UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-Q





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





For
the quarterly period ended March 31, 2008





OR





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





For
the transition period from ________ to ________.





Commission
File Number: 000-50484







Marshall
Edwards, Inc.


(Exact
name of registrant as specified in its charter)





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





140
Wicks Road, North Ryde, NSW, 2113 Australia


(Address
of principal executive offices) (Zip Code)





(011)
61 2 8877- 6196


Registrant’s
telephone number, including area code:








Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes   x  No
o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer,  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 filer  o
            Non-accelerated
      filer  xAccelerated
      filer   o
            Smaller
      reporting entity  o





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





As of
April 30, 2008 the number of shares outstanding of the issuer’s common stock,
$0.00000002 par value, was 68,854,938.












1


MARSHALL
EDWARDS, INC.





INDEX


PART
      I
            FINANCIAL
      INFORMATION
            PageItem
      1:
            Financial
      Statements (Unaudited)Consolidated
      Balance Sheets as of March 31, 2008 and June 30, 2007
            3Consolidated
      Statements of Operations for the three months and nine months ended March
      31, 2008 and 2007 and for the period from December 1, 2000 (inception)
      through March 31, 2008
            4Consolidated
      Statements of Cash Flows for the nine months ended March 31, 2008 and 2007
      and for the period from December 1, 2000 (inception) through March 31,
      2008
            5Consolidated
      Statement of Stockholders’ Equity
            6Notes
      to Consolidated Financial Statements
            7Item
      2:
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
            21Item
      3:
            Quantitative
      and Qualitative Disclosures about Market Risk
            31Item
      4:
            Controls
      and Procedures
            32PART
      II
            OTHER
      INFORMATIONItem
      1A:
            Risk
      Factors
            33Item
      6:
            Exhibits
            34SIGNATURES
            35







2


PART
I  FINANCIAL INFORMATION


Item 1:
Financial Statements





MARSHALL
EDWARDS, INC.


(A
Development Stage Company)


CONSOLIDATED
BALANCE SHEETS


(In
thousands, except share and per share data)





March
      31
              
              
              June
      30,2008
              
              
              2007(unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
              
              $
              22,902
              
              
              $
              16,158Deferred
      offering costs
              
              
              52
              
              
              
              25Prepaid
      expenses and other current assets
              
              
              244
              
              
              
              107Total
      current assets
              
              
              23,198
              
              
              
              16,290Total
      assets
              
              $
              23,198
              
              
              $
              16,290LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
              
              $
              1,066
              
              
              $
              1,197Accrued
      expenses
              
              
              1,552
              
              
              
              984Amount
      due to related company
              
              
              644
              
              
              
              332Total
      current liabilities
              
              
              3,262
              
              
              
              2,513Stockholders'
      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: 68,854,938 atMarch
      31, 2008 and 63,390,937 at June 30, 2007
              
              
              -
              
              
              
              -Additional
      paid-in capital
              
              
              68,266
              
              
              
              53,098Deficit
      accumulated during development stage
              
              
              (48,330
              )
              
              
              (39,321
              )Total
      stockholders' equity
              
              
              19,936
              
              
              
              13,777Total
      liabilities and stockholders' equity
              
              $
              23,198
              
              
              $
              16,290





See
accompanying notes to the consolidated financial statements.





3


MARSHALL
EDWARDS, INC.


(A
Development Stage Company)


CONSOLIDATED
STATEMENTS OF OPERATIONS


(In
thousands, except share and per share data)


(Unaudited)


Three
      Months Ended
                March
      31,
              
              
              Nine
      Months Ended
                March
      31,
              
              
              Period
      from December 1, 2000 (Inception) through
                March
      31,2008
              
              
              2007
              
              
              2008
              
              
              2007
              
              
              2008Revenues:Interest and
      other income
              
              $
              149
              
              
              $
              171
              
              
              $
              582
              
              
              $
              489
              
              
              $
              2,326Total
      revenues
              
              
              149
              
              
              
              171
              
              
              
              582
              
              
              
              489
              
              
              
              2,326Operating
      expenses:Research and
      development
              
              
              (1,860
              )
              
              
              (1,446
              )
              
              
              (6,631
              )
              
              
              (4,179
              )
              
              
              (22,572
              )License
      fees
              
              
              (1,000
              )
              
              
              -
              
              
              
              (1,000
              )
              
              
              (5,000
              )
              
              
              (18,000
              )Selling,
      general and administrative
              
              
              (620
              )
              
              
              (447
              )
              
              
              (1,957
              )
              
              
              (3,087
              )
              
              
              (10,078
              )Total
      operating expenses
              
              
              (3,480
              )
              
              
              (1,893
              )
              
              
              (9,588
              )
              
              
              (12,266
              )
              
              
              (50,650
              )Loss
      from operations
              
              
              (3,331
              )
              
              
              (1,722
              )
              
              
              (9,006
              )
              
              
              (11,777
              )
              
              
              (48,324
              )Income
      tax expense
              
              
              (1
              )
              
              
              (1
              )
              
              
              (3
              )
              
              
              (1
              )
              
              
              (6
              )Net
      loss arising during development stage
              
              $
              (3,332
              )
              
              $
              (1,723
              )
              
              $
              (9,009
              )
              
              $
              (11,778
              )
              
              $
              (48,330
              )Net
      loss per common share:Basic
      and diluted
              
              $
              (0.05
              )
              
              $
              (0.03
              )
              
              $
              (0.13
              )
              
              $
              (0.19
              )Weighted
      average number of common shares outstanding
              
              
              68,854,938
              
              
              
              63,390,937
              
              
              
              68,119,782
              
              
              
              63,131,878











See
accompanying notes to the consolidated financial statements.




