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 September 30, 2009





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. Yesx   Noo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). YesoNoo





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.


Large
      accelerated filero
            Non-accelerated
      filer   xAccelerated
      filero
            Smaller
      reporting entityo





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yeso Nox





As of
October 31, 2009 the number of shares outstanding of the issuer’s common stock,
$0.00000002 par value, was 73,463,233.















MARSHALL
EDWARDS, INC.





INDEX


PART
      I
            FINANCIAL
      INFORMATION
            PageItem
      1:
            Financial
      Statements (Unaudited)Consolidated
      Balance Sheets as of September 30, 2009 and June 30, 2009
            3Consolidated
      Statements of Operations for the three months ended September 30, 2009 and
      2008 and for the period from December 1, 2000 (inception) through
      September 30, 2009
            4Consolidated
      Statements of Cash Flows for the three months ended September 30, 2009 and
      2008 and for the period from December 1, 2000 (inception) through
      September 30, 2009
            5Consolidated
      Statement of Stockholders’ Equity
            6Notes
      to Consolidated Financial Statements
            7Item
      2:
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
            18Item
      3:
            Quantitative
      and Qualitative Disclosures about Market Risk
            26Item
      4T:
            Controls
      and Procedures
            27PART
      II
            OTHER
      INFORMATIONItem
      6:
            Exhibits
            28SIGNATURES
            29








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)


September
      30,
                
                
                June
      30,2009
                
                
                2009(unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                
                $
                15,233
                
                
                $
                19,067Prepaid
      expenses and other current assets
                
                
                54
                
                
                
                289Total current
      assets
                
                
                15,287
                
                
                
                19,356Total
      assets
                
                $
                15,287
                
                
                $
                19,356LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
                
                $
                1,270
                
                
                $
                736Accrued
      expenses
                
                
                930
                
                
                
                3,186Amount
      due to related company
                
                
                282
                
                
                
                221Total current
      liabilities
                
                
                2,482
                
                
                
                4,143Stockholders'
      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: 73,463,233 atSeptember 30,
      2009 and 73,463,233 at June 30, 2009
                
                
                -
                
                
                
                -Additional
      paid-in capital
                
                
                78,124
                
                
                
                78,124Deficit
      accumulated during development stage
                
                
                (65,319
                )
                
                
                (62,911
                )Total
      stockholders' equity
                
                
                12,805
                
                
                
                15,213Total
      liabilities and stockholders' equity
                
                $
                15,287
                
                
                $
                19,356





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
                September
      30,
              
              
              Period
      from December 1,
                2000
      (Inception) through
                September
      30,2009
              
              
              2008
              
              
              2009Revenues:Interest and
      other income
              
              $
              26
              
              
              $
              96
              
              
              $
              2,672Total
      revenues
              
              
              26
              
              
              
              96
              
              
              
              2,672Operating
      expenses:Research and
      development
              
              
              (503
              )
              
              
              (2,078
              )
              
              
              (33,546
              )License
      fees
              
              
              (1,500
              )
              
              
              -
              
              
              
              (21,500
              )Selling,
      general and administrative
              
              
              (431
              )
              
              
              (269
              )
              
              
              (12,938
              )Total operating
      expenses
              
              
              (2,434
              )
              
              
              (2,347
              )
              
              
              (67,984
              )Loss
      from operations
              
              
              (2,408
              )
              
              
              (2,251
              )
              
              
              (65,312
              )Income
      tax expense
              
              
              -
              
              
              
              (1
              )
              
              
              (7
              )Net
      loss arising during development stage
              
              $
              (2,408
              )
              
              $
              (2,252
              )
              
              $
              (65,319
              )Net
      loss per common share:Basic
      and diluted
              
              $
              (0.03
              )
              
              $
              (0.03
              )Weighted
      average number of common shares outstanding
              
              
              73,463,233
              
              
              
              71,910,438








See
accompanying notes to the consolidated financial statements.





4


MARSHALL
EDWARDS, INC.


(A
Development Stage Company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)








Three
      Months Ended
                September
      30,
              
              
              Period
      from December 1, 2000 (Inception) through
                September
      30,2009
              
              
              2008
              
              
              2009Operating
      activitiesNet
      loss arising during development stage
              
              $
              (2,408
              )
              
              $
              (2,252
              )
              
              $
              (65,319
              )Adjustments to
      reconcile net loss to net cash(used in)
      provided by operating activities:Share
      based payments
              
              
              -
              
              
              
              65
              
              
              
              1,732Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
              
              
              235
              
              
              
              46
              
              
              
              (54
              )Accounts
      payable
              
              
              534
              
              
              
              (417
              )
              
              
              1,270Accrued
      expenses
              
              
              (2,256
              )
              
              
              20
              
              
              
              930Amounts due to
      related company
              
              
              61
              
              
              
              (188
              )
              
              
              282Net
      cash used in operating activities
              
              
              (3,834
              )
              
              
              (2,726
              )
              
              
              (61,159
              )Financing
      activitiesNet
      proceeds from issuance of  common stock
              
              
              -
              
              
              
              9,924
              
              
              
              76,392Net
      cash provided by financing activities
              
              
              -
              
              
              
              9,924
              
              
              
              76,392Net
      (decrease)/increase in cash and cash equivalents
              
              
              (3,834
              )
              
              
              7,198
              
              
              
              15,233Cash
      and cash equivalents at beginning of period
              
              
              19,067
              
              
              
              19,743
              
              
              
              -Cash
      and cash equivalents at end of period
              
              $
              15,233
              
              
              $
              26,941
              
              
              $
              15,233























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, 2009
              
              
              73,463,233
              
              
              $
              78,124
              
              
              $
              (62,911
              )
              
              $
              15,213Net
      loss arising during development stage
              
              
              -
              
              
              
              -
              
              
              
              (2,408
              )
              
              
              (2,408
              )Comprehensive
      Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,408
              )Balance
      at September 30, 2009
              
              
              73,463,233
              
              
              $
              78,124
              
              
              $
              (65,319
              )
              
              $
              12,805

















See
accompanying notes to the consolidated financial statements.




