UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended October 31, 2007

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Transition Period From _____ to ____

                        Commission File Number 000-49845

                                    CDEX INC.
              (Exact name of small business issuer in its charter)


                 Nevada                                  52-2336836
    (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                  Identification No.)

                      4555 South Palo Verde Road, Suite 125
                             Tucson, Arizona, 85714
                                  520-514-6393
     (Address of principal executive offices and registrant's phone number)

Securities registered under Section 12(b) of the Exchange Act:
  None.

Securities registered under Section 12(g) of the Exchange Act: Common stock,
  $.005 par value per share.

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

Issuer's revenues for its most recent fiscal year: $505,193.

Check whether the issuer is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes [ ] No [X]

The aggregate market value of the Class A common stock held by non-affiliates
was approximately $22,580,000 on January 22, 2008 based on the last reported
sale price of the registrant's Class A common stock on the Over-the-Counter
Bulletin Board (OTCBB).

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

The number of shares outstanding of the issuer's common stock as of January 22,
2008 was 53,566,300 shares.

                    DOCUMENTS INCORPORATED BY REFERENCE: none

Transitional Small Business Disclosure Format Yes |_| No |X|

<PAGE>

                                    CDEX INC.
                                   FORM 10-KSB
                   For the Fiscal Year Ended October 31, 2007

Part I

   Item 1.    Description of Business.......................................3
   Item 2.    Description of Property......................................14
   Item 3.    Legal Proceedings............................................14
   Item 4.    Submission of Matters to a Vote of Security Holders..........14

Part II

  Item 5.     Market for Common Equity and Related Stockholder Matters.....15
  Item 6.     Management's Discussion and Analysis of Financial
              Condition or Plan of Operation...............................16
  Item 7.     Financial Statements.........................................21
  Item 8.     Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure..........................21
  Item 8A.    Controls and Procedures......................................22
  Item 8B.    Other Information............................................23

Part III

  Item 9.     Directors and Executive Officers of the Registrant...........23
  Item 10.    Executive Compensation.......................................29
  Item 11.    Security Ownership of Certain Beneficial Owners
              and Management and Related Stockholder Matters...............32
  Item 12.    Certain Relationships and Related Transactions...............33

Part IV

  Item 13.    Exhibits, Lists and Reports on Form 8-K......................33
  Item 14.    Principal Accountant Fees and Services.......................34

Financial Statements...................................................... F1

Signatures.................................................................35

                                        2
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                                     PART I

This document contains forward-looking statements as that term is defined in the
federal securities laws. Forward-looking statements can be identified by the use
of words such as "expects," "plans," "may," "anticipates," "believes," "should,"
"intends," "estimates," and other words of similar meaning. These statements are
subject to risks and uncertainties that cannot be predicted or quantified and,
consequently, actual results may differ materially from those expressed or
implied by such forward-looking statements. Such risks and uncertainties
include, without limitation, the ability of the Company to raise capital to
finance the development of its chemical detection products, the effectiveness,
profitability and the marketability of those products, the ability of the
Company to protect its proprietary information, the establishment of an
efficient corporate operating structure as the Company grows and, other risks
detailed from time-to-time in our filings with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly update any
forward-looking statements.


ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

CDEX Inc. is a technology development company that is currently applying its
patented and patents pending chemical detection technologies to develop products
in the healthcare, security, and brand protection markets. CDEX is a public
company and its common stock is traded on the OTC Bulletin Board (OTCBB) under
the symbol "CEXI.OB". CDEX was incorporated in the State of Nevada on July 6,
2001 and maintains its corporate offices and research and development
laboratories in Tucson, Arizona.

Currently, CDEX is focused in three distinct markets:

     1. Healthcare - Validation of medications, training and quality assurance
     (e.g., validation of prescription and compounded medications to provide for
     patient safety, training of medical staff regarding compounding practices,
     and detection of the diversion of narcotics and controlled substances);

     2. Security and Public Safety - Identification of substances of concern
     (e.g., explosives, illegal drugs and the detection of counterfeit drugs and
     medications to assist in the protection of the nation's drug supply); and

     3. Brand Protection - Detection of counterfeit or sub-par products for
     brand protection (e.g., inspection of incoming raw materials, outgoing
     final products, and products in the distribution channel).

All current CDEX product development is based on applying the same underlying
technologies. CDEX anticipates developing and/or acquiring other technologies in
the future through partnering and investment. However, unless and until such
time as we acquire or develop other technology assets, all of the Company's
revenues will come from products developed from our current suite of patents and
patent pending technologies, or through licensing arrangements with companies
with related intellectual property.


OUR TECHNOLOGY

Our research efforts are centered on, but not limited to, the use of excitation
energy sources and patented/patents pending processing technology for substance
verification, authentication, and identification. When certain substances are
exposed to excitation energy the substances produce photons at specific
wavelengths that form unique spectral fingerprints that can be used as
signatures to validate and authenticate the substances.

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<PAGE>

CDEX creates reference signatures of substances of interest, such as selected
narcotics, explosive compounds, ingredients of chemical agents, medicines and
spirits and liquors and stores them in a reference signature database. CDEX
software validates a substance of interest by comparing its signature against
the known reference signature of the substance of interest in the Company
database.

The CDEX advantage is that substances of interest are tested at the base levels
and their signatures are compared to the known signatures of the substance of
interest. This provides rapid validation and authentication that the substance
is genuine. CDEX technology does not need to rely upon packaging schemes such as
holograms, inks, ingredient taggants, or RFID tags, all of which can be defeated
by determined counterfeiters.

PRODUCTS

We are currently focusing our resources on marketing and developing real-time
(within seconds) chemical detection products using proprietary, patented and
patents pending technologies. While our primary area of focus for 2007 was
products in the medical and security markets, we continued research and
development on several other potential products areas.

CDEX is marketing its current products and is in the process of expanding those
product lines and developing other products for different markets and customers.

PRINCIPAL PRODUCTS
------------------

     1.   Healthcare Market. ValiMed(TM) Product Line - Validation of
          substances, training and quality assurance. CDEX's current product
          line in the medical market is ValiMed(TM), a medication validation
          unit. This product line consists of two solution areas targeted to
          specific areas of the healthcare market. They are ValiMed(TM) Impaired
          Clinician Solution and ValiMed(TM) Patient Safety Solution.

          o    VALIMED(TM) PATIENT SAFETY SOLUTION: Validates high risk
               medications that are compounded for intravenous or oral
               administration. This ValiMed(TM) unit is also used in training of
               staff to improve accuracy in compounding practice. This
               stand-alone product line comes in various configurations for
               specific health care settings and is currently installed in a
               number of hospitals.

          o    VALIMED(TM) IMPAIRED CLINICIAN SOLUTION: Aids hospitals in the
               detection of the diversion of narcotics and controlled
               substances. It validates returned partial doses of narcotics.
               This insures the clear liquid in a syringe is the labeled
               narcotic and has not been substituted with another clear liquid
               such as saline. This stand-alone product line comes in various
               configurations for specific health care settings and is currently
               installed in a number of hospitals.

     2.   Security Market. CDEX ID2 (Meth Scanner) Product Line -
          methamphetamine detection. The Meth Scanner is a handheld, battery
          operated scanning device that is capable of detecting trace amounts of
          methamphetamine on virtually all surfaces while in the scan mode. CDEX
          has completed beta testing and has the Meth Scanner in the production
          cycle. Marketing will begin in 2008 with availability scheduled for
          the first calendar quarter of 2008.

                                       4
<PAGE>

2007, Year in Review
--------------------

The Company's activities during 2007 were driven by the funds available to
pursue the operational plans of the Company. The year started with a
consolidation of the Company's headquarters and R&D facilities in Tucson
Arizona. The Company established six goals for the year, as noted below:

     1.   Refinement of the Valimed(TM) Units and Expansion of the ValiMed(TM)
          Signature Library to 150 by the end of 2007: The refinement process
          was completed in April 2007 and the goal of 150 Signatures was met.
          This goal was crucial to allowing the Company to more aggressively
          market ValiMed in the US and International markets.
     2.   Solidifying Existing Client relationships and expand the Client Base
          in the US: All existing ValiMed clients who had purchased a Unit
          elected to upgrade their Units and the fourth quarter of FY 2007 saw
          record sales of ValiMed Units to hospitals. Two of the Company's three
          oldest beta partners elected to purchase additional ValiMed units.
     3.   Begin the Expansion of the ValiMed Product Line to the International
          Market: In 2007, CDEX brought on a Vice President of International
          Sales and Marketing (based in Paris, France) and shortly thereafter
          announced its movement into the European Market with an initial focus
          on the UK.
     4.   Develop The Meth Scanner as its Second Product Line: During 2007, CDEX
          completed its beta testing and begin the production cycle of the Meth
          Scanner, with expected delivery of the first units in the first
          calendar quarter of 2008.
     5.   Complete the consolidation of its headquarters and R&D facility in
          Tucson, Arizona: That move and consolidation was completed in the
          second quarter of 2007.
     6.   Continue its relationship with Baxa Corporation for Marketing of
          ValiMed: The Baxa contract was set to expire in November 2007. It was
          renewed in the form of a non exclusive co-marketing agreement.

In FY 2007, the Company had revenues of $505,193, the largest in the Company's
history, and received net cash from financing activities of $1,489,240.

On January 9, 2007 the Company held a special meeting of shareholders at which
time the shareholders voted to increase the authorized Class A common shares of
stock from 50.2 million to 100 million. The additional shares of stock allowed
additional fund raising activities.


RESEARCH AND DEVELOPMENT (R&D)

R&D efforts were primarily directed towards refining and expansion of the
ValiMed(TM) product line and modification of the Meth Scanner based on feedback
from the in process beta testing.

R&D costs were $914,340 (including $274,471 for stock compensation and stock
option expenses) during 2007 fiscal year compared to $1,298,594 (including
$46,265 for stock compensation) during the 2006 fiscal year.

We have outsourced certain engineering and manufacturing tasks while retaining
control of critical technology and will continue this practice. Previously, we
entered into Master Services Agreements with several engineering/manufacturing
organizations. The agreements generally provide for the contractors to provide
services to CDEX from time to time which are to be set forth more specifically
in "statements of work" to be executed by each party. Such services may include,
without limitation: (i) non-recurring engineering services such as product
design, creation and modification of bills of materials, engineering drawing
packages, work instructions, manufacturing specifications, fabrication documents
and drawings, and survey documents; (ii) prototyping services such as the
development and testing of product prototypes, and; (iii) other related design
and manufacturing services as needed. Payments for services performed are on a
time and materials basis (paid monthly) or on a fixed price basis (paid upon
successful completion of each milestone) all as set forth in the statement of
work pertaining to the particular services.

                                       5
<PAGE>

INDUSTRY AND COMPETITION

1.   HEALTHCARE
     ----------

Healthcare spending continues to increase, fueled by an aging population and
increasing cost of healthcare technology. We do not see a change in this trend
into the future. There are multiple drivers of demand for the Company's Valimed
products. Medication errors are a major problem in the global healthcare market
and we expect resources will continue to be allocated to help prevent these
errors from occurring. To quantify the problem, it is estimated between 44,000
and 98,000 deaths occur annually due to preventable errors and 770,000 patients
are injured by adverse drug events. (IOM Report "To Err Is Human") A study
published by Auburn University reported an 8% error rate while observing
pharmacist mixing IV preparations. Finally, the University of Michigan conducted
a study of the ValiMed(TM) unit and determined that even though they knew that
high risk compounded medications would be checked through the ValiMed(TM)
system, five major compounding errors were made in an 18 month time period that
would have gone undetected had not the ValiMed(TM) system been in place. In
addition, impaired clinicians present a major problem in healthcare. It is
published in the medical literature (AANA J. 1999 Apr; 67(2): 133-40) that
approximately 5% to 10% of all healthcare workers with access to narcotics are
users of these substances. Substitution of water or saline for injectable
narcotics is a common practice to divert and steal these medications. Lastly,
USP 797 regulations have been instituted to promote quality and sterility of
compounded IV medications in pharmacies. These regulations are primarily focused
on sterility of IV medications, but the accuracy of the end product is also
included in the regulation. Historically, pharmacists have preformed a visual
examination of the end product for accuracy. Based on the number of errors
reported, this practice is not effective.

There are 6,600 hospitals in the US and 3,000 have greater than 300 beds
(Billian's Healthdata). Adding in the targeted global market for CDEX healthcare
products, the number of hospitals would exceed 12,000. The Company believes that
its ValiMed(TM) products are applicable to these hospitals and in many cases
multiple units would be needed to fulfill the institutions' needs.


2.   SECURITY & PUBLIC SAFETY
     ------------------------

Illicit and Counterfeit Drug Detection
--------------------------------------
According to DEA congressional testimony by Joseph T. Rannazzisi, Deputy Chief,
Office of Enforcement Operations Drug Enforcement Administration,
Methamphetamine is the number one drug problem in America today and the problem
continues to increase. Two competing technologies in the methamphetamine
detection marketplace are test kits and ion mobilization units. Some of the test
kits are inexpensive, but cannot readily detect trace amounts of methamphetamine
on surfaces and are a destructive test. The ion mobilization units are expensive
to purchase, and require a sophisticated user, airborne substances and
relatively high maintenance. CDEX technology may have the advantages of
portability, ease of use, low maintenance, and reduced costs. The Company has
also identified market opportunities for the application of its technology in
the detection of counterfeit medications.

Explosive Detection
-------------------
CDEX believes the explosives detection marketplace is potentially significant
because of growing awareness of terrorism due to recent world events. We believe
that this marketplace possibly includes the following potential customers:
militaries, airport/building security organizations and transportation related
organizations, government, law enforcement organizations, and school systems.

                                       6
<PAGE>

These markets are global in perspective and large in size. Currently, domestic
sales of people screening devices are dominated by a small number of products
sold by a handful of vendors. CDEX believes that if it launches chemical
detection products that those products will compete with existing detection
products, and, depending on the application, may have a competitive advantage by
being more advanced than existing tools in a number of areas. There are large
competitors in this space that have significantly more resources than CDEX.


3.   BRAND PROTECTION
     ----------------

Based on worldwide counterfeit enforcement activity (investigations, raids,
seizures, arrests, charges, convictions, sentences, civil litigation) for 2005,
as reported through the DOPIP Security Counterfeit Intelligence Report, more
than 3,703 incidents valued at approximately $3.2 trillion were analyzed from
133 countries. The eighth most commonly counterfeited category is Food &
Alcohol, 64 incidents worth $11 million, and the fourteenth most commonly
counterfeited category is Perfume & Cosmetics, 22 incidents worth $12 million.
US companies, for instance, estimate that between $200bn and $250bn in annual
revenue is lost to counterfeiters. The EU claims that 100,000 jobs are lost each
year to the same trade. In 2003 it was estimated that counterfeit goods cost the
state of New York $34bn, depriving it of $1.6bn in tax revenue (Scotsman.com
news). The Company believes these market applications represent business
opportunities for the application of its technology.

SALES AND MARKETING

CDEX's business vision is to develop technologies to the point of market or
application viability and then, where management determines it to be beneficial,
team with organizations to complete commercial deployment and/or distribution
through our sales and marketing channels. In some instances, we may take a
technology directly to market. In others, we may seek to license the technology
to third parties who will then develop and market products employing it. Our
products and technologies may be licensed to original equipment manufacturers,
sold direct or via resellers as standalone end units, or be integrated as
sensors that gather and relay information to an integrated solution that is the
repository of information gathered from many sources (e.g., in security
applications from perimeter, environmental and structural security devices,
medication delivery systems). Accordingly, our prospective "client base" varies
depending on the application and the stage of development. In marketing our
chemical detection products and technologies, we intend to target, via
partnerships as well as direct sales, both U.S. and foreign governments, in
addition to private industry or individuals requiring confirmation of the
presence or absence of substances.

We are currently reaching potential customers and partners through our website,
participating in industry events (such as trade shows and public meetings),
distributing product information through targeted mailings and direct sales
activities which include demonstrations of product application and traditional
advertising. Planned advertising activities include trade and industry magazines
and managed clinical trials where researchers are likely to publish articles
discussing the results of the trials. We also anticipate reaching prospective
customers via strategic relationships.

Effective November 7, 2005, the company entered into a two year exclusive
Reseller Agreement with Baxa Corporation ("Baxa") to sell, market, and
distribute the ValiMed(TM) product in the USA and Canada. This Reseller
Agreement, as amended, expired on November 7, 2007 and was replaced by a
non-exclusive Co-Marketing Agreement, dated November 10, 2007.

