DELAWARE
|
51-0407811
|
(State
or other jurisdiction of
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(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
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Large
accelerated filer o
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Non-accelerated
filer x
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Accelerated
filer o
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Smaller
reporting entity o
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PART
I
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FINANCIAL
INFORMATION
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Page
|
Item
1:
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Financial
Statements (Unaudited)
|
|
Consolidated
Balance Sheets as of December 31, 2008 and June 30, 2008
|
3
|
|
Consolidated
Statements of Operations for the three months and six months ended
December 31, 2008 and 2007 and for the period from December 1, 2000
(inception) through December 31, 2008
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4
|
|
Consolidated
Statements of Cash Flows for the six months ended December 31, 2008 and
2007 and for the period from December 1, 2000 (inception) through December
31, 2008
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5
|
|
Consolidated
Statement of Stockholders’ Equity
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6
|
|
Notes
to Consolidated Financial Statements
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7
|
|
Item
2:
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
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18
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Item
3:
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Quantitative
and Qualitative Disclosures about Market Risk
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28
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Item
4T:
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Controls
and Procedures
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29
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PART
II
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OTHER
INFORMATION
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|
Item
4:
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Submission
of Matters to a Vote of Security Holders
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30
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Item
6:
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Exhibits
|
31
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SIGNATURES
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32
|
|
December
31
|
June
30,
|
|||||||
2008
|
2008
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 24,989 | $ | 19,743 | ||||
Deferred
offering costs
|
- | 110 | ||||||
Prepaid
expenses and other current assets
|
65 | 125 | ||||||
Total
current assets
|
25,054 | 19,978 | ||||||
Total
assets
|
$ | 25,054 | $ | 19,978 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ | 690 | $ | 1,130 | ||||
Accrued
expenses
|
1,592 | 1,884 | ||||||
Amount
due to related company
|
255 | 429 | ||||||
Total
current liabilities
|
2,537 | 3,443 | ||||||
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: 73,463,233 at
|
||||||||
December 31,
2008 and 68,854,938 at June 30, 2008
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- | - | ||||||
Additional
paid-in capital
|
78,099 | 68,266 | ||||||
Deficit
accumulated during development stage
|
(55,582 | ) | (51,731 | ) | ||||
Total
stockholders' equity
|
22,517 | 16,535 | ||||||
Total
liabilities and stockholders' equity
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$ | 25,054 | $ | 19,978 |
Three
Months Ended
December
31,
|
Six
Months Ended
December
31,
|
Period
from December 1, 2000 (Inception) through
December
31,
|
||||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2008
|
||||||||||||||||
Revenues:
|
||||||||||||||||||||
Interest and
other income
|
$ | 76 | $ | 215 | $ | 172 | $ | 433 | $ | 2,590 | ||||||||||
Total
revenues
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76 | 215 | 172 | 433 | 2,590 | |||||||||||||||
Operating
expenses:
|
||||||||||||||||||||
Research and
development
|
(1,365 | ) | (1,865 | ) | (3,443 | ) | (4,771 | ) | (28,709 | ) | ||||||||||
License
fees
|
- | - | - | - | (18,000 | ) | ||||||||||||||
Selling,
general and administrative
|
(310 | ) | (660 | ) | (579 | ) | (1,337 | ) | (11,456 | ) | ||||||||||
Total
operating expenses
|
(1,675 | ) | (2,525 | ) | (4,022 | ) | (6,108 | ) | (58,165 | ) | ||||||||||
Loss
from operations
|
(1,599 | ) | (2,310 | ) | (3,850 | ) | (5,675 | ) | (55,575 | ) | ||||||||||
Income
tax expense
|
- | (1 | ) | (1 | ) | (2 | ) | (7 | ) | |||||||||||
Net
loss arising during development stage
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$ | (1,599 | ) | $ | (2,311 | ) | $ | (3,851 | ) | $ | (5,677 | ) | $ | (55,582 | ) | |||||
Net
loss per common share:
|
||||||||||||||||||||
Basic
and diluted