6


MARSHALL
EDWARDS, INC.


(A
Development Stage Company)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)








1.
Basis of Presentation and Summary of Significant Accounting
Policies





Marshall
Edwards, Inc. (“MEI”) including its wholly-owned subsidiary Marshall Edwards Pty
Ltd (“MEPL”) (together, the “Group” or the “Company”) is a development stage
company incorporated in December 2000 as a wholly-owned subsidiary of Novogen
Limited (“Novogen”).  As of the date of this Quarterly Report, Novogen
owns approximately 71.3% of the outstanding shares of the Company’s common
stock.





The
Company’s financial statements have been prepared in accordance with U.S.
generally accepted accounting principles or “GAAP” for the interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X of the Securities Exchange Act of 1934 as amended. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. We believe all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation have been
included herein. Operating results for the three months ended September 30, 2009
are not necessarily indicative of the results that may be expected for the year
ending June 30, 2010 or any other future period. The balance sheet at June 30,
2009 has been derived from the audited financial statements at that date. You
should read these financial statements and notes in conjunction with the audited
financial statements for the year ended June 30, 2009 which are included in the
Company’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission.





Principles
of Consolidation





The
consolidated financial statements include the accounts of MEI and its
wholly-owned subsidiary MEPL. 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 U.S., 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, which is recognized on an
accruals basis.





7


Cash
and Cash Equivalents





Cash on
hand and in banks and short-term deposits is stated at its 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. Cash deposits held in Australian banks are guaranteed by the
Australian Government up to a maximum amount of A$1 million per
account.





Income
Taxes





Income
taxes have been provided for using the liability method. 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.
There is a full valuation allowance against net deferred tax
assets.





The
Company accounts for any uncertain tax position by using a two step approach.
Step one, recognition, requires a company to determine if the weight of
available evidence indicates that a tax position is more likely than not to be
sustained upon audit, including resolution of related appeals or litigation
processes, if any. Step two, measurement, is based on the largest amount of
benefit, which is more likely than not to be realized upon ultimate settlement.
Additionally, tax positions for which the timing of the ultimate resolution is
uncertain are recognized as long term liabilities.





The
Company’s major tax jurisdictions are the U.S. and Australia and its tax years
since inception remain subject to examination by the appropriate governmental
agencies in those jurisdictions due to its tax loss position.





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. Fair value has been
determined based on the fair value of identical investments in active markets.
All cash and cash equivalents are classified as level 1 as defined by the fair
value hierarchy.





Foreign
Currency Translation





The
financial statements of MEPL have been translated into U.S. dollars. 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.





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





8


Research
and Development Expenses





Research
and development expenses relate primarily to the cost of conducting human
clinical and pre-clinical trials of the licensed cancer compounds. Research and
development costs are charged to earnings in the period incurred.





Clinical
development costs are a significant component of research and development
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 statements.





At June
30, 2009 the Company had accrued $1,181,000 in relation to claims received for
clinical trial expenses in connection with the termination of enrollment into
the OVATURE Phase III clinical trial. Following negotiations the Company has
paid $649,000 during the quarter and has accrued $266,000 as at September 30,
2009 representing management’s best estimate of the final amounts payable for
claims received.


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.





The
license agreements with Novogen may be cancelled without penalty by MEPL by
giving three months notice. Therefore license fees due under these license
agreements are recognised as an expense when the milestone event
occurs.





Stock-Based
Compensation





The
Company’s 2008 Stock Omnibus Equity Compensation 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.





The
Company recognizes the cost of goods acquired or the expense for services
received in a share-based payment transaction when it obtains the goods or as
services are received. The Company recognizes a corresponding increase in equity
or a liability depending on the classification of the share-based instrument
granted.





Basic
and Diluted Loss Per Share





In
computing basic earnings or loss per share, the dilutive effect of stock options
and warrants are excluded, whereas for diluted earnings per share they are
included unless the effect is anti-dilutive.





Stockholders’
Equity





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





9


Deferred
Offering Costs





Where
costs associated with a capital raising have been incurred at balance date and
it is probable that the capital raising will be successfully completed after
balance date, such costs are deferred and offset against the proceeds
subsequently received from the capital raising.





2.
Loss Per Share





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


Three
      Months Ended
                September
      30,2009
              2008(In
      Thousands, except share and per share data)NumeratorNet
      loss arising during development stage
              
              
              (2,408)
              (2,252)Numerator
      for diluted earnings per share
              
              
              $          (2,408)
              $          (2,252)DenominatorDenominator
      for basic earnings per share:Weighted
      average number of shares used in computing net loss per share, basic and
      diluted
              73,463,233
              71,910,438Dilutive
      potential common shares
              
              
              73,463,233
              71,910,438Basic
      and diluted earnings per share
              
              
              $            (0.03)
              $            (0.03)





During
the period presented, the Company had warrants and stock options 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 and
stock options consist of the following potential common shares:





As
      at September 30,2009
              2008(Number
      of warrant shares)Warrants
      exercisable prior to July 11, 2010 at an exercise price of
      $4.35
              2,815,258
              2,815,258Warrants
      exercisable prior to August 6, 2012 at an exercise price of
      $3.60
              2,185,598
              2,185,598Warrants
      exercisable prior to August 6, 2012 at an exercise price of
      $3.00
              248,364
              248,364Warrants
      exercisable prior to July 30, 2013 at an exercise price of
      $2.17
              46,083
              46,083Stock
      options exercisable prior to January 28, 2014 at an exercise price of
      $0.63
              50,000
              -Common
      shares issuable upon exercise of outstanding warrants
              5,345,303
              5,295,303