As the Company's domestic markets related to ValiMed have expanded, we have
began focusing more fully on international markets. We have established an
international presence in Europe and have establish reference test partners in

                                       7
<PAGE>

London for our ValiMed Product Line as a first step in breaching the European
market. We have also received unsolicited contacts by prospective partners from
a number of other international areas, including the Middle East, Taiwan,
Vietnam, Korea, Malaysia, Japan, Australia and China based on information on
www.cdex-inc.com. These contacts were primarily interested in explosive and drug
detection, ValiMed, and the technology's potential use in the brand protection
industry. These contacts may never result in revenue or relationships that will
benefit CDEX. CDEX has not applied for licenses or permits to do business
directly in any foreign country. CDEX has obtained TUV certification for its
ValiMed(TM) product with Elliott Labs in Fremont, CA. TUV tests and certifies
that products meet electrical safety standards and electromagnetic interference
and compatibility (EMI/EMC) standards. TUV tests and certifies to UL standards
for the USA market and CE standards for the European Union market.

INTELLECTUAL PROPERTY RIGHTS

We rely on non-disclosure agreements, patent, trade secret and copyright laws to
protect the intellectual property that we have and plan to develop, but such
laws may provide insufficient protection. Moreover, other companies may develop
products that are similar or superior to CDEX's or may copy or otherwise obtain
and use our proprietary information without authorization. In addition, certain
of our know-how and proprietary technology may not be patentable. Policing
unauthorized use of CDEX's proprietary and other intellectual property rights
could entail significant expense and could be difficult or impossible to do. In
addition, third parties may bring claims of copyright or trademark infringement
against CDEX or claim that certain of our processes or features violate a
patent, that we have misappropriated their technology or formats or otherwise
infringed upon their proprietary rights. Any claims of infringement, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention, and/or require CDEX to enter into costly royalty or
licensing arrangements to prevent further infringement, any of which could cause
a decrease in our profits.

The Company makes business decisions regarding which inventions to patent, and
in what countries. Currently, the company has 2 patents issued or allowed, and
others in various stages of prosecution. In addition, the Company has filed
international counterparts to its US patents and applications where it deems
appropriate.

Our competitive position also depends upon unpatented trade secrets. Trade
secrets are difficult to protect. Our competitors may independently develop
proprietary information and techniques that are substantially equivalent to ours
or otherwise gain access to our trade secrets, such as through unauthorized or
inadvertent disclosure of our trade secrets.

GOVERNMENT REGULATION

The products developed may be subject to various governmental regulations and
controls, including that associated with security products in airports, handling
of explosive materials and related to x-ray energy. The storage and handling of
certain explosive material is subject to licensure. With regard to handling such
explosive material, we retain the services of a licensed contractor to transport
and store explosive material for testing. Following such testing, the contractor
returns the explosive material to a licensed storage facility. It is possible
that government agencies may develop additional regulations that impact our
initial and future products.

The U.S. Food and Drug Administration (FDA) has jurisdiction to regulate
computer products and software as medical devices if they are intended for use
in the diagnosis, cure, mitigation, treatment or prevention of disease. We have
preliminarily determined that our initial products are not medical devices.
However, further investigation or a change in FDA policy could subject us to
regulation. Noncompliance with applicable FDA requirements can result in such
things as fines, injunctions, and suspension of production.

                                       8
<PAGE>

Except as specifically mentioned above, we are not currently aware of any other
federal, state or local laws that would have a significant adverse impact on
development and distribution of our initial products. However, various federal,
state or local agencies may propose new legislation pertaining to the use of
potentially dangerous materials, to the discharge of materials into the
environment, to the manufacturing or marketing of chemical validation products
(or designation of one or more of our chemical validation products as medical
devices) and/or otherwise potentially relating to the our business which may
require us to allocate a portion of our operating budget to ensure full
compliance with such regulations.

EMPLOYMENT

At October 31, 2007, the Company had ten full time employees.

RISK FACTORS

You should carefully consider each of the following risk factors and all of the
other information in this report. The following risks relate principally to
CDEX's business and contain forward-looking statements. Actual results could
differ materially from those set forth in the forward-looking statements. See
"Cautionary Statement Regarding Forward-Looking Statements" below.

A HISTORY OF OPERATING LOSSES AND AN ACCUMULATED DEFICIT MAY AFFECT CDEX'S
ABILITY TO SURVIVE.

We have a history of operating losses and an accumulated deficit. Since our
principal activities to date have been limited to organizational activities,
research and development, product development and beginning marketing and sales,
CDEX has produced increasing but limited revenues. In addition, we have only
limited assets. As a result, we cannot be certain that CDEX will continue to
generate increased revenues or become profitable in the future. If we are unable
to obtain sufficient customers and generate sufficient revenues to operate
profitably, our business will not succeed.

CDEX HAS RECEIVED A GOING CONCERN OPINION FROM ITS INDEPENDENT AUDITORS THAT
EXPRESSES UNCERTAINTY REGARDING ITS ABILITY TO CONTINUE AS A GOING CONCERN.

We have received a report from our independent auditors for the fiscal year
ended October 31, 2007 containing an explanatory paragraph that expresses
uncertainty regarding our ability to continue as a going concern due to
historical negative cash flow. We cannot be certain that our business plans will
be successful or what actions may become necessary to preserve our business. Any
inability to raise capital may require us to reduce operations or could cause
our business to fail.

Our limited operating history makes our future operating results unpredictable
rendering it difficult to assess the health of our business or its likelihood of
success. The inability to assess these factors could result in a total loss of
an investor's investment in CDEX.

In the case of an established company in an ongoing market, investors may look
to past performance and financial condition to get an indication of the health
of the company or its likelihood of success. Our short operating history and the
evolving nature of the chemical identification markets in which we focus make it
difficult to forecast our revenues and operating results accurately. We expect
this unpredictability to continue into the future due to the following factors:

     o the timing of sales of our products and services, particularly in light
     of our sales history;

                                       9
<PAGE>

     o difficulty in keeping current with changing technologies;

     o unexpected delays in introducing new products, new product features and
     services;

     o increased costs and expenses, whether related to sales and marketing,
     manufacturing, product development or administration;

     o deferral of recognition of our revenue in accordance with applicable
     accounting principles due to the time required to complete projects;

     o the mix of product license and services revenue; and

     o costs related to possible acquisitions of technologies or businesses.

CDEX could experience operating losses or even a total loss of our business
which, as a result of the foregoing factors, would be difficult to anticipate
and could thus cause a total loss of capital invested in CDEX.


THE ABSENCE OF A FULL TIME CHIEF FINANCIAL OFFICER LEAVES CDEX WITHOUT THE
BENEFIT OF THIS TYPE OF EXPERTISE AND CONSISTENT MONITORING OF CONTROLS AND
PROCEDURES WHICH A FULL-TIME CHIEF FINANCIAL OFFICER WOULD AFFORD.

We have not retained a permanent, full-time chief financial officer. The
responsibilities of the principal accounting and financial officer are being
handled by a qualified part-time chief financial officer on a consultancy basis.
The Sarbanes-Oxley Act requires public companies to maintain disclosure controls
and procedures that are designed to ensure that information required to be
disclosed in reports filed with the SEC is recorded, processed, summarized and
reported within the time required. This includes controls and procedures to
ensure that such information is accumulated and communicated to management,
including the chief executive and financial officers, so as to allow timely
decisions regarding required disclosure of such information. The Sarbanes-Oxley
Act also requires documentation of internal control procedures, remediation as
needed, and periodic testing of the controls, and these requirements are
expected to apply to smaller companies such as CDEX beginning in 2009. A
permanent, full-time chief financial officer would better coordinate and oversee
these procedures and our disclosure, bringing to bear specific financial and
accounting expertise. Our part time chief financial officer currently performs
this function with assistance from the CEO and others.

LACK OF ADDITIONAL FINANCING COULD PREVENT US FROM OPERATING PROFITABLY WHICH,
EVENTUALLY, COULD RESULT IN A TOTAL LOSS OF OUR BUSINESS.

Since our inception, we have funded our operations through revenue from the sale
of our products, borrowings and financings. Current funds available to CDEX may
not be adequate for us to be competitive in the areas in which we intend to
operate, and we have no arrangements or commitments for ongoing funding. If
funding is insufficient at any time in the future, we may not be able to grow
revenue, take advantage of business opportunities or respond to competitive
pressures. The unavailability of funding could prevent us from producing
additional revenues or ever becoming profitable. Our continued operations, as
well as the successful implementation of our business plan, may therefore depend
upon our ability to raise additional funds of approximately $2,500,000 net to
the Company through bank borrowings or equity or debt financing over the next
twelve months. We continue to seek prospective investors who may provide some of
this funding. However, such funding may not be available when needed or may not
be available on favorable terms. Certain family members or business entities of
our management team have loaned funds to CDEX on an as-needed basis although
there is no definitive or legally binding arrangement to do so. If we do not
produce revenues and become profitable, eventually, we will be unable to sustain
our business.

                                       10
<PAGE>

IF WE ISSUE ADDITIONAL EQUITY TO FUND OPERATIONS OR ACQUIRE BUSINESSES OR
TECHNOLOGIES, CDEX SHAREHOLDERS WILL EXPERIENCE DILUTION PROPORTIONAL TO THE
ISSUED EQUITY.

If working capital or future acquisitions are financed through the issuance of
equity securities, CDEX shareholders will experience dilution proportional to
the equity issued. In addition, securities issued in connection with future
financing activities or potential acquisitions may have rights and preferences
senior to the rights and preferences of the currently outstanding CDEX shares of
common stock. The conversion of future debt obligations into equity securities
could also have a dilutive effect on our shareholders. Regardless of whether our
cash assets prove to be inadequate to meet our operational needs, we may elect
to compensate providers of services by issuing stock or stock options in lieu of
cash.

OUR POTENTIAL INABILITY TO PROTECT THE PROPRIETARY RIGHTS IN CDEX'S TECHNOLOGIES
AND INTELLECTUAL PROPERTY MAY HAMPER OUR ABILITY TO MANUFACTURE PRODUCTS WHICH
WOULD PREVENT US FROM EARNING REVENUES OR BECOMING PROFITABLE.

Our success and ability to compete will depend in part on the protection of our
potential patents and other proprietary information. We currently have two
patents issued and others in various stages of government review for our
chemical detection technologies. We rely on non-disclosure agreements and patent
and copyright laws to protect the intellectual property that we have developed
and plan to develop. However, such agreements and laws may provide insufficient
protection. Moreover, other companies may develop products that are similar or
superior to CDEX's or may copy or otherwise obtain and use our proprietary
information without authorization. If a third party were to violate one or more
of our patents, we may not have the resources to bring suit or otherwise protect
the intellectual property underlying the patent. In the event of such a
violation or if a third party appropriated any of our unpatented technology,
such party may develop and market products which we intend to develop and/or
market. We would lose any revenues which we would otherwise have received from
the sale or licensing of those products. This could prevent our ever making a
profit on any products based upon the misappropriated technology.

Policing unauthorized use of CDEX's proprietary and other intellectual property
rights could entail significant expense and could be difficult or impossible. In
addition, third parties may bring claims of copyright or trademark infringement
against CDEX or claim that certain of our processes or features violate a
patent, that we have misappropriated their technology or formats or otherwise
infringed upon their proprietary rights. Any claims of infringement, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention, and/or require CDEX to enter into costly royalty or
licensing arrangements to prevent further infringement, any of which could
increase our operating expenses and thus prevent us from becoming profitable.

Our competitive position also depends upon unpatented trade secrets. Trade
secrets are difficult to protect. Our competitors may independently develop
proprietary information and techniques that are substantially equivalent to ours
or otherwise gain access to our trade secrets, such as through unauthorized or
inadvertent disclosure of our trade secrets. If this occurs, our competitors may
use our processes or techniques to develop competing products and bring them to
market ahead of us. This could prevent us from becoming profitable.

We may rely on certain intellectual property licensed from third parties, and
may be required to license additional products or services in the future, in
order to move forward with our business plan. These third party licenses may be
unavailable on acceptable terms, when needed or at all. An inability to enter
into and maintain any of these licenses could prevent us from developing or
marketing products based upon the underlying technology and could prevent us
from earning revenues on these products or from becoming profitable.

                                       11
<PAGE>

NO ASSURANCE OF SUCCESSFUL MANUFACTURING MAY AFFECT OUR ABILITY TO SURVIVE.

CDEX itself has limited experience in manufacturing commercial quantities of
products, and our management has had limited experience in this area. We
presently have no plans for developing in-house manufacturing capability beyond
aggregating off-the-shelf components for our initial units into a final
assembly. Accordingly, we depend upon outside manufacturers to manufacture and
assemble our products. In our early stages with each new product, we plan to do
the final assembly and testing of the initial units in-house. We cannot be
certain that the terms of such arrangement will be favorable enough to permit
our products to compete effectively in the marketplace.

DEPENDENCE ON OUTSOURCED MANUFACTURING MAY AFFECT OUR ABILITY TO BRING PRODUCTS
TO MARKET.

At present, we do not plan to manufacture any of our products in-house. We are
considering different possibilities for bringing different products to market
among them, licensing to third parties or outsourcing manufacturing. The risks
of association with outsourced manufacturers are related to their operations,
finances and suppliers. CDEX would have little control over an outsourced
manufacturer and may suffer losses if any outside manufacturer fails to perform
its obligations to manufacture and ship the manufactured product. These
manufacturers' financial affairs may also affect our ability to obtain product
from them in a timely fashion should they fail to continue to obtain sufficient
financing during a period of incremental growth. Problems with outsourced
manufacturers could damage our relationships with our clientele and cost us
future revenues. If we are unable to contract with adequate manufacturers, and
in the absence of licensing or other means, we may be unable to market our
products. This would prevent us from earning revenues.

LACK OF MARKET ACCEPTANCE MAY LIMIT OUR ABILITY TO SELL PRODUCTS AND GENERATE
REVENUES WHICH WOULD PREVENT US FROM EARNING REVENUES OR BECOMING PROFITABLE.

We cannot be certain that any products that we successfully develop will ever
achieve wide market acceptance. Our products, if successfully developed, may
compete with a number of traditional products manufactured and marketed by major
technology companies, as well as new products currently under development by
such companies and others. In the explosives detection marketplace, for example,
many airports and other facilities and agencies have already invested in and
implemented systems that are based upon technology that is different from ours.
While we believe our technology is superior, we will have to demonstrate its
superiority to these potential customers in order to sell our products and
generate revenues. We may encounter similar obstacles in other application
areas. The degree of market acceptance of our products will depend on a number
of factors, including the establishment and demonstration of the efficacy of the
product candidates, their potential advantage over alternative methods and
reimbursement policies of government and third party payors. We cannot be
certain that the marketplace in general will widely accept and utilize any of
our products. If potential customers do not accept and purchase our products, we
will be unable to generate revenues and become profitable.

WE INTEND TO MARKET OUR PRODUCTS IN INDUSTRIES WHERE TECHNOLOGY CHANGES RAPIDLY,
AND WE WILL INCUR COSTS TO KEEP OUR PRODUCTS CURRENT AND INNOVATIVE. OUR FAILURE
TO DO SO COULD RENDER OUR PRODUCTS OBSOLETE, MAKING OUR BUSINESS UNPROFITABLE.

We hope to market our products in industries characterized by rapid change due
to the introduction of new and emerging technologies. Critical issues concerning
the governmental or commercial use of chemical detection mechanisms, including
security, reliability, accuracy, cost, ease of use, accessibility, or potential
tax or other government regulation, may affect the relevance and functionality
of our products. Future technology or market changes may cause some of our
products to become obsolete more quickly than expected. We will need to make
research and development expenditures to create new features for our products to

                                       12
<PAGE>

enhance their effectiveness and become and remain competitive. If we are
unsuccessful in timely assimilating development changes in the various
environments, we may be unable to achieve or maintain profitability.


POTENTIAL DEFECTS AND PRODUCT LIABILITY COULD RESULT IN DELAYS IN MARKET
ACCEPTANCE, UNEXPECTED LIABILITY AND COSTS AND DIMINISHED OPERATING RESULTS.

Technology-based products frequently contain errors or defects, especially when
first introduced or when new versions are released. Defects and errors could be
found in current versions of our products, future upgrades to current products
or newly developed and released products. These defects could result in product
liability suits, delays in market acceptance or unexpected redevelopment costs,
which could cause any profits we might otherwise have to decline. We anticipate
most of our agreements with customers will contain provisions designed to limit
our exposure to potential product liability claims. It is possible, however,
that we will be unable to negotiate such provisions with certain customers or
that these provisions, if negotiated, may not be valid as a result of federal,
state, local or foreign laws or ordinances or unfavorable judicial decisions.
While CDEX has products liability insurance, a successful and significant
product liability claim could damage our business, operating results and
financial condition.

