##### 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 March 31, 2007
 Commission file number 001-31608
 XCORPOREAL, INC.
  Delaware
    
    98-0349685(State or other jurisdiction of incorporation or organization)
    
    (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 May 9, 2007Common Stock, $0.0001 par value
    
    14,200,050 shares
 o þ




---



##### 



INDEX
 PART I  FINANCIAL INFORMATIONItem 1. Interim Financial StatementsBalance Sheets at March 31, 2007 (unaudited) and December 31, 2006Statements of Operations (unaudited) for the three months ended March 31,
2007 and March 31, 2006 and the period from inception (May 4, 2001) to
March 31, 2007Statement of Stockholders Equity (Deficit) for the three months ended
March 31, 2007 and the period from inception (May 4, 2001) to March 31
2007 (unaudited)Statements of Cash Flows (unaudited) for the three months ended March 31,
2007 and March 31, 2006 and the period from inception (May 4, 2001) to
March 31, 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 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSignaturesEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 XCORPOREAL, INC.
(a Development Stage Company)
 
 BALANCE SHEETS
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrentCash and cash equivalents
    
    $
    444,075
    
    
    $
    27,440,987Marketable securities, at fair value
    
    
    24,623,290
    
    
    
    Restricted cash
    
    
    75,000
    
    
    
    Prepaids
    
    
    133,202
    
    
    
    70,850Other current assets
    
    
    1,265
    
    
    
    19,378Total current assets
    
    
    25,276,832
    
    
    
    27,531,215Property and equipment, net
    
    
    37,869
    
    
    
    3,328Other assets
    
    
    13,031
    
    
    
    1,000Total Assets
    
    
    25,327,732
    
    
    
    27,535,543LIABILITIESCurrentAccounts payable
    
    
    492,940
    
    
    
    143,606Accrued placement agent fees
    
    
    
    
    
    
    1,348,470Accrued professional fees
    
    
    312,208
    
    
    
    312,208Accrued other liabilities
    
    
    583,276
    
    
    
    204,522Other current liabilities
    
    
    115,400
    
    
    
    124,676Total Current Liabilities
    
    
    1,503,824
    
    
    
    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
March 31, 2007 and December 31, 2006
    
    
    1,420
    
    
    
    1,420Additional paid-in capital
    
    
    33,221,109
    
    
    
    29,924,410Deficit accumulated during the development stage
    
    
    (9,398,621
    )
    
    
    (4,523,769
    )Total Stockholders Equity
    
    
    23,823,908
    
    
    
    25,402,061Total Liabilities & Stockholders Equity
    
    $
    25,327,732
    
    
    $
    27,535,543
  3




---



##### Table of Contents



XCORPOREAL, INC.
(a Development Stage Company)
 
 STATEMENTS OF OPERATIONS
(Unaudited)
 May 4, 2001 (DateThree Months Ended
    
    
    of Inception) toMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007Operating Expenses:Selling, general and administrative
    
    $
    4,041,634
    
    
    $
    6,203
    
    
    $
    7,360,286Research and development
    
    
    1,143,563
    
    
    
    
    
    
    
    2,430,885Depreciation and amortization
    
    
    1,521
    
    
    
    
    
    
    
    1,616Loss before Other Income and Income Tax
    
    
    (5,186,718
    )
    
    
    (6,203
    )
    
    
    (9,792,787
    )Interest Income
    
    
    311,866
    
    
    
    
    
    
    
    394,166Loss before income taxes
    
    
    (4,874,852
    )
    
    
    (6,203
    )
    
    
    (9,398,621
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    Net Loss
    
    $
    (4,874,852
    )
    
    $
    (6,203
    )
    
    $
    (9,398,621
    )Basic and diluted loss per share
    
    $
    (0.34
    )
    
    $
    (0.00
    )Weighted average number of shares
outstanding
    
    
    14,200,050
    
    
    
    3,820,000
  4




---



##### Table of Contents



XCORPOREAL, INC.
(a Development Stage Company)
 
 STATEMENTS OF CASH FLOWS
(Unaudited)
 May 4, 2001 (DateThree Months Ended
    
    
    of Inception) toMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007Cash flows used in operating activitiesNet Loss for the Period
    
    $
    (4,874,852
    )
    
    $
    (6,203
    )
    
    $
    (9,398,621
    )Adjustments to reconcile net loss to net cash used in
operating activities:Non-employee Stock Based Compensation
    
    
    2,657,635
    
    
    
    
    
    
    
    4,820,246Stock Based Compensation
    
    
    639,064
    
    
    
    
    
    
    
    903,315Depreciation and amortization
    
    
    1,521
    
    
    
    
    
    
    
    1,616Net Change in assets and liabilities:Prepaid Expenses
    
    
    (62,352
    )
    
    
    
    
    
    
    (133,202
    )Other Current Assets
    
    
    18,113
    
    
    
    
    
    
    
    (1,265
    )Other Assets
    
    
    (12,031
    )
    
    
    
    
    
    
    (13,031
    )Accounts Payable and Accrued Liabilities
    
    
    (620,382
    )
    
    
    2,702
    
    
    
    1,388,424Other Current Liabilities
    
    
    (9,276
    )
    
    
    
    
    
    
    115,400Net Cash Used in Operating Activities
    
    
    (2,262,560
    )
    
    
    (3,501
    )
    
    
    (2,317,118
    )Cash Flows from Investing ActivitiesCapital Expenditures
    
    
    (36,062
    )
    
    
    
    
    
    
    (39,485
    )Restricted Cash
    
    
    (75,000
    )
    
    
    
    
    
    
    (75,000
    )Purchase of marketable securities
    
    
    (24,623,290
    )
    
    
    
    
    