4





MARSHALL
EDWARDS, INC.


(A
Development Stage Company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)








Nine
      Months Ended
              March
      31,
            
            
            Period
      from December 1, 2000 (Inception) through
              March
      31,2008
            
            
            2007
            
            
            2008Operating
      activitiesNet
      loss arising during development stage
            
            $
            (9,009
            )
            
            $
            (11,778
            )
            
            $
            (48,330
            )Adjustments to
      reconcile net loss to net cash(used
      in) provided by operating activities:Share
      based payments
            
            
            -
            
            
            
            1,642
            
            
            
            1,642Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
            
            
            (137
            )
            
            
            165
            
            
            
            (244
            )Accounts
      payable
            
            
            (131
            )
            
            
            440
            
            
            
            1,066Accrued
      expenses
            
            
            568
            
            
            
            815
            
            
            
            1,552Amounts
      due to related company
            
            
            312
            
            
            
            18
            
            
            
            644Net
      cash used in operating activities
            
            
            (8,397
            )
            
            
            (8,698
            )
            
            
            (43,670
            )Financing
      activitiesNet
      proceeds from issuance of  common stock *
            
            
            15,193
            
            
            
            16,915
            
            
            
            66,624Deferred
      offering costs
            
            
            (52
            )
            
            
            -
            
            
            
            (52
            )Net
      cash provided by financing activities
            
            
            15,141
            
            
            
            16,915
            
            
            
            66,572Net
      increase (decrease) in cash and cashequivalents
            
            
            6,744
            
            
            
            8,217
            
            
            
            22,902Cash
      and cash equivalents at beginning of period
            
            
            16,158
            
            
            
            10,054
            
            
            
            -Cash
      and cash equivalents at end of period
            
            $
            22,902
            
            
            $
            18,271
            
            
            $
            22,902




*
Deferred offering costs of $25,000 from the year ended June 30, 2007 have been
offset against net proceeds from the issuance of common stock in the nine months
to March 31, 2008.























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, 2007
              
              
              63,390,937
              
              
              $
              53,098
              
              
              $
              (39,321
              )
              
              $
              13,777Net
      loss arising during development stage
              
              
              -
              
              
              
              -
              
              
              
              (9,009
              )
              
              
              (9,009
              )Comprehensive
      Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (9,009
              )Common
      Stock issued August 6, 2007
              
              
              5,464,001
              
              
              
              14,727
              
              
              
              -
              
              
              
              14,727Warrants
      issued as share-based payment (refer Note 6)
              
              
              -
              
              
              
              441
              
              
              
              -
              
              
              
              441Balance
      at March 31, 2008
              
              
              68,854,938
              
              
              $
              68,266
              
              
              $
              (48,330
              )
              
              $
              19,936














See
accompanying notes to the consolidated financial statements.




6




MARSHALL
EDWARDS, INC.


(A
Development Stage Company)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)








1.      The
Company and Summary of Significant Accounting Policies





Marshall
Edwards, Inc. (“MEI”) including its 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”). The Company commenced operations in May 2002 and its business
purpose is the development and commercialization of drugs for the treatment of
cancer. The Company is presently engaged in the clinical and pre-clinical
development of the anti-cancer drugs phenoxodiol, triphendiol (formally NV-196)
and NV-143. Novogen’s subsidiary has granted to MEPL, worldwide non-transferable
licenses under its patent right and patent applications and its relevant
know-how to conduct clinical trials and commercialize and distribute all forms
of phenoxodiol, triphendiol and NV-143 for uses in the field of prevention,
treatment, and cure of cancer in humans, except topical applications. As at the
date of this report, Novogen owns approximately 71.9% of the outstanding shares
of the Company’s common stock.





The
Company’s main focus since commencing operations has been to undertake human
clinical testing of phenoxodiol. Operations have now expanded to include the
additional licensed drug candidates triphendiol and NV-143. During fiscal year
2007, the Company commenced the OVATURE Phase III clinical trial for phenoxodiol
(known as “OVATURE”). The Company has reached agreement under the Special
Protocol Assessment process with the United States Food and Drug Administration
(the “FDA”) on the design of its 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. During fiscal year 2008, the Company has continued to recruit
patients into the OVATURE trial, continued its preclinical trials for
triphendiol and completed a Phase Ia study for triphendiol.








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 United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and the accompanying notes. Actual results could differ
from those estimates.






7


Revenue
Recognition





Interest





The only
revenue earned to date is interest on cash balances, which is recognized on an
accruals basis.





Cash
and Cash Equivalents





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





Income
Taxes





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





Effective
July 1, 2007, the Company adopted Financial Accounting Standards Interpretation
48 (FIN 48), “Accounting for Uncertainty in Income Taxes – an interpretation of
FASB No 109”. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of uncertain
tax positions taken or expected to be taken in a company’s income tax return,
and also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. FIN 48
utilizes a two step approach for evaluating uncertain tax positions accounted
for in accordance with SFAS No. 109, “Accounting for Income Taxes” (SFAS 109).
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.
The cumulative effect of adopting FIN 48 on July 1, 2007 is recognized as a
change in accounting principle, recorded as an adjustment to the opening balance
of accumulated deficit on the adoption date. As a result of the implementation
of FIN 48, the Company did not recognise any increase or decrease in the
liability for unrecognized tax benefits related to tax positions taken in prior
periods, therefore, there was no corresponding adjustment in accumulated
deficit. Additionally, FIN 48 specifies that tax positions for which the timing
of the ultimate resolution is uncertain should be recognized as long term
liabilities. The Company’s total amount of net tax losses carried forward as of
July 1, 2007 adoption date was $45 million.





