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


                                  FORM 10-KSB/A
                                   Amendment 1


|X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
                                          OF 1934
       For the Fiscal Year Ended October 31, 2008

|_|  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.
                 (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
                                  520-745-5172
     (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.
            (Title of Class)

Check if issuer is not required to file reports pursuant to Section 13 or 15(d)
of the Exchange Act. [ ]

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 there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Issuer's revenues for its most recent fiscal year: $835,764.

The aggregate market value of the Class A common stock held by non-affiliates
was approximately $3,920,000 on January 29, 2009 based on the last reported sale
price of the registrant's Class A common stock on the Over-the-Counter Bulletin
Board (OTCBB).


The number of shares outstanding of the issuer's common stock as of March 5,
2009 was 62,367,000 shares.


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

<PAGE>


                                EXPLANATORY NOTE

         CDEX, Inc. (the "Company") is filing this Amendment No. 1 to its Annual
Report on Form 10-KSB for the fiscal year ended October 31, 2008 in response to
comments received from the Securities and Exchange Commission. This Amendment
No. 1 shall amend the original filing in its entirety. Exhibits required to be
filed hereunder, are incorporated herein by reference to the original filing.

         This Form 10-KSB/A does not reflect events occurring after the filing
of the original report or modify or update those disclosures affected by
subsequent events. Information not affected by this amendment remains unchanged
and reflects the disclosures made at the time the original report was filed.

         This filing is for the sole purpose of amending 1) the disclosure of
our controls and procedures pursuant to Item 8A, 2) the Report of Independent
Registered Public Accounting Firm on page F-2, and 3) corrections of Exhibits
31.1 and 31.2.

         As required by Rule 12b-15 under the Securities Exchange Act of 1934,
as amended, new certifications of our principal executive officer and principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, are filed as exhibits to this Amendment.


<PAGE>

                                   CDEX, INC.
                          ANNUAL REPORT ON FORM 10-KSB
                       FOR THE YEAR ENDED OCTOBER 31, 2008

<TABLE>
<CAPTION>
<S>                                                                                        <C>
Part I

Item 1.     Description of Business.....................................................    1
Item 2.     Description of Property.....................................................   11
Item 3.     Legal Proceedings...........................................................   11
Item 4.     Submission of Matters to a Vote of Security Holders.........................   11

Part II

  Item 5.   Market for Common Equity and Related Stockholder Matters..................     11
  Item 6.   Management's Discussion and Analysis of Financial
                Condition and Results of Operation....................................     12
  Item 7.   Financial Statements......................................................     15
  Item 8.   Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure...................................     15
  Item 8A.  Controls and Procedures...................................................     15
  Item 8B.  Other Information.........................................................     16

Part III

  Item 9.    Directors and Executive Officers, Corporate Governance;
                Compliance with Section 16(A) of the Exchange Act.....................     16
  Item 10.  Executive Compensation....................................................     20
  Item 11.  Security Ownership of Certain Beneficial Owners
                and Management and Related Stockholder Matters........................     23
  Item 12.  Certain Relationships and Related Transactions............................     25

Part IV

  Item 13.  Exhibits..................................................................     25
  Item 14.  Principal Accountant Fees and Services....................................     26
Signatures............................................................................     27

Financial Statements..................................................................     F1
</TABLE>

<PAGE>

                                     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. ("CDEX", "we", "us" or the "Company") 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.

         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

                                       1
<PAGE>

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
2008 was products in the medical and security markets, we continued research and
development on several other potential products areas.

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 and ancillary products that provide a recurring revenue
                  stream upon use of the primary products. The primary products
                  are ValiMed(TM) Impaired Clinician Solution and ValiMed(TM)
                  Patient Safety Solution.

                >     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.

                >     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 container 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 Product Line - real time detection
                  of specified illegal drugs. This product line contains both
                  hand-held and table top devices that detect trace amounts of
                  specified illegal drugs in virtually real time. Currently, the
                  products detect methamphetamine with cocaine and heroin to be
                  added. Sales began in 2008.