OUR POTENTIAL FUTURE BUSINESS AND/OR TECHNOLOGY ACQUISITIONS MAY BE
UNPREDICTABLE AND MAY CAUSE OUR BUSINESS TO SUFFER.

CDEX intends to expand its operations through the acquisition of additional
technologies (either by purchasing other businesses or acquiring their
technological assets) which it perceives to be unexploited and develop products
based upon these technologies. We have not yet identified these specific
technologies, and some of these technologies may be outside our current field of
operations. However, we may be unable to identify any such businesses or
technologies. Expansion may involve a number of special risks, including
possible adverse effects on our operating results or balance sheet (particularly
in the event of impairment of acquired intangible assets), diversion of
management attention, inability to retain key personnel, risks associated with
unanticipated events, any of which could prevent us from becoming profitable. In
addition, if competition for acquisition candidates or technologies were to
increase, the cost of acquiring businesses or technologies could increase as
well. If we are unable to implement and manage our expansion strategy
successfully, our business may suffer or fail.

SUBSTANTIAL COMPETITION MAY LIMIT OUR ABILITY TO SELL PRODUCTS AND THEREBY OUR
CHANCES OF BECOMING PROFITABLE.

We may experience substantial competition in our efforts to locate and attract
customers for our products. We are aware of a number of competitors in the
explosive detection industry which we believe have greater experience, resources
and managerial capabilities and may be in a better position than we are to
obtain access to and attract customers. A number of larger companies similarly
may enter some or all of our target markets and directly compete with us. In the
counter-terrorism arena, it is difficult to assess our competition due to the
high level of secrecy and lack of available information with respect to defense
and homeland security contracts and contractors. We must assume that the demand
for the technology in this area has given rise to a corresponding supply of
scientists and others who are developing technology similar to, or otherwise
competitive with ours. In the area of brand protection, many companies may seek
to develop technology in-house to protect their own brands rather than contract
with us for our technology. In the areas of medical and pharmaceutical
validation and brand protection, various existing technologies compete with ours
and already are in use in the marketplace. These include radio frequency
identification tags, taggant agents (chemical agents added to the target

                                       13
<PAGE>

substance to serve solely as identifying tags), laboratory testing,
refractometers and bar coding. If our competitors are more successful in
marketing their products, we may be unable to achieve or maintain profitability.

LOSS OF ANY OF OUR CURRENT MANAGEMENT OR INABILITY TO RECRUIT AND RETAIN QUALITY
PERSONNEL COULD ADVERSELY IMPACT OUR BUSINESS AND PROSPECTS. OUR DIRECTORS AND
OFFICERS EXERT SUBSTANTIAL CONTROL OVER OUR BUSINESS AND OPERATIONS.

We are dependent on our officers and other key personnel, and the loss of any of
our key personnel could materially harm our business because of the cost and
time necessary to retain and train a replacement. Such a loss would also divert
management attention away from operational issues. This would increase costs and
prevent or reduce our profits.

OUR MANAGEMENT LACKS EXPERIENCE IN THIS MARKET.

Although widely experienced in other industries, our current senior management
team has limited experience leading the development, marketing and sales of
technology products in the chemical detection and validation marketplace. This
lack of experience could lead to inefficiency and slow the process of marketing
our products and prevent us from making sales or becoming profitable.

LACK OF KEY MAN INSURANCE

The Company carries no key-man insurance. In the event that any of the Company's
senior executive officers departed the Company or passed away, the Company may
not have the available funds to attract an individual of similar experience. The
Company is considering obtaining key-man insurance once it has sufficient funds
to do so.


ITEM 2. DESCRIPTION OF PROPERTY

The Company leases office and laboratory space in Tucson, Arizona. The lease
expires April 30, 2009 and provides for monthly rent of approximately $4,300
with 3% annual escalations and is cancelable on 120 days notice. In the second
quarter of fiscal year 2007, the Company cancelled a portion of the lease on
space the Company vacated which was not adjacent to its office. The Company
agreed to pay a cancellation fee and certain delinquent amounts over the
remaining term of the lease. Subsequently, in first quarter of 2008, the Company
rented additional space immediately adjacent to its R&D offices, at a cost of
approximately $800 monthly with a 3% annual escalation that will expire at the
same time as its primary lease. Total rent expense was $42,514 and $86,593 for
the years ended October 31, 2007 and 2006, respectively.


ITEM 3. LEGAL PROCEEDINGS

CDEX is not currently involved in any legal proceedings nor do we have knowledge
of any threatened litigation.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

A Special Meeting of Stockholders of the Company was held on January 9, 2007 to
approve an amendment to our Certificate of Incorporation to increase the number
of shares of Class A common stock that we are authorized to issue from
50,200,000 shares to 100,000,000 shares.

                                       14
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our Class A common stock is traded on the Over-The-Counter Bulletin Board
("OTCBB") under the symbol "CEXI.OB." Our shares are thinly traded with low
average daily volume. This coupled with a limited number of market makers
impairs the liquidity of our common stock, not only in the number of shares of
common stock which can be bought and sold, but also through possible delays in
the timing of transactions, and lower prices for our common stock than might
otherwise prevail. This could make it difficult or impossible for an investor to
sell shares of our common stock or to obtain a desired price.

Our common stock may be subject to the low-priced security or so called "penny
stock" rules that impose additional sales practice requirements on
broker-dealers who sell such securities. The Securities Enforcement and Penny
Stock Reform Act of 1990 ("Reform Act") requires additional disclosure in
connection with any trades involving a stock defined as a "penny stock"
(generally defined as, according to recent regulations adopted by the U.S.
Securities and Exchange Commission, any equity security that has a market price
of less than $5.00 per share, subject to certain exceptions), including the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith. The
regulations governing low-priced or penny stocks sometimes may limit the ability
of broker-dealers to sell CDEX's common stock and thus, ultimately, the ability
of the investors to sell their securities in the secondary market. Prices for
CDEX shares will be determined in the marketplace and may be influenced by many
factors, including the depth and liquidity of the market for the shares, CDEX's
results of operations, what investors think of CDEX and the chemical detection
and validation industry, changes in economic conditions in the industry, and
general economic and market conditions. Market fluctuations could have a
material adverse impact on the trading price of our shares.

If CDEX is unable to maintain NASD registered broker/dealers as market makers,
the liquidity of our common stock could be impaired, not only in the number of
shares of common stock which could be bought and sold, but also through possible
delays in the timing of transactions, and lower prices for our common stock than
might otherwise prevail. Furthermore, the lack of market makers could result in
CDEX shareholders being unable to buy or sell shares of our common stock on any
secondary market. We may be unable to maintain such market makers.

The table below sets forth the high and low sales price for our Class A common
stock as reported on the OTCBB:

                                                          High       Low
                                                          ----       ---
           Fiscal Year Ended October 31, 2007:
               First quarter                             $0.38      $0.12
               Second quarter                            $0.30      $0.14
               Third quarter                             $0.26      $0.15
               Fourth quarter                            $0.85      $0.15



As the foregoing are over-the-counter market quotations, they reflect
inter-dealer prices, without retail markup, markdown, or commissions, and may
not represent actual transactions.

                                       15
<PAGE>

SHAREHOLDERS

Our transfer agent has advised that the approximate number of record holders of
common stock at January 22, 2008 was 1,477. However, a large number of our
shareholders hold their shares in "street name" with brokerage accounts and,
therefore, do not appear on the shareholder list maintained by our transfer
agent.

DIVIDENDS

We have paid no cash dividends on our common stock and we do not anticipate
paying any cash dividends in the foreseeable future.

SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS

During the fourth quarter of fiscal year 2007, the Company sold 200,000 shares
of common stock at a price of $0.12 per share for proceeds of $24,000. In
addition, the Company received $21,600 in proceeds from the exercise of 140,000
option shares. The total proceeds of $45,600 were used to finance operations and
other general corporate purposes.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
        OPERATION

You should read the following discussion in conjunction with our audited
financial statements and related notes included elsewhere in this document. The
following discussion (as well as other discussions in this document) contains
forward-looking statements. Please see Forward-Looking Statements for a
discussion of uncertainties, risks and assumptions associated with these
statements.

PLAN OF OPERATION

General
-------

CDEX Inc. is a technology development company that is currently applying its
patented and patents pending chemical detection technologies to develop products
in the healthcare, security, and brand protection markets. CDEX is a public
company and its common stock is traded on the OTC Bulletin Board (OTCBB) under
the symbol "CEXI.OB". CDEX was incorporated in the State of Nevada on July 6,
2001 and maintains its corporate offices and research and development
laboratories in Tucson, Arizona.

Currently, CDEX is focused in three distinct markets:

1. Healthcare - Validation of medications, training and quality assurance (e.g.,
validation of prescription and compounded medications to provide for patient
safety, training of medical staff regarding compounding practices, and detection
of the diversion of narcotics and controlled substances);

2. Security and Public Safety - Identification of substances of concern (e.g.,
explosives, illegal drugs and the detection of counterfeit drugs and medications
to assist in the protection of the nation's drug supply); and

3. Brand Protection - Detection of counterfeit or sub-par products for brand
protection (e.g., inspection of incoming raw materials, outgoing final products,
and products in the distribution channel).

                                       16
<PAGE>

ValiMed(TM) Product Line
------------------------

ValiMed is the medical product line of CDEX. The current ValiMed product line
uses Enhanced Photoemission Spectroscopy to validate, in virtually real time,
high-risk medication admixtures, as well as returned narcotics, to provide an
increased level of patient safety. Products in the ValiMed(TM) line compare a
spectroscopic signature of a tested medication to the correct signature in the
CDEX Medication Signature Library and return an easy to understand "validated"
or "not validated" result, requiring no user interpretation.

In 2006, CDEX management and staff successfully completed second stage
implementation of the production plan for the ValiMed(TM) Medication Validation
System, and began shipment of production units to end user clients and to our
U.S. and Canadian ValiMed distributor. In the first half of FY 2007, CDEX began
the expansion of the ValiMed Product Line and its corresponding Medication
Signature Library. This expansion was announced and associated sales launched in
the 3rd fiscal quarter of 2007. This has resulted in an influx of prospective
clients and contracts for sale of ValiMed units signed with new and existing
clients. During the first half of fiscal year 2007, CDEX also contacted all of
its existing ValiMed clients to allow them to convert to the expanded
ValiMed Units and Signature Library. CDEX has expanded its Medication Signature
Library from around 70 in mid-2007 to 160 by the end of calendar year 2007. CDEX
is continuing to add signatures to its Medication Signature Library based on
Client needs.

All ValiMed(TM) production units are shipped with the TUV mark indicating that
ValiMed(TM) meets the electrical safety, electromagnetic interference (EMI), and
electromagnetic compatibility (EMC) test requirements for products sold in the
USA, Canada, and the European Union. In addition, ValiMed(TM) has been tested to
the TUV CB Scheme which opens opportunities to market and sell ValiMed(TM)
production units in countries other than the US, Canada, and the European Union.

In the fourth quarter of FY 2007, CDEX hired its Vice President of International
Sales and Marketing based in Europe and announced plans to expand into the
international market in FY 2008. While potential sales in the international
market may represent a significant distribution opportunities for ValiMed(TM),
CDEX management cannot guarantee that its actions in the international
marketplace will result in substantial revenue for CDEX.

ValiMed(TM) has transitioned from a beta-test product to a production product.
Management does not expect the revenues from ValiMed(TM) to grow in a linear or
predictable manner due to the fact that ValiMed(TM) is a relatively new product.

In the fourth fiscal quarter, CDEX completed beta testing of another product in
the ValiMed LVM(TM) product line (a lower cost unit capable of validation of a
limited number of medication signatures).

In order to increase sales, CDEX must receive additional investment funding to
implement its business plan, fund its international marketing and sales
initiatives, and provide working capital in order to purchase production
materials and parts inventories. CDEX is continuing to seek such funding.

Illicit Drug Detector
---------------------

In FY 2007, CDEX completed beta testing with law enforcement partners of its
ID2, Meth Scanner, a hand held, battery operated device capable of detecting
trace quantities of methamphetamine in real time while scanning surfaces,
including skin and clothing. As a result of beta testing, the ID2 was modified
and field tested. It is expected that the production cycle of the Meth Scanner
will start in the second quarter of fiscal year 2008. Potential markets for the
Meth Scanner include law enforcement, school systems, property inspection (e.g.
homes, apartments, automobiles and hotels), healthcare and private
investigation. There is no assurance that the Company will be successful in
penetrating these markets.

                                       17
<PAGE>

R&D

In the first half of fiscal year 2007, CDEX continued research and development
efforts with several other potential products for the medical and security
markets.

Intellectual Property
---------------------

The Company relies on non-disclosure agreements, patent, trade secret and
copyright laws to protect the Company's intellectual property. The Company makes
a business decision regarding which inventions to patent, and in what countries.
Currently, the company has two patents issued or allowed, and others in various
stages of prosecution. In addition the Company has filed international
counterparts to its US patents and applications where it deems appropriate.


RESULTS OF OPERATIONS

Fiscal Year Ended October 31, 2007 Compared to Fiscal Year Ended October 31,
2006

Revenue: Revenues were $505,193 and $283,385 during the years ended October
31, 2007 and October 31, 2006, respectively. The increase of $221,808 (or 78%)
was primarily due to the delivery of ValiMed(TM) units. At October 31, 2007, the
Company had deferred revenue for the BAXA ValiMed units of $196,000 compared to
deferred revenue of $588,000 at October 31, 2006.

Cost of revenue: Costs of revenues were $176,208 and $141,080 during the years
ended October 31, 2007 and October 31, 2006, respectively. The increase of
$35,128 (or 25%) was the result of costs associated with the increased number of
ValiMed(TM) units that were shipped during the year. In addition, during 2006
the Company incurred costs associated with the purchase of tooling and no
tooling costs were incurred in 2007. Gross profit margins were 65% and 50% in
fiscal 2007 and 2006, respectively.

Research and development costs: Research and development costs were $914,340
during the year ended October 31, 2007, compared with $1,298,594 during the year
ended October 31, 2006. The decrease of $384,254 (or 30%) resulted from a
decrease primarily in compensation expense due to lower employment levels and
secondarily in expenditures for materials and consultants. The decreases in
compensation and other development costs were partially offset by an increase of
approximately $228,000 in non-cash stock based compensation expense.

General and administrative expenses: General and administrative expenses were
$1,877,027 during the year ended October 31, 2007, compared with $2,222,208
during the year ended October 31, 2006. This decrease of $345,181 (or 16%)
resulted primarily from a decrease in compensation expense due to lower
employment levels and a decrease in legal costs due to the settlement of a
lawsuit during 2006. The decrease in general and administrative expense would
have been greater except for an increase of approximately $550,000 in non-cash
stock based compensation expense.

Other income (expense): Other expense was $21,587 during fiscal year ended
October 31, 2007, compared other expense of $21,605 during the fiscal year ended
October 31, 2006. The other expense in fiscal year 2007 was interest expense on
notes payable. The other expense in fiscal year 2006 was interest expense on
notes payables partially offset by interest income earned on short term
investments.

Net loss was $2,483,969 during the fiscal year ended October 31, 2007, compared
with a net loss of $3,400,102 during the fiscal year ended October 31, 2006, due
to the foregoing factors.

                                       18
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

To date, CDEX has incurred substantial losses, and will require financing for
operating expense, working capital and other corporate purposes. We anticipate
that we will require financing on an ongoing basis unless and until we are able
to support our operating activities with additional revenues.

As of October 31, 2007, we had negative working capital of $1,471,636 including
$27,384 of cash and cash equivalents. We anticipate the need to raise additional
capital over the next twelve months to satisfy our current budgetary
projections. Our continued operations, as well as the implementation of our
business plan, therefore will depend upon our ability to raise additional funds
through bank borrowings, equity or debt financing. If the Company is not
successful in raising the required additional capital, it may default in its
payments to its creditors and could result in the filing of bankruptcy
protection. Currently, the Company has sufficient cash to fund operations into
the second quarter of fiscal 2008, and has entered into Warrant agreements for
additional funding with payments that would begin in the second quarter of
fiscal 2008. The Company is actively seeking new investments from its current
accredited investors as well as new accredited investors.