The
Company’s major tax jurisdictions are the United States 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.





8


Fair
Value of Financial Instruments





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





Foreign
Currency Translation





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





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





Research
and Development Expenses





Research
and development expenses relate primarily to the cost of conducting human
clinical and pre-clinical trials of phenoxodiol, triphendiol and NV-143.
Research and development costs are charged to earnings in the period
incurred.





License
Fees





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





Stock-Based
Compensation





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





Other
stock-based payments have been accounted for in accordance with SFAS No. 123R
“Share-Based Payments”. The Company therefore 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





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





9


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.





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
                March
      31,
              
              
              Nine
      Months Ended
                March
      31,2008
              
              
              2007
              
              
              2008
              
              
              2007(In
      Thousands, except share and per share data)NumeratorNet
      loss arising during development stage
              
              
              (3,332
              )
              
              
              (1,723
              )
              
              
              (9,009
              )
              
              
              (11,778
              )Effect
      of dilutive securities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Numerator
      for diluted earnings per share
              
              $
              (3,332
              )
              
              $
              (1,723
              )
              
              $
              (9,009
              )
              
              $
              (11,778
              )DenominatorDenominator
      for basic earnings per share:Weighted
      average number of shares used in computing net loss per share, basic and
      diluted
              
              
              68,854,938
              
              
              
              63,390,937
              
              
              
              68,119,782
              
              
              
              63,131,878Effect
      of dilutive securities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Dilutive
      potential common shares
              
              
              68,854,938
              
              
              
              63,390,937
              
              
              
              68,119,782
              
              
              
              63,131,878Basic
      and diluted earnings per share
              
              $
              (0.05
              )
              
              $
              (0.03
              )
              
              $
              (0.13
              )
              
              $
              (0.19
              )


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







10


As
      at March 31,2008
              2007(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
              -Warrants
      exercisable prior to August 6, 2012 at an exercise price of
      $3.00
              248,364
              -Common
      shares issuable upon exercise of outstanding warrants
              
              5,249,220
              2,815,258




During
July 2006, the Company issued 6,452,937 shares of common stock and 2,815,258
warrants in connection with a PIPE capital raising and to secure a standby
equity distribution agreement entered into between the Company and YA Global,
L.P. (formerly Cornell Capital Partners, L.P.) as of July 11, 2006. For further
details see Note 6 “Equity”.





During
August 2007, the Company issued 5,464,001 shares of common stock and warrants
exercisable for 2,433,962 shares of common stock in connection with a PIPE
capital raising. For further details see Note 6 “Equity”.








3.      Expenditure
Commitments





At March
31, 2008, the Company had contractual obligations for the conduct of clinical
trials, pre-clinical research and development and manufacturing process
development of approximately $16,980,000. 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
            
            $
            16,980
            
            
            $
            8,830
            
            
            $
            6,076
            
            
            $
            2,074
            
            
            $
            -Total
            
            $
            16,980
            
            
            $
            8,830
            
            
            $
            6,076
            
            
            $
            2,074
            
            
            $
            -




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 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,




11


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.








4.
            Segment
      Information





The
Company’s focus is to continue the clinical and pre-clinical program currently
underway for the development and commercialization of phenoxodiol, NV-143 and
triphendiol. The business contains two major operating segments based on
geographic location.






Three
      Months Ended
                March
      31, 2008
              
              
              Three
      Months Ended
                March
      31, 2007(In
      Thousands)USA
              
              
              Australia
              
              
              USA
              
              
              AustraliaLoss
      from operations
              
              $
              (55
              )
              
              $
              (3,277
              )
              
              $
              (21
              )
              
              $
              (1,702
              )Segment
      assets
              
              
              22,428
              
              
              
              770
              
              
              
              14,971
              
              
              
              3,381Nine
      Months Ended
                March
      31, 2008
              
              
              Nine
      Months Ended
                March
      31, 2007(In
      Thousands)USA
              
              
              Australia
              
              
              USA
              
              
              AustraliaLoss
      from operations
              
              $
              (230
              )
              
              $
              (8,779
              )
              
              $
              (1,875
              )
              
              $
              (9,903
              )





5.           Related
Party Transactions





License
Agreement for Phenoxodiol





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




12


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





(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, beginning in 2006, an $8,000,000 annual milestone
license fee is payable under the amended terms of the Phenoxodiol License
Agreement for each calendar year ending December 31 during the exclusivity
period of the license. The annual milestone license fees have been deferred
under the License Amendment Deed for Phenoxodiol and the Further Amended and
Restated License Agreement which are discussed below.





License
Amendment Deed for Phenoxodiol





In June 2006, the Company entered into
an amendment deed to the Phenoxodiol License Agreement (the “License Amendment
Deed for Phenoxodiol”). Pursuant to the original term of the Phenoxodiol License
Agreement, the Company was required to pay an $8,000,000 license milestone fee
to Novogen Research Pty Limited in December 2006. The License Amendment Deed for
Phenoxodiol extends the date that the $8,000,000 license milestone fee is
payable until the earliest receipt by MEPL of the first:





(i)
            approval
      by 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.





Upon
receipt of any of the above (the “Approval Date”), the Company must pay to
Novogen, $8,000,000, together with interest on that amount from (and including)
December 31, 2006, calculated at the bank bill rate. This milestone replaces the
$8,000,000 December 31, 2006 milestone fee.





13


Further
Amended and Restated License Agreement





Following
agreement in March 2007, MEPL and Novogen Research Pty Limited entered into
another amendment deed to the Phenoxodiol License Agreement for the purpose of
further amending and restating the Phenoxodiol License Agreement (the “Further
Amended and Restated License Agreement”).





