##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-QSB
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 Commission file number 001-31608
 XCORPOREAL, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    98-0349685
(IRS Employer Identification Number)
 11150 Santa Monica Blvd., Suite 340, Los Angeles, California 90025
 (310) 424-5668
  þ o
  o þ
  Class
    
    Outstanding as of August 2, 2007Common Stock, $0.0001 par value
    
    14,200,050 shares
 o þ




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##### 



INDEX
 PART I  FINANCIAL INFORMATIONItem 1. Interim Financial StatementsBalance Sheets at June 30, 2007 (unaudited) and December 31, 2006Statements of Operations (unaudited) for the three and six months ended
June 30, 2007 and June 30, 2006 and the period from inception (May 4,
2001) to June 30, 2007Statement of Stockholders Equity (Deficit) for the six months ended June
30, 2007 and the period from inception (May 4, 2001) to June 30 2007
(unaudited)Statements of Cash Flows (unaudited) for the six months ended June 30,
2007 and June 30, 2006 and the period from inception (May 4, 2001) to
June 30, 2007Notes to the Interim Financial StatementsItem 2. Managements Discussion and Analysis or Plan of OperationItem 3. Controls and ProceduresPART II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSignaturesEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 XCORPOREAL, INC.
(a Development Stage Company)
 
 BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrentCash and cash equivalents
    
    $
    346,887
    
    
    $
    27,440,987Marketable securities, at fair value
    
    
    22,676,578
    
    
    
    Restricted cash
    
    
    83,050
    
    
    
    Prepaids
    
    
    158,802
    
    
    
    70,850Other current assets
    
    
    12,066
    
    
    
    19,378Total current assets
    
    
    23,277,383
    
    
    
    27,531,215Property and equipment, net
    
    
    56,094
    
    
    
    3,328Other assets
    
    
    951
    
    
    
    1,000Total Assets
    
    
    23,334,428
    
    
    
    27,535,543LIABILITIESCurrentAccounts payable
    
    
    455,036
    
    
    
    143,606Accrued placement agent fees
    
    
    
    
    
    
    1,348,470Accrued professional fees
    
    
    427,259
    
    
    
    312,208Accrued royalties
    
    
    208,333
    
    
    
    83,333Accrued other liabilities
    
    
    111,630
    
    
    
    121,189Other current liabilities
    
    
    115,400
    
    
    
    124,676Total Current Liabilities
    
    
    1,317,658
    
    
    
    2,133,482Commitments and contingenciesSTOCKHOLDERS EQUITYPreferred Stock, $0.001 par value, 10,000,000
shares authorized, none outstanding
    
    
    
    
    
    
    Common Stock, $0.0001 par value, 40,000,000
shares authorized, 14,200,050 outstanding on June
30, 2007 and December 31, 2006
    
    
    1,420
    
    
    
    1,420Additional paid-in capital
    
    
    34,202,998
    
    
    
    29,924,410Deficit accumulated during the development stage
    
    
    (12,187,648
    )
    
    
    (4,523,769
    )Total Stockholders Equity
    
    
    22,016,770
    
    
    
    25,402,061Total Liabilities & Stockholders Equity
    
    $
    23,334,428
    
    
    $
    27,535,543




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XCORPOREAL, INC.
(a Development Stage Company)
 
 STATEMENTS OF OPERATIONS
(Unaudited)
 May 4, 2001 (DateThree Months Ended
    
    
    Six Months Ended
    
    
    of Inception) toJune 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007Operating Expenses:Selling, general and administrative
    
    $
    1,611,188
    
    
    $
    5,587
    
    
    $
    5,590,288
    
    
    $
    11,790
    
    
    $
    8,908,940Research and development
    
    
    1,482,037
    
    
    
    
    
    
    
    2,688,134
    
    
    
    
    
    
    
    3,975,456Depreciation and amortization
    
    
    3,862
    
    
    
    
    
    
    
    5,383
    
    
    
    
    
    
    
    5,478Loss before Other Income and Income Tax
    
    
    (3,097,087
    )
    