10


3. Expenditure
Commitments





At
September 30, 2009, the Company had contractual obligations for the conduct of
clinical trials, pre-clinical research and development and manufacturing process
development of approximately $2,178,000. 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:





(In
      thousands)
                
                
                
                
                Payment
      due by periodContractual
      Obligations
                
                Total
                
                
                less
      than 1 Year
                
                
                1 -
      3 Years
                
                
                3 -
      5 Years
                
                
                More
      than 5 YearsPurchase
      Obligations
                
                $
                2,178
                
                
                $
                1,547
                
                
                $
                346
                
                
                $
                285
                
                
                $
                -Total
                
                $
                2,178
                
                
                $
                1,547
                
                
                $
                346
                
                
                $
                285
                
                
                $
                -


No
amounts have been included for future payments to Novogen which may arise in
connection with the Phenoxodiol License Agreement, the License Agreement for
Triphendiol and NV-143, the License Agreement for NV-128, the Services Agreement
or the Manufacturing License and Supply Agreement as future payments under the
terms of the agreements are subject to termination provisions. The terms of the
agreements, including future payments, 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.





Pursuant
to the terms of a Guarantee and Indemnity Agreement, the Company has guaranteed
the payment and performance of the obligations of MEPL to Novogen and its
subsidiaries, Novogen Laboratories Pty Limited and Novogen Research Pty Limited,
under the Phenoxodiol 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 Phenoxodiol License
Agreement and the obligations of Novogen Laboratories Pty Limited under the
Manufacturing License and Supply Agreement to MEPL. Each of the Company and
Novogen’s obligations in the Guarantee and Indemnity Agreement are absolute,
unconditional and irrevocable.





11


4.
Segment Information





The
Company’s focus is the clinical development and commercialization of its
licensed cancer compounds. The business contains two major segments based on
geographic location.




Three
      Months Ended
                September
      30, 2009
              
              
              Three
      Months Ended
                September
      30, 2008(In
      Thousands)USA
              
              
              Australia
              
              
              USA
              
              
              AustraliaLoss
      from operations
              
              $
              (20
              )
              
              $
              (2,388
              )
              
              $
              (253
              )
              
              $
              (1,999
              )Segment
      assets
              
              
              11,689
              
              
              
              3,598
              
              
              
              20,854
              
              
              
              6,166





5.
Related Party Transactions





License
Agreement for Phenoxodiol, as amended





In
September 2003, the Company entered into a license agreement pursuant to which
Novogen’s subsidiary, Novogen Research Pty Limited, granted 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 “Phenoxodiol License Agreement”). The Phenoxodiol License
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 Phenoxodiol License 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
Phenoxodiol License Agreement. Also, MEPL paid $2,000,000 to Novogen in January
2005 and $4,000,000 in January 2006 which were the annual milestone license fee
payments due under the Phenoxodiol License Agreement. The Company paid a second
lump sum license fee of $5,000,000 to Novogen in July 2006 following the raising
of funds in a private placement or PIPE. This license fee was due on the later
of November 1, 2003 or such later 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
exceeded $50,000,000. Following the PIPE capital raising which closed on July
11, 2006, the funds received from equity issuances exceeded $50,000,000 which
triggered this license fee payment. Future amounts payable to Novogen under
terms of the Phenoxodiol License Agreement are as follows:





1. 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. The
preconditions to such payments have not yet occurred.





The
“Exclusivity Period” ends on the later of:





(a)
            the
      date of expiration or lapsing of the last patent right in the patents and
      patent applications set out in the Phenoxodiol License Agreement with
      Novogen; or





12


(b)
            the
      date of expiration or lapsing of the last licensed patent right which MEPL
      would, but for the license granted in the Phenoxodiol License Agreement,
      infringe in any country in the geographical territory covered by the
      Phenoxodiol License Agreement by doing in that country any of the things
      set out in the Phenoxodiol License
Agreement.





2. In addition to the amounts above,
the License Agreement for Phenoxodiol was amended in June 2006 and April 2007 to
provide that upon the earliest receipt (the “Approval Date”) by MEPL of the
first:





(i)
            approval
      by the U.S. Food and Drug Administration (the “FDA”) of a New Drug
      Application (“NDA”) for
phenoxodiol;


(ii)
            approval
      or authorization of any kind to market phenoxodiol in the United States;
      or


(iii)
            approval
      or authorization of any kind by a government agency in any other country
      to market phenoxodiol,





MEPL will
be required to pay Novogen Research Pty Limited $8,000,000, together with
interest on such amount from (and including) December 31, 2006 to (but
excluding) the Approval Date. Thereafter, MEPL will be required to make license
milestone fee payments of $8,000,000 to Novogen Research Pty Limited on
December 31 of the year of the Approval Date and on December 31 of
each year thereafter during the exclusivity period under the Phenoxodiol License
Agreement.





No
license fees have been accrued in respect of phenoxodiol at September 30,
2009.