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$ | (0.02 | ) | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.08 | ) | ||||||||
Weighted
average number of common shares outstanding
|
73,463,233 | 68,854,938 | 72,686,835 | 67,756,199 |
Six
Months Ended
December
31,
|
Period
from December 1, 2000 (Inception) through
December
31,
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
Operating
activities
|
||||||||||||
Net
loss arising during development stage
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$ | (3,851 | ) | $ | (5,677 | ) | $ | (55,582 | ) | |||
Adjustments to
reconcile net loss to net cash
|
||||||||||||
(used
in) provided by operating activities:
|
||||||||||||
Share
based payments
|
65 | - | 1,707 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Prepaid
expenses and other current assets
|
60 | 45 | (65 | ) | ||||||||
Accounts
payable
|
(440 | ) | (327 | ) | 690 | |||||||
Accrued
expenses
|
(292 | ) | 885 | 1,592 | ||||||||
Amounts
due to related company
|
(174 | ) | 294 | 255 | ||||||||
Net
cash used in operating activities
|
(4,632 | ) | (4,780 | ) | (51,403 | ) | ||||||
Financing
activities
|
||||||||||||
Net
proceeds from issuance of common stock *
|
9,878 | 15,193 | 76,392 | |||||||||
Net
cash provided by financing activities
|
9,878 | 15,193 | 76,392 | |||||||||
Net
increase in cash and cash equivalents
|
5,246 | 10,413 | 24,989 | |||||||||
Cash
and cash equivalents at beginning of period
|
19,743 | 16,158 | - | |||||||||
Cash
and cash equivalents at end of period
|
$ | 24,989 | $ | 26,571 | $ | 24,989 |
Common
Stock
|
Additional
paid in capital
|
Deficit
accumulated during development stage
|
Total
|
|||||||||||||
(shares)
|
||||||||||||||||
Balance
at June 30, 2008
|
68,854,938 | $ | 68,266 | $ | (51,731 | ) | $ | 16,535 | ||||||||
Net
loss arising during development stage
|
- | - | (3,851 | ) | (3,851 | ) | ||||||||||
Comprehensive
Loss
|
(3,851 | ) | ||||||||||||||
Common
Stock issued July 31, 2008
|
4,608,295 | 9,768 | - | 9,768 | ||||||||||||
Warrants
issued as share-based payment (refer Note 6)
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- | 65 | - | 65 | ||||||||||||
Balance
at December 31, 2008
|
73,463,233 | $ | 78,099 | $ | (55,582 | ) | $ | 22,517 |
Three
Months Ended
December
31,
|
Six
Months Ended
December
31,
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|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(In
Thousands, except share and per share data)
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(In
Thousands, except share and per share data)
|
|||||||||||||||
Numerator
|
||||||||||||||||
Net
loss arising during development stage
|
(1,599 | ) | (2,311 | ) | (3,851 | ) | (5,677 | ) | ||||||||
Effect
of dilutive securities
|
- | - | - | - | ||||||||||||
Numerator
for diluted earnings per share
|
$ | (1,599 | ) | $ | (2,311 | ) | $ | (3,851 | ) | $ | (5,677 | ) | ||||
Denominator
|
||||||||||||||||
Denominator
for basic earnings per share:
|
||||||||||||||||
Weighted
average number of shares used in computing net loss per share, basic and
diluted
|
73,463,233 | 68,854,938 | 72,686,835 | 67,756,199 | ||||||||||||
Effect
of dilutive securities
|
- | - | - | - | ||||||||||||
Dilutive
potential common shares
|
73,463,233 | 68,854,938 | 72,686,835 | 67,756,199 | ||||||||||||
Basic
and diluted earnings per share
|
$ | (0.02 | ) | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.08 | ) |
As
at December 31,
|
||||
2008
|
2007
|
|||
(Number
of warrant shares)
|
||||
Warrants
exercisable prior to July 11, 2010 at an exercise price of
$4.35
|
2,815,258
|
2,815,258
|
||
Warrants
exercisable prior to August 6, 2012 at an exercise price of
$3.60
|
2,185,598
|
2,185,598
|
||
Warrants
exercisable prior to August 6, 2012 at an exercise price of
$3.00
|
248,364
|
248,364
|
||
Warrants
exercisable prior to July 30, 2013 at an exercise price of
$2.17
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46,083
|
-
|
||
Common
shares issuable upon exercise of outstanding warrants
|
5,295,303
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5,249,220
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(In
thousands)
|
Payment
due by period
|
|||||||||||||||||||
Contractual
Obligations
|
Total
|
less
than 1 Year
|
1 -
3 Years
|
3 -
5 Years
|
More
than 5 Years
|
|||||||||||||||
Purchase
Obligations
|
$ | 13,813 | $ | 8,041 | $ | 4,867 | $ | 905 | $ | - | ||||||||||
Total
|
$ | 13,813 | $ | 8,041 | $ | 4,867 | $ | 905 | $ | - |
Three
Months Ended
December
31, 2008
|
Three
Months Ended
December
31, 2007
|
|||||||||||||||
(In
Thousands)
|
||||||||||||||||
USA
|
Australia
|
USA
|
Australia
|
|||||||||||||
Loss
from operations
|
$ | (109 | ) | $ | (1,490 | ) | $ | (96 | ) | $ | (2,215 | ) | ||||
Segment
assets
|
16,369 | 8,685 | 22,557 | 4,076 | ||||||||||||
Six
Months Ended
December
31, 2008
|
Six
Months Ended
December
31, 2007
|
|||||||||||||||
(In
Thousands)
|
||||||||||||||||
USA
|
Australia
|
USA
|
Australia
|
|||||||||||||
Loss
from operations
|
$ | (362 | ) | $ | (3,489 | ) | $ | (175 | ) | $ | (5,502 | ) |
(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.