    
    (5,587
    )
    
    
    (8,283,805
    )
    
    
    (11,790
    )
    
    
    (12,889,874
    )Interest Income
    
    
    308,060
    
    
    
    
    
    
    
    619,926
    
    
    
    
    
    
    
    702,226Loss before income taxes
    
    
    (2,789,027
    )
    
    
    (5,587
    )
    
    
    (7,663,879
    )
    
    
    (11,790
    )
    
    
    (12,187,648
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Loss
    
    $
    (2,789,027
    )
    
    $
    (5,587
    )
    
    $
    (7,663,879
    )
    
    $
    (11,790
    )
    
    $
    (12,187,648
    )Basic and diluted loss per share
    
    $
    (0.20
    )
    
    $
    (0.00
    )
    
    $
    (0.54
    )
    
    $
    (0.00
    )Weighted average number of shares
outstanding
    
    
    14,200,050
    
    
    
    3,820,000
    
    
    
    14,200,050
    
    
    
    3,820,000




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XCORPOREAL, INC.
(a Development Stage Company)
 
 STATEMENTS OF CASH FLOWS
(Unaudited)
 May 4, 2001 (DateSix Months Ended
    
    
    of Inception) toJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007Cash flows used in operating activitiesNet Loss for the Period
    
    $
    (7,663,879
    )
    
    $
    (11,790
    )
    
    $
    (12,187,648
    )Adjustments to reconcile net loss to net cash used in
operating activities:Non-employee Stock Based Compensation
    
    
    2,795,124
    
    
    
    
    
    
    
    4,957,735Stock Based Compensation
    
    
    1,483,464
    
    
    
    
    
    
    
    1,747,715Depreciation and amortization
    
    
    5,383
    
    
    
    
    
    
    
    5,478Net Change in assets and liabilities:Prepaid Expenses
    
    
    (87,952
    )
    
    
    
    
    
    
    (158,802
    )Other Current Assets
    
    
    7,312
    
    
    
    
    
    
    
    (12,066
    )Other Assets
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Accounts Payable and Accrued Liabilities
    
    
    (806,548
    )
    
    
    5,459
    
    
    
    1,202,257Other Current Liabilities
    
    
    (9,276
    )
    
    
    
    
    
    
    115,400Net Cash Used in Operating Activities
    
    
    (4,276,372
    )
    
    
    (6,331
    )
    
    
    (4,330,931
    )Cash Flows from Investing ActivitiesCapital Expenditures
    
    
    (58,100
    )
    
    
    
    
    
    
    (61,523
    )Restricted Cash
    
    
    (83,050
    )
    
    
    
    
    
    
    (83,050
    )Purchase of marketable securities
    
    
    (25,000,000
    )
    
    
    
    
    
    
    (25,000,000
    )Sale of marketable securities
    
    
    2,323,422
    
    
    
    
    
    
    
    2,323,422Net Cash Used in Investing Activities
    
    
    (22,817,728
    )
    
    
    
    
    
    
    (22,821,151
    )Cash Flows from Financing ActivitiesCapital Stock issued
    
    
    
    
    
    
    
    
    
    
    27,434,349Advances from related party
    
    
    
    
    
    
    6,590
    
    
    
    64,620Net Cash Provided by Financing Activities
    
    
    
    
    
    
    6,590
    
    
    
    27,498,969Increase/(decrease) in cash during the period
    
    
    (27,094,100
    )
    
    
    259
    
    
    
    346,887Cash, beginning of the period
    
    
    27,440,987
    
    
    
    
    
    
    
    Cash, end of the period
    
    $
    346,887
    
    
    $
    259
    
    
    $
    346,887Supplemental disclosure of cash flow information; cash paid for:Interest
    
    $
    
    
    
    $
    
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    
    
    
    $
    




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XCORPOREAL, INC.
(a Development Stage Company)
 
 STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY)
For the Period May 4, 2001 (Inception) to June 30, 2007
(Unaudited)
 DeficitAccumulatedAdditional
    