License
Agreement for Triphendiol and NV-143





In May
2006, the Company entered into a second license agreement with Novogen for two
oncology compounds, triphendiol and NV-143 (the “License Agreement for
Triphendiol and NV-143”). Triphendiol is being developed initially in oral form
for the treatment of pancreatic and bile duct cancer and has completed initial
Phase I(a) human testing. NV-143 is targeted for the treatment of melanoma, also
in oral dose form, and is in the pre-clinical stage. The License Agreement for
Triphendiol and NV-143 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 triphendiol and NV-143 products. The
License Agreement for Triphendiol and NV-143 covers uses of triphendiol and
NV-143 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. The Company is required
to make payments under the terms of the License Agreement for Triphendiol and
NV-143 with Novogen as follows:





1.     A
lump sum license fee of $1,000,000 is payable to Novogen on the commencement
date of the license in consideration of the license granted. This initial lump
sum license fee was paid to Novogen in May 2006.





2.     In
further consideration of the license granted, MEPL must pay to Novogen the
following milestone license fees upon the occurrence of the corresponding
milestone as set forth below;





13


a)     the
first license product containing triphendiol to reach a milestone as set forth
below; and


b)     the
first licensed product containing NV-143 to reach a milestone as set forth
below.


The
milestone license fees are:


i)
            $1,000,000
      on the date an Investigation New Drug Application (“IND”) for the licensed
      product goes into effect or the equivalent approval of a government agency
      is obtained in another country. If this event does not occur before March
      31, 2008 then this amount will be due on this date. The amount of
      $1,000,000 was paid to Novogen on March 31, 2008 under the terms of this
      agreement;


ii)
            $2,000,000
      on the date of enrollment of the first clinical trial subject in a Phase
      II clinical trial of the licensed product. If this event does not occur
      before June 30, 2009, then this amount will be due on this date; The
      amount of $2,000,000 was paid to Novogen on June 30, 2009 under the terms
      of this agreement;


iii)
            $3,000,000
      on the date of enrollment of the first clinical trial subject in a Phase
      III clinical trial of the licensed product. If this event does not occur
      before December 31, 2011, then this amount will be due on this date;
      and


iv)
            $8,000,000
      on the date of first receipt of a NDA for the licensed product from the
      FDA or equivalent approval from a government agency in another country. If
      this event does not occur before December 31, 2013, then this amount will
      be due on this date.





3.     MEPL
must pay Novogen royalties of 5.0% of all net sales and 25% of commercialization
income for the term of the license. The royalty rate is reduced by 50% if the
licensed patent rights in any country or territory expire, lapse, are revoked,
do not exist or are assigned to MEPL and the product is entirely manufactured
and supplied in such country.





4.     Minimum
royalties of $3,000,000 per year are payable following the date of first receipt
of an NDA for a licensed product from the FDA (or equivalent approval from a
government agency in any other country) until the expiration of the
term.





No
license fees have been accrued in respect of triphendiol or NV-143 at September
30, 2009.





License
Agreement for NV-128





On August
4, 2009, the Company, through MEPL, entered into a license agreement with
Novogen pursuant to which Novogen granted to MEPL an exclusive, worldwide,
non-transferable license under its patents and patent applications and in the
intellectual property rights related to its know how to conduct clinical trials,
commercialize and distribute NV-128 (the “NV-128 Licence Agreement”). NV-128 is
an investigational cancer compound which has been shown in pre-clinical
laboratory studies to promote cancer cell death by targeting a pro-survival
regulatory pathway (the AKT-mTOR pathway). The NV-128 License Agreement covers
the use of NV-128 in the field of prevention, treatment and cure of cancer in
humans delivered in all forms except topical applications. The NV-128 License
Agreement remains in effect until (i) the expiration or lapsing of the last
relevant patents or patent applications in the world or (ii) Novogen’s
assignment to MEPL of the last relevant patents or patent applications in the
world so that MEPL may assume the filing, prosecution and maintenance of such
patents or patent applications. Thereafter, the license becomes a non-exclusive,
perpetual and irrevocable license covering any remaining intellectual property
rights related to the know how with respect to NV-128.





14


1.     The
Company paid U.S. $1,500,000 to Novogen Research in August 2009, which was the
first lump sum license fee payment under the terms of the license
agreement.





2.     Future
amounts payable to Novogen upon the achievement of certain milestones are as
follows:


i)
              $1,000,000
      on the date an IND for the licensed product goes into effect or the
      equivalent approval of a government agency is obtained in another country.
      If this event does not occur before December 31, 2011 then this amount
      will be due on this date;
 
 ii)       
      $2,000,000 on the date of enrollment of the first clinical trial subject
      in a Phase II clinical trial of the
licensed
 product.
      If this event does not occur before December 31, 2012, then this amount
      will be due on this date;
 
 iii)
              $3,000,000
      on the date of enrollment of the first clinical trial subject in a Phase
      III clinical trial of the licensed product. If this event does not occur
      before December 31, 2014, then this amount will be due on this date;
      and
 
 iv)
              $8,000,000
      on the date of first receipt of a NDA for the licensed product from the
      FDA or equivalent approval from a government agency in another country. If
      this event does not occur before December 31, 2017, then this amount will
      be due on this date.


3.     MEPL
must pay Novogen royalties of 5.0% of all net sales and 25% of commercialization
income for the term of the license.





4.     Minimum
royalties of $3,000,000 per year are payable following the date of first receipt
of an NDA for a licensed product from the FDA (or equivalent approval from a
government agency in any other country) until the expiration of the
term.





The
license agreement is able to be cancelled without penalty by MEPL by giving
three months notice.





Amended
and Restated License Option Deed





On
September 24, 2003, MEPL and Novogen Research Pty Limited entered into an
Amended and Restated License Option Deed (the “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.





Amended
and Restated Services Agreement





On
September 24, 2003, the Company, Novogen and MEPL entered into an Amended and
Restated Services Agreement (the “Services Agreement”). The Company does not
currently intend to directly employ any staff. Under the terms of the Services
Agreement, Novogen or its subsidiaries have agreed to provide services
reasonably required by the Company relating to the development and
commercialization of phenoxodiol and other licensed products, including
triphendiol and NV-143. Novogen has agreed to provide these services at cost
plus a 10% mark-up. The Company may terminate the Services Agreement on three
months written notice to Novogen.





