the amounts above, beginning in 2006, an $8 million annual milestone
      license fee is payable under the license agreement for each calendar year ending
      December 31 during the exclusivity period of the license.





At
      June
      30, 2005 an amount of $2,000,000 was accrued and reflected in amounts due to
      the
      parent company, being 50% of the $4,000,000 milestone payment payable to Novogen
      on December 31, 2005 under the terms of the license agreement with Novogen.
      An
      additional milestone license fee accrual of $2,000,000 was made at March 31,
      2006 in connection with the $8,000,000 payment due within 30 days following
      the
      end of the calendar year, December 31, 2006. The Company paid the December
      31,
      2005 annual milestone license fee of $4,000,000 due to Novogen at the end of
      January 2006.





The
      Company will also be required to make payments to Novogen under the services
      agreement and manufacturing license and supply agreement.





The
      Company does not intend to incur any significant capital expenditures in the
      foreseeable future.





*Off-Balance
      Sheet Arrangements*





The
      Company does not currently have any off-balance sheet arrangements.





*Contractual
      Obligations*





The
      following table summarizes the Company’s contractual obligations at March 31,
      2006:





(In
                  thousands)
              
              
              
              Payment
                  due by period**Contractual
                  Obligations**
              
              
              **Total**
              
              
              less
                  than 1 Year
              
              
              1
                  -
                  3 Years
              
              
              3
                  -
                  5 Years
              
              
              More
                  than 5 YearsPurchase
                  Obligations
              
              $
              2,410
              
              $
              2,410
              
              $
              -
              
              $
              -
              
              $
              -Total
              
              $
              2,410
              
              $
              2,410
              
              $
              -
              
              $
              -
              
              $
              -




No
      amounts have been included for future payments to Novogen which may arise in
      connection with the license agreement, the services agreement or the
      manufacturing license and supply agreement as future payments under the terms
      of
      the agreements are subject to termination provisions.








22


*New
      Accounting Pronouncements*




Share-Based
      Payments




In
      December 2004, the FASB Issued Statement of Financial Accounting Standards
      No.
      123R (Statement 123R), "Share-Based Payments", the provisions of which are
      effective for the Company in fiscal 2006. This Statement eliminates the
      alternative to use APB No. 25's intrinsic value method of accounting that was
      provided in Statement 123 as originally issued. Statement 123R requires
      companies to recognize the cost of employee services received in exchange for
      awards of equity instruments based on the grant-date fair value of those awards.
      While the fair-value-based method prescribed by Statement 123R is similar to
      the
      fair-value-based method disclosed under the provisions of Statement 123 in
      most
      respects, there are some differences. The Company’s stock option plan provides
      for the grant of options to the Company’s directors, employees, employees of the
      Company’s affiliates and certain of the Company’s contractors and consultants.
      To date no options have been issued under the plan.











23


Item
      3: Quantitative and Qualitative Disclosures about Market Risk







**Interest
      Rate Risk**





The
      Company places cash in “on call” deposits and short term investments with high
      quality financial institutions.





The
      Company does not consider the effects of interest rate movements to be a
      material risk to its financial condition. The Company does not use derivative
      financial instruments to hedge its risks associated with the fluctuations of
      interest rates.





**Foreign
      Currency Risk**





The
      Company conducts a portion of its business in various currencies, primarily
      in
      U.S. and Australian dollars. At March 31, 2006, the Company had not established
      a foreign currency hedging program. Net foreign exchange losses during the
      nine
      months ended March 31, 2006 were $31,000 compared with net foreign exchange
      losses of $5,000 during the nine months ended March 31, 2005. Foreign exchange
      gains and losses occur upon consolidation of MEPL, which uses U.S. dollars
      as
      its functional currency and also engages in transactions in foreign currencies.
      MEPL’s accounts are denominated in Australian dollars. Translation of MEPL’s
      financial statements into U.S. dollars did not have a material impact on the
      Company’s financial position.





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











24





Item
      4: Controls and Procedures




**Evaluation
      of Disclosure Controls and Procedures**





At
      the
      end of the period covered by this report, the Company’s management, with the
      participation of the Company’s principal executive officer and principal
      financial officer, evaluated the effectiveness of the Company’s disclosure
      controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Securities Exchange Act of 1934, as amended). Based on this evaluation, the
      Company’s principal executive officer and principal financial officer have
      concluded that the Company’s disclosure controls and procedures are effective to
      ensure that information required to be disclosed by the Company in reports
      that
      it files or submits under the Exchange Act is recorded, processed, summarized
      and reported within the time periods specified in Securities and Exchange
      Commission rules and forms.