    
    DuringCommon Stock
    
    
    Paid-in
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Capital
    
    
    Stage
    
    
    TotalCommon stock issued for cash at $0.01 per share
    
    
    2,500,000
    
    
    $
    250
    
    
    $
    24,750
    
    
    
    
    
    
    $
    25,000Net Loss for the year ended December 31, 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (40,255
    )
    
    
    (40,255
    )Balance as of December 31, 2001
    
    
    2,500,000
    
    
    
    250
    
    
    
    24,750
    
    
    
    (40,255
    )
    
    
    (15,255
    )Common stock issued for cash at $0.05 per share
    
    
    1,320,000
    
    
    
    132
    
    
    
    65,868
    
    
    
    
    
    
    
    66,000Net Loss for the year ended December 31, 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,249
    )
    
    
    (31,249
    )Balance as of December 31, 2002
    
    
    3,820,000
    
    
    
    382
    
    
    
    90,618
    
    
    
    (71,504
    )
    
    
    19,496Net Loss for the year ended December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,962
    )
    
    
    (12,962
    )Balance as of December 31, 2003
    
    
    3,820,000
    
    
    
    382
    
    
    
    90,618
    
    
    
    (84,466
    )
    
    
    6,534Net Loss for the year ended December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,338
    )
    
    
    (23,338
    )Balance as of December 31, 2004
    
    
    3,820,000
    
    
    
    382
    
    
    
    90,618
    
    
    
    (107,804
    )
    
    
    (16,804
    )Net Loss for the year ended December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,753
    )
    
    
    (35,753
    )Balance as of December 31, 2005
    
    
    3,820,000
    
    
    
    382
    
    
    
    90,618
    
    
    
    (143,557
    )
    
    
    (52,557
    )Common stock issued for a licence rights
    
    
    9,600,000
    
    
    
    960
    
    
    
    40
    
    
    
    
    
    
    
    1,000Capital stock cancelled
    
    
    (3,420,000
    )
    
    
    (342
    )
    
    
    342
    
    
    
    
    
    
    
    Warrants granted for consulting fees
    
    
    
    
    
    
    
    
    
    
    2,162,611
    
    
    
    
    
    
    
    2,162,611Forgiveness of related party debt
    
    
    
    
    
    
    
    
    
    
    64,620
    
    
    
    
    
    
    
    64,620Common stock issued for cash at $7.00, net of
placement fees of $2,058,024
    
    
    4,200,050
    
    
    
    420
    
    
    
    27,341,928
    
    
    
    
    
    
    
    27,342,348Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    264,251
    
    
    
    
    
    
    
    264,251Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,380,212
    )
    
    
    (4,380,212
    )Balance as of December 31, 2006
    
    
    14,200,050
    
    
    
    1,420
    
    
    
    29,924,410
    
    
    
    (4,523,769
    )
    
    
    25,402,061Warrants granted for consulting services
    
    
    
    
    
    
    
    
    
    
    2,795,124
    
    
    
    
    
    
    
    2,795,124Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,483,464
    
    
    
    
    
    
    
    1,483,464Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,663,879
    )
    
    
    (7,663,879
    )Balance as of June 30, 2007
    
    
    14,200,050
    
    
    $
    1,420
    
    
    $
    34,202,998
    
    
    $
    (12,187,648
    )
    
    $
    22,016,770




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XCORPOREAL, INC.
 (a Development Stage Company)
 
 NOTES TO THE INTERIM FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
 Note 1  Interim Reporting
   Note 2  Nature and Continuance of Operations
   Note 3  Development Stage Company
  Risks and Uncertainties
 Note 4  Cash Equivalents and Marketable Securities




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Note 5 Property and Equipment
  Property and equipment
    
    $
    61,523Accumulated depreciation
    
    
    (5,429
    )Property and equipment, net
    
    $
    56,094
  Note 6  Interest Income
  Note 7  Mineral Property
  Note 8  Related Party Transaction
  May 2, 2001(Date ofThree months ended
    