15


Transactions
giving rise to expenditures amounting to $683,000 and $683,000 were made under
the Services Agreement with Novogen during the three months ended September 30,
2009 and 2008, respectively. Of these amounts, $487,000 and $442,000 related to
service fees paid to Novogen for research and development services provided in
the three months ended September 30, 2009 and 2008, respectively, reflecting the
time spent by Novogen research staff on the development of phenoxodiol,
triphendiol and NV-143. Additionally, $196,000 and $241,000 of the total
expenditures during the three months ended September 30, 2009 and 2008,
respectively, related to costs incurred for administration and accounting
services provided by Novogen.





At
September 30, 2009 and 2008, $282,000 and $241,000, respectively, were due and
owing to Novogen under the Services Agreement and are included in amounts due to
related company.





Manufacturing
License and Supply Agreement





On
September 24, 2003, MEPL and Novogen Laboratories Pty Limited, a subsidiary of
Novogen, entered into an amended and restated manufacturing license and supply
agreement (the “Manufacturing License and Supply Agreement”). Under the terms of
the Manufacturing License and Supply Agreement, MEPL has granted to Novogen
Laboratories Pty Limited an exclusive, non-transferable sub license to
manufacture and supply phenoxodiol in its primary manufactured form. Novogen
Laboratories Pty Limited has agreed to supply phenoxodiol to MEPL for the
clinical trial development program and phenoxodiol’s ultimate commercial use.
Phenoxodiol supplied by Novogen under the terms of this agreement will be
charged at cost plus a 50% markup.





There
were no transactions under the Manufacturing License and Supply Agreement with
Novogen during the three months ended September 30, 2009 and for three months
ended September 30, 2008.





At
September 30, 2009 and September 30, 2008 no amount was due and owing to Novogen
under the Manufacturing License and Supply Agreement





Novogen
has taken the strategic decision not to manufacture large scale Active
Pharmaceutical Ingredients for cancer drugs, including phenoxodiol, as these can
be more economically supplied by third parties with particular expertise in this
area.





6.
Equity





The
Company entered into a Securities Subscription Agreement dated as of July 28,
2008 with Novogen and OppenheimerFunds, Inc. (“Oppenheimer”) pursuant to which
the Company sold 2,908,295 and 1,700,000 shares of common stock to Novogen and
Oppenheimer, respectively, with Oppenheimer acting as adviser to each of the
following parties severally and not jointly: (i) Oppenheimer International
Growth Fund; (ii) Mass Mutual International Equity Fund; (iii) Oppenheimer
International Growth Fund/VA; (iv) AZL Oppenheimer International Growth Fund;
(v) OFITC International Growth Fund; and (vi) OFI International Equity Fund, at
a purchase price of $2.17 per share, the consolidated closing bid price of the
Company’s common stock as quoted by the Nasdaq Market Intelligence Desk at 4:00
PM EST on July 28, 2008.





16


The
shares were registered under the Securities Act of 1933, as amended (the
“Securities Act”), under a Shelf Registration Statement on Form S-3 (File No.
333-149807). The Company received net proceeds of $9.8 million from the sale of
the shares.





Following
the closing of the registered direct offering described above in July 2008,
Novogen retained approximately 71.3% of the Company’s common stock.





In July
2008, the Company also issued a warrant to Mr. John O’Connor exercisable for
46,083 shares of common stock, as consideration for investor relations services
rendered by him to the Company. The warrant has an exercise price of $2.17 per
share. The warrant may be exercised immediately and expires five years from the
date of issuance, on July 30, 2013. The warrant has not been registered under
the Securities Act. The Company issued the warrant to Mr. O’Connor in a private
placement made in reliance upon the exemption from securities registration
afforded by Section 4(2) of the Securities Act.





In
January 2009, the Company filed a registration statement on Form S-8 (File No.
333-156985) with the SEC registering 7,000,000 shares of common stock eligible
for issuance under the Marshall Edwards, Inc. 2008 Stock Omnibus Equity
Compensation Plan.





In
January 2009, the Company issued a stock option exercisable for 50,000 shares of
common stock to Associate Professor Gil Mor of Yale University in recognition of
his contribution to the development of phenoxodiol under the Marshall Edwards,
Inc. 2008 Stock Omnibus Equity Compensation Plan. The options have an exercise
price of $0.63. The options are exercisable immediately and expire five years
from date of issue.





7.
Contingent Liabilities





In
relation to the claims received in connection with the termination of enrollment
into the OVATURE Phase III clinical trial, the Company has finalized
negotiations and signed a Deed of Release. The Company believes that it does not
have any further liability in relation to claims made other than amounts
provided in the accounts at September 30, 2009.




Under the
terms of the license agreements with Novogen, milestone license fee payments are
payable upon achieving certain milestones. Details of the payments due under
these agreements are detailed in Note 5 “Related Party Transactions.” The
license agreements are subject to termination provisions.





8.Significant Events After
Balance Date





The
subsequent event information has been evaluated up to November 10, 2009.





