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Marshall Edwards (MSH)

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Friday 14 May, 2004

Marshall Edwards

Interim Results

Marshall Edwards, Inc.
14 May 2004


                             MARSHALL EDWARDS, INC.
                                INTERIM RESULTS
                    FOR THE NINE MONTHS ENDED MARCH 31, 2004

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(unaudited)

                                                        March 31,      June 30,
                                                             2004          2003
                                                        -----------   -----------
                                                      (unaudited)      (Note 1)
ASSETS
Current assets
Cash and cash equivalents                                $ 25,546       $ 7,244
Prepaid expenses and other current assets                      14            42
                                                        -----------   -----------
Total current assets                                       25,560         7,286
                                                        -----------   -----------
Total assets                                             $ 25,560       $ 7,286
                                                        ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable                                            $ 140         $ 433
Accrued expenses                                              440           278
Amount due to parent company                                  837           642
                                                        -----------   -----------
Total current liabilities                                   1,417         1,353

Stockholders' equity:
Preferred stock, $0.01 par value, authorized 100,000            -             -
shares, none outstanding
Common stock, $ 0.00000002 par value, 113,000,000               -             -
authorized shares; shares issued and outstanding:
56,938,000 at March 31, 2004 and 52,032,000 at June
30, 2003
Additional paid-in capital                                 34,636         9,058
Deficit accumulated during development
stage                                                     (10,493)       (3,156)
Accumulated other comprehensive income                          -            31
                                                        -----------   -----------
Total stockholders' equity                                 24,143         5,933
                                                        ===========   ===========
Total liabilities and stockholders' equity               $ 25,560       $ 7,286
                                                        ===========   ===========

See accompanying notes.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)

                             Three Months Ended         Nine Months Ended      Period from
                                                                               December 1,
                                                                                  2000
                                                                               (Inception)
                                                                                through
                                  March 31,                 March 31,          March 31,
                                 2004         2003         2004         2003        2004
                              ---------     --------     --------     --------   ---------

Revenues:
Interest and
other income                     $ 75         $ 36        $ 121        $ 115       $ 273
                              ---------     --------     --------     --------   ---------
Total revenues                     75           36          121          115         273
                              =========     ========     ========     ========   =========

Operating expenses:
Research and
development                      (690)        (532)      (1,819)      (1,527)     (3,912)
License fees                     (500)           -       (5,000)           -      (5,500)
Selling,
general and
administrative                   (405)        (140)        (686)        (446)     (1,373)
Foreign
exchange
gains(losses)                     (21)          39           47           12          20
                              ---------     --------     --------     --------   ---------
Total
operating
expenses                       (1,616)        (633)      (7,458)      (1,961)    (10,765)
                              =========     ========     ========     ========   =========

Loss from
operations                     (1,541)        (597)      (7,337)      (1,846)    (10,492)
Income tax
expense                             -            -            -            -          (1)
                              ---------     --------     --------     --------   ---------
Net loss
arising during
development
stage                       $ (1,541)      $ (597)    $ (7,337)    $ (1,846)    $ (10,493)
                              =========     ========     ========     ========
                                                                                 =========

Net loss per common share:

Basic and
diluted                     $ (0.027)    $ (0.011)    $ (0.136)    $ (0.035)
                              =========     ========     ========     ========

Weighted
average common
shares
outstanding                56,938,000   52,023,000   54,098,411   52,023,000
                              =========     ========     ========     ========

See accompanying notes.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

                                              Nine Months Ended        Period from
                                                                       December 1,
                                                                          2000
                                                                       (Inception)
                                                                        through
                                                  March 31,            March 31,
                                                 2004          2003          2004
                                             ----------    ----------    ----------
Operating activities
Net loss
arising during
development
stage                                          (7,337)       (1,846)      (10,493)
Adjustments to reconcile net loss to net
cash
(used in) provided by operating
activities:
Changes in operating assets and
liabilities:
Prepaid
expenses and
other current
assets                                             28            (3)          (14)
Accounts
payable                                          (292)          433           144
Accrued
expenses                                          162             -           578
Amounts due to
parent company                                    195             -           695
                                             ----------    ----------    ----------
Net cash used
in operating
activities                                     (7,244)       (1,416)       (9,090)

Financing activities
Net proceeds
from issuance
of Common
Stock                                          25,577             -        34,636
                                             ----------    ----------    ----------
Net cash
provided by
financing
activities                                      5,577             -        34,636
Effect of exchange rate changes on cash
and cash
equivalents                                       (31)            -             -
Net increase (decrease) in cash and
cash
equivalents                                    18,302        (1,416)       25,546
Cash and cash
equivalents at
beginning of
period                                          7,244         9,164             -
                                             ----------    ----------    ----------
Cash and cash
equivalents at
end of period                                  25,546         7,748        25,546
                                             ==========    ==========    ==========
Income taxes
paid                                                -             1             1
                                             ==========    ==========    ==========