During the fiscal year ended October 31, 2007, the Company received $1,489,240
in funding, comprised of:


     o    $216,540 received from the sale of preferred stock. These preferred
          shares were never issued and were converted into 2,346,212 shares of
          common stock during the second quarter of 2007.

     o    $1,518,640 received from the sale of 13,617,998 shares of common stock
          at an average price between $0.11 and $.12 per share. The investors
          received warrants to purchase up to 15,819,279 shares at exercise
          prices ranging from $.15 per share to $.45 per share from time periods
          ranging from one year to 2.5 years from the effective dates of the
          share purchases.

     o    $213,100 for notes payable.

     o    Repayment of a note payable in the amount of $220,000.

     o    Repayment of redeemable preferred stock liabilities of $239,040 which
          were recorded during 2006 and the quarter ended January 31, 2007 to
          reflect the liability incurred by the Company prior to issuance of the
          preferred shares pending the finalization of the negotiation of terms
          and conditions.


We had a net decrease in cash and cash equivalents of $28,944 during the fiscal
year ended October 31, 2007, compared with a net decrease of $1,415,913 during
the fiscal year ended October 31, 2006. We used net cash of $1,459,226 and
$1,808,752 in operating activities during the fiscal years ended October 31,
2007 and 2006, respectively, and capitalized $58,958 and $86,162 in patent costs
and property and equipment during the fiscal years ended October 31, 2007 and
2006, respectively. We received net proceeds in the amount of $1,489,240 and
$479,000 from the sale of preferred stock, common stock and notes payable to
accredited investors during the fiscal years ended October 31, 2007 and 2006,
respectively.

OFF-BALANCE SHEET ARRANGEMENTS

CDEX has not participated in any off balance sheet financing or other
arrangements.

                                       19
<PAGE>

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations
are based on our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America
(GAAP). The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate these estimates, including those
related to bad debts, inventory obsolescence, intangible assets, payroll tax
obligations, and litigation. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of certain assets and liabilities. Actual results may differ
from these estimates under different assumptions or conditions.

We have identified below certain accounting policies which we apply in the
preparation of our financial statements. We believe that the policies discussed
below are those most critical to our business operations. These policies form
the basis of our discussion throughout this section and affect our reported and
expected financial results.


USE OF ACCOUNTING ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions. These estimates and assumptions affect (i) the
reported amounts of assets and liabilities, (ii) disclosure of contingent assets
and liabilities at the date of the financial statements and (iii) the reported
amounts of revenues and expenses during the periods covered by our financial
statements. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS: We maintain cash balances that may exceed federally
insured limits. We do not believe that this results in any significant credit
risk. We consider all highly liquid investments with original maturities of 90
days or less to be cash equivalents.

REVENUE RECOGNITION: Revenue is recognized in compliance with Staff Accounting
Bulletin (SAB) No. 104, Revenue Recognition, and EITF Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables. Sales revenues are recognized when
persuasive evidence of an agreement with the customer exists, products are
shipped and installation, if necessary, completed, title passes pursuant to the
terms of the agreement with the customer, the amount due from the customer is
fixed or determinable, collectibility is reasonably assured, and there are no
significant future performance obligations. Service revenues are recognized at
time of performance. Service maintenance revenues are recognized ratably over
the term of the agreement.

Deferred revenue represents amounts invoiced or received but not recognized as
revenue if the above revenue recognition terms are not met. Specifically, the
company does not recognize revenue for ValiMed(TM) units purchased by Baxa
Corporation that are warehoused at the company's Tucson facility per Baxa's
request (commonly referred to as bill and hold transactions). Such transactions
represent $196,000 of deferred revenue at October 31, 2007. Further, the company
deferred $50,000 from the Missouri State Highway Patrol (MSHP) for the Meth Gun
Pilot Test Program as the program was not completed by October 31, 2007

INVENTORY: Inventory is valued at the lower of actual cost based on a first-in,
first-out basis or market. Inventory includes the cost of component raw
materials and manufacturing.

PROPERTY AND EQUIPMENT: Property and equipment are stated at historical cost and
are depreciated using the straight-line method over the estimated useful lives
of the related assets, ranging from two to seven years. Depreciation expenses
were $29,322 and $23,794 for the years ended October 31, 2007 and 2006,
respectively.

                                       20
<PAGE>

PATENT: The Company capitalizes the costs of obtaining patents when patents are
granted. Patents are amortized over their useful lives, generally 17 years.
Patent expenses were $5,392 and zero for 2007 and 2006, respectively.

INCOME TAXES: We file our income tax returns on the cash basis of accounting,
whereby revenue is recognized when received and expenses are deducted when paid.
To the extent that items of income or expense are recognized in different
periods for income tax and financial reporting purposes, deferred income taxes
are provided to give effect to these temporary differences. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured by applying presently enacted statutory tax rates, which are
applicable to the future years in which deferred tax assets or liabilities are
expected to be settled or realized, to the differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
The effect of a change in tax rates on deferred tax assets and liabilities is
recognized in operations in the period that the tax rate is enacted.

As we have never operated at a profit, no tax benefit has been reflected in the
statement of operations and a valuation allowance has been established reducing
the net carrying value of the deferred tax asset to zero.

RISKS, UNCERTAINTIES AND CONCENTRATIONS: Financial instruments that potentially
subject CDEX to significant concentration of credit risk consist primarily of
cash equivalents and accounts receivable. In addition, at times CDEX's cash
balances exceed federally insured amounts. Accounts receivable represents a
portion of the revenue outstanding on these contracts. We provide for estimated
credit losses, if required, at the time of revenue recognition.

STOCK-BASED COMPENSATION: We determine stock based compensation expense as the
fair value, at the measurement date, of the service received or the common stock
issued, whichever is more reliably determined. In the case of employees, the
measurement date is the date of grant. In the case of outside consultants, the
measurement date is the date at which their performance is complete. This total
cost is first reflected as deferred compensation in stockholders' equity
(deficit) and then amortized to compensation expense on a straight-line basis
over the period over which the services are performed. When the fair value of
the common stock is used and the measurement date is not the date of grant, the
total cost is re-measured at the end of each reporting period based on the fair
market value on that date, and the amortization is adjusted.

We have also utilized employment and consulting agreements which combine cash
and stock elements of compensation, where a fixed dollar value of stock is
awarded to settle non-cash compensation. We have awarded some of the common
shares in advance of when the service is performed although these shares are
subject to forfeiture in the event of non-performance. We have also paid
performance bonuses in awards of common stock.



ITEM 7. FINANCIAL STATEMENTS

The financial statements begin on Page F-1 following Item 14 hereof.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.

                                       21
<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES

Management is responsible for establishing and maintaining adequate internal
controls over financial reporting of the Company. Internal controls over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States of America.
Management does not expect that the Company's internal controls will prevent all
error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system will be met. The design and operation of a
control system must reflect the fact that there are resource limitations and the
benefit of the controls must be considered relative to their costs.

For the year ended October 31, 2007, as required by SEC Rule 13a-15(b), the
President and Chief Executive Officer and the qualified part time Chief
Financial Officer acting on a consultancy basis conducted an evaluation of the
effectiveness of the Company's internal controls over financial reporting. Based
upon this evaluation, they concluded that the Company's disclosure controls and
procedures were effective at the reasonable assurance level.

As of the year ended October 31, 2006, an evaluation was carried out under the
supervision of James Griffin, our former President, Chief Executive Officer and
Principal Accounting and Financial Officer, and with the participation of our
management at that time, of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act). The Company
concluded that, as of October 31, 2006, these disclosure controls and procedures
were ineffective. Specifically, the Company identified a material weakness in
revenue recognition for bill and hold transactions. As defined by the Public
Company Accounting Oversight Board's Auditing Standard No. 2, a material
weakness is defined as a significant deficiency or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.

In fiscal 2006, the Company sold and delivered Valimed (TM) units to Baxa which
requested the units to be held at the Company's facility in Arizona, pending
shipping instructions from Baxa's end-user customer. The Valimed (TM) units were
paid for and revenue was reported in the company's second and third quarter
10QSB filings. Upon further review, and in consultation with its independent
auditor and the SEC, the Company concluded on January 29, 2007 to revise its
accounting procedure for such transactions and recognize revenue only at such
time as the Company receives a fixed schedule for delivery from its customer. As
a result of the material weakness discussed above, the Company filed amended
10QSB reports for the fiscal quarters ended April 30 and July 31, 2006, which
reflect restated quarterly revenue and cost of revenue balances.

Remediation Plan

In addition to controls and procedures consistent with prior practices, we
developed and implemented a remediation plan. In order to remediate the
aforementioned material weakness, we expanded our accounting policy for revenue
recognition of bill and hold transactions (see Revenue Recognition in
Management's Discussion and Analysis of Financial Condition or Plan of Operation
in this report). Further, we have established fixed delivery dates for Valimed
(TM) units at our Arizona facility.

We believe we have improved our disclosure controls and procedures and
remediated the identified material weakness. Management of the Company will
continue to evaluate the effectiveness of our disclosure controls and
procedures. Because of the inherent limitations in all control systems, controls
can provide only reasonable, not absolute, assurance that all control issues and
instances of fraud, if any, will be or have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.

                                       22
<PAGE>

Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future conditions; over time, control may
become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate. Because of the inherent
limitation in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.

Changes in Internal Controls Over Financial Reporting

The Company implemented the remediation plan discussed above, in connection with
the evaluation required by paragraph (d) of Securities Exchange Act Rules
13a-15(f) or 15d-15(f) that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.


ITEM 8B. OTHER INFORMATION

None.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information regarding our executive officers and
directors:

     NAME                          AGE     POSITION
     ---------                     -----   --------
     Malcolm H. Philips             62     President and Chief Executive
                                           Officer and Chairman of the Board
                                           Of Directors (1)
     James Griffin                  58     CEO/President, Director (2)
     Timothy Shriver                57     Sr. Vice President of Technical
                                           Operations, Director (2)
     Dr. BD Liaw                    70     Chairman of the Board of
                                           Directors (3)
     George Dials                   62     Director
     Donald W. Strickland           58     Director
     Carmen J. Conicelli, Jr.       55     Director

(1) Effective June 11, 2007, Mr. Philips was appointed President and Chief
Executive Officer and Member of the Board of Directors. On October 9, 2007, Mr.
Philips was appointed Chairman of the Board of Directors.

(2) Effective December 28, 2006, Mr. Griffin resigned from the position of
CEO/President and from the Board of Directors. Mr. Shriver was appointed to the
position of acting President and Chief Financial Officer and relinquished this
position on June 11, 2007.

(3) Effective October 9, 2007, Dr. BD Liaw resigned from the Board of Directors.

The following is a summary of the business experience of each of our executive
officers and directors:

On June 11, 2007, Mr. Malcolm H. Philips Jr. was appointed President, Chief
Executive Officer and a Member of the Board of Directors of CDEX Inc. On October
9, 2007, Mr. Philips was appointed Chairman of the Board of Directors. He has
overall responsibility for directing the Company's activities. Mr. Philips was
the founding President, CEO and Chairman of the Board of CDEX and served in
those positions from July 2001 until he left the Company in early 2006. During
his earlier tenure with CDEX, Mr. Philips guided the Company during its
formation, technology acquisitions and development, transition to a public

                                       23
<PAGE>

company, and initial commercialization of its existing product lines. Prior to
his work with CDEX, Mr. Philips served as an attorney for 23 years (ultimately
as a senior partner with Winston and Strawn, one of the largest law firms in the
United States), an energy consultant for 4 years, and an army officer for 8
years (serving in various stations including Viet Nam and various positions
including OIC of the SM-1 Nuclear Power Plant). Mr. Philips has a BS in
engineering from the United States Military Academy (1967), a Master of
Engineering in Nuclear Engineering from Iowa State University (1971) and a Juris
Doctor from Georgetown University Law Center (1978). Mr. Philips was a
Professional Engineer (Texas) and has received various awards in the military
including the Bronze Star, Nuclear Plant Engineer Certification, Nuclear Plant
OIC Certification and Airborne/Ranger Certifications.

Effective January 1, 2006, Mr. James O. Griffin, became our President & Chief
Executive Officer, and on February 3, 2006 was appointed to serve as a director.
Mr. Griffin has served in senior executive positions in the high technology
security and defense electronic systems industries for more than 25 years.
Throughout his career, Mr. Griffin has focused on commercializing emerging
technologies--growing sales and establishing productive distribution channels.
Mr. Griffin joined CDEX in 2005, originally as Chief Operating Officer, from a
background in both public and private enterprises in the U.S., with extensive
experience establishing and heading the international business units of several
multinationals, including SenTech, Simplex, and Cardkey Systems. Immediately
preceding CDEX, at Cernium, Inc., Mr. Griffin served as Vice President of
Federal Systems Sales where he founded the company's Washington, DC office, and
opened relationships with government agencies for the developer of security
video analytics systems. Previously, as Vice President and General Manager for
the IPIX Corporation, he launched the company's security division, IPIX
Security, and established a customer base that included the 2004 G-8 Summit for
the IPIX line of mission critical security imaging systems. As Managing Director
of Simplex Asia Ltd., Mr. Griffin led a nearly two-year transformation of the
fire alarm manufacturer's Asian operations and reversed a major operating loss.
Under Mr. Griffin's leadership, the security services division of Mosler Inc.
added contracts with the New York Port Authority to upgrade the security systems
in the three airports serving New York City. For Cardkey Systems, Mr. Griffin
created the company's international division, linking together worldwide
distributors to form cohesive sales channels. Mr. Griffin holds an MBA from
Pepperdine University and a B.S. in Electrical Engineering from California State
University.

Timothy Shriver has served as our Senior Vice President of Technical Operations
since July 2001. From 1999 until 2001 Mr. Shriver provided outside consulting
services to Ontario Hydro-Generation and CAMOCO, a large uranium mining and
processing company. Mr. Shriver's consulting focused on overall business
practices with particular emphasis on the implementation of quality assurance
programs and evaluation of management capabilities and practices. From 1997 to
1999, Mr. Shriver served as Director of Performance Assurance for Ontario
Hydro-Generation (OPG), where he developed and managed the implementation of the
overall Quality Program at OPG's three CANDU sites and OPG auxiliary sites
supporting the Nuclear Program (at that time, the largest in North America). His
activities also included responsibility for the development and implementation
of an integrated Corrective Action Program, a performance based Audit and
Assessment program and the development of a process oriented Quality Assurance
Manual including the establishment and maintenance of the required interface
with the federal regulator to obtain approval. Between OPG and CDEX, Mr. Shriver
consulted for other utilities' quality assurance programs.

Dr. BD Liaw has served as a director of CDEX since October 2001 and became
Chairman of the Board in February 2006. Since January 2003, he has also served
as Managing Director - Energy Services for Dynamic Resolutions LLC, performing
consulting services to international utilities in Asia. Dynamic Resolutions is
not affiliated with CDEX. From July 1995 to October 2002, he served as an
Advisor and from September 1996 to March 2001, as an Executive Director, to
Taiwan Power Co., an electrical utility. Dr. Liaw served for over 20 years at

                                       24
<PAGE>

the U.S. Nuclear Regulatory Commission and its predecessor agency, the Atomic
Energy Commission. His work related to the high-level nuclear waste repository
and low-level waste projects. In 1986 and 1987, he was invited by China and
Taiwan, respectively, to visit Mainland China and Taiwan to assist in
establishing their nuclear safety regulatory programs. In 1985 thru 1990, Dr.
Liaw managed the NRC's regulatory oversight of the Tennessee Valley Authority's
(TVA) nuclear program, and was instrumental in bringing TVA's nuclear program
back to full regulatory compliance. Dr. Liaw represented the NRC in many
meetings, conferences and symposiums in the United States and around the world
on a wide range of issues. In 1994, Dr. Liaw accepted an invitation from the
government of Taiwan to visit and help resolve some legislators' concerns
regarding energy issues facing the country. Subsequently in 1995, Dr. Liaw
accepted a request to return to Taiwan as an advisor to the Ministry of Economic
Affairs. Dr. Liaw also served in a number of positions over the past six years,
including as an advisor to the Industrial Technology Research Institute.