The
combined result of the License Amendment Deed for Phenoxodiol and the Further
Amended and Restated License Agreement will be that upon the Approval Date, 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 March 31,
2008.





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 is currently in Phase I
human testing. NV-143 is targeted for the treatment of melanoma, also in oral
dose form, and is in the pre-clinical testing 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;





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 investigational 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;


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.





14


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 March 31,
2008.








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 agreement on three months
written notice to Novogen.





Transactions
giving rise to expenditures amounting to $2,137,000 and $1,653,000 were made
under the Services Agreement with Novogen during the nine months ended March 31,
2008 and 2007, respectively. Of these amounts, $1,408,000 and $1,051,000 related
to service fees paid to Novogen for research and development services provided
in the nine months ended March 31, 2008 and 2007, respectively, reflecting the
time spent by Novogen research staff




15


on the
development of phenoxodiol, triphendiol and NV-143. Additionally, $729,000 and
$602,000 of the total expenditures during the nine months ended March 31, 2008
and 2007, respectively, related to costs incurred for administration and
accounting services provided by Novogen.





At March
31, 2008 and 2007, $560,000 and $199,000, respectively, were due and owing to
Novogen under the services agreement and are included in amounts due to related
company in the balance sheet.





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.





Transactions
giving rise to expenditures amounting to $31,000 and $130,000 were made under
the Manufacturing License and Supply Agreement with Novogen during the nine
months ended March 31, 2008 and 2007, respectively.





At March
31, 2008 and 2007, $7,000 and $21,000, respectively, were due and owning to
Novogen under the Manufacturing License and Supply Agreement and are included in
amounts due to related company in the balance sheet.





Novogen
has taken the strategic decision not to manufacture large scale Active
Pharmaceutical Ingredients (“API”) for cancer drugs, including phenoxodiol, as
these can be more economically supplied by third parties with particular
expertise in this area. The Company has entered into contracts with third
parties to ensure that sufficient quantities of phenoxodiol can be manufactured
in compliance with cGMP (Current Good Manufacturing Practices), to supply the
necessary quantities of API for the OVATURE trial and to complete the analytical
and stability work necessary for an NDA submission.








6.
Equity





MEI is a
development stage company incorporated in December 2000. MEI commenced
operations in May 2002 coinciding with its listing on the London Stock
Exchange’s Alternative Investment Market (the “AIM”).





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





16


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





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





·
            one
      share of common stock; and




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




The
2,392,000 warrants exercisable prior to December 18, 2006 have expired. No
shares of common stock have been issued as a result of exercise of any of these
warrants.





In
connection with the December 2003 offering, the Company’s common stock and
warrants commenced trading separately on the Nasdaq Global Market. The Company
received proceeds of $15.5 million, net of $2.4 million transaction costs in the
December 2003 offering. Following the offering, Novogen retained 86.9% of the
Company’s common stock.





In
January 2006, the Company voluntarily cancelled the trading of its common stock
on the AIM.





On July
11, 2006, the Company entered into a securities subscription agreement with
certain accredited investors providing for the placement of 6,329,311 shares of
the Company’s common stock and warrants exercisable for 2,215,258 shares of the
Company’s common stock at a purchase price of $2.90 per unit. Each unit
consisted of one share of common stock and 0.35 of a warrant to purchase one
share of common stock. The warrants have an exercise price of $4.35 per share,
subject to certain adjustments. The exercise price and number of shares issuable
upon exercise of such warrants are subject to adjustment in the event of stock
dividends, stock splits and other similar events. The warrants may be exercised
no less than six months from the closing date and will expire four years from
the date of issuance, or July 11, 2010. The Company closed the private
placement, or PIPE, on July 11, 2006. In connection with the PIPE, the Company
received proceeds of $16.8 million net of $1.5 million commissions and other
costs.





In
connection with the securities subscription agreement described above the
Company entered into a registration rights agreement pursuant to which the
Company is obligated to file a resale registration statement with the Securities
and Exchange Commission (the “SEC”) covering the shares of common stock issued
in connection with the securities subscription agreement, in addition to the
shares of common stock underlying the warrants issued in connection with the
securities subscription agreement. The Company filed the registration statement
on August 9, 2006. The resale registration statement was declared effective
September 5, 2006.





On July
11, 2006, the Company entered into a standby equity distribution agreement (the
“SEDA”), with YA Global Investments, L.P. (“YA Global,” formerly Cornell Capital
Partners, L.P.). The SEDA was subsequently terminated in August 2007. Under the
SEDA,




17


the
Company may have issued and sold to YA Global shares of its common stock for a
total purchase price of up to $15 million, once a resale registration statement
was in effect. Commencing as of the effective date of the registration statement
and continuing for up to 24 months thereafter, the Company had sole discretion
whether and when to sell shares of its common stock to YA Global. YA Global
would have been irrevocably bound to purchase shares of common stock from the
Company after the Company sent a notice that it intended to sell shares of its
common stock to YA Global. Each advance under the SEDA was limited to a maximum
of $1.5 million.





In
connection with the SEDA, the Company paid YA Global a commitment fee of 123,626
shares of its common stock and warrants to purchase 600,000 shares of its common
stock which expire on July 11, 2010. The warrants have an exercise price of
$4.35 per share, subject to certain adjustments. The exercise price and number
of shares issuable upon exercise of such warrants are subject to adjustment in
the event of stock dividends, stock splits and other similar events. The
commitment fee, comprising shares and warrants, is a share-based payment and has
been accounted for in accordance with FAS123R "Share-based Payment". The fair
values of shares and warrants issued have been recognized directly as equity in
the balance sheet and as selling, general and administration expenses in the
income statement in the quarter ended September 30, 2006.