    
    (24,623,290
    )Net Cash Used in Investing Activities
    
    
    (24,734,352
    )
    
    
    
    
    
    
    (24,737,775
    )Cash Flows from Financing ActivitiesCapital Stock issued in Private Placement for
$29,400,351 in
cash; fees of $2,058,024
    
    
    
    
    
    
    
    
    
    
    27,434,348Advances from related party
    
    
    
    
    
    
    3,540
    
    
    
    64,620Net Cash Provided by Financing Activities
    
    
    
    
    
    
    3,540
    
    
    
    27,498,968Increase/(decrease) in cash during the period
    
    
    (26,996,912
    )
    
    
    39
    
    
    
    444,075Cash, beginning of the period
    
    
    27,440,987
    
    
    
    
    
    
    
    Cash, end of the period
    
    $
    444,075
    
    
    $
    39
    
    
    $
    444,075Supplemental disclosure of cash flow information;
cash paid
for:Interest
    
    $
    
    
    
    $
    
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    
    
    
    $
    
  5




---



##### Table of Contents



XCORPOREAL, INC.
(a Development Stage Company)
 
 STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY)
 For the Period May 4, 2001 (Inception) to March 31, 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 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
    
    
    
    
    
    
    
    
    
    
    2,657,635
    
    
    
    
    
    
    
    2,657,635Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    639,064
    
    
    
    
    
    
    
    639,064Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,874,852
    )
    
    
    (4,874,852
    )Balance as of March 31, 2007
    
    
    14,200,050
    
    
    $
    1,420
    
    
    $
    33,221,109
    
    
    $
    (9,398,621
    )
    
    $
    23,823,908
  6




---



##### Table of Contents



XCORPOREAL, INC.
(a Development Stage Company)
 
 NOTES TO THE INTERIM FINANCIAL STATEMENTS
 March 31, 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
    7




---



##### Table of Contents



Note 5 Property and Equipment
  Property and equipment
    
    $
    39,450Accumulated depreciation
    
    
    (1,581
    )Property and equipment, net
    
    $
    37,869
  Note 6  Interest Income
  Note 7  Mineral Property
  Note 8  Related Party Transaction
  May 2, 2001(Date ofThree months ended
    
    Inception) toMarch 31,
    
    March 31,2007
    
    2006
    
    2007Administrative services
    
    $
    
    
    
    $
    1,500
    
    
    $
    12,000
 Note 9  License Agreement
  Note 10  Terminated Merger Agreement
  8




---



##### Table of Contents



Note 11  Stock Options and Warrants
 Incentive Compensation Plan
  Stock Options to Employees, Officer and Directors
    Three months endedMarch 31, 2007Expected dividend yield
    
    
    0.00
    %Expected volatility
    
    
    110
    %Risk-free interest rate
    
    
    4.46
    %Expected terms in years
    
    6.5 years
 Warrants and Stock Options to Non-Employees
    9




---



##### Table of Contents



Three months endedMarch 31, 2007Expected dividend yield
    
    
    0.00
    %Expected volatility
    
    
    135
    %Risk-free interest rate
    
    
    4.50 - 4.65
    %Expected terms in years
    
    5.0-10.0 years
  Stock Options
    
    
    Unamortizedand Warrants
    
    
    CompensationOutstanding
    
    
    ExpenseJanuary 1, 2007
    
    
    2,054,221
    
    
    $
    10,002,154Granted in the period
    
    
    1,485,000
    
    
    
    9,253,316Expensed in the period
    
    
    
    
    
    
    (3,296,699
    )March 31, 2007
    
    
    3,539,221
    
    
    $
    15,958,771
 Amendment of the 2006 Incentive Compensation Plan
  10




---



##### Table of Contents



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
 extra-corporeal
 License Agreement
  Description of Business
 extra-corporeal
  
    
    Portable kidney dialysis for use in the clinic, hospital, or at home
    
    Wearable Artifical Kidney (WAK) for chronic treatment of End Stage Renal Disease (ESRD)
    
    Portable ultrafiltration for management of fluid overload under physician supervision
    
    Wearable Ultrafiltration Device (WUD) for chronic treatment of fluid overload under physician supervision.
 Product Applications
  11




---



##### Table of Contents




    
    Reduced size, weight, and power consumption allows us to deploy a wearable package so that
the treatment does not interfere with normal activities of daily life.
    
    Reduced fluid requirements make the WAK easy to use for consumers and reduce utility
requirements (water, electricity) at home.
    
    Novel vascular access makes the WAK safe and effective for home use.
  Research and Development
 R&D Team
  
    
    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.
    
    Developing software to allow physicians to customize the function of the device to meet
the specific dialysis needs of each patient.
    
    Adapting the extra-corporealplatform technology underlying our Wearable Artificial
Kidney to other medical uses. We believe our technology is a platform for a number of other
devices that can be used to treat other diseases and will offer substantive value
propositions for patients and healthcare providers.
    
    Expanding our recruiting and retaining an experienced team of scientists and engineers.
 Clinical Studies
 T
  Managements Discussion and Analysis
 Results of Operations for the three months ended March 31, 2007
  12




---



##### Table of Contents



Liquidity and Capital Resources
   Off-Balance Sheet Arrangements
  Legal Proceedings
  Critical Accounting Policies and Estimates
   Marketable Securities
  Identifiable Intangibles
  13




---



##### Table of Contents



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
 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
 14




---



##### Table of Contents



Considering the Effects of Prior Year Misstatement when Quantifying Misstatements in Current Year
Financial Statements
 
 ITEM 3. Controls and Procedures
   15




---



##### Table of Contents



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
 16




---



##### Table of Contents



SIGNATURES
  Date: May 11, 2007
    By:
    /s/ ROBERT S. STEFANOVICHRobert S. StefanovichInterim Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) 17