25








**PART
      II OTHER INFORMATION**





Item
      1A: Risk Factors





Set
      forth
      below in this Quarterly Report on Form 10-Q and in other documents we file
      with
      the Securities and Exchange Commission, including, without limitation, our
      most
      recently filed Form 10-K, are risks and uncertainties that could cause actual
      results to differ materially from the results contemplated by the
      forward-looking statements in this Quarterly Report on Form 10-Q. We believe
      that these risks and uncertainties are the principal material risks facing
      the
      Company as of the date of this Form 10-Q. In the future, we may become subject
      to additional risks that are not currently known to us. If any of these risks
      actually occur, our business, financial condition and operating results could
      be
      seriously harmed. As a result, the trading price of our common stock could
      decline, and you could lose all or part of the value of your
      investment.




***We
      may not be able to raise the additional funds necessary to complete Phase III
      clinical trials and commercialize phenoxodiol, or if we do raise the additional
      funds necessary, the trading price of our common stock may decline and our
      common stock may be diluted.***




While
      we
      believe that we have sufficient funds to complete our current clinical trial
      program, we will require additional funds to further the evaluation of
      phenoxodiol beyond the current objectives, including the completion of any
      Phase
      III clinical trials for phenoxodiol, and to pursue the commercialization of
      phenoxodiol. If our capital resources are insufficient to meet future capital
      requirements, we will have to raise additional funds. We cannot assure you
      that
      we will be able to get additional financing on any terms, and, if we are able
      to
      raise funds, it may be necessary for us to sell shares of our common stock
      or
      securities convertible into our common stock at a price that is a significant
      discount from the market price, resulting in potential dilution to existing
      holders of our common stock and a downward pressure on the stock price. If
      we
      are unable to obtain additional funds on favorable terms we may be required
      to
      cease or reduce our operations.







26





Item
      6: Exhibits and Reports on Form 8-K








a)
      Exhibits


**Exhibit
      Index**











Exhibits






31.1   
        Certification
        required by Rule 13a-14(a) or Rule 15d-14(a)
 31.2    Certification
        required by Rule 13a-14(a) or Rule 15d-14(a)
 32      
        Certification required by Rule 13a-14(b) or Rule 15d-14(b) and section 1350
        of
        Chapter 63 of Title 18
 of the United States Code (18 U.S.C 1350).





(b) Reports on Form 8-K.




On
      March
      27, 2006 the Company filed a current report on Form-8K regarding the appointment
      of Professor Bryan Williams to serve as a director of the Company and as a
      member of the Board’s Audit Committee and Remuneration Committee, effective
      March 31, 2006. This appointment was following the resignation of Professor
      David de Kretser AO, who resigned as director due to his appointment as the
      Governor of the State of Victoria, Australia.







27







**SIGNATURES**











Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned, thereunto
      duly authorized.








MARSHALL
      EDWARDS, INC.








/s/
      DAVID
      SEATON







David
      R.
      Seaton


Chief
      Financial Offer


(Duly
      Authorized Officer and Principal Financial Officer)





Date:
      May
      9, 2006





28


Exhibit
      31.1


**CERTIFICATION**





I,
      Christopher Naughton, certify that:







1.
            I
                have reviewed this report on Form 10-Q of Marshall
                Edwards, Inc.;




2.
            Based
                on my knowledge, this report does not contain any untrue statement
                of a
                material fact or omit to state a material fact necessary to make
                the
                statements made, in light of the circumstances under which such statements
                were made, not misleading with respect to the period covered by this
                report;




3.
            Based
                on my knowledge, the financial statements, and other financial information
                included in this report, fairly present in all material respects
                the
                financial condition, results of operations and cash flows of the
                registrant as of, and for, the periods presented in this
                report;




4.
            The
                registrant’s other certifying officer(s) and I are responsible for
                establishing and maintaining disclosure controls and procedures (as
                defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) for the registrant
                and have:




(a)
            Designed
                such disclosure controls and procedures, or caused such disclosure
                controls and procedures to be designed under our supervision, to
                ensure
                that material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within those
                entities, particularly during the period in which this report is
                being
                prepared:




(b)
            Evaluated
                the effectiveness of the registrant’s disclosure controls and procedures
                and presented in this report our conclusions about the effectiveness
                of
                the disclosure controls and procedures, as of the end of the period
                covered by this report based on such evaluation;
                and




(c)
            Disclosed
                in this report any change in the registrant’s internal control over
                financial reporting that occurred during the registrant’s most recent
                fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
                annual report) that has materially affected, or is reasonably likely
                to
                materially affect, the registrant’s internal control over financial
                reporting; and




5.
            The
                registrant’s other certifying officer(s) and I have disclosed, based on
                our most recent evaluation of internal control over financial reporting,
                to the registrant’s auditors and the audit committee of the registrant’s
                board of directors:




(a)
            All
                significant deficiencies and material weaknesses in the design or
                operation of internal control over financial reporting which are
                reasonably likely to adversely affect the registrant’s ability to record,
                process, summarize and report financial information;
                and




(b)
            Any
                fraud, whether or not material, that involves management or other
                employees who have a significant role in the registrant’s internal control
                over financial reporting.