On August
1, 2007, the Company entered into a securities subscription agreement with
certain accredited investors providing for the placement of 5,464,001 shares of
its common stock at a purchase price of $3.00 per share. The investors in the
transaction also received a warrant to purchase an additional 4 shares of common
stock for every block of 10 shares of common stock purchased. All of the
warrants have an exercise price of $3.60 per share. The warrants may be
exercised beginning February 6, 2008 and will expire five years from the date of
issuance, or August 6, 2012. The Company also issued 62,091 warrants to Blue
Trading, LLC, which acted as the placement agent in the private placement, as
part of the placement fee. The warrants issued to Blue Trading, LLC have an
exercise price of $3.00 per share and each warrant is convertible for 4 shares
of common stock. These warrants may be exercised immediately and will expire
five years from the date of issuance, on August 6, 2012. The Company closed the
private placement, or PIPE, on August 6, 2007. In connection with the
PIPE, the Company received proceeds of $15.2 million net of $1.2 million in
commissions and other costs.





The
Company entered into a registration rights agreement with the investors party to
the securities subscription agreement and Blue Trading, LLC, and agreed to file
a resale registration statement with the SEC registering the common stock and
the common stock issuable upon exercise of the warrants sold pursuant to the
securities subscription agreement for resale thereunder. The Company filed the
registration statement on October 2, 2007. The resale registration statement was
declared effective October 19, 2007.





Under the
terms of the July 11, 2006 and the August 1, 2007 PIPEs, the Company is required
to maintain effective registration statements covering the resale shares of
common stock issued in the PIPEs and the shares of common stock issuable upon
exercise of the warrants issued in the PIPEs. In relation to the July 11, 2006
PIPE, at the date of issuance, the Company assessed the terms of the
registration rights agreement, and as the penalty for not maintaining the
registration of common stock is less than the difference between the value of
registered shares and unregistered shares, the equity has been classified as
permanent equity.




18


The
August 1, 2007 PIPE has been assessed as permanent equity under FASB Staff
Position No. EITF 00-19-2, described below.





On
January 1, 2007 the Company adopted FASB Staff Position No. EITF 00-19-2 (FSP
00-19-2). FSP 00-19-2 requires the contingent obligation to make future payments
under the registration rights agreements be recognized separately in accordance
with FASB Statement No. 5, Accounting for Contingencies and the underlying
warrants be recognized without regard to the contingent obligation. The adoption
of FSP 00-19-2 had no effect on the Company’s financial statements as the
warrants issued in connection with the PIPEs will remain classified as permanent
equity and management does not currently believe that it is probable a payment
will be made under either of the registration rights agreements.





Following
the PIPE closed in August 2007, Novogen retained approximately 71.9% of the
Company’s common stock.





The
Company filed a shelf registration statement with the SEC in March 2008. The
shelf registration statement was declared effective by the SEC on April 3, 2008.
The shelf registration statement permits the Company to sell, from time to time,
up to $75,000,000 of common stock, preferred stock and warrants or any
combination of the foregoing. Pursuant to SEC regulations, however, the Company
cannot sell securities from the shelf registration statement which represent
more than one third of the Company’s public float during any 12-month
period.








7.
Contingent Liabilities





On July
11, 2006, the Company entered into a registration rights agreement, in
connection with the PIPE capital raising closed in July of that year, which
provides for liquidated damages if the Company does not maintain an effective
resale registration statement.





On August
1, 2007, in connection with the PIPE capital raising closed in August of that
year, the Company entered into a registration rights agreement pursuant to which
it is obligated to maintain an effective resale registration statement. The
resale registration statement will cover the shares of common stock issued in
connection with the securities subscription agreement as well as the shares of
common stock underlying the warrants issued in connection with the securities
subscription agreement. The resale registration statement also covers the shares
underlying the warrants issued to Blue Trading, LLC, which acted as placement
agent in the PIPE, as part of its placement fee.





In the
event that the resale registration statements covering the registrable
securities issued in the July 2006 PIPE and August 2007 PIPE cease to be
effective or usable at any time while shares of common stock covered by them
remain unsold or may only be sold subject to certain volume limitations, or
investors are not permitted to utilize the prospectus in connection with the
resale registration statements to resell shares of common stock covered by the
resale registration statements, the Company will be obligated to pay investors
who purchased shares of common stock in the PIPEs liquidated damages equal to 1%
of the aggregate purchase price paid by each investor pursuant to the applicable
securities subscription agreement for any shares of common stock, shares of
common stock issuable upon exercise of warrants or warrants then held by each
investor per month (pro rated for any




19


period
less than a month) until the resale registration statements are effective or the
investors are permitted to utilize the prospectus in connection with the resale
registration statements to resell shares of common stock covered by the resale
registration statements. Effective resale registration statements have been
maintained at the date of this report.





Liquidated
damages paid to each investor in the PIPEs may not exceed more than 10% of the
purchase price paid by such investor for shares of common stock purchased under
the securities subscription agreements.





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.






20


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





Special
Note Regarding Forward-Looking Statements




This
Quarterly Report on Form 10-Q includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts contained in this quarterly report, including
statements regarding the future financial position, business strategy and plans
and objectives of management for future operations, are forward-looking
statements. The words “believe,” “may,” “will,” “estimate,” “continue,”
“anticipate,” “intend,” “should,” “plan,” “expect,” and similar expressions, as
they relate to the Company, are intended to identify forward-looking statements.
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 additional required financing or financing available
      to us on acceptable terms;·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;·costs
      and delays in the development and/or receipt of the approval of the 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 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 (“Novogen”), 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;·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 those of our officers and
      directors who are residents of
              jurisdictions
      outside the United States;·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.







