The following discussion and analysis should be read in conjunction with "Item
8. Financial Statements and Supplementary Data" included below. Operating results are not necessarily indicative of results that may occur in future periods. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in the forward-looking statements as a result of many factors including, but not limited to, those set forth under "Cautionary Statement About Forward-Looking Statements" and "Risk Factors" in Item 1A. included above in this Annual Report on Form 10-K. All forward-looking statements included in this document are based on the information available to us on the date of this document and we assume no obligation to update any forward-looking statements contained in this Annual Report on Form 10-K.

Overview

Our main focus since commencing operations is to undertake human clinical testing of phenoxodiol. Our operations were expanded to include the additional licensed drug candidates triphendiol and NV-143 and most recently, NV-128. During fiscal year 2007, we commenced the OVATURE Phase III clinical trial. We have reached agreement under the SPA process with the FDA on the design of our OVATURE pivotal study protocol for phenoxodiol. The trial is designed to test the ability of phenoxodiol to restore sensitivity of late-stage ovarian cancers to carboplatin, a standard form of therapy for ovarian cancer.

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

The termination of patient enrollment into the OVATURE study and unblinded analysis of the available data from the trial have been discussed with FDA, because the analysis will not be performed as described in the approved SPA.

We decided to terminate new enrollment into the OVATURE Phase III clinical trial and assess the available patient data, in part, because we believe that the global financial downturn makes it unlikely that we will be able to raise the necessary capital through debt or equity issuances in the near future to fund the trial to completion as originally planned. Additionally, changes in the standard of care over the period that the OVATURE Phase III clinical trial has been in operation resulted in fewer women meeting the inclusion criteria of the OVATURE protocol, which slowed patient recruitment rates.

In August, 2009, we entered into a third license agreement with Novogen for the investigational oncology compound NV-128. In consideration of the license granted to us we paid Novogen a license fee of $1,500,000 on August 7, 2009.

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

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

As of June 30, 2009, we had accumulated losses of $62,911,000.

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

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

Expenses to date have consisted primarily of costs associated with conducting the clinical trials of phenoxodiol including OVATURE, costs incurred under the Phenoxodiol License Agreement, as amended, the License Agreement for Triphendiol and NV-143, the Services Agreement and the Manufacturing License and Supply Agreements with Novogen and its subsidiaries, including the costs of the clinical trial drug supplies.

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

As at the date of the Annual Report on Form 10-K, Novogen owns approximately 71.3% of the outstanding shares of our common stock.

Liquidity and Capital Resources

At June 30, 2009, we had cash resources of $19,067,000 compared to $19,743,000 at June 30, 2008. The decrease was due to expenditures in the clinical trial program and other corporate expenses incurred in the period, partially offset by our registered direct offering in July 2008, as described below. Funds are invested in short term money market accounts, pending use.

On July 28, 2008 we entered into a securities subscription agreement with Novogen and OppenheimerFunds, Inc. ("Oppenheimer") pursuant to which we sold 2,908,295 and 1,700,000 shares of common stock to Novogen and Oppenheimer, respectively, with Oppenheimer acting as adviser to each of the following parties severally and not jointly: (i) Oppenheimer International Growth Fund;
(ii) Mass Mutual International Equity Fund; (iii) Oppenheimer International Growth Fund/VA; (iv) AZL Oppenheimer International Growth Fund; (v) OFITC International Growth Fund; and (vi) OFI International Equity Fund, at a purchase price of $2.17 per share, the consolidated closing bid price of our common stock as quoted by the NASDAQ Market Intelligence Desk at 4:00 PM EST on July 28, 2008. The shares were registered under the Securities Act of 1933, as amended (the "Securities Act") under a Shelf Registration Statement on Form F-3. We received gross proceeds of $10 million from the sale of the shares.

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

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

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

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

Source and Uses of Cash

Cash Used in Operating Activities

Cash used in operating activities for the twelve months ended June 30, 2009 was $10,554,000 compared to $11,498,000 for the same period in 2008.