See accompanying notes.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)

                             Common  Additional     Deficit   Accumulated     Total
                            Stock       paid in accumulated         other   ---------
                          ---------   capital        during comprehensive
                                      --------- development income/(loss)
                                                    stage
                                                  ---------    ----------
                         (shares)

Balance at
June 30, 2003          52,032,000     $ 9,058   $ (3,156)          $ 31     $ 5,933
Net loss from                                                                     -
operations for the
nine months
to March 31,
2004                                              (7,337)                    (7,337)
Foreign
currency
translation
adjustments                                                         (31)        (31)
                                                                            ---------
Comprehensive
Loss                                                                         (7,368)
Common Stock
issued
November 30,
2003                    2,514,000      10,056                                10,056
Common Stock issued
December 18, 2003
(including
2,392,000
warrants)               2,392,000      15,522                                15,522
                          ---------   ---------   ---------    ----------   ---------
Balance at
March 31, 2004         56,938,000    $ 34,636    $ (10,493)         $ -    $ 24,143
                          =========   =========                ==========   =========
                                                  =========

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2004

1. Organization and Basis of Preparation of Financial Statements

The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. Marshall Edwards, Inc. ('MEI') believes all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months and nine
months ended March 31, 2004 are not necessarily indicative of the results that
may be expected for the year ending June 30, 2004 or any other period. The
balance sheet at June 30, 2003 has been derived from the audited financial
statements at that date. The financial statements and notes should be read in
conjunction with the audited financial statements for the year ended June 30,
2003 which were included in the MEI's Amendment No. 3 to Form S-1 filed December
10, 2003.

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

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

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

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 London
Stock Exchange's Alternative Investment Market ('AIM'). Following the listing,
Novogen Limited retained 95.1% of the Company's common stock.

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

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

-        one share of common stock; and
-        one warrant to purchase a share of common stock, exercisable prior to
December 18, 2006 at an exercise price equal to $9.00.
In connection with the December 2003 offering, the Company's common stock and
warrants commenced trading separately on the Nasdaq National Market. The Company
received proceeds of $15,522,000, net of $2,418,000 transaction costs in the
December 2003 offering. Following the offering, Novogen Limited retained 86.9%
of the Company's common stock.

2. Accounting Policies

Revenue Recognition

Interest

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

Principles of Consolidation

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

Cash and cash equivalents

Cash on hand and in banks and short-term deposits are stated at the nominal
value. The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Substantially all of
the Company's cash is deposited in financial institutions that are FDIC insured.
These deposits are in excess of the FDIC insurance limits.

Income Taxes

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

Fair Value of Financial Instruments

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

Foreign Currency Translation

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

Research and Development Expenses

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

Stock-Based Compensation

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

Basic and Diluted Loss Per Share

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

Comprehensive Loss

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

3. Loss Per Share

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

                                  Three Months Ended         Nine Months Ended
                                       March 31,                 March 31,
                                      2004         2003         2004         2003
                                  ----------    ---------    ---------     --------
                                        (In Thousands, except share data)
Numerator
Net loss arising during
development stage                   (1,541)        (597)      (7,337)      (1,846)
Effect of dilutive securities            -            -            -            -
                                  ----------    ---------    ---------     --------
Numerator for diluted
earnings per share                  (1,541)        (597)      (7,337)      (1,846)
                                  ==========    =========    =========     ========

Denominator
Denominator for basic
earnings per share -
weighted-average shares         56,938,000   52,023,000   54,098,411   52,023,000
Effect of dilutive securities            -            -            -            -
                                  ----------    ---------    ---------     --------
Dilutive potential common
shares                          56,938,000   52,023,000   54,098,411   52,023,000
                                  ==========    =========    =========     ========

4. Financial Instruments

The fair value of financial assets and liabilities approximates their carrying
value in the Consolidated Balance Sheets because they are short term and at
market rates of interest.

5. Expenditure Commitments

At March, 31, 2004, the Company had contracted to conduct research and
development expenditures of approximately $2,460,000. 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: $340,000 in the fiscal year ended June 30,
2004, $1,698,000 in the fiscal year ended June 30, 2005 and $422,000 in the
fiscal year ended June 30, 2006. No amounts have been included for future
payments to Novogen which may arise in connection with the license agreement,
the services agreement or the manufacturing license and supply agreement.
Payments in connection with these agreements are detailed in Note 7 'Related
Party Transactions'

6. Segment Information

The Company's focus is to continue the clinical program currently underway for
the development and commercialization of phenoxodiol.

