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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549


FORM 10-Q


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


For the quarterly period ended September 30, 2005


OR


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


For the transition period from ___to ___.


Commission File Number: 000-50484





Marshall Edwards, Inc.




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


(011) 61 2 8877- 6196
Registrants telephone number, including area code:


þ o
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MARSHALL EDWARDS, INC.
INDEX
 PagePART I
    
    FINANCIAL INFORMATIONItem 1:
    
    Financial Statements (Unaudited)
    
    
    3Consolidated Balance Sheets as of September 30, 2005 and June 30, 2005
    
    
    3Consolidated Statements of Operations for the three months ended September 30, 2005and 2004 and for the period from December 1, 2000 (inception) through September 30, 2005
    
    
    4Consolidated Statements of Cash Flows for the three months endedSeptember 30, 2005 and 2004 and for the period from December 1, 2000 (inception)through September 30, 2005
    
    
    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
    
    
    22Item 4:
    
    Controls and Procedures
    
    
    23PART II
    
    OTHER INFORMATIONItem 2:
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 6:
    
    Exhibits and Reports on Form 8-K
    
    
    26SIGNATURES
    
    
    
    
    27
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PART I FINANCIAL INFORMATION
  MARSHALL EDWARDS, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
 September 30,
    
    June 30,2005
    
    2005(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    8,422
    
    
    $
    9,238Short Term Investments
    
    
    10,000
    
    
    
    10,000Prepaid expenses and other current assets
    
    
    160
    
    
    
    126Total current assets
    
    
    18,582
    
    
    
    19,364Total assets
    
    $
    18,582
    
    
    $
    19,364LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    334
    
    
    $
    254Accrued expenses
    
    
    384
    
    
    
    403Amount due to parent company
    
    
    3,146
    
    
    
    2,186Total current liabilities
    
    
    3,864
    
    
    
    2,843Stockholders equity:Preferred stock, $0.01 par value, authorized 100,000 shares,
none outstanding
    
    
    
    
    
    
    Common stock, $0.00000002 par value, 113,000,000 authorized
shares; shares issued and outstanding: 56,938,000 at
September 30, 2005 and 56,938,000 at June 30, 2005
    
    
    
    
    
    
    Additional paid-in capital
    
    
    34,636
    
    
    
    34,636Deficit accumulated during development stage
    
    
    (19,918
    )
    
    
    (18,115
    )Total stockholders equity
    
    
    14,718
    
    
    
    16,521Total liabilities and stockholders equity
    
    $
    18,582
    
    
    $
    19,364
 See accompanying notes to the consolidated financial statements.
 3




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MARSHALL EDWARDS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
 Period fromDecember 1, 2000(Inception) throughThree
Months Ended September 30,
    
    September 30,2005
    
    2004
    
    2005Revenues:Interest and other income
    
    $
    122
    
    
    $
    67
    
    
    $
    775Total revenues
    
    
    122
    
    
    
    67
    
    
    
    775Operating expenses:Research and development
    
    
    (586
    )
    
    
    (439
    )
    
    
    (7,339
    )License fees
    
    
    (1,000
    )
    
    
    (500
    )
    
    
    (10,000
    )Selling, general and administrative
    
    
    (339
    )
    
    
    (358
    )
    
    
    (3,353
    )Total operating expenses
    
    
    (1,925
    )
    
    
    (1,297
    )
    
    
    (20,692
    )Loss from operations
    
    
    (1,803
    )
    
    
    (1,230
    )
    
    
    (19,917
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    (1
    )Net loss arising during development stage
    
    $
    (1,803
    )
    
    $
    (1,230
    )
    
    $
    (19,918
    )Net loss per common share:Basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.02
    )Weighted average common shares outstanding
    
    
    56,938,000
    
    
    
    56,938,000
 See accompanying notes to the consolidated financial statements.
 4




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MARSHALL EDWARDS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Period from December 1,Three Months Ended
    
    2000 (Inception) throughSeptember 30,
    
    September 30,2005
    
    
    2004
    

    2005Operating activitiesNet loss arising during development stage
    
    $
    (1,803
    )
    