2008, Year in Review
--------------------

         The global economic downturn impacted CDEX and our share price, as well
as much of the rest of the world. Even in the face of this downturn, CDEX had
record revenues and a good year operationally with a number of accomplishments.
To name only a few:

   o     We modified our ValiMed(TM) product line to incorporate "artificial
         intelligence," allowing the unit to react to the changing conditions on
         site without requiring individual modifications; developed and shipped
         to clients our next generation ValiMed Unit, the Model CCT; completed
         successful TUV certification of the Model CCT to allow broader
         introduction of the CCT into the U.S. and international markets; and
         developed a number of medication safety related products using the CCT
         platform.

                                       2
<PAGE>

   o     We continued our U.S. sales expansion of ValiMed. By the end of the
         year, we more than doubled our ValiMed hospital client base, had record
         sales of ValiMed for the year, demonstrated ValiMed at major U.S.
         medical conferences/shows, and built a robust ValiMed sales pipeline.
   o     We began a committed focus of introducing ValiMed to the European
         community. By the end of 2008, we had installed ValiMed units in major
         hospitals in Europe and the Middle East for reference testing, had
         signed international distribution agreements with major distributors,
         had contractual exclusivity commitments for substantial quantities of
         ValiMed Units over a three year period, and had sold and shipped our
         first international ValiMed Units.
   o     We completed development and testing of the ID2 Meth Scanner(TM);
         modified the Scanner to add features requested by our Beta Test
         partners; manufactured our first production Meth Scanner; developed a
         related table top ID2 unit for more sensitive detection of
         methamphetamine; began development work on insertion of other drug
         signatures into the Scanner; and began developing a miniaturized
         version of the Meth Scanner for broader market applications.
   o     In the last half of 2008 we started building a sales team for the ID2
         product line, sold and delivered domestically and internationally our
         first ID2 Meth Scanners, and signed a number of national and
         international distributors.

         CDEX also had its share of disappointments and struggles in 2008.
First, the world wide economic downturn slowed sales of products, impacted the
availability of investment funding, and resulted in a global decline in stock
prices.

RESEARCH AND DEVELOPMENT ("R&D")

         R&D efforts were primarily directed towards refining and expansion of
the ValiMed(TM) and ID2 product lines.

         R&D costs were $943,416 during 2008 fiscal year compared to $639,869
during the 2007 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.


INDUSTRY AND COMPETITION

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

         Healthcare spending is fueled in some measure 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

                                       3
<PAGE>

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 approximately 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. In a recent report by the Rand Corporation it was
estimated that methamphetamine use alone costs the U.S. approximately $23
billion per year. 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. 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 &

                                       4
<PAGE>

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.

         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 the Middle East and have establish
reference test partners in selected cities across these regions as a first step
in breaching the international market. We have also received unsolicited
contacts by prospective partners from a number of other international areas,
including 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.

                                       5
<PAGE>

         The Company makes business decisions 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.

         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 international
manufacturing, handling and transport; security products in airports; handling
of sensitive substances such as illegal drugs, medications, and explosive
materials and related to potentially harmful energy such as x-ray energy. The
storage and handling of certain explosive materials and drugs is subject to
licensure. 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.

         Except as mentioned above, we are not currently aware of any other U.S.
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, 2008, the Company had 19 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 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.

                                       6
<PAGE>

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 reports from our independent auditors for the fiscal
years ended October 31, 2004 through 2008 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 all of our products and services, particularly
         in light of our limited sales history for some of our products;

         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.

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 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.

                                       7
<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 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.

                                       8
<PAGE>

OUR ABILITY TO SURVIVE MAY BE AFFECTED BY A LACK OF SUCCESSFUL MANUFACTURING
EXPERIENCE.

         CDEX itself has a growing but limited experience in manufacturing
commercial quantities of products. 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 do in-house production manufacturing of
any of our products. While we currently do limited in-house assembly and
primarily outsource the production manufacturing/assembly of our product, we are
considering different possibilities for bringing different products to market,
among them, licensing to third parties. 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 that may be 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
payers. 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 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.

                                       9
<PAGE>

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. There may be competitors who may 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 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
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.

                                       10
<PAGE>

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 approximately 4,000 square feet of office and
laboratory space in Tucson, Arizona. The lease expires April 30, 2009 and
provides for monthly rent of approximately $5,200 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
approximately $66,000 and $43,000 for the years ended October 31, 2008 and 2007,
respectively.