Mr. Dials has been a director of CDEX since July 2001. Currently Mr Dials is
President and Chief Executive Officer of Y-12 National Security Complex in oak
Ridge, TN. From April 2003 until February 2006, Mr. Dials was the Chief
Operating Officer of Waste Control Specialists, a chemical waste repository.
From July 2002 until May 2003, Mr. Dials was President and CEO of LES, LLC a
company seeking a license to build a nuclear fuel enrichment facility. From
February 2001 to June 2002, Mr. Dials served as Senior Vice President of
Consulting Services for Science and Engineering Associates responsible for its
Consulting Services line of business, where he provided executive level
direction in corporate mergers and acquisitions in the consulting area. Mr.
Dials managed the engineering, and scientific studies of Yucca Mountain as a
potential geologic repository for spent nuclear fuel and high-level radioactive
waste. Responsibilities include scheduling and cost performance, technical and
administrative performance, strategic operations plan development, and resource
allocation for a $250 million project. Mr. Dials received a B.S. in Engineering
in 1967 from West Point and Masters Degrees in Political Science and Nuclear
Engineering from the Massachusetts Institute of Technology. He served in the
U.S. Army for 10 years, and was awarded the Silver Star and Bronze Star for
Valor.

Mr. Donald W. Strickland was appointed to serve as a Director on February 3,
2006. He comes to CDEX from a 30-year career in successfully developing
businesses internationally for both large public companies and technology
startups. He has held executive positions at Eastman Kodak Company and Apple
Computer, including heading product development, manufacturing, and sales. In
1996 he became CEO of PictureWorks Technology, a technology start up, which he
sold for $200M in 2000 to IPIX Corporation, a public company traded on the
NASDAQ exchange. Thereafter, he served as President and CEO of IPIX through
2004, during which time he led the company through a major restructuring,
focusing on the security markets and taking the company to profitability. Mr.
Strickland holds a bachelor's degree in physics from Virginia Tech, a master's
degree in physics from the University of Notre Dame, a master's degree in optics
from the University of Rochester, a master's degree in management from the
Stanford University and a law degree from George Washington University.


Mr. Carmen J. Conicelli, Jr., was appointed to serve as a Director on October 9,
2007. He has served in senior management positions in a number of companies over
the past 32 years, with a primary focus in national and international (Europe,
Japan, Latin America and Asia) financial planning and management. He has
directed financial operations involving SEC compliance and reporting, internal
control and audit, strategic planning, financial systems control, and
mergers/acquisitions/consolidations in a number of industries including
precision optical manufacturing and distribution, cable and telecommunications,
manufacturing, and software development. Mr. Conicelli has served in public
company accounting and since 2004 has served as Chief Financial Officer of
Edmund Optics, Inc. From 2003 to 2004, Mr. Conicelli served as a Senior
Financial Consultant to VWR International. He has a Bachelor of Science Degree
in Business Administration (Accounting Major) from Drexel University (1974) with
extensive postgraduate training and is a Certified Public Accountant.

                                       25
<PAGE>

SIGNIFICANT EMPLOYEE/CONSULTANT

In addition to our executive officers and directors, Dr. Wade Poteet, our
Principal Scientist, is a significant consultant of CDEX. Dr. Poteet resigned
from his employment position with the company in January 2006 and now serves on
a full-time consultancy basis continuing as the company's Principal Scientist.
For the past 30 years, Dr. Poteet has held Senior Management positions in small
entrepreneurial engineering firms. He has served as our Principal Scientist
since July 2001. From July 2001 until January 2003, Dr. Poteet was a member, and
served as Principal Scientist, of Dynamic Management Resolutions LLC, providing
scientific, management and engineering services. Dynamic Management Resolutions
was a consulting company that provided technical and management services on a
contract basis to CDEX and CDEX Delaware. From May 1999 to July 2001, Dr. Poteet
served as President/Principal Scientist for CP Systems, Inc., a private company
that, at that time, built large observatory-class telescopes and marketed and
distributed recreational global positioning units. At CP Systems, Dr. Poteet
directed contract research in remote sensing in the x-ray and ultraviolet
regions, including landmine, anti-terrorist and drug detection programs, and
provided research and development for nanometrology technologies. From 1971 to
May 1999, Dr. Poteet served as Vice President/Principal Scientist for System
Specialists, Inc., where he directed all research and development, including
NASA airborne projects and advanced instruments for commercial and government
programs. Dr. Poteet received his Ph. D. in 1970 in Experimental Solid State
Physics from Virginia Polytechnic Institute (VPI) (Thesis topic: Nuclear
Quadrupole Resonance in Superconductors). His M.S. in Physics is also from VPI,
in 1968 (Thesis topic: Nuclear Magnetic Resonance in Superconductors).


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Officers, Directors and 10% stockholders of CDEX, other then those listed
below, timely filed all reports subject to the reporting requirements of Section
16(a) during the fiscal year ended October 31, 2007.

The following table sets forth as of Feburary 8, 2008, the name and position of
Officers, Directors and 10% stockholders of CDEX who failed to file on a timely
basis any reports required pursuant to Section 16(A) during fiscal year ended
October 31, 2007. As of February 13, 2008, Malcolm H. Philips has filed his Form
3 report and is now current with his required filings. The Company expects Dr.
BD Liaw and Jeffrey Brumfield to complete their fillings within ten days.

                                                                   Report to be
Name                     Position                                  Filed
--------------------------------------------------------------------------------


Malcolm H. Philips       President and Chief Executive Officer     Form 3
                         and Chairman of the Board

Dr. BD Liaw              Director                                  Form 4

Jeffrey Brumfield        Investor                                  Form 3

                                       26
<PAGE>

CODE OF ETHICS

                            CDEX Inc. CODE OF ETHICS

The Board of Directors has adopted this Code of Ethics to guide the conduct of
its directors, officers and employees in the conduct of the Company's business
and financial dealings. All directors, officers and employees of the Company are
expected to be familiar with this Code of Ethics and to adhere to and apply the
principles and procedures set forth herein. The Company has designated a
Committee of the Board of Directors to review compliance with the Code. In
addition, the Company has designated contact persons to report potential
violations of the Code or to discuss specific meanings of the Code. Should you
have any questions or concerns or wish to discuss a possible violation of this
Code of Ethics, you should contact either Donald Strickland or Malcolm Philips
at 520 745 5172.

The general purposes of this Code of Ethics are as follows:

     o    To create a corporate culture and business environment in which the
          legitimate interests of stockholders, employees, customers and
          suppliers and other stakeholders are all fairly and openly represented
          and in which all feel, as far as possible, they are treated fairly.
     o    To promote honest, open, candid and ethical conduct, including fair
          dealing and the ethical handling of actual or apparent conflicts of
          interest;
     o    To promote full, fair, accurate, timely and understandable financial
          and other disclosure; o To promote compliance with applicable laws and
          governmental rules and regulations;
     o    To ensure the protection of the Company's legitimate business
          interests, including corporate opportunities, assets and confidential
          information; and
     o    To deter wrongdoing and, when it occurs, detect and swiftly deal with
          it and its consequences for the company's stakeholders fairly.

Set forth below are the specific rules governing the conduct of directors,
officers and employees which form the substance of this Code of Ethics. Each
director, officer and employee should read them carefully and commit to
upholding them in the pursuit of the Company's business and financial affairs.

I. Honest and Candid Conduct: Each director, officer and employee must act with
integrity, including being honest and candid while still maintaining the
confidentiality of information in compliance with the Company's policies for the
handling of confidential information as outlined in more detail in the company's
standard non disclosure and non compete agreements. In addition, each director,
officer and employee must adhere to the highest standard of business ethics and
observe the letter, form and spirit of state and federal laws, as well as
governmentally mandated accounting standards and other rules and regulations.

II. Conflicts of Interest/Corporate Opportunities: A "conflict of interest"
arises when an individual's personal interest or position in the corporate
management structure interferes with or is inconsistent with the interests of
the Company or with the carrying out their duties in the best interests of the
Company. A conflict of interest can arise when a director, officer or employee
takes any action outside the Company or has any interest outside the Company
that may make it difficult to perform his or her work for the Company
objectively and effectively. Even the appearance of such a situation may create
a conflict of interest. Any director, officer or employee contemplating a
material transaction or relationship which could reasonably be expected to give
rise to a conflict of interest, or the appearance of a conflict of interest,
should discuss it with the Code of Ethics Contact Person prior to taking any
action. Service to the Company should never be subordinated to personal gain and
advantage. Conflicts of interest must be avoided and when detected they must be
reported and action taken to relieve them immediately upon detection.

                                       27
<PAGE>

The following are examples of potential cases of conflict of interest. This
list, however, is by no means exhaustive:

Significant ownership or other financial interest in any supplier or customer of
the Company;

Any consulting, employment or other financial relationship with a significant
supplier or customer, or with any competitor of the Company;

Any outside business activity which detracts from an individual's ability to
devote an appropriate amount of time and/or attention to the Company;

Using company assets or influence for personal use or benefit;

Receipt of non-nominal gifts of excessive entertainment from any company with
which the Company has current or prospective business dealings or from
supervised employees;

Selling anything to the Company or buying anything from the Company, other than
on similar terms and conditions as would prevail in an arms-length transaction;
or

Actions that would present a conflict for a director, officer or employee if
taken by a family member with knowledge of the director, officer or employee.

Directors, officers and employees of the Company are prohibited from taking
(directly or indirectly) a business opportunity that is discovered through the
use of corporate property, information or position, unless the Company has
approved in writing or been offered the opportunity and declined it. Any
director, officer or employee contemplating such a transaction or business
opportunity should first discuss it with the appropriate Code of Ethics Contact.
Simply put, it is imperative that all put the Company's interest first. While a
more comprehensive discussion of the Company's sexual harassment or racial
prejudice policy will be provided, the Company will not tolerate such action or
the failure to report to the appropriate Code of Ethics Contact such action,
both of which will be dealt with equally.

III. Disclosure: Every director, officer or employee who is directly involved in
the Company's financial affairs or decision-making or is part of the Company's
SEC/public disclosure process must be familiar with and comply with the
Company's disclosure controls and procedures and internal control over financial
reporting, to the extent relevant to his or her area of responsibility. This
also extends to ensuring that the Company's public disclosure documents filed
with the SEC comply in all material respects, with the applicable securities
laws and SEC rules and regulations. Such persons should consult with other
Company officials with the goal of making full, fair, timely, accurate and
understandable disclosure. Such persons must properly review and critically
analyze proposed disclosure for accuracy and completeness and must not knowingly
misrepresent, or cause others to misrepresent, facts about the Company to
others, including the Company's independent auditors, counsel or governmental or
self-regulatory organizations (such as the NASD).

IV. Compliance: It is the personal responsibility of each director, officer and
employee to uphold the Company's policy of complying with all applicable laws,
rules and regulations and to adhere to the standards and restrictions imposed
thereby. It is against Company policy and, in many circumstances, illegal for a
director, officer or employee to profit from undisclosed, nonpublic Company
information. This includes trading in the Company's securities (either directly
or indirectly) while in possession of material nonpublic information relating to
the Company. Any director, officer or employee who is uncertain about the
legality of a purchase or sale or business relationship or witnesses a violation
of this code, should immediately consult with the Code of Ethics Contact Person
or any Board member who will, if appropriate, discuss the matter with the board
of directors and/or Company counsel.

V. Reporting and Accountability: All potential violations of this Code of Ethics
will be reported to the Company's CEO. With respect to allegations of Code of
Ethics violations related to employees who are not officers or directors, the
CEO will be responsible for directing an appropriate investigation and, in
conjunction with the Code of Ethics Contact Person for Employees, administering
appropriate corrective actions. The board of directors will be responsible for


                                       28
<PAGE>

directing an appropriate investigation and administering appropriate corrective
action with respect to allegations of Code of Ethics violations related to
officers or directors of the Company. The Company's board of directors is
responsible for final interpretation of the Code of Ethics. The Company will not
tolerate any delay in or failure to report or any retaliation against any other
director, officer or employee who, in good faith, reports any existing or
potential violation of this Code of Ethics. If a violation has occurred, the
Company will take such disciplinary or preventive action as it deems
appropriate. In certain cases, this may involve dismissal or notification of
appropriate governmental authorities for appropriate prosecution or other
action.

VI. Waiver: From time to time, the Company may waive one or more provisions of
this Code of Ethics. But this can only be done in writing. Any request for a
waiver of any provision of this code must be in writing and addressed to the
board of directors. Prior to submitting a request for a waiver, you should
consult with the appropriate Code of Ethics Contact Person. In certain cases,
waivers of this Code of Ethics must be reported on Form 8-K to the Securities
and Exchange Commission.


ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information regarding the remuneration of our
Executive officers and significant employees:

<TABLE>
<CAPTION>
                                        SUMMARY COMPENSATION TABLE

NAME AND PRINCIPAL                  FISCAL     SALARY(1)       OPTION            ALL OTHER           TOTAL
POSITION                             YEAR                    AWARDS (2)        COMPENSATION (1)
------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>           <C>               <C>                  <C>
Malcolm Philips                     2007       $ 62,999      $280,595                               $343,594
President, CEO and Chairman         2006       $ 16,000      $      -          $349,000             $365,000
of the Board of Directors

Timothy D. Shriver                  2007       $201,560      $142,235                               $343,795
Sr. VP Technical Operations         2006       $163,690      $      -          $ 30,290             $193,980
Director

Dr. Wade Poteet                     2007       $138,000      $ 88,115                               $226,115
Principal Scientist                 2006       $131,000      $      -          $ 19,000             $150,000
</TABLE>


(1) During 2007, Mr. Philips and Mr. Shriver deferred a portion of their cash
salary. During 2006, pursuant to the terms of their respective Employment
Agreement Agreements and based upon CDEX's financial condition, the executive
officers have each foregone a portion of his stated salary, and have been paid
instead in the form of cash and shares of common stock. All share amounts are
subject to a vesting schedule with a risk of forfeiture in the event the
employee does not remain with CDEX for the required amount of time. Dr. Poteet
resigned from his employment position with the company effective January 1, 2006
and now serves on a full-time consultancy basis, continuing as the company's
Principal Scientist. See discussion under Employment Agreements below for
greater detail on the terms of employment including compensation.

(2) Stock option awards are exercisable within one or two years of the date of
grant. The fair value of each option is estimated using the Black-Scholes option
model with the following assumptions: volatility of 75%; dividend yield of 0%;
risk free interest rate of 4.2% and expected terms of 3 to 5 years.

                                       29
<PAGE>

EMPLOYMENT AGREEMENTS

The Company entered into employment agreements with Messrs. Philips and Shriver
effective January 1, 2002. The agreements each continue for an indefinite period
unless terminated by CDEX for "cause," or by the employee for "good reason" (as
such terms are defined in the agreements), or upon two weeks prior written
notice by either party to the other. The agreements provide for salaries based
on annual amounts of $300,000 for Mr. Philips and $250,000 for Mr. Shriver,
which are subject to review on an annual basis. The salary shall be payable in
equal monthly installments, unless otherwise required by applicable state law
and, based on CDEX's economic posture, may be paid in cash and/or stock, at
CDEX's option. Each agreement provides for a minimum monthly cash payment to the
employee of $7,500 for Mr. Shriver and $3,000 for Mr. Philips. CDEX has availed
itself of this option for the past three fiscal years as reflected under
"Compensation of Executive Officers." Each of these agreements provides for the
forfeiture of restricted stock granted to the employee in the event of the
employee's termination before the stock is fully vested. Under the agreements,
each employee is entitled to a severance package in the event of termination by
CDEX other than for "cause" or by the employee for "good reason." In each case,
"good reason" includes a change in management of CDEX.

The agreements with Messrs. Philips and Shriver were amended on January 1, 2003
to increase the intended minimum monthly cash payment to the employee to $8,000,
and permit CDEX to pay the entire salary in common stock if paying cash is not
in the best interest of the Company.

Mr. Philips resigned from the positions of Chief Executive Officer and President
effective January 1, 2006, and the company entered into a Settlement and
Consulting Agreement, as of said date, with an entity controlled by Mr. Philips,
for Mr. Philips's continued services as the Company's Chairman of the Board and
additional services as a consultant in order to assure a smooth and settled
transition for the Company's new Chief Executive Officer. The agreement has a
term of one year, unless extended by mutual agreement of the parties, and may be
terminated by either party on two weeks' notice. Pursuant to the agreement, the
Company paid Mr. Philips 350,000 free-trading shares of Class A Common Stock.
Mr. Philips' agreement was terminated in April 2006.

Effective June 11, 2007, the Company entered into an employment agreement with
Mr. Philips whereby Mr. Philips became the CEO and President. The agreement
provides for an annual salary of $180,000. The agreement provides for an award
of 350,000 stock options with a strike price as the fair market value of the
shares on June 11, 2007. These options vest on June 11, 2008 and terminate five
years after the grant date. Furthermore, if the Company elects to terminate Mr.
Philips' employment for any reason prior to June 11, 2009, the Company shall pay
to Mr. Philips a severance fee of $200,000. In addition, on July 17, 2007, the
Company granted to Mr. Philips 100,000 options with a strike price as of the
fair market value at the time of granting.