21


These
risks are not exhaustive. Other sections of this quarterly report may include
additional factors which could adversely impact business and financial
performance. In addition, 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, 2007. Moreover, we operate in a very
competitive and rapidly changing environment.




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 will 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
report.




Overview





Our main
focus since commencing operations is to undertake human clinical testing of
phenoxodiol. Our operations have now expanded to include the additional licensed
drug candidates triphendiol and NV-143. During fiscal year 2007, we commenced
the Phase III clinical trial (known as “OVATURE”). We have 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. During fiscal
year 2008, the Company has continued to recruit patients into the OVATURE trial,
continued its preclinical trials for triphendiol and completed a Phase Ia study
for triphendoil.








As at the
date of the report, Novogen owns approximately 71.9% of the outstanding shares
of our common stock.





22


We do not
employ any staff directly but obtain services from Novogen under a services
agreement. We have incurred losses since inception and expect to incur operating
losses and generate negative cash flows from operations for the foreseeable
future as we expand research and development activities and move phenoxodiol,
triphendiol and NV-143 into later stages of development.





We
believe that the proceeds of the private placement closed in August 2007 provide
us with sufficient cash resources to fund our planned operations over the next
twelve months which include progressing the Phase III OVATURE trial, the planned
preclinical development of triphendiol and NV-143 and the planned human Phase I
clinical program for triphendiol.





We will
however need additional funds in order complete the OVATURE trial and to
progress the clinical development program for triphendiol and NV-143 beyond the
current objectives.





In
connection with our preparation to raise additional funds, we filed a shelf
registration statement with the SEC in March 2008. The shelf registration
statement was declared effective by the SEC on April 3, 2008. The shelf
registration statement permits us to sell, from time to time, up to $75,000,000
of common stock, preferred stock and warrants or any combination of the
foregoing. Pursuant to SEC regulations, however, we cannot sell securities from
the shelf registration statement which represent more than one third of our
public float during any 12-month period.





As of
March 31, 2008, we had accumulated losses of $48,330,000.





We have
not generated any revenues from operations since inception other than interest
on cash assets.





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, the License Agreement for Triphendiol and NV-143,
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.





We expect
to make quarterly and annual operating losses for the foreseeable future due to
several factors including the timing and extent of research and development
efforts, particularly with expected increases in expenses relating to OVATURE
and the planned clinical trials of triphendiol. The extent and possible outcomes
of current and future clinical trial activities makes accurate prediction of
future operating results difficult or impossible.





Critical
Accounting Estimates





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





23


Development
Expenses





Research
and development costs incurred since inception through March 31, 2008 aggregate
to $22,572,000.





Research
and development costs include clinical trial expenses and are expensed as they
are incurred. These costs are expected to increase in the future as the
phenoxodiol clinical program progresses and as we expand our research and
development of triphendiol and NV-143. The OVATURE trial requires large patient
numbers, resulting in significantly increased costs.





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





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





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


·the
      number of sites included in the trials;·the
      length of time required to enroll suitable patients;·the
      number of patients that participate in the trials;·the
      number of treatment cycles patients complete while they are enrolled in
      the    trials;·the
      indication being studied; and·the
      efficacy and safety profile of the
product.





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





As a
result of these uncertainties, we are unable to determine the duration of, or
completion costs for, research and development projects or when, and to what
extent, we will receive cash inflows from the commercialization and sale of the
drug candidates.





We intend
to continue the clinical development of phenoxodiol as well as triphendiol and
NV-143, which were licensed from Novogen. We will also continue to assess the
opportunity to license other cancer drugs developed by Novogen as the
opportunities arise.





Clinical
Trial Expenses





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





24


Clinical
trial expenses of $831,000 have been accrued at March 31, 2008. These estimates
are based on the number of patients in each trial and the number of drug
administration cycles completed.





Clinical
research contracts may vary depending on the clinical trial design and protocol.
Generally the costs, and therefore estimates, associated with clinical trial
contracts are based on the number of patients, 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.





Manufacturing
Scale-up Expenses





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





Manufacturing
expenses of $576,000 have been accrued at March 31, 2008. These estimates are
based on the milestones completed for each of the service
contracts.





Stock
Based Compensation





We
account for stock based payments in accordance with SFAS No. 123R “Share-Based
Payments”. 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 600,000 warrants issued July 11,
2006, in connection with the commitment fee under the Standby Equity
Distribution Agreement entered into by the Company and YA Global Investments,
L.P. (formally Cornell Capital Partners, L.P.) as of July 11, 2006 (the “SEDA”)
and the 62,091 warrants representing 248,364 warrant shares issued August 6,
2007 to Blue Trading, LLC as part of a placement fee, the following assumptions
were used:




July
      11,  2006
                August
      6, 2007Dividend
      yield
                0%
                0%Expected
      volatility
                76%
                71%Historical
      volatility
                76%
                71%Risk-free
      interest rate
                5.45%
                4.13%Expected
      life of warrant
                4
      years
                5
      yearsWarrant
      fair value
                $1.998
                $1.777


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.





25


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





26


Results
of Operations





Three
Months Ended March 31, 2008 and 2007





We
recorded a consolidated loss of $3,332,000 and $1,723,000 for the three months
ended March 31, 2008 and 2007, respectively.