ITEM 3. LEGAL PROCEEDINGS

         CDEX may from time to time be involved in legal proceedings arising
from the normal course of business. In June 2008, a lawsuit was filed by
Hutchinson & Steffen in a Nevada District Court, Clark County, against the
Company, alleging, among other things, breach of contract. On July 2, 2008,
Hutchinson & Steffen and the Company entered into a settlement agreement,
staying the legal proceedings pending completion of the terms of the settlement
agreement. As of the date of this report, we have not received notice of any
other legal proceedings.

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

None

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

         Our Class A common stock is traded on the 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

                                       11
<PAGE>

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, 2008:
               First quarter                         $ 0.80        $ 0.38
               Second quarter                        $ 0.54        $ 0.25
               Third quarter                         $ 0.39        $ 0.22
               Fourth quarter                        $ 0.34        $ 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.

SHAREHOLDERS

         As of December 17, 2008 there were approximately 1,502 holders of
record of CDEX's Class A common stock. 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 2008, the Company received
$28,805 in proceeds from the exercise of 142,600 warrant shares at a price of
approximately $0.20 per share. Additionally, notes payable in the aggregate
amount of $53,664 were converted into 541,113 Class A Common Shares, or
approximately $.10 per share. The total proceeds of $82,470 were used to finance
operations and other general corporate purposes.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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.

                                       12
<PAGE>

RESULTS OF OPERATIONS

         Fiscal Year Ended October 31, 2008 Compared to Fiscal Year Ended
October 31, 2007

         Revenues were $835,764 and $505,193 for the fiscal years ended October
31, 2008 and October 31, 2007, respectively. The increase of $330,571 (or 65%)
was primarily due to the delivery of ValiMed(TM) units.

         Costs of revenues were $220,316 and $176,208 for the years ended
October 31, 2008 and October 31, 2007, respectively. The increase of $44,108 (or
25%) was the result of costs associated with the increased number of ValiMed(TM)
units that were shipped during the year. Gross profit margins were 74% and 65%
in fiscal 2008 and 2007, respectively.

         Research and development costs were $943,416 during the year ended
October 31, 2008, compared with $639,869 during the year ended October 31, 2007.
The increase of $303,547 (or 47%) resulted from an increase primarily in
compensation expense due to higher employment levels and secondarily in
expenditures for materials and consultants.

         General and administrative expenses were $1,598,969 during the year
ended October 31, 2008, compared with $2,151,498 during the year ended October
31, 2007. This decrease of $552,529 (or 26%) resulted primarily from a decrease
in non-cash compensation expense of approximately $556,000. The decrease in
general and administrative expense is partially offset by an increase in legal
and licenses expenses of approximately $102,000.

         Other income (expense) was $207,235 during fiscal year ended October
31, 2008, compared to $21,587 during the fiscal year ended October 31, 2007. The
other expense in fiscal year 2008 was interest expense on notes payables
partially offset by interest income earned on short term investments. The other
expense in fiscal year 2007 was interest expense on notes payable.

         Net loss was $2,134,172 during the fiscal year ended October 31, 2008,
compared with a net loss of $2,483,969 during the fiscal year ended October 31,
2007, due to the foregoing factors.

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, 2008, we had negative working capital of $1,644,032
including $26,373 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. 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, 2008, the Company received
$1,941,704 in funding, comprised of:

   o     $942,430 from the net proceeds from five notes payable. These notes
         bear interest from 9.9% to 12% and have maturities up to two years.

   o     $670,000 received from the exercise of 3,811,248 warrants for an
         average price $.18 per share.

   o     $268,520 for 825,928 shares of restricted Class A Common Stock at an
         average price of approximately $0.33 per share. Investors who purchased
         682,143 of these shares received warrants to purchase up to 503,571
         shares at a weighted average exercise price of $.54 per share for a two
         year period from the effective dates of the share purchases.

                                       13
<PAGE>

   o     $31,950 received from the exercise of 210,000 stock options for an
         average price of approximately $.15 per share.

   o     $28,804 received from the exercise of 142,600 stock options for an
         average price of approximately $.20 per share.