Effective January 11, 2006, the Company entered into an amendment to the
employment agreement of Mr. Shriver. The amendment to Mr. Shriver's employment
agreement provides for an annual cash salary of $180,000 as well as options
which will vest 1/3 on January 1, 2007, and 1/24th of the remainder on the first
day of each month thereafter for the following two years, as long as he is
providing to the Company substantial services pursuant to a contract with the
Company at the time of vesting. The Company canceled all options granted to Mr.
Shriver in 2006. On July 17, 2007, the Company granted to Mr. Shriver 200,000
options with a strike price the fair market value at the time of granting with
50% vesting immediately and 25% vesting in both 12 and 24 months.

                                       30
<PAGE>

The following table sets forth information regarding stock option awards to our
Executive Officers and significant officers:

<TABLE>
<CAPTION>
                             Option Awards at October 31, 2007

Name                         Number of           Number of             Option         Option
                             Securities          Securities           Exercise       Exercise
                             Underlying          Underlying            Price           Date
                             Unexercised         Unexercised
                             Options (#)         Options (#)
                             Exercisable         Unexercisable
<S>                             <C>                  <C>              <C>            <C>
Malcolm H. Philips              100,000                    -          $   0.15       7/17/2010
                                350,000                    -          $   0.22       6/11/2012

Timothy D. Shriver              100,000              100,000          $   0.15       7/17/2010

Dr.Wade Poteet                   50,000               50,000          $   0.15       7/17/2010
</TABLE>

The following table sets forth information regarding stock based compensation
granted to our Directors:

                   Director Summary
                     Compensation

             Name                     Option Awards


George Dials                            $32,713

Dr. BD Liaw                             $32,713

Donald W. Strickland                    $49,070

STOCK INCENTIVE PLANS

2002 Stock Incentive Plan
-------------------------

On May 27, 2002, our board of directors adopted the 2002 Stock Incentive Plan,
under which stock options and restricted stock may be granted to such of our
officers, directors, employees or other persons providing services to CDEX as
our board of directors, or a committee designated by them for this purpose,
selects. The plan was approved by our stockholders on July 1, 2002.

Stock options granted under the plan may be nonqualified stock options or
incentive stock options, as provided in the plan. Incentive stock options are to
be issued in accordance with Section 422 of the Internal Revenue Code of 1986,
as amended. As such, incentive stock options may only be issued to employees of
CDEX or any subsidiary of CDEX, must have an exercise price of no less than the
fair market value of the common stock on the date of the grant; provided,
however, that in the event the grantee is a ten percent stockholder, the
exercise price shall not be less then 110% of fair market value of the common
stock on the date of the grant. The aggregate fair market value of the
underlying shares cannot exceed $100,000 for any individual option holder during
any calendar year. Incentive stock options granted to a ten percent stockholder
must expire no later than five years from the date of grant. Non-incentive
options are not subject to the restrictions contained in Section 422, except
that pursuant to the plan, such options cannot be exercisable at less than 85%
of fair market value and must expire no later than ten years from the date of
grant. The options are non-transferable and may not be assigned except that
non-incentive options may, in certain cases be assigned to family members of the
grantee.

Upon termination of the employment (other than for cause) of a grantee of
options under this plan, the grantee shall have 60 days following such
termination, or one year if such termination results from the grantee's death or
disability (as defined in the plan), to exercise the vested portion of any
option. Holders of options under the plan have no voting or other rights of
shareholders except and to the extent that they exercise their options and are
issued the underlying shares. Options under the plan may be exercised by the
issuance of a promissory note from the grantee, or on a cashless basis by the
grantee surrendering a portion of the shares issuable thereunder, as payment of
the exercise price in lieu of cash.

Restricted stock granted under this plan may be issued subject to any
restrictions set by our board of directors in its discretion except that the
vesting restrictions for restricted stock granted to individuals who are not
officers, directors or consultants of CDEX shall lapse no less rapidly than the
rate of 20% per year for each of the first five years from the grant date.
However, the board of directors in its discretion may shorten or eliminate the
restrictions. Generally, unless otherwise provided by the board of directors
with respect to a particular grant of restricted stock, holders of restricted
stock have the right to vote and receive dividends on their shares, including
shares not yet vested. Also, unless otherwise so provided, any unvested shares
are deemed forfeited by the grantee upon termination of such grantee's service
with CDEX.

2003 Stock Incentive Plan
-------------------------

On July 1, 2003, our shareholders adopted the 2003 Stock Incentive Plan, which
has substantially the same terms as the 2002 Stock Incentive Plan. At the annual
meeting of stockholders held on June 30, 2004, the shareholders authorized
10,000,000 shares in the aggregate for issuance under both the 2002 and 2003

                                       31
<PAGE>

plans, including 3,000,000 available for the Board of Directors to allocate at
their discretion. At the annual meeting of the stockholders held on March 17,
2006, the shareholders approved an amendment to the 2003 Stock Incentive Plan
increasing the number of Class A common stock available for issuance by an
additional 3,500,000 shares. This amendment increased the aggregate number of
shares available for issuance under both the 2002 and 2003 Stock Incentive Plans
to 13,500,000. It should be noted that our 2005 Form 10-KSB correctly listed the
aggregate number of shares reserved for issuance under the 2002 and 2003 Stock
Incentive Plans as 10,000,000 shares and Form DEF 14A filed on February 14,
2006, as well as the second quarter 2006 10-QSB correctly noted an increase in
the reserved shares by 3.5 million as approved at the March 17, 2006 Shareholder
Meeting. However, the 2006 Form 10-KSB inadvertently listed the aggregate number
of shares reserved for issuance under both the 2002 and 2003 Stock Incentive
Plans as 10,000,000 shares. The 2003 Stock Incentive Plan provides for a pro
rata increase in the number of shares permitted to be granted or issued for an
increase in the authorized shares approved by the shareholders. At a special
shareholders' meeting held on January 9, 2007, the shareholders approved an
increase in the number of authorized shares from 50.2 million to 100 million.
This shareholder action resulted in an automatic increase in the number of
shares permitted to be issued or granted under the 2003 Stock Incentive Plan to
approximately 26.9 million.

As of January 22, 2008, we have issued or granted 12,378,043 shares of common
stock under the plans to certain of our officers, directors, consultants and
employees, which are subject to forfeiture in accordance with the vesting
schedules set forth in the granting agreements. Shares issued pursuant to the
plans, whether underlying options or as restricted stock, generally may not be
sold or transferred without the grantee first offering CDEX a right of first
refusal to purchase the shares sought to be sold.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

The following table sets forth the stock ownership as of January 22, 2008 of:
(i) each person known by us, as of the date of this report, to be the beneficial
owner of five percent (5%) or more of our common stock, (ii) each executive
officer and director, individually, and (iii) our executive officers and
directors as a group. Each person has sole voting and investment power with
respect to the shares shown, unless otherwise indicated.

Item 11  Security Ownership of Certain Beneficial Owners and Management

<TABLE>
<CAPTION>
Name and Address of          Position                         Title of Class         Amount of                     Percent of Class
Beneficial Owner (1)                                                            Beneficial Ownership
------------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                              <C>                        <C>          <C>             <C>
Mr. Jeffery Brumfield        Investor                         Class A Common             6,970,042                    13.0%

Malcolm H. Philips, Jr.      Executive Offier and Director    Class A Common             2,377,853    (2)   (3)        4.4%

Timothy Shriver              Executive Offier and Director    Class A Common             1,259,322    (2)              2.4%

George Dials                 Director                         Class A Common               180,000    (2)              0.3%

Dr. BD Liaw                  Director                         Class A Common               175,000    (2)              0.3%

Donald W. Strickland         Director                         Class A Common                     -    (2)              0.0%

Carmen J. Conicelli          Director                         Class A Common                     -    (4)              0.0%


Shares of all named executives,                                                         10,962,217                    20.5%
significant employees and
directors as a group (6 persons)
</TABLE>

(1) The address for each of the listed persons is c/o CDEX Inc., 4555 South Palo
Verde Road, Suite 125, Tucson, AZ 85714.

(2) The stock granted to each of the above-named directors and executive
officers may be subject to a vesting schedule and risk of forfeiture. CDEX has
the option to require that any unvested shares at termination be forfeited. Upon
termination of employment/provision of service, CDEX has the option to purchase
any vested shares of the employee/service provider at fair market value.

(3) Includes stock held by entities in which Mr. Philips has a controlling
interest.

(4) Mr. Carmen J. Conicelli was appointed a Director on October 9, 2007.

                                       32
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal year ended October 31,2007, certain Directors and Officers loaned
the Company $158,000. These notes mature in one year from the loan date and pay
interest at the rate of 9% or 10% per year. The notes are convertible into Class
A common stock with warrants.


                                     PART IV

ITEM 13. EXHIBITS

3.1       Amended and Restates Articles of Incorporation of the Company filed
          January 2, 2004, together with Certificate of Designation of Rights,
          Preferences and Privileges(1)

3.2       By-Laws of the Company adopted July 6, 2001(1)

3.3       Form 8-K filed on December 4, 2007 to amend By-Laws to increase the
          number of authorized shares from 50.2 million to 100 million (4)

4.1       Specimen certificate for shares of Company common stock (3)

4.2       2002 Stock Incentive Plan(1)

4.3       2003 Stock Incentive Plan(1)

4.4       Form of Securities Purchase Agreement(3)

10.1      Form 8-K announcing the appointment of August F. DeLuca as Chief
          Financial Officer and VP of Finance effective January 16, 2008 (4)

10.2      Form 8-K announcing the appointment of Malcolm H. Philips as Chairman
          of the Board of Directors, the appointment of Carmen J. Concicello as
          a Director and the resignation of Dr. BD Liaw as a Director effective
          October 9, 2007 (4)

10.3      Form 8-K announcing an amendment to the By-Laws effective November 27,
          2007 (4)

10.4      Form 8-K announcing the appointment of Malcolm H. Philips as President
          and Chief Executive Officer and Director and also announcing the
          Company's intent to present and/or distribute to interested investors
          and analysts the "Investor Presentation", dated August 2007 and
          attached thereto (4)

10.5      Form 8-K announcing the change in the Company's independent auditor
          (4)

                                       33
<PAGE>

31        Rule 13a-14(a)/15d-14(a) Certification of Malcolm H. Philips

31        Rule 13a-14(a)/15d-14(a) Certification of August F. DeLuca

32        Section 1350 Certification of Malcolm H. Philips

32        Section 1350 Certification of August F. DeLuca

(1)       Incorporated by reference to the Company's Registration Statement on
          Form SB-2, as filed with the Securities and Exchange Commission on
          February 2, 2004.

(2)       Incorporated by reference to Amendment No. 1 to the Company's
          Registration Statement on Form SB-2, as filed with the Securities and
          Exchange Commission on May 5, 2004.

(3)       Incorporated by reference to Amendment No. 2 to the Company's
          Registration Statement on Form SB-2, as filed with the Securities and
          Exchange Commission on June 21, 2004.

(4)       Incorporated by reference on various Form 8-Ks


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a summary of the fees billed to us by S.E. Clark and Co., our
independent auditor, for professional services rendered for the year ended
October 31, 2007 and Aronson and Company, our prior independent auditors, for
audit and professional services rendered for the fiscal years ended October 31,
2006 and 2007:


               Description              FY2006       FY2007
               -----------             -------      -------
               Audit fees              $58,000      $57,007
               Other services           15,600        6,850
                                       -------      -------
               Total                   $73,600      $63,857
                                       -------      -------


                                       34
<PAGE>

                                    CDEX Inc.
                      Index to Audited Financial Statements
                      Years Ended October 31, 2007 and 2006
--------------------------------------------------------------------------------


                                                                            Page
Report of Independent Registered Public Accounting Firm.......................F2

Audited Financial Statements:

   Balance Sheet..............................................................F4

   Statements of Operations...................................................F5

   Statements of Changes in Stockholder's Equity/(Deficit)....................F6

   Statements of Cash Flows...................................................F7

   Notes to Financial Statements..............................................F8




                                      F-1
<PAGE>

             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------


Board of Directors and Stockholders
CDEX Inc.
Tucson, Arizona

We have audited the accompanying balance sheet of CDEX Inc. (the "Company") as
of October 31, 2007 and the related statements of operations, changes in
stockholders' deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements for the year ended October
31, 2006, which are presented for comparative purposes. Those statements were
audited by other auditors whose report contained an unqualified opinion with
added comment pertaining to the Company's ability to continue as a going
concern.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board, generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of CDEX Inc. as of October 31, 2007
and the results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the accumulation of losses and shortage of capital raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 9 The financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.

/s/ S.E.Clark & Company, P.C.

Tucson, Arizona
January 19, 2008

                                      F-2
<PAGE>

Report of Independent Registered Public Accounting Firm


Board of Directors
CDEX Inc.
Tucson, Arizona

We have audited the accompanying Statements of Operations, Stockholders' Equity
and Cash Flows of CDEX Inc. for the year ended October 31, 2006. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of CDEX Inc. for
the year ended October 31, 2006 in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company incurred net losses in each year of
operations, has an accumulated deficit in excess of $23 million as of October
31, 2006, has insufficient working capital to sustain its operations over the
next year and has no committed borrowing arrangements. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 9. These financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


/s/ Aronson & Company
Rockville, Maryland
January 29, 2007

                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                                         CDEX Inc.
                           Balance Sheet as of October 31, 2007

<S>                                                                            <C>
Assets
          Current assets
                     Cash and cash equivalents                                 $     27,384
                     Accounts receivable                                             68,924
                     Finished goods inventory                                       113,489
                     Raw materials inventory                                         23,846
                     Prepaid expenses                                                94,520
                                                                               ------------
          Total current assets                                                      328,163

          Property and equipment                                                    651,327
                     Less: Accumulated depreciation                                (624,490)
                                                                               ------------
          Net property and equipment                                                 26,837

          Patents                                                                   100,000
                     Less: Accumulated amortization                                  (5,393)
                                                                               ------------
          Net patents                                                                94,607

          Other assets                                                                2,499
                                                                               ------------

Total Assets                                                                   $    452,106
                                                                               ============

Liabilities and Stockholders' Equity

          Current Liabilities
                     Accounts payable and accrued expenses                     $  1,343,274
                     Notes payable and accrued interest                             218,288
                     Advance payments                                               116,180
                     Deferred revenue                                               246,000
                                                                               ------------
          Total Current Liabilties                                                1,923,742


          Total Liabilities                                                       1,923,742

Commitments and Contingencies

Stockholders' Deficit
          Preferred Stock - Undesignated - $.005 par value per share,
                     350,000 shares authorized and none outstanding                       -
          Preferred Stock - Series A - $.005 par value per share,
                     150,000 shares authorized and 6,675 outstanding                     33
          Class A common stock - $.005 par value per share, 100,000,000
                     shares authorized and 51,569,407 outstanding                   257,851
          Additional paid in capital                                             23,928,584
          Accumulated deficit                                                   (25,658,104)
                                                                               ------------
Total Stockholders' Deficit                                                      (1,471,636)

Total Liabilities and Stockholders' Deficit                                    $    452,106
                                                                               ============
</TABLE>


The accompanying Notes to Financial Statements are an integral part of these
financial statements.


                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                                    CDEX Inc.
                            Statements of Operations


                                                                    Years Ended
                                                                     October 31
                                                      ----------------------------------------

                                                          2006                       2007
                                                          ----                       ----
<S>                                                  <C>                         <C>

Revenue                                              $    283,385                $    505,193


Cost of Revenue                                           141,080                     176,208
                                                     ------------                ------------
Gross Profit                                              142,305                     328,985


Operating Expenses
       Research and Development costs                   1,298,594                     914,340
       General and administrative expenses              2,222,208                   1,877,027
                                                     ------------                ------------
Total Operating Expenses                                3,520,802                   2,791,367

Loss From Operations                                   (3,378,497)                 (2,462,382)

Other Income (Expense)
       Interest income                                      7,201
       Interest expense                                   (28,806)                    (21,587)
                                                     ------------                ------------
Total Other (Expense) Income                              (21,605)                    (21,587)
                                                     ------------                ------------
Net Loss                                             $ (3,400,102)               $ (2,483,969)
                                                     ============                ============

Basic and diluted net loss
       per common share:                             $      (0.09)               $      (0.05)

Basic and diluted weighted average
       common shares oustanding                        36,569,497                  45,831,502
</TABLE>


The accompanying Notes to Financial Statements are an integral part of these
financial statements.


                                      F-5
<PAGE>

<TABLE>
<CAPTION>
CDEX Inc.