                                   Three Months Ended      Three Months Ended
                                     March 31, 2004          March 31, 2003
                                    ---------   ---------   ---------   ---------
                                     USA      Australia      USA      Australia
                                   ---------   ---------   ---------   ---------
Loss from
operations                          $ (223)   $ (1,318)      $ (28)     $ (569)
Segment assets
at March 31                          24,149       1,411       6,920         133

                                    Nine Months Ended       Nine Months Ended
                                     March 31, 2004          March 31, 2003
                                    ---------   ---------   ---------   ---------
                                     USA      Australia      USA      Australia
                                   ---------   ---------   ---------   ---------
Loss from
operations                          $ (274)   $ (7,063)      $ (99)   $ (1,747)

7. Related Party Transactions

License Agreement

The license agreement is an agreement under which Novogen's subsidiary, Novogen
Research Pty Limited, grants to MEPL a worldwide non-transferable license under
its patent and patent applications and in its know-how to conduct clinical
trials and commercialize and distribute phenoxodiol products. The agreement
covers uses of phenoxodiol in the field of prevention, treatment or cure of
cancer in humans delivered in all forms except topical applications. The license
is exclusive until the expiration or lapsing of the last relevant Novogen
patents or patent applications in the world and thereafter is nonexclusive. MEPL
may terminate the agreement by giving three months' notice to Novogen. MEPL paid
$5,000,000 to Novogen in February 2004 which was the first lump sum license fee
payment due under the terms of the license agreement. This amount was accrued at
December 31, 2003. Future amounts payable to Novogen under terms of the license
agreement are as follows:

1. A second lump sum license fee of $5,000,000 is payable to Novogen on 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 exceeds $50,000,000.

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

3. Amounts payable for annual milestone license fees under the license agreement
for the calendar years ended December 31 are as follows:

Calendar Year
----------------------                 -----------
2004                                   $2,000,000
2005                                   $4,000,000
Each calendar year thereafter          $8,000,000

License Option Deed

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

Services Agreement

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

Manufacturing License and Supply Agreement

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

Transactions amounting to $468,654 and $1,375,110 were made under the services
agreement and the manufacturing license and supply agreement with Novogen during
the three months and nine months ended March 31, 2004, respectively. At March
31, 2004, $188,364 owed to Novogen is included in accounts payable.

Management's Discussion and Analysis of Financial Condition and Results of
Operation

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

-        Company's inability to obtain any additional required financing or
         financing available to the Company on acceptable terms;

-        the Company's failure to successfully commercialize our product
         candidates;

-        costs and delays in the development and/or FDA approval, of the failure
         to obtain such approval, of the Company's product candidates;

-        uncertainties in clinical trial results;

-        the Company's inability to maintain or enter into, and the risks
         resulting from our dependence upon, collaboration or contractual 
         arrangements necessary for the development, manufacture, 
         commercialization, marketing, sales and distribution of any products;

-        competition and competitive factors;

-        the company's inability to protect its patents or proprietary rights
         and obtain necessary rights to third party patents and intellectual 
         property to operate its business;

-        the Company's inability to operate its business without infringing the
         patents and proprietary rights of others;

-        general economic conditions;

-        the failure of any products to gain market acceptance;

-        technological changes;

-        government regulation and the receipt of the regulatory approvals;

-        changes in industry practice ; and

-        one time events.

These risks are not exhaustive. Other sections of this quarterly report may
include additional factors which could adversely impact business and financial
performance. Moreover, the Company operates in a very competitive and rapidly
changing environment. You should not rely upon forward-looking statements as
predictions of future events. The Company cannot assure you that the events and
circumstances reflected in the forward-looking statements will be achieved or
occur. Although it believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance or achievements.
The following discussion is qualified in its entirety by, and should be read in
conjunction with, the more detailed information set forth in financial
statements and the notes thereto appearing elsewhere in this report.
Overview

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

The Company's main focus during fiscal year 2003 and in the nine months to March
31, 2004 was to undertake human clinical testing of phenoxodiol. The Company
does not employ any staff directly but obtains services from Novogen under a
services agreement. The Company has incurred losses since inception and expects
to incur operating losses and generate negative cash flows from operations for
the foreseeable future as it expands research and development activities and
moves phenoxodiol into later stages of development. As of March 31, 2004, the
Company had accumulated losses of $10,493,000.