|
(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
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(iii)
|
approval
or authorization of any kind by a government agency in any other country
to market phenoxodiol;
|
|
i)
|
$1,000,000
on the date an IND for the licensed product goes into effect or the
equivalent approval of a government agency is obtained in another country.
If this event does not occur before 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.
|
· our
inability to obtain additional required financing or financing available
to us on acceptable terms, particularly in the
context of the current global financial crisis;
|
· our
inability to maintain or enter into, and our dependence upon,
collaboration or contractual arrangements necessary
for the clinical development of phenoxodiol and other drug
candidates;
|
· our
limited operating history;
|
· our
failure to successfully commercialize our product candidates;
|
· 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.
|
· the
number of sites included in the trials;
|
· the
length of time required to enroll suitable patients;
|
· the
number of patients who participate in the trials;
|
· the
number of treatment cycles patients complete while they are enrolled in
the trials;
|
· the
indication being studied;
|
· the
availability of alternative treatment; and
|
· the
efficacy and safety profile of the
product.
|
August
6, 2007
|
July
30, 2008
|
|
Dividend
yield
|
0%
|
0%
|
Expected
volatility
|
71%
|
81%
|
Historical
volatility
|
71%
|
81%
|
Risk-free
interest rate
|
4.13%
|
3.36%
|
Expected
life of warrant
|
5
years
|
5
years
|
Warrant
fair value
|
$1.777
|
$1.41
|
Matter
|
For
|
Against
|
Abstain
|
Withhold authority
|
Broker non-votes
|
|||||||||||||||
1.
Election of Directors
|
||||||||||||||||||||
Christopher Naughton
|
59,585,660 | - | - | 3,600,924 | - | |||||||||||||||
William D. Rueckert
|
62,819,362 | - | - | 367,222 | - | |||||||||||||||
2.
Adoption of the Marshall Edwards, Inc, 2008 Stock Omnibus Equity
Compensation Plan.
|
57,578,876 | 2,857,409 | 62,875 | - | 2,687,424 | |||||||||||||||
3.
Ratification of appointment of BDO Kendalls Audit & Assurance
(NSW-VIC) Pty Ltd as auditors.
|
60,667,094 | 2,441,818 | 77,672 | - | - |
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).
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of Marshall Edwards,
Inc.;
|
2.
|
Based
on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this Quarterly Report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Quarterly
Report;
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within the
entities, particularly during the period in which this Quarterly Report is
being prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in the Quarterly Report our conclusions about the
effectiveness of this disclosure controls and procedures, as of the end of
the period covered by this Quarterly Report based on such evaluation;
and
|
(d)
|
Disclosed
in this Quarterly Report any change in the registrant’s internal control
over financial reporting that occurred during the registrants first fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting.
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors:
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
|
Christopher
Naughton
|
|
Chief
Executive Officer
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of Marshall Edwards,
Inc.;
|
2.
|
Based
on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this Quarterly Report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Quarterly
Report;
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within the
entities, particularly during the period in which this Quarterly Report is
being prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in the Quarterly Report our conclusions about the
effectiveness of this disclosure controls and procedures, as of the end of
the period covered by this Quarterly Report based on such evaluation;
and
|
(d)
|
Disclosed
in this Quarterly Report any change in the registrant’s internal control
over financial reporting that occurred during the registrants first fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting.
|
5.
|
The
Company’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors:
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
|
David
R. Seaton
|
|
Chief
Financial Officer
|
1.
|
The
Registrant’s Quarterly Report on Form 10-Q for the period ended December
31, 2008, (the “Form 10-Q”) to which this Certification is attached as
Exhibit 32.1, fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended;
and
|
2.
|
The
information contained in the Form 10-Q fairly presents, in all material
respects, the financial condition of the Registrant at the end of the
period covered by the Form 10-Q and results of operations of the
registrant for the period covered by the Form
10-Q.
|