Cash Requirements

The Company intends to allocate its current funds of approximately $19 million to completing the OVATURE data analysis of 142 patients, pursuing negotiations for out-licensing phenoxodiol should evidence of efficacy and safety emerge from the OVATURE analysis, initiating the triphendiol clinical program and in-licensing further promising anti-cancer compounds from Novogen.

Specifically we intend to:

· Commence the clinical development of the drug candidate triphendiol in the U.S. for which an IND has been granted by the FDA, allowing clinical trials to commence in the U.S. for pancreatic and bile duct cancers. In addition, this drug was designated by the FDA as an Orphan Drug for treatment of pancreatic cancer, bile duct cancer, and late stage melanoma;

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

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

Payments to Novogen

Future payments to Novogen under the terms of the Phenoxodiol License Agreement, as amended and the License Agreement for Triphendiol and NV-143 and the License agreement for NV-128 are detailed in Note 6 of the financial statements "Related Party Transactions"

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.

Results of Operations

Summary of Revenue and Expenses

The following table provides a summary of revenues and expenses to supplement
the more detailed discussions below:

Revenues                                                    Years Ended June 30,
                                                       2009         2008         2007
                                                               (in thousands)
Interest and other income                            $    228     $    674     $    645
Total revenues                                            228          674          645


Research and development expenses                           Years Ended June 30,
                                                        2009         2008         2007
                                                               (in thousands)
Clinical trial study costs                           $ (5,719 )   $ (5,928 )   $ (2,255 )
Drug/manufacturing scale-up costs                        (198 )     (1,310 )     (1,860 )
Research and development service charge                (1,456 )     (2,065 )     (1,145 )
Other                                                    (404 )        (22 )       (501 )
Total Research and Development Costs                   (7,777 )     (9,325 )     (5,761 )


License Fees                                                Years Ended June 30,
                                                        2009         2008         2007
                                                               (in thousands)

License Fees                                           (2,000 )     (1,000 )     (5,000 )


Selling, general and administrative expenses                Years Ended June 30,
                                                        2009         2008         2007
                                                               (in thousands)
Legal and professional fees                          $   (479 )   $   (527 )   $   (488 )
Administrative service charge                            (808 )       (989 )       (818 )
Share based payment                                       (90 )          -       (1,642 )
Other                                                    (253 )     (1,240 )       (755 )
Total selling, general and administrative expenses     (1,630 )     (2,756 )     (3,703 )

Year Ended June 30, 2009 Compared to the Year Ended June 30, 2008

We recorded a consolidated loss of $11,180,000 and $12,410,000 for the years ended June 30, 2009 and 2008, respectively.

Revenues: We received interest on cash assets and cash equivalents of $228,000 for the year ended June 30, 2009 versus $674,000 for the year ended June 30, 2008. This decrease was due to lower interest rates as a result of the global financial crisis.

Research and Development: Research and development expenses reduced $1,548,000 to $7,777,000 for the year ended June 30, 2009 compared to $9,325,000 for the year ended June 30, 2008. This decrease was primarily due to a reduction in the cost of drug for the OVATURE clinical trail which was mostly manufactured in prior years. The research and development service charge from Novogen decreased for the year ended June 30, 2009, due to favorable currency movements in the U.S. dollar compared to the Australian dollar as these charges are denominated in Australian dollars.

Also included in clinical trial study costs are the expenses associated with the termination of the enrollment in the OVATURE Phase III clinical trial.

License Fees: Milestone license fees of $2,000,000 have been expensed in the twelve months ended June 30, 2009 under the terms of the License Agreement for Triphendiol and NV-143. This license fee was due on the date of enrollment of the first clinical trial subject in a Phase II clinical trial of the licensed product. As this event did not occur the payment was due and paid on June 30, 2009.

Selling, General and Administrative: Selling, general and administrative expenses decreased by $1,126,000 to $1,630,000 for the year ended June 30, 2009 compared to $2,756,000 for the year ended June 30, 2008. The decrease was due primarily to our decision to conserve cash and reduce expenses associated with public relations, travelling expenses and reduced administration service fees paid to Novogen.