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

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

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

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

Critical Accounting Estimates

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

Clinical Trials Expenses

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

Clinical trial expenses of $637,000 have been included in the financial
statements for the nine months ended March 31, 2004, of which $430,000 has been
accrued at March 31, 2004. These estimates are based on the number of patients
in each trial and the patient treatment cycle.

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

Development Expenses

Research and development costs incurred since inception through March 31, 2004
amount to $3,912,000.

Research and development costs are expensed as they are incurred and are
expected to increase in the future as the phenoxodiol clinical program
progresses.

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

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

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; and

-        the efficacy and safety profile of the product.

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

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

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

Results of Operations

Three Months Ended March 2004 and 2003

The Company recorded a consolidated loss of $1,541,000 and $597,000 for the
three months ended March 2004 and 2003, respectively.

Revenues:. The Company received interest on cash assets and cash equivalents of
$75,000 for the three months ended March 31, 2004 versus $36,000 for the three
months ended March 31, 2003. The increase was due to the Company's higher cash
balances following the Company's December 2003 public offering.

Research and Development: Research and Development expenses increased $158,000
to $690,000 for the three months ended March 31, 2004 compared to $532,000 of
the three months ended March 31, 2003. The increase was due primarily to the
increase in cost of phenoxodiol supplied for use in the clinical trial program.
Research and development expenses for the three months ended March 31, 2004 also
include an initial payment of $20,000 due on commencement of the cervical cancer
clinical trial being conducted at Yale University New Haven Hospital.

License Fees: Milestone license fees of $500,000 have been accrued in the three
months ended March 31, 2004 in connection with the annual milestone license fee
of $2,000,000 that is payable to Novogen on December 31, 2004 under the terms of
the license agreement with Novogen.

Selling, General and Administrative: Selling, administrative and general
expenses increased by $265,000 to $405,000 for the three months ended March 31,
2004 compared to $140,000 for the three months ended March 31, 2003. The
increase was due primarily to the increase in costs associated with professional
and other fees relating to compliance with United States reporting requirements.
Other expenses including public relations also increased.

Foreign Exchange Gains/(Losses): Foreign exchange gains/losses occur when
revaluing cash denominated in foreign currencies and upon consolidation of MEI's
wholly owned Australian subsidiary Marshall Edwards Pty Ltd ('MEPL'), which has
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. Foreign exchange losses were $21,000 for the
three months ended March 31, 2004 compared to gains of $39,000 for the three
months ended March 31, 2003.

Nine Months Ended March 2004 and 2003

The Company recorded a consolidated loss of $7,337,000 and $1,846,000 for the
nine months ended March 31, 2004 and 2003 respectively.

Revenues: The Company received interest of $121,000 on cash assets and cash
equivalents for the nine months ended March 31, 2004 versus $115,000 for the
nine months ended March 31, 2003 The increase was due to the higher cash
balances following the exercise of the Company's outstanding Warrants in
November 2003 and the Company's December 2003 public offering.

Research and Development: Research and Development expenses increased $292,000
to $1,819,000 for the nine months ended March 31, 2004 compared to $1,527,000 of
the nine months ended March 31, 2003. The increase was due primarily to the cost
of phenoxodiol supplied for use in the clinical trial program which increased
due to Novogen's higher production costs and increased dosages.

License Fees: A license fee of $5,000,000 was paid to Novogen in February 2004
under the terms of the license agreement following the exercise of warrants and
the receipt of proceeds from the public offering completed in December 2003 of
which, $4,500,000 of license fee expense was included in the Consolidated
Statement of Operations for the nine months ended March 2004. The remaining
$500,000 had been expensed in the fiscal year ended June 30, 2003.

Milestone license fees of $500,000 have been accrued in the three months ended
March 31, 2004 in connection with the milestone license fee of $2,000,000 that
is payable to Novogen on December 31, 2004 under the terms of the license
agreement with Novogen.

Selling, General and Administrative: Selling, administrative and general
expenses increased $240,000 to $686,000 for the nine months ended March 31, 2004
compared to $446,000 for the nine months ended March 31, 2003. The increase
occurred in the three months ended March 31, 2004 and was due primarily to the
increase in the costs associated with professional and other fees relating to
compliance with United States reporting requirements. Other expenses including
public relations also increased.

Foreign Exchange Gains/(Losses): Foreign exchange gains/losses occur when
revaluing cash denominated in foreign currencies and upon consolidation of MEPL,
which uses US dollars as its functional currency and also engages transactions
in foreign currency. Further, MEPL's accounts and financial statements are
denominated in Australian dollars. For the nine months ended March 31, 2004
exchange gains were $47,000 compared to exchange gains of $12,000 for the nine
months ended March 31, 2003.