Date:
      May
      9, 2006         /s/CHRISTOPHER
      NAUGHTON







Christopher
      Naughton


Chief
      Executive Officer





29


Exhibit
      31.2


**CERTIFICATION**





I,
      David
      Ross Seaton, certify that:







1.
            I
                have reviewed this report on Form 10-Q of Marshall Edwards,
                Inc.;




2.
            Based
                on my knowledge, this report does not contain any untrue statement
                of a
                material fact or omit to state a material fact necessary to make
                the
                statements made, in light of the circumstances under which such statements
                were made, not misleading with respect to the period covered by this
                report;




3.
            Based
                on my knowledge, the financial statements, and other financial information
                included in this report, fairly present in all material respects
                the
                financial condition, results of operations and cash flows of the
                registrant as of, and for, the periods presented in this
                report;




4.
            The
                registrant’s other certifying officer(s) and I are responsible for
                establishing and maintaining disclosure controls and procedures (as
                defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) for the registrant
                and have:




(a)
            Designed
                such disclosure controls and procedures, or caused such disclosure
                controls and procedures to be designed under our supervision, to
                ensure
                that material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within these
                entities, particularly during the period in which this report is
                being
                prepared:




(b)
            Evaluated
                the effectiveness of the registrant’s disclosure controls and procedures
                and presented in this report our conclusions about the effectiveness
                of
                the disclosure controls and procedures, as of the end of the period
                covered by this report based on such evaluation;
                and




(c)
            Disclosed
                in this report any change in the registrant’s internal control over
                financial reporting that occurred during the registrant’s most recent
                fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
                annual report) that has materially affected, or is reasonably likely
                to
                materially affect, the Company’s internal control over financial
                reporting; and




5.
            The
                Company’s other certifying officer(s) and I have disclosed, based on our
                most recent evaluation of internal control over financial reporting,
                to
                the registrant’s auditors and the audit committee of the registrant’s
                board of directors:




(a)
            All
                significant deficiencies and material weaknesses in the design or
                operation of internal control over financial reporting which are
                reasonably likely to adversely affect the registrant’s ability to record,
                process, summarize and report financial information;
                and




(b)
            Any
                fraud, whether or not material, that involves management or other
                employees who have a significant role in the registrant’s internal control
                over financial reporting.












Date:
      May
      9, 2006         /s/
      DAVID
      SEATON








David
      R.
      Seaton


Chief
      Financial Officer


30


Exhibit
      32





**CERTIFICATION**








Pursuant
      to the requirement set forth in Rule 13a-14(b) or Rule 15d-14(b) of the
      Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63
      of
      Title 18 of the United States Code (18 U.S.C. § 1350), Christopher Naughton, the
      President and Chief Executive Officer of Marshall Edwards, Inc. (the
“registrant”), and David R. Seaton, the Chief Financial Officer of the
      registrant, each hereby certifies that, to his or her knowledge:





1.
            The
                registrant’s Quarterly Report on Form 10-Q for the period ended March 31,
                2006, to which this Certification is attached as Exhibit 32 (the
“Periodic
                Report”), fully complies with the requirements of Section 13(a) or Section
                15(d) of the Securities Exchange Act of 1934, as amended;
                and


2.
            The
                information contained in the Periodic Report fairly presents, in
                all
                material respects, the financial condition of the registrant at the
                end of
                the period covered by the Periodic Report and results of operations
                of the
                registrant for the period covered by the Periodic
                Report.





These
      certifications accompany the Form 10-Q to which they relate, are not deemed
      filed with the Securities and Exchange Commission and are not to be incorporated
      by reference into any filing of the registrant under the Securities Act of
      1933,
      as amended, or the Securities Exchange Act of 1934, as amended (whether made
      before or after the date of the Form 10-Q), irrespective of any general
      incorporation language contained in such filing.





Dated:
      May 9, 2006




















/s/
      CHRISTOPHER NAUGHTON      /s/
      DAVID
      SEATON







Christopher
      Naughton          
David
      R.
      Seaton


Chief
      Executive Officer         Chief
      Financial
      Officer




31