    Six months ended
    
    Inception) toJune 30,
    
    June 30,
    
    June 30,2006
    
    2007
    
    2006
    
    2007
    
    2007Administrative services
    
    $
    1,500
    
    
    $
    
    
    
    $
    3,000
    
    
    $
    
    
    
    $
    12,000
 Note 9  License Agreement
  Note 10  Terminated Merger Agreement




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Note 11  Stock Options and Warrants
 Incentive Compensation Plan
  Stock Options to Employees, Officer and Directors
    For the quarterendedJune 30, 2007Expected dividend yields
    
    zeroExpected volatility
    
    
    110
    %Risk-free interest rate
    
    
    4.60
    %Expected terms in years
    
    
    6.25-6.50
 Warrants and Stock Options to Non-Employees




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For the quarterendedJune 30, 2007Expected dividend yields
    
    zeroExpected volatility
    
    
    135
    %Risk-free interest rate
    
    
    4.67
    %Expected terms in years
    
    
    9.87
  Stock Options and
    
    
    UnamortizedWarrants
    
    
    CompensationOutstanding
    
    
    ExpenseJanuary 1, 2007
    
    
    2,054,221
    
    
    $
    10,002,154Granted in the period
    
    
    2,160,000
    
    
    
    13,343,156Cancelled in the period
    
    
    (50,000
    )
    
    
    (282,403
    )Expensed in the period
    
    
    
    
    
    
    (4,297,569
    )June 30, 2007
    
    
    4,164,221
    
    
    $
    18,765,338
 Note 12  Subsequent Events
  
 ITEM 2. Managements Discussion and Analysis or Plan of Operation.
 The following discussion of our financial condition and results of operations should be read
in conjunction with our financial statements and the related notes, and the other financial
information included in this report.
 Forward-Looking Statements
  Plan of Operation
 Overview
 extracorporeal




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License Agreement
  Intellectual Property
    Description of Business
 extracorporeal
  
    
    Hospital ultrafiltration therapy for fluid overload resulting from congestive heart failure
 
    
    Hospital acute renal replacement therapy
 
    
    Home chronic renal replacement therapy
 
    
    Wearable Artificial Kidney (WAK) for chronic treatment of End Stage Renal Disease (ESRD)
  Product Applications




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Research and Development
 R&D Team
  
    
    Adapting the extracorporealplatform technology to
develop four devices for medical use. We believe our technology is a platform for a number of devices
that can be used to treat other diseases and will offer substantive value propositions for
patients and healthcare providers.
 
    
    Developing software to allow physicians to customize the function of the device to meet
the specific dialysis needs of each patient.
 
    
    Expanding our recruiting and retaining an experienced team of scientists and engineers.
 
    
    Improving the chemicals used in the dialysis process. The current chemicals have been
used for decades. We believe new chemicals that last longer and can be used in smaller
quantities would further reduce the cost and weight of our product.
 Clinical Studies
   Third-party Arrangements
   Management Team and Board of Directors
   Managements Discussion and Analysis
 Results of Operations for the three and six months ended June 30, 2007




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Liquidity and Capital Resources
   Off-Balance Sheet Arrangements
  Legal Proceedings




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Critical Accounting Policies and Estimates
   Marketable Securities
  Identifiable Intangibles
  Stock-Based Compensation
 Share-Based
Payment
 Recent Accounting Pronouncements
 Accounting for Servicing of Financial Assets 
an amendment of FASB Statement No. 140
 Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109




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Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities SFAS No. 159 Fair Value Measurements.
 Accounting for Registration Payment Arrangements FSP 00-19-2 Accounting for Contingencies
 Considering the Effects of Prior Year Misstatement when Quantifying
Misstatements in Current Year Financial Statements
 
 ITEM 3. Controls and Procedures




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PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings.
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
    
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders.
  
 ITEM 5. Other Information.
  
 ITEM 6. Exhibits.
 No.
    
    Description of Exhibit31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




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SIGNATURES
  Date: August 6, 2007
    By:
    /s/ ROBERT S. STEFANOVICHRobert S. StefanovichInterim Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)