    $
    (1,230
    )
    
    $
    (19,918
    )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
    
    
    (34
    )
    
    
    (24
    )
    
    
    (160
    )Accounts payable
    
    
    80
    
    
    
    (106
    )
    
    
    334Accrued expenses
    
    
    (19
    )
    
    
    (43
    )
    
    
    384Amounts due to parent company
    
    
    960
    
    
    
    366
    
    
    
    3,146Net cash used in operating activities
    
    
    (816
    )
    
    
    (1,037
    )
    
    
    (16,214
    )Financing activitiesProceeds from issuance of Common Stock
    
    
    
    
    
    
    
    
    
    
    34,636Investments in short-term deposits
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Net cash provided by financing activities
    
    
    
    
    
    
    
    
    
    
    24,636Net (decrease) increase in cash and cash
equivalents
    
    
    (816
    )
    
    
    (1,037
    )
    
    
    8,422Cash and cash equivalents at beginning of period
    
    
    9,238
    
    
    
    24,819
    
    
    
    Cash and cash equivalents at end of period
    
    $
    8,422
    
    
    $
    23,782
    
    
    $
    8,422
 See accompanying notes to the consolidated financial statements.
 5




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MARSHALL EDWARDS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Deficit accumulated
    
    Accumulated otherAdditional paid in
    
    during development
    
    comprehensiveCommon Stock
    
    capital
    
    stage
    
    income/(loss)
    
    Total(shares)Balance at June 30, 2005
    
    
    56,938,000
    
    
    $
    34,636
    
    
    $
    (18,115
    )
    
    $
    
    
    
    $
    16,521Net loss arising during development stage
    
    
    
    
    
    
    
    
    
    
    (1,803
    )
    
    
    
    
    
    
    (1,803
    )Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,803
    )Balance at September 30, 2005
    
    
    56,938,000
    
    
    $
    34,636
    
    
    $
    (19,918
    )
    
    $
    
    
    
    $
    14,718
 See accompanying notes to the consolidated financial statements.
 6




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MARSHALL EDWARDS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2005
 1. The Company and Summary of Significant Accounting Policies
     7




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Principles of Consolidation
  Estimates
  Revenue Recognition
 Interest
  Cash and Cash Equivalents and Short Term Investments
  Income Taxes
  Fair Value of Financial Instruments
  Foreign Currency Translation
  8




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Research and Development Expenses
  License Fees
  Stock-Based Compensation
  Basic and Diluted Loss Per Share
  Comprehensive Loss
  9




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2. Loss Per Share
  Three Months Ended
September 30,2005
    
    2004NumeratorNet loss arising during development stage
    
    
    (1,803
    )
    
    
    (1,230
    )Effect of dilutive securities
    
    
    
    
    
    
    Numerator for diluted earnings per share
    
    $
    (1,803
    )
    
    $
    (1,230
    )DenominatorDenominator for basic earnings per share -
weighted-average shares
    
    
    56,938,000
    
    
    
    56,938,000Effect of dilutive securities
    
    
    
    
    
    
    Dilutive potential common shares
    
    
    56,938,000
    
    
    
    56,938,000Basic and diluted earnings per share
    
    $
    (0.03
    )
    
    $
    (0.02
    )
  As at September 30,2005
    
    2004Common shares issuable upon exercise of outstanding warrants
    
    
    2,392,000
    
    
    
    2,392,000
  3. Expenditure Commitments
  (In thousands)

Payment due by periodless than
    
    
    
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    
    Total
    
    
    
    1 Year
    
    
    
    1 - 3 Years
    
    
    
    3 - 5 Years
    
    
    
    5 YearsPurchase Obligations
    
    
    $
    2,649
    
    
    
    $
    2,187
    
    
    
    $
    462
    
    
    
    $
    
    
    
    
    $
    Total
    
    
    $
    2,649
    
    
    
    $
    2,187
    
    
    
    $
    462
    
    
    
    $
    
    
    