17


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 (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). 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 us, are
intended to identify forward-looking statements. We have based these
forward-looking statements largely on current expectations and projections about
future events and financial trends that we believe may affect our 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:


·our
      inability to obtain required additional financing or financing available
      to us on acceptable terms, particularly in the context of the global
      financial crisis;·our
      inability to maintain or enter into, and our dependence upon,
      collaboration or contractual arrangements necessary for the
                clinical
      development of phenoxodiol and other drug candidates;·our
      limited operating history;·our
      failure to successfully commercialize our product candidates;·our
      termination of new enrollment into the OVATURE Phase III clinical
      trial;·costs
      and delays in the clinical development program and/or receipt of U.S. Food
      and Drug Administration (the “FDA”)
                or other required governmental approvals, or the failure to obtain such
      approvals, for our product candidates;·uncertainties
      in clinical trial results;·our
      inability to maintain or enter into, and the risks resulting from our
      dependence upon, collaboration or contractual arrangements necessary for
      the development, manufacture, commercialization, marketing, sales and
      distribution of any products;·our
      inability to control the costs of manufacturing our products;·continued
      cooperation and support of Novogen Limited, our parent
      company;·competition
      and competitive factors;·our
      inability to protect our patents or proprietary rights and obtain
      necessary rights to third party patents and intellectual property to
      operate our business;


18


·our
      inability to protect our patents or proprietary rights and obtain
      necessary rights to third party patents and intellectual property to
      operate our business;·our
      inability to operate our business without infringing the patents and
      proprietary rights of others;·costs
      stemming from our defence against third party intellectual property
      infringement claims;·difficulties
      in enforcement of civil liabilities against our officers and directors who
      are residents of jurisdictions outside the U.S.;·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.





These
risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q
may include additional factors which could adversely impact our business and
financial performance. In addition, our 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, 2009. Moreover, we operate in a
very competitive and rapidly changing environment. New risk factors emerge from
time to time and it is not possible for us to predict all risk factors, nor can
we assess the impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.





You
should not rely upon forward looking statements as predictions of future events.
We cannot assure you that the events and circumstances reflected in the forward
looking statements will be achieved or occur. Although we believe that the
expectations reflected in the forward looking statements are reasonable, we
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 Quarterly Report on
Form 10-Q.




Overview





Our main
focus since commencing operations has been to undertake human clinical testing
of phenoxodiol. Our operations were expanded to include the additional licensed
drug candidates triphendiol and NV-143. In August 2009, we entered into a third
license agreement for the drug candidate NV-128. During fiscal year 2007, we
commenced the Phase III clinical trial (known as “OVATURE”).





19


We
reached agreement under the Special Protocol Assessment process with the FDA on
the design of our OVATURE pivotal study protocol for phenoxodiol. The trial is
designed to test the ability of phenoxodiol to restore sensitivity of late-stage
ovarian cancers to carboplatin, a standard form of therapy for ovarian
cancer.





In April
2009, we announced the termination of enrollment into the OVATURE Phase III
trial and our intention to undertake an un-blinded analysis of the available
data from the trial.  The patients currently enrolled in the trial
will continue their treatment according to the study
protocol.  However, ceased recruiting new patients and the available
data from 142 completed and current patients will be analyzed for safety and
efficacy outcomes.





We intend
to allocate our current funds of approximately $15 million to completing the
OVATURE data analysis of 142 patients, pursuing negotiations for out-licensing
phenoxodiol should evidence of efficacy and safety emerge from the OVATURE
analysis, initiating the triphendiol clinical program and continuing the
pre-clinical program for NV-128.





We
believe that the proceeds from the registered direct offering which closed in
July 2008 and savings generated from ceasing the OVATURE trial will provide us
with sufficient cash resources to fund these operations over the next twelve
months.





We will,
however, need additional funds in order complete the planned clinical
development programs beyond the current objectives.





As of
September 30, 2009, we had accumulated losses of $65,319,000.





We have
not generated any revenues from operations since inception other than interest
on cash assets. We have incurred losses since inception and expect to incur
operating losses and generate negative cash flows from operations for the
foreseeable future.





We do not
employ any staff directly but obtain services from Novogen under the Services
Agreement.





Expenses
to date have consisted primarily of costs associated with conducting the
clinical trials of phenoxodiol, including OVATURE, costs incurred under the
Phenoxodiol License Agreement, as amended, the License Agreement for Triphendiol
and NV-143, the License Agreement from NV-128, 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.





As at the
date of the Quarterly Report, Novogen owns approximately 71.3% of the
outstanding shares of our common stock.





20


Critical
Accounting Estimates





The
preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the U.S. 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.





Clinical
Trials 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 statements.





Generally
the costs, and therefore estimates, associated with clinical trial contracts are
based on the number of patients, drug administration 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.





Clinical
trial expenses of $838,000 have been accrued at September 30, 2009. These
estimates are based on the number of patients in each trial and the drug
administration cycle.





At June
30, 2009 we had accrued $1,181,000 in relation to claims received for clinical
trial expenses in connection with the termination of enrollment into the OVATURE
Phase III clinical trial. Following negotiations we have paid $649,000 during
the quarter and have accrued $266,000 as at September 30, 2009 representing
management’s best estimate of the final amounts payable for claims
received.





Stock
Based Compensation





On
December 9, 2008, we adopted the Marshall Edwards, Inc. 2008 Stock Omnibus
Equity Compensation Plan (the “2008 Stock Omnibus Equity Compensation Plan”) and
cancelled the Marshall Edwards, Inc. Share Option Plan (the “Share Option
Plan”). No options were issued under the Share Option Plan. The 2008 Stock
Omnibus Equity Compensation Plan provides for the issuance of a maximum of
7,000,000 shares of common stock in connection with the grant of options and/or
other stock-based or stock-denominated awards to our non-employee directors,
officers, employees and advisors. To date, we have issued options exercisable
for 50,000 shares of common stock under the 2008 Stock Omnibus Equity
Compensation Plan.