Liquidity and Capital Resources

At March 31, 2004, the Company had cash resources of $25,546,000 compared to
$7,244,000 at June 30, 2003. The increase is due almost exclusively to the sale
of common stock through the exercise of warrants in November 2003 and as a
result of a public offering of common stock units in December 2003. Funds are
invested in short term market accounts, pending use. The implementation of the
Company's business plan is dependent on the Company's ability to maintain
adequate cash resources to complete the clinical development program.

Source and Uses of Cash

Cash Used in Operating Activities

Cash used in operating activities for the nine months ended March 31, 2004 was
$7,244,000 compared to $1,416,000 for the same period in 2003. The increase in
cash outflow of $5,828,000 for the nine months ended March 31, 2004 included the
payment of $5,000,000 to Novogen under the terms of the license agreement. The
remaining cash outflow of $828,000 resulted from increased payments of operating
expenses including clinical trial costs and drug supplies.

Cash Provided from Financing Activities

Cash provided from financing activities for the nine months ended March 31, 2004
was $25,577,000.

In November 2003, 2,514,000 warrants were exercised at an exercise price of
$4.00. These warrants were issued as part of the sale of common stock in May
2002. Proceeds from the exercise of the warrants were $10,056,000.

In December 2003, the Company completed an initial public offering in the United
States of 2,392,000 common stock units at an initial public offering price of
$7.50 per unit. Each common stock unit consists of:

-        one share of common stock; and

-        one warrant to purchase a share of common stock at an exercise price
         equal to $9.00.

The Company intends to use the proceeds of the December 2003 public offering as
follows:

-        Approximately $1.1 million to commence Phase II clinical trials of
         phenoxodiol as a monotherapy in earlier stage cancers;

-        Approximately $4.2 million to commence Phase II clinical trials of
         phenoxodiol in combinational therapy with other anti-cancer drugs for 
         late stage chemo-resistant tumors; and

-        The balance for other corporate purposes, including potential payments
         to Novogen under the terms of the license agreement, potential 
         licensing of other cancer compounds developed by Novogen and potential 
         expansion of the clinical trial program for phenoxodiol to include 
         other forms of cancer.

Cash Requirements

Based on current plans, the Company believes that it will have sufficient cash
resources to fund operations at least through the end of December 2004 and to
complete the current Phase lb/IIa and Phase II clinical trial program, commence
Phase II clinical trials of phenoxodiol as a monotherapy in early stage cancer,
and to commence Phase II clinical trials of phenoxodiol in combinational therapy
with other anti-cancer drugs for late stage chemo- resistant tumors. Ongoing
operations through the conduct of the clinical trial program will continue to
consume cash resources without generating revenues.

If the Phase III clinical program, which is a multi-center study measuring
efficacy in a large number of patients is undertaken, additional funds will be
required to complete the program. The Company is not able to reasonably estimate
at this time either the amount required or when that amount will need to be
raised. This will to a large extent be influenced by the number of patients
enrolled in the trial, which can only be determined accurately upon completion
of Phase II trials. If the Phase II trials are successful the Company will seek
to raise the funds required to complete Phase III trials or enter into a
collaborative arrangement with a major pharmaceutical company.

The Company must pay amounts to Novogen under the license agreement with Novogen
when certain milestones are met. For details of the amounts payable see note 7
to the Financial Statements 'Related Party Transactions', included under Item 1.

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

Contractual obligations

The following table summarizes our future payment obligations and commitments as
of March 31, 2004:

(In thousands)                                  Payment due by period
-----------------         ------- -------       -----------------------
                                                   
Contractual                       Total    less    1 - 3     3 - 5   More than
Obligations                                than    Years     Years    5 Years
                                           1 Year
                                                   
       -----------------  ------- -------  ------- -------   -------  --------

Long Term Debt                        -        -        -        -         -
Obligations
Capital Lease                         -        -        -        -         -
Obligations
Operating Lease                       -        -        -        -         -
Obligations
Purchase
Obligations                     $ 3,468   $ 2,666   $ 802      $ -       $ -
                                  
Other Long-term Lease Liabilities     -        -        -        -         -
Reflected on the Balance Sheet
under GAAP
       -----------------  ------- -------  -------  -------  -------  --------
                 Total           $ 3,468   $ 2,666   $ 802     $ -       $ -
       -----------------  ------- -------  -------  -------  -------  --------
                                

Off-Balance Sheet Arrangements

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





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