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 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 June 30, 2009, we had not established a foreign currency hedging program. Net foreign exchange gains during the twelve months ended June 30, 2009 were $242,000 compared with net exchange losses of $255,000 during the twelve months ended June 30, 2008.

Year Ended June 30, 2008 Compared to the Year Ended June 30, 2007

We recorded a consolidated loss of $12,410,000 and $13,820,000 for the years ended June 30, 2008 and 2007, respectively.

Revenues: We received interest on cash assets and cash equivalents of $674,000 for the year ended June 30, 2008 versus $645,000 for the year ended June 30, 2007. This increase was due to higher cash balances combined with an increase in interest rates.

Research and Development: Research and development expenses increased $3,564,000 to $9,325,000 for the year ended June 30, 2008 compared to $5,761,000 for the year ended June 30, 2007. This increase was primarily due to increased clinical trial costs incurred associated with the OVATURE Phase III clinical trial reflecting the increasing number of patients on study and the commissioning of new trial sites.

License Fees: Milestone license fees of $1,000,000 have been expensed in the twelve months ended June 30, 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 twelve months ended June 30, 2007. 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 private placement or PIPE which closed in July 2006, the funds received from equity issuances exceeded $50,000,000 which triggered this license fee payment.

Selling, General and Administrative: Selling, general and administrative expenses decreased by $947,000 to $2,756,000 for the year ended June 30, 2008 compared to $3,703,000 for the year ended June 30, 2007. The decrease was due primarily to the cost of the share-based payment, valued at $1,642,000, in fiscal 2007 for a commitment fee paid to YA Global Investments, LP (YA Global Investments, formerly Cornell Capital Partners, LP) in connection with a Standby Equity Distribution Agreement ("SEDA") entered into by us and YA Global Investments as of July 11, 2006. These savings were partially off set by increased costs for general corporate expenses including an increase in legal compliance costs, travel expenses, public relations and service fees paid to Novogen reflecting an increase in corporate and accounting services and insurance.

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 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 June 30, 2008, we had not established a foreign currency hedging program. Net foreign exchange losses during the twelve months ended June 30, 2008 were $255,000 compared with net exchange losses of $98,000 during the twelve months ended June 30, 2007.

Off-Balance Sheet Arrangements

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

Contractual Obligations

For details of our contractual obligations at June 30, 2009 see Note 4 to the financial statements "Expenditure Commitments".

Critical Accounting Estimates

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

Clinical Trials Expenses

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

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

Clinical trial expenses of $5,719,000 have been included in the financial statements for the year ended June 30, 2009, of which $3,086,000 has been accrued at June 30, 2009. These estimates are based on the number of patients in each trial and the drug administration cycle.

Following the termination of enrolment into the OVATURE Phase III clinical trial, claims for clinical trial expenses have been received totalling $2,224,000. Approximately $1,181,000 has been accrued and is subject to continued negotiation and represents management's best estimate of amounts that may be payable. Depending on the outcome of these negotiations, the actual costs may be different to the amount accrued in completing the financial statements.

The remaining balance of $1,043,000 is currently being disputed as management believe the costs are outside the scope of the contracts and do not believe that these amounts are due and owing. These amounts are disclosed as a contingent liability in Note 10 to the financial statements "Contingent Liability".

Stock Based Compensation

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

We account for stock based payments 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 the 62,091 warrants representing 248,364 warrant shares issued August 6, 2007 to Blue Trading, LLC as part of a placement fee, the warrant representing 46,083 warrant shares issued to Mr. John O'Connor on July 30, 2008, in consideration for investor relations services rendered, and stock options representing 50,000 shares of common stock issued to Associate Professor Gil Mor of Yale University on January 28, 2009, in recognition of his contribution to the development of phenoxodiol under the 2008 Stock Omnibus Equity Compensation Plan, the following assumptions were used:

                         August 6, 2007 July 30, 2008 January 28, 2009
Dividend yield                 0%            0%              0%
Expected volatility           71%            81%            111%
Historical volatility         71%            81%            111%
Risk-free interest rate      4.13%          3.36%          1.70%
Expected life of warrant    5 years        5 years        5 years
Warrant fair value           $1.78          $1.41          $0.50

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