Statements of Changes in Stockholders' Equity/(Deficit)

                                                     Shares of   Shares of      Shares of
                                                     Preferred    Class A        Class B       Preferred   Class A       Class B
                                                       Stock    Common Stock   Common Stock      Stock   Common Stock  Common Stock
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>           <C>          <C>           <C>          <C>
------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 2005                                         35,679,971      175,000   $          -  $   178,404  $        875
====================================================================================================================================
Sale of preferred stock for cash                       6,675               -                $         33  $         -
Sale of common stock for cash                                        457,563                              $     2,288
Shares issued for compensation                                       932,875                              $     4,664
Exchange of Class B for Class A common stock                         175,000     (175,000)                $       875  $       (875)
Remeasurement of compensation expense
Amortization of deferred compensation expense
Net loss

------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 2006                              6,675      37,245,409                $         33  $   186,232  $          -
====================================================================================================================================


Sale of common stock for cash                                     13,477,998                              $    67,390
Shares issued to placement agent                                     556,000                              $     2,780
Stock option exercise                                                140,000                              $       700
Shares issued for compensation                                       150,000                              $       750
Fair value of stock option grants
Net loss

------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 2007                              6,675      51,569,407                $         33  $   257,853
====================================================================================================================================

<CAPTION>
                                                                 Additional                                  Stock
                                                                   Paid-in      Deferred    Accumulated  Subscription
                                                                  Capital     Compensation    Deficit     Receivable       Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>           <C>          <C>            <C>         <C>
------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 2005                                        $20,435,268   $   (72,536) $(19,774,033)  $         - $    767,978
====================================================================================================================================

Sale of preferred stock for cash                                 $   133,467                                           $    133,500
Sale of common stock for cash                                    $   140,712                                           $    143,000
Shares issued for compensation                                   $   792,733                                           $    797,398
Exchange of Class B for Class A common stock
Remeasurement of compensation expense                            $    (3,631)  $     3,631
Amortization of deferred compensation expense                                  $    68,906                             $     68,906
Net loss                                                                                     $(3,400,102)              $ (3,400,102)

------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 2006                                        $21,498,550   $          - $(23,174,135) $         -  $ (1,489,320)
====================================================================================================================================

Sale of common stock for cash                                    $ 1,429,650                                           $  1,497,040
Shares issued to placement agent                                 $    91,740                                           $     94,520
Stock option exercise                                            $    20,900                                           $     21,600
Shares issued for compensation                                   $    28,000                                           $     28,750
Fair value of stock option grants                                $   859,743                                           $    859,743
Net loss                                                                                    $ (2,483,969)              $ (2,483,969)

------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 2007                                        $23,928,584                $(25,658,104)              $ (1,471,636)
====================================================================================================================================
</TABLE>


The accompanying Notes to Financial Statements are an integral part of these
financial statements.


                                      F-6
<PAGE>

<TABLE>
<CAPTION>
                                    CDEX Inc
                            Statements of Cash Flows

                                                                               Years Ended
                                                                                October 31
                                                                 --------------------------------------
                                                                      2006                   2007
                                                                      ----                   ----
<S>                                                               <C>                    <C>
Cash Flows from Operating Activities
           Net loss                                               $(3,400,102)           $(2,483,969)
           Adjustments to reconcile net loss to cash used by
                 operating activities
                            Depreciation and amortization              23,794                 34,714
                            Stock and deferred compensation           300,267                930,723
                            Noncash interest                           28,806                 21,162
                 Changes in operating assets and liabilities
                            Inventory                                 (39,571)               153,698
                            Accounts receivable                         9,110                (56,472)
                            Prepaid expenses and other assets           2,845                 (7,575)
                            Current liabilities                     1,266,098                (51,506)
                                                                  -----------            -----------
Net cash used by operating activities                              (1,808,752)            (1,459,226)

Cash Flows from Investing Activities
           Capitalized patent costs                                   (50,000)               (50,000)
           Purchase of property and equipment                         (36,162)                (8,958)
                                                                  -----------            -----------
Net cash used by investing activities                                 (86,162)               (58,958)

Cash Flows from Financing Activities
           Proceeds from sale of preferred stock                      156,000                216,540
           Proceeds from sale of common stock                         143,000              1,518,640
           Proceeds from note payable                                 180,000                213,100
           Repayment of preferred stock proceeds                            -               (239,040)
           Repayment of notes payable                                       -               (220,000)
                                                                  -----------            -----------
Net cash provided by financing activities                             479,000              1,489,240

Net increase (decrease) in cash                                    (1,415,913)               (28,944)

Cash and cash equivalents, beginning of the period                  1,472,242                 56,328
                                                                  -----------            -----------

Cash and cash equivalents, end of the period                      $    56,328            $    27,384
                                                                  ===========            ===========

Supplemental Cash Flow Information
           Actual cash payments for interest                      $         -            $       425
           Conversion of Class B to Class A common stock          $    18,250            $         -
</TABLE>

The accompanying Notes to Financial Statements are an integral part of these
financial statements.


                                      F-7
<PAGE>

1. Organization     Basis of presentation: CDEX Inc. (the Company), incorporated
   and significant  under the laws of the State of Nevada on July 6, 2001
   accounting       (inception), began operations in July 2001 by acquiring the
   policies         assets listed below along with chemical detection
                    technology, nanometrology, technical processes and
                    intellectual property rights from Loch Harris, Inc. in
                    exchange for 13,865,000 shares of Class A common stock. The
                    transaction is considered a reorganization of affiliated
                    entities and hence the assets acquired are valued at the
                    historical cost of the transferor. As the intangible assets
                    had no historical cost basis on the books of the transferor,
                    they are carried at a zero cost value on the Company's
                    books. Tangible assets acquired were:

                    Cash                                   $    73,000
                    Other receivables                            7,000
                    Property and equipment, net                366,099

                    On March 1, 2002, 200,000 shares issued as described above
                    were returned to the Company in exchange for its payment of
                    $57,000 of liabilities of the transferor related to legal
                    and professional services performed.

                    Use of accounting estimates: The preparation of financial
                    statements in conformity with generally accepted accounting
                    principles requires management to make estimates and
                    assumptions. These estimates and assumptions affect (i) the
                    reported amounts of assets and liabilities, (ii) disclosure
                    of contingent assets and liabilities at the date of the
                    financial statements and (iii) the reported amounts of
                    revenues and expenses during the periods covered by our
                    financial statements. Actual results could differ from those
                    estimates.

                    Revenue recognition: Revenue is recognized in compliance
                    with Staff Accounting Bulletin (SAB) No. 104, Revenue
                    Recognition, and EITF Issue No. 00-21, Revenue Arrangements
                    with Multiple Deliverables. Sales revenues are recognized
                    when persuasive evidence of an agreement with the customer
                    exists, products are shipped and installation, if necessary,
                    completed, title passes pursuant to the terms of the
                    agreement with the customer, the amount due from the
                    customer is fixed or determinable, collectibility is
                    reasonably assured, and there are no significant future
                    performance obligations. Service revenues are recognized at
                    time of performance. Service maintenance revenues are
                    recognized ratably over the term of the agreement.

                    Deferred revenue represents amounts invoiced or received but
                    not recognized as revenue if the above revenue recognition
                    terms are not met. Specifically, the company does not
                    recognize revenue for ValiMed(TM) units purchased by Baxa
                    Corporation that are warehoused at the company's Tucson
                    facility per Baxa's request (commonly referred to as bill
                    and hold transactions). Such transactions represent $196,000
                    of deferred revenue at October 31, 2007. Further, the
                    company deferred $50,000 from the Missouri State Highway
                    Patrol (MSHP) for the Meth Gun Pilot Test Program as the
                    program was not completed by October 31, 2007.

                    In fiscal years 2006 and 2007, revenue was recognized from
                    sales to 9 and 11 customers, respectively. Sales to Baxa
                    Corporation and Henry Ford Health Systems represented 60%
                    and 15% of fiscal year 2006 revenue, respectively. Sales to
                    Baxa Corporation were 79% of fiscal year 2007 revenue. No
                    other customer in 2007 represented more than 5% of total
                    sales.

                                      F-8
<PAGE>

                    Cash and cash equivalents: The Company maintains cash
                    balances that may exceed Federally insured limits. The
                    Company does not believe that this results in any
                    significant credit risk. The Company considers all highly
                    liquid investments with original maturities of 90 days or
                    less to be cash equivalents.

                    Property and equipment: Property and equipment are stated at
                    historical cost and are depreciated using the straight-line
                    method over the estimated useful lives of the related
                    assets, ranging from two to seven years. Depreciation
                    expense was $23,794 and $29,322 for the years ended October
                    31, 2006 and 2007, respectively.

                    Inventory: Inventory is valued at the lower of actual cost
                    based on a first-in, first-out basis or market. Inventory
                    includes the cost of component raw materials and
                    manufacturing.

                    Advertising and marketing costs: The cost of advertising and
                    marketing is expensed as incurred. Advertising and marketing
                    expense was $109,897 and $26,320 for the years ended October
                    31, 2006 and 2007, respectively.

                    Research and development: Total research and development
                    costs include labor and stock compensation for employees and
                    contractors, rent, professional services, materials, lab
                    equipment and disposals. These costs are expensed on the
                    accompanying Statements of Operations as research and
                    development costs.

                    Stock-Based Compensation: In the fiscal year ended October
                    31, 2006, the Company followed SFAS No. 123, Accounting for
                    Stock-Based Compensation. In accounting for stock options,
                    as permitted by SFAS No. 123, the Company accounted for
                    stock-based compensation to employees in accordance with
                    Accounting Principles Board (APB) Opinion No. 25 Accounting
                    for Stock Issued to Employees, and accordingly recognized
                    compensation expense for fixed stock option grants only when
                    the exercise price was less than the fair value of the
                    shares on the date of the grant.

                    The Company granted stock options in fiscal year 2005 and
                    the first and second quarters of fiscal year 2006. In the
                    third quarter of 2006 the company canceled all options by
                    contractual agreement with the option holders. Accordingly,
                    there are no options outstanding at October 31, 2006.

                    The following table illustrates the effect on net loss if
                    the Company had applied the fair value recognition
                    provisions of SFAS No. 123 to stock-based compensation:

                                      F-9
<PAGE>

                                                                      Year Ended
                                                                October 31, 2006

                    Reported Net Loss                               $(3,400,102)

                    Add: Noncash stock compensation included        $   300,267
                               in reported net loss
                    Deduct: Total noncash stock compensation        $  (294,267)
                    expense determined under fair valued based
                    methods for all awards                          -----------

                    Pro Forma Net Loss                              $(3,394,102)

                    The effect of applying SFAS No. 123 on a pro forma net
                    income (loss) as stated above is not necessarily
                    representative of the effects on reported net income (loss)
                    for future years due to, among other things, the vesting
                    period of the stock options and the fair value of additional
                    options to be granted in the future years.

                    The weighted-average fair value of options granted during
                    2006 was $1,027,000, respectively. The fair value of each
                    option is estimated on the date of grant using the
                    Black-Scholes option-pricing model with the following
                    assumptions: volatility of 75%; dividend yield of 0%;
                    average risk-free interest rate of 3.8% to 4.2%; and
                    expected term of 5 years.

                    Stock-Based Compensation: For the fiscal year ended October
                    31, 2007, the Company followed SFAS 123 (Revised) Accounting
                    for Stock Based Compensation and applied SFAS 123 (Revised)
                    to equity based compensation paid to employees, Directors
                    and consultants. The Statement requires a public entity to
                    measure the cost of services received for an award of equity
                    instruments based on the grant date fair value of the award.
                    This cost will be recognized over the period during which
                    services are provided. The fair value of stock options is
                    estimated using the Black-Scholes option pricing model.
                    Expected volatilities of 75% are based on the historical
                    performance of our stock. The risk free interest rate of
                    4.2% is based upon the U.S. Treasury bond rate in effect at
                    the time of the grant with maturities similar to the life of
                    the options. The expected term of the options of 3 to 5
                    years represents the period of time that options are
                    expected to remain unexercised.

                    The Company granted stock options in fiscal year 2005 and
                    the first and second quarters of fiscal year 2006. In the
                    third quarter of 2006 the company canceled all options by
                    contractual agreement with the option holders. Accordingly,
                    there are no options outstanding at October 31, 2006.

                    The following table illustrates the effect on net loss of
                    applying SFAS 123(Revised) to stock-based compensation to
                    the fiscal year ended October 31, 2007.

                                      F-10
<PAGE>

                                                                      Year Ended
                                                                October 31, 2007

                    Reported Net Loss                              $ (2,483,969)

                    Add: Noncash stock compensation included       $     28,750

                    Add: Stock option compensation expense
                    included                                       $    859,743
                                                                   ------------


                    Pro Forma Net Loss                             $ (1,595,476)

                    Earnings per Common Share - as reported        $      (0.05)

                    Earnings per Common Share - pro forma          $      (0.03)

                    Basic weighted average common shares             45,831,502
                    outstanding

                    The effect of applying SFAS No. 123(Revised) on a pro forma
                    net income (loss) as stated above is not necessarily
                    representative of the effects on reported net income (loss)
                    for future years due to, among other things, the vesting
                    period of the stock options and the fair value of additional
                    options to be granted in the future years.

                    The weighted-average fair value of options granted during
                    2007 was approximately $1,275,000, respectively. The options
                    granted during 2006 were cancelled in 2006. The fair value
                    of each option is estimated on the date of grant using the
                    Black-Scholes option-pricing model with the following
                    assumptions: volatility of 75%; dividend yield of 0%;
                    average risk-free interest rate of 3.8% to 4.2%; and
                    expected terms of 2 to 5 years.


                    Patent: The Company capitalizes the costs of obtaining
                    patents when patents are granted. Patents are amortized over
                    their useful lives, generally 17 years. Patent Expenses were
                    $5,392 and zero for 2007 and 2006, respectively.

                    Income taxes: The Company files its income tax returns on
                    the cash basis of accounting, whereby revenue is recognized
                    when received and expenses are deducted when paid. To the
                    extent that items of income or expense are recognized in
                    different periods for income tax and financial reporting
                    purposes, deferred income taxes are provided to give effect
                    to these temporary differences. Deferred tax assets and
                    liabilities are recognized for the future tax consequences
                    attributable to differences between the financial statement
                    carrying amounts of assets and liabilities and their
                    respective tax bases. Deferred tax assets and liabilities
                    are measured by applying presently enacted statutory tax
                    rates, which are applicable to the future years in which
                    deferred tax assets or liabilities are expected to be
                    settled or realized, to the differences between the
                    financial statement carrying amounts and the tax bases of
                    existing assets and liabilities. The effect of a change in
                    tax rates on deferred tax assets and liabilities is
                    recognized in operations in the period that the tax rate is
                    enacted.

                                      F-11
<PAGE>

                    As the Company has not yet achieved profitable operations,
                    no tax benefit has been reflected in the statement of
                    operations and a valuation allowance has been established
                    reducing the net carrying value of the deferred tax asset to
                    zero.

                    Fair Value of Financial instruments: The carrying amounts of
                    items reflected in current assets and current liabilities
                    approximate their fair value due to the short-term nature of
                    their underlying terms.

                    Risks, Uncertainties and Concentrations: Financial
                    instruments that potentially subject the Company to
                    significant concentration of credit risk consist primarily
                    of cash equivalents and accounts receivable. In addition, at
                    times the Company's cash balances exceed federally insured
                    amounts.

                    Net Loss Per Common Share: Basic net loss per share was
                    determined by dividing the net loss by the weighted average
                    number of common shares outstanding during each year. The
                    effect of common stock equivalents is not considered as it
                    would be anti-dilutive.

2. Related party    During fiscal year ended October 31, 2007, certain Directors
   transaction      and Officers loaned the Company $158,000 included in Notes
                    Payable. These notes mature in one year from the respective
                    loan dates, pay interest at the rate of 9% or 10% per year
                    and are convertible into Class A common stock with warrants
                    and have other terms similar to those notes payable provided
                    by investor and further described below in Note 7 Notes
                    Payable.



3. New accounting   In December 2004, the FASB issued SFAS No. 123 (revised
   standards        2004), Accounting for Share-Based Payments ("SFAS123(R)").
                    SFAS 123(R) requires that the compensation cost relating to
                    share-based payment transactions be recognized in financial
                    statements, with the cost measured based on the estimated
                    fair value of the equity or liability instruments issued. We
                    are required to apply SFAS 123(R) as of the first annual
                    reporting period that begins after December 15, 2005;
                    therefore, we adopted the new requirements beginning with
                    our fiscal year 2007 as of November 1, 2006. The Company
                    granted but then cancelled options in 2006, and hence this
                    pronouncement would not have had a material impact on
                    previously reported results.