Revenues: We received interest
on cash assets and cash equivalents and short term investments of $149,000 for
the three months ended March 31, 2008 compared to $171,000 for the three months
ended March 31, 2007. The decrease was primarily due to lower interest rates in
the U.S. earned by our cash deposits .





Research and Development:
Research and development expenses increased $414,000 to $1,860,000 for the three
months ended March 31, 2008 compared to $1,446,000 for the three months ended
March 31, 2007. The increase was due primarily to the costs associated with the
Phase III OVATURE clinical trial.





License Fees:Milestone
license fees of $1,000,000 have been expensed in the three months ended March
31, 2008. Under the terms of the License Agreement for Triphendiol and NV-143,
the milestone payment of $1,000,000 became due on March 31, 2008 or the date an
Investigational New Drug Application for the licensed product goes into effect
or the equivalent approval of a government agency is obtained in another
country. As this event did not occur before March 31, 2008, this amount became
due on this date.





Pursuant
to the Further Amended and Restated License Agreement for Phenoxodiol, the
annual $8,000,000 milestone payment, due to Novogen on each December 31 during
the exclusivity period, will not become payable until receipt of a New Drug
Application (“NDA”) for phenoxodiol or other approval to market phenoxodiol in
the U.S. or abroad has been obtained.





Selling, General and Administrative:Selling, general and administrative expenses increased by $173,000 to
$620,000 for the three months ended March 31, 2008 compared to $447,000 for the
three months ended March 31, 2007. The increase was due to increased investor
and public relation costs, increased travel costs and additional director
fees.





Foreign
exchange gains/(losses) are included in selling, general and administrative
expenses and occur when revaluing cash denominated in foreign currencies and
upon consolidation of 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. At March 31, 2008, we had not established a foreign currency
hedging program. Net foreign exchange losses during the three months ended March
31, 2008 were $61,000 compared with $14,000 during the three months ended March
31, 2007.





27


Nine
Months Ended March 31, 2008 and 2007





We
recorded a consolidated loss of $9,009,000 and $11,778,000 for the nine months
ended March 31, 2008 and 2007, respectively.





Revenues: We received interest
on cash assets and cash equivalents and short term investments of $582,000 for
the nine months ended March 31, 2008 versus $489,000 for the nine months ended
March 31, 2007. The increase was due to higher cash balances following the
capital raising in August 2007 partially offset by recent decreases in interest
rates earned by our cash deposits.





Research and Development:
Research and development expenses increased $2,452,000 to $6,631,000 for the
nine months ended March 31, 2008 compared to $4,179,000 for the nine months
ended March 31, 2007. The increase was due primarily to the costs associated
with the Phase III OVATURE clinical trial.





License Fees:Milestone
license fees of $1,000,000 have been expensed in the nine months ended March 31,
2008 under the terms of the License Agreement for Triphendiol and NV-143. The
second lump sum license fee of $5,000,000 due under the terms of the Amended and
Restated License Agreement was expensed in the nine months ended March 31,
2007.





Selling, General and Administrative:Selling, general and administrative expenses decreased by $1,130,000 to
$1,957,000 for the nine months ended March 31, 2008 compared to $3,087,000 for
the nine months ended March 31, 2007. The decrease was primarily due to no share
based payment expense in the nine months ended March 31, 2008 compared to share
based payment expense of $1,642,000 in the nine months ended March 31, 2007
which represented a fee for entering into the SEDA. This decrease in expense was
partially offset by increased investor and public relation costs, increased
travel costs and additional director fees. These costs increased by $377,000 in
aggregate.





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 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. Net foreign exchange losses during the nine months ended
March 31, 2008 were $159,000 compared with net foreign exchange losses of
$39,000 during the nine months ended March 31, 2007.








Liquidity
and Capital Resources





At March
31, 2008, we had cash resources of $22,902,000 compared to $16,158,000 at June
30, 2007. The increase was due to the capital raising in August 2007, as
described below, which was partially offset by 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 August
1, 2007, we entered into a securities subscription agreement with certain




28


accredited
investors providing for the placement of 5,464,001 shares of our common stock at
a purchase price of $3.00 per share. The investors in the transaction also
received a warrant to purchase an additional 4 shares of common stock for every
block of 10 shares of common stock purchased. All of the warrants have an
exercise price of $3.60 per share. The warrants may be exercised beginning
February 6, 2008 and will expire five years from the date of issuance, or August
6, 2012. We also issued 62,091 warrants to Blue Trading, LLC, which acted as the
placement agent in the private placement or PIPE, as part of the placement fee.
The warrants issued to Blue Trading, LLC have an exercise price of $3.00 per
share and each warrant is convertible for 4 shares of common stock. These
warrants may be exercised immediately and will expire five years from the date
of issuance, on August 6, 2012. We closed the private placement on August 6,
2007 and we received proceeds of $15.2 million net of $1.2 million commissions
and other costs.





We have
entered into a registration rights agreement with the investors party to the
securities subscription agreement and Blue Trading, LLC, and have agreed to file
a registration statement with the Securities and Exchange Commission (the “SEC”)
for the common stock and the common stock issuable upon exercise of the warrants
sold pursuant to the securities subscription agreement for resale thereunder. We
filed the registration statement on October 2, 2007. The resale registration
statement was declared effective on October 19, 2007.





In August
2007, we terminated the SEDA.





Source
and Uses of Cash





Cash
Used in Operating Activities





Cash used
in operating activities for the nine months ended March 31, 2008 was $8,397,000
compared to $8,698,000 for the same period in 2007. The decrease in cash outflow
of $301,000 was due primarily to license fees in the nine months ended March 31,
2008 of $1,000,000 compared to the same period last year which contained the
second lump sum license fee paid to Novogen of $5,000,000, offset by increased
cash outflows incurred in connection with the increased costs associated with
the Phase III OVATURE trial.