    
    $
    
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4. Segment Information
  Three
Months EndedSeptember 30, 2005
    

Three
Months EndedSeptember 30, 2004(In Thousands)USA
    
    Australia
    
    USA
    
    AustraliaLoss from operations
    
    $
    (30
    )
    
    $
    (1,773
    )
    
    $
    (74
    )
    
    $
    (1,156
    )Segment assets
    
    
    15,077
    
    
    
    3,505
    
    
    
    15,374
    
    
    
    8,462
 5. Related Party Transactions
 License Agreement
  11




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Calendar Year2005
    
    $
    4,000,000Each calendar year thereafter during the exclusivity period
    
    $
    8,000,000
  License Option Deed
  Services Agreement
   12




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Manufacturing License and Supply Agreement
    6. Equity
     
    
    one share of common stock; and
 13




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
    
    one warrant to purchase a share of common stock, exercisable prior to
December 18, 2006 at an exercise price equal to $9.00.
  14




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Special Note Regarding Forward-Looking Statements
  
    
    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




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Overview
      16




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Critical Accounting Estimates
  Development Expenses
      
    
    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.
  17




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Clinical Trial Expenses
    Results of Operations
 Three Months Ended September 2005 and 2004
  Revenues:
 Research and Development:
 License Fees:
 18




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Selling, General and Administrative:
 Liquidity and Capital Resources
  Source and Uses of Cash
 Cash Used in Operating Activities
  Cash Requirements
    19




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Calendar Year2005
    
    $
    4,000,000Each calendar year thereafter during the exclusivity period
    
    $
    8,000,000
     20




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Off-Balance Sheet Arrangements
  Contractual Obligations
  (In thousands)

Payment due by periodContractual Obligations
    
    
    Total
    
    
    
    less than 1 Year
    
    
    
    1 - 3 Years
    
    
    
    3 - 5 Years
    
    
    
    More than 5 yearsPurchase Obligations
    
    
    $
    2,649
    
    
    
    $
    2,187
    
    
    
    $
    462
    
    
    
    $
    
    
    
    
    $
    Total
    
    
    $
    2,649
    
    
    
    $
    2,187
    
    
    
    $
    462
    
    
    
    $
    
    
    
    
    $
    
  New Accounting Pronouncements
   21




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Interest Rate Risk
   Foreign Currency Risk
   22




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Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
    
    
    U.S. GAAP;
    
    financial reporting in accordance with the SEC regulations;
    
    requirements of the Public Company Accounting Oversight Board; and
    
    application of technical accounting pronouncements.
  23




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1)
    
    the employment of additional accounting staff on the Novogen accounting team which
will enable senior finance staff responsible for the preparation of U.S. GAAP financial
reports to spend more time dealing with U.S. GAAP reporting issues;2)
    
    increasing the level of attendance at targeted U.S. GAAP and SEC reporting courses
by senior Novogen finance staff responsible for the preparation of U.S. GAAP financial
reports and SEC disclosure; and3)
    
    subscribing to additional information networks that provide publications and updates
of SEC and U.S. GAAP releases and rule changes and of information about the requirements
of the Public Company Accounting Oversight Board.
 Progress on the implementation of Novogens plan to address the material weakness
     24




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PART II OTHER INFORMATION
    
    
    Approximately $1.1 million to commence Phase II clinical trials of
phenoxodiol as a monotherapy in earlier stage cancers;
    
    Approximately $4.2 million to commence Phase II clinical trials of
phenoxodiol in combinational therapy with other anti-cancer drugs
for late stage chemo-resistant tumors; and
    
    The balance for other corporate purposes, including potential
payments to Novogen under the terms of the license agreement,
potential licensing of other cancer compounds developed by Novogen
and potential expansion of the clinical trial program for
phenoxodiol to include other forms of cancer.
  25




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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).
   26




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SIGNATURES
  MARSHALL EDWARDS, INC./s/ David SeatonDavid R. SeatonChief Financial Offer(Duly Authorized Officer and PrincipalFinancial Officer)
  27