We
account for stock based payments by estimating the fair value of the options
issued. The costs of these equity-settled transactions are determined using a
binomial model to calculate the fair value at the date on which they are
granted. With respect to the fair value of the warrant representing 46,083
warrant shares issued to Mr. John O’Connor on July 30, 2008, in
consideration for investor relations services rendered, and stock options
representing 50,000 shares of common stock issued to Associate Professor Gil Mor
of Yale University on January 28, 2009, in recognition of his contribution to
the development of phenoxodiol under the 2008 Stock Omnibus Equity Compensation
Plan, the following assumptions were used:





21




July
      30, 2008
              January
      28, 2009Dividend
      yield
              0%
              0%Expected
      volatility
              81%
              111%Historical
      volatility
              81%
              111%Risk-free
      interest rate
              3.36%
              1.70%Expected
      life of warrant
              5
      years
              5
      yearsWarrant
      fair value
              $1.41
              $0.50


The
dividend yield reflects the assumption that the current dividend payout, which
is zero, will continue with no anticipated increases. The expected life of the
warrant is based on historical data and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility is indicative of future trends, which
may also not necessarily be the actual outcome.








Results
of Operations





Three
Months Ended September 30, 2009 and 2008





We
recorded a consolidated loss of $2,408,000 and $2,252,000 for the three months
ended September 30, 2009 and 2008, respectively.





Revenues: We received interest
on cash assets and cash equivalents and short term investments of $26,000 for
the three months ended September 30, 2009 compared to $96,000 for the three
months ended September 30, 2008. The decrease was due to lower cash balances and
lower interest rates earned by our cash deposits.





Research and Development:
Research and development expenses decreased $1,575,000 to $503,000 for the three
months ended September 30, 2009 compared to $2,078,000 for the three months
ended September 30, 2008. The reduction was due to the termination of the
enrollment in the OVATURE Phase III clinical trial and associated cost savings
..





Selling, General and Administrative:Selling, general and administrative expenses increased by $162,000 to
$431,000 for the three months ended September 30, 2009 compared to $269,000 for
the three months ended September 30, 2008. The increase was due to net foreign
exchange movements (described below), partially offset by reduced spending on
legal fees, reduced travel expenses and reduced share based payment expenses
which were not incurred in the three months ended September 30,
2009.





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 our wholly owned 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 our
financial position.





22


However,
exchange rates are volatile in the current market resulting from the global
financial crisis and there is a possibility that foreign exchange gains/losses
may have a material impact in future periods. At September 30, 2009, we had not
established a foreign currency hedging program. Net foreign exchange losses
during the three months ended September 30, 2009 were $90,000 compared with
foreign exchange gains of $408,000 during the three months ended September 30,
2008.





Liquidity
and Capital Resources





At
September 30, 2009, we had cash resources of $15,233,000 compared to $19,067,000
at June 30, 2009. The decrease was due to the expenditures in the clinical trial
program and other corporate expenses incurred in the period. Funds are invested
in short term money market accounts, pending use.





On July
28, 2008 we entered into a securities subscription agreement with Novogen and
OppenheimerFunds, Inc. (“Oppenheimer”) pursuant to which we sold 2,908,295 and
1,700,000 shares of common stock to Novogen and Oppenheimer, respectively, with
Oppenheimer acting as adviser to each of the following parties severally and not
jointly: (i) Oppenheimer International Growth Fund; (ii) Mass Mutual
International Equity Fund; (iii) Oppenheimer International Growth Fund/VA; (iv)
AZL Oppenheimer International Growth Fund; (v) OFITC International Growth Fund;
and (vi) OFI International Equity Fund, at a purchase price of $2.17 per share,
the consolidated closing bid price of our common stock on July 28, 2008. The
shares were registered under the Securities Act of 1933, as amended (the
“Securities Act”) under a Shelf Registration Statement on Form S-3 (File No.
333-149807). We received gross proceeds of $10 million from the sale of the
shares.





Following
the closing, in July 2008, of the registered direct offering described above,
Novogen retained approximately 71.3% of our common stock.





In July
2008, we issued a warrant to Mr. John O’Connor exercisable for 46,083 shares of
common stock, as consideration for investor relation services rendered by him to
us. The warrant has an exercise price of $2.17 per share. The warrant may be
exercised immediately and expires five years from the date of issuance, on July
30, 2013. The warrant has not been registered under the Securities Act. We
issued the warrant to Mr. O’Connor in a private placement made in reliance upon
the exemption from securities registration afforded by Section 4(2) of the
Securities Act.





In
January 2009, we issued a stock option exercisable for 50,000 shares of common
stock to Associate Professor Gil Mor of Yale University in recognition of his
contribution to the development of phenoxodiol under the Marshall Edwards, Inc
2008 Stock Omnibus Equity Compensation Plan. The option has an exercise price of
$0.63 per share of common stock. The options are exercisable immediately and
expire five years from date of issue, on January 28, 2014.





Given the
current state of the global financial markets, we do not expect to be able to
raise additional capital through the issuance of equity or debt in this calander
year.





23


Source
and Uses of Cash





Cash
Used in Operating Activities





Cash used
in operating activities for the three months ended September 30, 2009 was
$3,834,000 compared to $2,726,000 for the same period in 2008.





Cash
Requirements





The
Company intends to allocate its current funds of approximately $15 million to
completing the OVATURE data analysis of 142 patients, pursuing negotiations for
out-licensing phenoxodiol should evidence of efficacy and safety emerge from the
OVATURE analysis, initiating the triphendiol clinical program and continuing the
pre-clinical program for NV-128.





Specifically
we intend to:





·
            Continue
      the clinical development of the drug candidate
  triphendiol;





·
            Continue
      the pre-clinical development of NV-128. In August 2009 we completed
      negotiations with Novogen to in-license the mTOR inhibitor NV-128, which
      has shown compelling preclinical results to date. In consideration of the
      license granted to us we paid Novogen a license fee of
      $1,500,000.