                    In September 2006, the FASB issued SFAS No. 158, Employers'
                    Accounting for Defined Benefit Pension and Other
                    Postretirement Plans - an amendment of FASB Statements No.
                    87, 88, 106 and 132(R). This statement would require a
                    company to (a) recognize in its statement of financial
                    position an asset for a plan's overfunded status or a
                    liability for a plan's underfunded status, (b) measure a
                    plan's assets and its obligations that determine its funded
                    status as of the end of the employer's fiscal year, and (c)
                    recognize changes in the funded status of a defined

                                      F-12
<PAGE>

                    postretirement plan in the year in which the changes occur
                    (reported in comprehensive income). The requirement to
                    recognize the funded status of a benefit plan and the
                    disclosure requirements are effective as of the end of the
                    fiscal year ending after December 15, 2006. The requirement
                    to measure the plan assets and benefit obligations as of the
                    date of the employer's fiscal year-end statement of
                    financial position is effective for fiscal years ending
                    after December 15, 2008. The adoption of this new accounting
                    pronouncement will not have an impact on our financial
                    position or results of operation. The Company does not have
                    any such plans.

                    In June 2006, the FASB issued Interpretation 48 ("FIN 48"),
                    Accounting for Uncertainty in Income Taxes, an
                    interpretation of FASB Statement No. 109, Accounting for
                    Income Taxes. FIN 48 clarifies the accounting for
                    uncertainty in income taxes recognized in an enterprise's
                    financial statements in accordance with FASB Statement No.
                    109. FIN 48 describes a recognition threshold and
                    measurement attribute for financial statement recognition
                    and measurement of a tax position taken or expected to be
                    taken in a tax return and also provides guidance on
                    de-recognition, classification, interest and penalties,
                    accounting in interim periods, disclosure and transition.
                    The guidance is effective for fiscal years beginning after
                    December 15, 2006 and we adopted this statement for our
                    fiscal year beginning November 1, 2007. Based upon our
                    current net operating loss position, adoption of this new
                    accounting pronouncement did not have an impact on our
                    financial position or results of operation.

                    In May 2005, the FASB issued SFAS 154, "Accounting Changes
                    and Error Corrections" (SFAS 154) which replaces APB Opinion
                    No. 20, "Accounting Changes" and SFAS 3, "Reporting
                    Accounting Changes in Interim Financial Statements - An
                    Amendment of APB Opinion No. 28." SFAS 154 provides guidance
                    on the accounting for and reporting of accounting changes
                    and error corrections. It establishes retrospective
                    application, or the latest practicable date, as the required
                    method for reporting a change in accounting principle and
                    the reporting of a correction of an error. SFAS 154 is
                    effective for accounting changes and corrections of errors
                    made in fiscal years beginning after December 15, 2005. The
                    adoption of SFAS 154 is not expected to have a material
                    impact on our financial position, results of operations or
                    cash flows.



4. Income taxes     The benefit from income taxes reflected in the accompanying
                    financial statements, all of which is deferred, varies from
                    the amounts which would have been computed using statutory
                    rates as follows (000's):

                                                          Year Ended October 31,
                                                          ----------------------
                                                              2006       2007
                    ------------------------------------------------------------
                    Federal income taxes at the
                      maximum  statutory rate                $ 1,156    $   845
                    State income taxes, net of Federal tax
                      effect                                     126        114
                    Other                                         11         12
                    Increase in valuation allowance           (1,293)      (971)
                    ------------------------------------------------------------
                    Benefit from income taxes                $     -    $     -
                    ------------------------------------------------------------

                                      F-13
<PAGE>

                    Deferred income taxes were as follows as of October 31:
                                                               2006       2007
                    ------------------------------------------------------------
                    Stock based compensation                 $ 1,256    $ 1,569
                    Fixed asset basis difference                  37         34
                    Receivables excluded from income for
                    income tax reporting purposes                 (4)       (27)
                    Accounts payable and accrued expenses
                    deducted for
                      financial statement reporting purposes,
                      but not for income tax reporting
                      purposes                                   375        499
                    Net operating loss carryforward            4,474      5,023
                    ------------------------------------------------------------
                    Deferred tax asset                       $ 6,138    $ 7,113
                    Valuation allowance                      $(6,138)   $(7,113)
                    ------------------------------------------------------------
                    Total                                    $     -    $     -
                    ------------------------------------------------------------

                    For income tax purposes, the Company has net operating loss
                    carryforwards of approximately $12.8 million at October 31,
                    2007 that, subject to applicable limitations, may be applied
                    against future taxable income. If not utilized, the net
                    operating loss carryforwards will expire between 2022 and
                    2026.

5. Stock grants     The Company determines stock based compensation expense as
   and options      the fair value, at the measurement date, of the service
                    received or the common stock issued, whichever is more
                    reliably determinable.

                    The Company has also utilized employment and consulting
                    agreements which combine cash and stock elements of
                    compensation, where a fixed dollar value of stock is awarded
                    to settle non-cash compensation. For such stock awards
                    through May 2005, the fair value of the services is
                    determined based on the number of shares issued valued at
                    the weighted average value of the proceeds per share
                    received from sales of common stock to unaffiliated
                    purchasers during the compensation period. For stock awards
                    from June 2005 through October 2006, the fair value of the
                    services is determined based on the number of shares issued
                    valued at the closing price of the company's Class A common
                    shares on the Over-The-Counter Bulletin Board ("OTCBB").

                    In the case of employees and directors, the measurement date
                    is the date of grant. In the case of outside consultants,
                    the measurement date is the date at which their performance
                    is complete. This total cost is first reflected as deferred
                    compensation in stockholders' equity and then amortized to
                    compensation expense on a straight-line basis over the
                    period over which the services are performed. When the fair
                    value of the common stock is used and the measurement date
                    is not the date of grant, the total cost is re-measured at

                                      F-14
<PAGE>

                    the end of each reporting period based on the fair market
                    value on that date, and the amortization is adjusted. The
                    compensation cost is re-measured at the fair value as of the
                    end of each reporting period and the deferred compensation
                    account is adjusted.

                    The Company has two separate stock plans - the 2002 and 2003
                    Stock Incentive Plans. Both plans provide for the issuance
                    of stock options and stock grants. The 2002 Stock Incentive
                    Plan permits the issuance of up to 3,500,000 shares through
                    December 31, 2011. The 2003 Stock Incentive Plan permits the
                    issuance of up to 26,892,000 shares through December 28,
                    2011 after subtracting any shares issued under the 2002
                    Plan. The 2003 Plan also provides for specific numbers of
                    shares to be awarded upon the achievement of defined
                    scientific and sales-related milestones. The Company granted
                    932,875 Class A common shares with a fair value of $797,398
                    during the year ended October 31, 2006. During the year
                    ended October 31, 2007, the Company granted 150,000 Class A
                    common shares with a fair value of $28,750 and issued
                    2,200,000 stock options with a fair value of $1,275,570.

                    Stock grant and stock option activity under the Plans is as
                    follows:

                    Balance October 31, 2005                8,950,168
                       Granted                              2,622,875
                       Forfeited                           (1,990,000)
                                                           ----------
                    Balance October 31, 2006                9,583,043
                       Granted                              2,350,000
                       Forfeited
                                                           ----------
                    Balance October 31, 2007               11,933,043
                                                           ----------

                    Total compensation expense related to stock awards for
                    employees and consultants was $300,267 and $28,750 for the
                    years ended October 31, 2006 and 2007, respectively. Upon
                    termination, the Company has the option to purchase any
                    vested shares from the employees at fair market value.

                    Stock options were granted with an exercise price equal to
                    the market price of the stock at the date of grant.
                    Substantially all of the options granted were exercisable
                    pursuant to a three-year vesting schedule.


                    The following is a summary of all option activity:

                                       Number of            Weighted Average
                                        Shares               Exercise Price
                                        ------               --------------

Outstanding at October 31, 2005         300,000                   $ 1.10
Granted                               1,690,000                   $ 0.95
Cancelled                            (1,990,000)                  $ 0.97

Outstanding at October 31, 2006               -
granted                               2,200,000                   $ 0.17
exercised                               140,000                   $ 0.15

Outstanding at October 31, 2007       2,060,000                   $ 0.17

                                      F-15
<PAGE>

6. Stockholders'    During the fiscal year ended October 31, 2007, the Company
   Equity           sold 13,477,998 shares of Class A Common Stock for
                    $1,497,040, an average price of $.11 per share. In addition,
                    the Company received $21,600 from the exercise of 140,000
                    stock options for Class A common Stock for an average
                    exercise price of $.15 per share.

                    During the fiscal year ended October 31, 2006, the Class B
                    (special voting rights) common stock was eliminated and all
                    remaining shares were converted to Class A shares on a
                    one-for-one basis.

                    During the fiscal year ended October 31, 2007, the Company
                    engaged a placement agent to assist it in raising capital
                    and paid the agent 556,000 Class A common stock with a fair
                    market value at the time of grant of $94,520.

                    During the fiscal year ended October 31,2006, the Company
                    sold 6,675 shares of Series A preferred stock at an average
                    price of $20 per share for proceeds of $133,500. The
                    preferred stock is convertible into common stock at the
                    option of the shareholder at a conversion rate of
                    approximately 29.851, or into approximately 199,255 common
                    shares. The conversion rate is the quotient obtained by
                    dividing $20 by $0.67 which is the weighted average fair
                    market price of the common stock during the 20-day trading
                    period prior to the preferred stock purchase closing of the
                    preferred stock lead investor. The preferred stock has the
                    following rights: no dividend requirements, a liquidation
                    preference over all common shares, participating voting
                    rights on an as-converted basis, and 199,255 common shares
                    have been reserved for potential conversion.

                    In addition, the Company received net proceeds of $22,500
                    pursuant to an agreement requiring the Company to issue a
                    new category of redeemable preferred stock. This amount is
                    reflected as a liability as the Company does not have the
                    authorized shares to meet this requirement as of October 31,
                    2006.

7. Notes Payable    During fiscal year 2007, the Company received $213,100 in
                    proceeds from notes payable. These notes bear interest of 9%
                    or 10% per annum, mature between December 18, 2007 and
                    October 31, 2008, one year from their respective effective
                    dates, and are convertible at the lowest stock price 90 days
                    prior to and 12 months after the loan date into Class A
                    Common Stock with warrants. The number of warrants equals
                    the number of Class A common shares issued upon conversion
                    of the notes payable plus accrued interest. The warrants
                    have an exercise price equal to twice the conversion price.
                    At October 31, 2007, the Notes Payable plus accrued interest
                    could be converted into approximately 1.6 million shares
                    with approximately 1.6 million warrants with an aggregate
                    exercise price of approximately $440,000.


8. Commitments      The future minimum lease payments required under operating
                    leases that have an initial non-cancelable lease term
                    greater than one year as of October 31, 2007 are as follows:

                    Year ending October 31,                           Amount
                    ------------------------------------------------------------
                      2008                                          $ 60,713
                      2009                                          $ 30,565
                    ------------------------------------------------------------
                      Total                                         $ 91,278
                    ------------------------------------------------------------

                                      F-16
<PAGE>

                    The future minimum royalty payments required under a patent
                    license agreement are as follows: in calendar year 2008
                    $75,000 payable quarterly and in calendar year 2009 $50,000
                    payable quarterly. In addition to the future minimum royalty
                    payments, the Company is required to pay a royalty on sales
                    above a certain limit defined in the agreement.


9. Financial        The Company has incurred losses since its inception of
   condition        approximately $25,658,000 and has had limited product sales
                    from its inception through fiscal year 2007. The Company
                    plans to raise cash to fund its operations and pay its
                    outstanding obligations from credit facilities or the sale
                    of its securities in the future. Nonetheless, there can be
                    no guarantee that the Company will be able to raise cash or
                    maintain its current workforce through any of these plans.

                    The Company's ability to continue as a going concern and
                    meet its obligations as they come due is dependent upon its
                    ability to raise sufficient cash as discussed above. The
                    existing cash balance will fund one month of operations if
                    no additional cash is raised. The Company anticipates it
                    will require approximately $2,500,000 to satisfy our current
                    budgetary projections, which include substantial payments
                    for the component parts associated with assembly of our
                    products. The Company's continued operations, as well as the
                    implementation of our business plan, therefore will depend
                    upon its ability to raise additional funds through bank
                    borrowings, equity or debt financing. The Company continues
                    to seek prospective investors who may provide some of this
                    funding. The Company also anticipates it will need to
                    maintain the current workforce to achieve commercially
                    viable sales levels. There can be no guarantee that these
                    needs will be met or that sufficient cash will be raised to
                    permit operations to continue. Should the Company be unable
                    to raise sufficient cash to continue operations at a level
                    necessary to achieve commercially viable sales levels, the
                    liquidation value of the Company's assets may be
                    substantially less than the balances reflected in the
                    financial statements and the Company may be unable to pay
                    its creditors.

                    During the fiscal year ended October 31, 2007, the Company
                    received $1,489,240 in funding, comprised of:

                   o   $216,540 received from the sale of preferred stock.
                       These preferred shares were never issued and were
                       converted into 2,346,212 shares of common stock during
                       the second quarter of 2007.

                   o   $1,518,640 received from the sale of 13,617,998 shares
                       of common stock at an average price between $0.11 and
                       $.12 per share. The investors received warrants to
                       purchase up to 15,819,279 shares at exercise prices
                       ranging from $.15 per share to $.45 per share from time
                       periods ranging from one year to 2.5 years from the
                       effective dates of the share purchases.

                   o   $213,100 for notes payable.

                   o   Repayment of a note payable in the amount of $220,000.

                   o   Repayment of redeemable preferred stock liabilities of
                       $239,040 which were recorded during 2006 and the quarter
                       ended January 31, 2007 to reflect the liability incurred
                       by the Company prior to issuance of the preferred shares
                       pending the finalization of the negotiation of terms and
                       conditions.

                                      F-17
<PAGE>

10. Subsequent      Subsequent to October 31, 2007, four investors during
    Event           December 2007 exercised 1,611,247 warrants providing the
                    Company with $322,000 of funding. The weighted average
                    exercise price was $.20 per share. Two investors converted
                    their notes payable and accrued interest in the amount of
                    $41,029 into 341,901 shares of Class A common stock where
                    the conversion price was $.12 per share. In January 2008,
                    two investors purchased 325,000 shares of restricted Class A
                    common stock for $130,000 and were granted two year
                    warrants. In November 2007 and January 2008, a total of
                    135,000 stock options with a weighted average exercise price
                    of $.15 per share were exercised providing the Company with
                    $20,450 of funding.

                    Effective November 7, 2005, the company entered into a two
                    year exclusive Reseller Agreement with Baxa Corporation to
                    sell, market, and distribute the ValiMed(TM) product in the
                    USA and Canada. This Reseller Agreement, as amended, expired
                    on November 7, 2007 and was replaced by a non-exclusive
                    Co-Marketing Agreement.


                                      F-18
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on February 12, 2008.

                                    CDEX INC.




                       By:   /s/ Malcolm H. Philips
                            ------------------------------
                             Name: Malcolm H. Philips
                             Title: Chief Executive
                             Officer/President/Chairman of
                             the Board of Directors

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose signature
appears below constitutes and appoints Malcolm H. Philips, as such person's true
and lawful attorney-in-fact and agent, with full powers of substitution and
re-substitution, for such person in name, place and stead, to sign in any and
all amendments to this report on Form 10-KSB, in any and all capacities, and to
file the same, with all exhibits thereto and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorney-in-fact and agents, and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that such attorneys-in-fact and agents, or
any of them, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1934, this report has been
signed by the following persons in the capacities and on the dates stated.




NAME                                  TITLE                         DATE
----                                  -----                         ----

/s/ Malcolm H. Philips          CHIEF EXECUTIVE OFFICER/       February 12, 2008
------------------------        PRESIDENT/CHAIRMAN OF THE
MALCOLM H. PHILIPS              BOARD OF DIRECTORS


/s/ Timothy Shriver             DIRECTOR                       February 12, 2008
------------------------
TIMOTHY SHRIVER

/s/ George Dials                DIRECTOR                       February 12, 2008
------------------------
GEORGE DIALS

/s/ Donald W. Strickland        DIRECTOR                       February 12, 2008
------------------------
DONALD W. STRICKLAND

/s/ Carmen J. Conicelli         DIRECTOR                       February 12, 2008
------------------------
CARMEN J. CONCICELLI


                                       35