Cash
Requirements





We are
currently conducting the OVATURE Phase III clinical study to support marketing
approval of phenoxodiol for ovarian cancer and the clinical and pre clinical
development of triphendiol and NV-143.





Ongoing
operations through the conduct of the clinical trial program will continue to
consume cash resources without generating revenues.





We
believe that the proceeds of the private placement or PIPE closed in August 2007
provide us with sufficient cash resources to fund our planned operations over
the next twelve months which include progressing the OVATURE trial, the planned
preclinical development of triphendiol and NV-143 and the planned human Phase Ib
clinical program for triphendiol.





We will,
however, need additional funds in order complete the OVATURE trial and to
progress the clinical development program for triphendiol and NV-143 beyond the
current objectives.





29


In
connection with our preparation to raise additional funds, we filed a shelf
registration statement with the SEC in March 2008. The shelf registration
statement was declared effective by the SEC on April 3, 2008. The shelf
registration statement permits us to sell, from time to time, up to $75,000,000
of common stock, preferred stock and warrants or any combination of the
foregoing. Pursuant to SEC regulations, however, we cannot sell securities from
the shelf registration statement which represent more than one third of our
public float during any 12-month period.








Payments
to Novogen





Future
payments to Novogen under the terms of the Phenoxodiol License Agreement, the
License Amendment Deed for Phenoxodiol, the Further Amended and Restated License
Agreement and the License Agreement for Triphendiol and NV-143 are detailed in
Note 5 of the financial statements “Related Party Transactions” on page 12 of
this report





We will
also be required to make payments to Novogen under the Services Agreement and
Manufacturing License and Supply Agreement.





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.





Contractual
Obligations





For
details of our contractual obligations at March 31, 2008 see Note 3 to the
financial statements “Expenditure Commitments on page 11 of this
report.






30


Item 3:
Quantitative and Qualitative Disclosures about Market Risk







Interest
Rate Risk





We place
cash in “on call” deposits and short term investments with high quality
financial institutions.





We do not
consider the effects of interest rate movements to be a material risk to our
financial condition. We do not use derivative financial instruments to hedge our
risks associated with the fluctuations of interest rates.





Foreign
Currency Risk





We
conduct our business in various currencies, primarily in U.S. and Australian
dollars. At March 31, 2008, we had not established a foreign currency hedging
program. Net foreign exchange losses during the nine months ended March 31, 2008
were $159,000 compared with net foreign exchange losses of $39,000 during the
nine months ended March 31, 2007. 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.











31


Item 4T:
Controls and Procedures




Evaluation
of Disclosure Controls and Procedures





At the
end of the period covered by this 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 Securities Exchange Act of 1934, as amended).
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 Securities Exchange Act of 1934, as amended is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms.




There
were no changes in our internal control over financial reporting during the
period covered by this Form 10-Q that have materially affected, or are
reasonably likely to affect, the Company’s internal control over financial
reporting.








32


PART
II  OTHER INFORMATION





Item 1A:
Risk Factors





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





In
the event that Novogen undergoes a change in control while remaining our
controlling stockholder, we will become subject to the control and influence of
Novogen’s new controlling stockholder who may have views regarding the
development of our business that differ from the development strategies we are
currently pursuing.





In the
event that Novogen undergoes a change in control while remaining our controlling
stockholder, we will become subject to the control and influence of Novogen’s
new controlling stockholder who will have the ability to indirectly determine
the outcome of all matters submitted to our stockholders for approval through
its control of Novogen. This entity may have views regarding the development of
our business that differ from the development strategies we are currently
pursuing. Such controlling stockholder may cause Novogen to use its influence
and voting power to change the direction in which we are developing our
business. Such changes may include, but are not limited to, a decreased focus on
the development of any of our current drug candidates and an increased focus on
the development of alternative drug candidates, which may or may not be targeted
to treat cancers. Additionally, this entity make seek to renegotiate the terms
of our existing license agreements, manufacturing and supply agreement and
services agreement with Novogen.








33


Item 6:
Exhibits and Reports on Form 8-K








a)
Exhibits


Exhibit
Index








Exhibits





31.1
            Certification
      required by Rule 13a-14(a) or Rule 15d-14(a)31.2
            Certification
      required by Rule 13a-14(a) or Rule 15d-14(a)32.1
            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).























34


SIGNATURES











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









MARSHALL
EDWARDS, INC.




/s/
DAVIDSEATON





David R.
Seaton


Chief
Financial Offer


(Duly
Authorized Officer and Principal Financial Officer)





Date: May
6, 2008





35


Exhibit
31.1


CERTIFICATION





I,
Christopher Naughton, certify that:







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




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




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




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




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




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




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




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: May
6, 2008




/s/CHRISTOPHERNAUGHTON





Christopher
Naughton


Chief
Executive Officer





36


Exhibit
31.2


CERTIFICATION





I, David
Ross Seaton, certify that:







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




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




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




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




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




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




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




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: May 6,
2008




/s/
DAVIDSEATON





David R.
Seaton


Chief
Financial Officer





37


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 or her knowledge:





1.
            The
      Registrant’s Quarterly Report on Form 10-Q for the period ended March 31,
      2008, to which this Certification is attached as Exhibit 32 “Form 10-Q”,
      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:
May 6, 2008




















/s/
CHRISTOPHERNAUGHTON


Christopher
Naughton
 Chief
Executive Officer






/s/ DAVIDSEATON


David R.
Seaton
 Chief
Financial Offic




38