Ongoing
operations, including the conduct of the pre clinical and clinical trial
program, will continue to consume cash resources without generating revenues. In
order to obtain the additional funding necessary to conduct our business, we may
need to rely on collaboration and /or licensing opportunities. We cannot assure
you that we will be able to raise the funds necessary to fund our programs or
find appropriate collaboration or licensing opportunities.





Payments
to Novogen





Future
payments to Novogen under the terms of the Phenoxodiol License Agreement, as
amended and the License Agreement for Triphendiol and NV-143 and the License
agreement for NV-128 are detailed in Note 5 of the financial statements “Related
Party Transactions” on page 12 of this Quarterly Report on Form
10-Q.





We will
also be required to make payments to Novogen under the Services Agreement and
Manufacturing License and Supply Agreement if future clinical supplies of drug
product are sourced from Novogen.





We do not
intend to incur any significant capital expenditures in the foreseeable
future.





Off-Balance
Sheet Arrangements





We do not
currently have any off-balance sheet arrangements.





24


Contractual
Obligations





For
details of our contractual obligations at September 30, 2009 see Note 3 to the
financial statements “Expenditure Commitments” on page 11 of this Quarterly
Report on Form 10-Q.





25


Item
3:                      Quantitative
and Qualitative Disclosures about Market Risk







Interest
Rate Risk





Our
exposure to market interest rates relates primarily to the investments of cash
balances.





We have
cash reserves held primarily in U.S. and Australian dollars and we place funds
on deposit with financial institutions which are generally at call.





We do not
use derivative financial instruments. We place our cash deposits with high
credit quality financial institutions, and, by policy, limit the amount of
credit exposure to any single counter-party. We are adverse to principal loss
and we ensure the safety and preservation of our invested funds by limiting
default risk, market risk and reinvestment risk.





We
mitigate default risk by depositing funds with high credit quality financial
institutions and by constantly positioning the portfolio to respond
appropriately to a significant reduction in a credit rating of any financial
institution.





We have
no interest rate exposure due to rate changes for long-term debt.





We do not
consider the effects of interest rate movements to be a material risk to our
financial condition.





Foreign
Currency Risk





We
conduct our business in various currencies, primarily in U.S. dollars and
Australian dollars, Euros and British pounds. At September 30, 2009, we had not
established a foreign currency hedging program. Net foreign exchange losses
during the three months ended September 30, 2009 were $90,000 compared with net
exchange gains of $408,000 during the three months ended September 30, 2008.
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 our financial position.





We do not
consider the effects of foreign currency movements to be a material risk to our
financial condition.











26


Item
4T:                 Controls
and Procedures




Evaluation
of Disclosure Controls and Procedures





At the
end of the period covered by this Quarterly Report, our management, with the
participation of our principal executive officer and principal financial
officer, evaluated the effectiveness of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on
this evaluation, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms and have ensured that
information required to be disclosed by us in such reports is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions
regarding  required disclosures.




There
were no changes in our internal control over financial reporting during the
period covered by this Quarterly Report that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.








27


PART
II  OTHER INFORMATION





Item
6:                 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)32.1
            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).











28


SIGNATURES











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





MARSHALL
EDWARDS, INC.





/s/ DAVIDSEATON








David R.
Seaton


Chief
Financial Officer


(Duly
Authorized Officer and Principal Financial Officer)





Date:
November 10, 2009





29


Exhibit
31.1


CERTIFICATION





I,
Christopher Naughton, certify that:







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




2.
            Based
      on my knowledge, this Quarterly 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 Quarterly Report;




3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this Quarterly 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 Quarterly
      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) ) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) 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 the
      entities, particularly during the period in which this Quarterly Report is
      being prepared;




(b)
            Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;




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




(d)
            Disclosed
      in this Quarterly Report any change in the registrant’s internal control
      over financial reporting that occurred during the registrants first fiscal
      quarter that has materially affected, or is reasonably likely to
      materially affect, the registrant’s internal control over financial
      reporting.




5.
            The
      registrant’s other certifying officer 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:
November 10, 2009








/s/CHRISTOPHERNAUGHTON







Christopher
Naughton


Chief
Executive Officer





30


Exhibit
31.2


CERTIFICATION





I, David
Ross Seaton, certify that:







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




2.
            Based
      on my knowledge, this Quarterly 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 Quarterly Report;




3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this Quarterly 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 Quarterly
      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) ) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) 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 the
      entities, particularly during the period in which this Quarterly Report is
      being prepared;




(b)
            Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;




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




(d)
            Disclosed
      in this Quarterly Report any change in the registrant’s internal control
      over financial reporting that occurred during the registrants first fiscal
      quarter that has materially affected, or is reasonably likely to
      materially affect, the registrant’s internal control over financial
      reporting.




5.
            The
      Company’s other certifying officer 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: November 10,
2009








/s/ DAVIDSEATON








David R.
Seaton


Chief
Financial Officer





31


Exhibit
32.1





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 knowledge:





1.
            The
      Registrant’s Quarterly Report on Form 10-Q for the period ended September
      30, 2009, (the “Form 10-Q”) to which this Certification is attached as
      Exhibit 32.1, 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 Form 10-Q fairly presents, in all material
      respects, the financial condition of the Registrant at the end of the
      period covered by the Form 10-Q and results of operations of the
      registrant for the period covered by the Form
  10-Q.





These
certifications accompanying 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:
November 10, 2009










/s/CHRISTOPHERNAUGHTON
  Christopher
Naughton
 Chief
Executive Officer






/s/ DAVIDSEATON
 
 
 David R.
Seaton
 Chief
Financial Officer
 
 32