         We had a net decrease in cash and cash equivalents of $1,011 during the
fiscal year ended October 31, 2008, compared with a net decrease of $28,944
during the fiscal year ended October 31, 2007. We used net cash of $1,921,272
and $1,459,226 in operating activities during the fiscal years ended October 31,
2008 and 2007, respectively, and capitalized $21,443 and $58,958 in patent costs
and property and equipment during the fiscal years ended October 31, 2008 and
2007, respectively. We received net proceeds in the amount of $1,941,704 and
$1,489,240 from the sale of preferred stock, common stock and notes payable to
accredited investors during the fiscal years ended October 31, 2008 and 2007,
respectively.

OFF-BALANCE SHEET ARRANGEMENTS

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

CRITICAL ACCOUNTING POLICIES

         The preparation of financial statements in conformity with United
States generally accepted accounting principles, which requires management to
make estimates, judgments and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Management bases its
assumptions on historical experiences and on various other assumptions that it
believes to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. In addition, Management
considers the basis and methodology used in developing and selecting these
estimates, the trends in and amounts of these estimates, specific matters
affecting the amount of and changes in these estimates, and any other relevant
matters related to these estimates, including significant issues concerning
accounting principles and financial statement presentation. Such estimates and
assumptions could change in the future as more information becomes known which
could impact the amounts reported and disclosed herein. Significant estimates
include revenue recognition, the valuation of inventory and stock-based
compensation expense.

         REVENUE RECOGNITION

         Revenue is recognized in compliance with Staff Accounting Bulletin 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 for the Meth Gun Pilot Test Program as the program was not
completed by October 31, 2008.

         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.

                                       14
<PAGE>

STOCK-BASED COMPENSATION

         For the fiscal year ended October 31, 2007, we determined 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.

         For the fiscal year ended October 31, 2008, 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.

ITEM 7. FINANCIAL STATEMENTS

         Our financial statements, the related notes and the Independent
Registered Public Accountant's Reports thereon, are included in CDEX' 2008
Financial Statements and are filed as a part of this report on page F-1
following the signatures.

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

         There were no changes in or disagreements with accountants on
accounting and financial disclosure

ITEM 8A. CONTROLS AND PROCEDURES


Management's Report on Internal Control over Financial Reporting

         Our Company's management is responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our
Company's internal control over financial reporting is designed to provide
reasonable assurance, not absolute assurance, regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles in the
United States of America. Internal control over financial reporting includes
those policies and procedures that: (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our Company's assets; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles in the
United States of America, and that our Company's receipts and expenditures are
being made only in accordance with authorizations of our management and
directors; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.

         Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

         As required by Rule 13a-15(c) promulgated under the Exchange Act, our
management, with the participation of our Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), evaluated the effectiveness of our internal
control over financial reporting as of October 31, 2008. Management's assessment
took into consideration the size and complexity of the company and was based on
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control over Financial Reporting -Guidance for Smaller
Public Companies. In performing the assessment, management has concluded that
our internal control over financial reporting was effective as of October 31,
2008.

         This annual report does not include an attestation report of the
Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission ("SEC") that permit the Company to provide
only management's report in this annual report.

                                       15
<PAGE>

Evaluation of disclosure controls and procedures

         Disclosure controls are controls and procedures that are designed to
ensure that information required to be disclosed in our reports filed under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the company's management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. Our management carried out
an evaluation under the supervision and with the participation of our CEO and
CFO, of the effectiveness of the design and operation of our disclosure controls
and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, the Company's
CEO and CFO have concluded that the Company's disclosure controls and procedures
were not effective as of October 31, 2008, due to management's failure to
include its report on internal control over financial reporting in the Form
10-KSB as required.

Changes in Internal Controls Over Financial Reporting

         There has been no change in The Company's internal control over
financial reporting for the quarter ended October 31, 2008 that materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.


ITEM 8B. OTHER INFORMATION

         On June 25, 2008, GEMINI MASTER FUND, LTD., a Cayman Islands company
("Gemini") and CDEX entered into a Securities Purchase Agreement, a 12% Senior
Convertible Note, and a Common Stock Purchase Warrant to purchase up to
2,717,391 shares of Common Stock (combined these are termed "Transaction
Documents"), all of which were reported in an 8K filed on June 25, 2008.
Subsequently, Gemini and CDEX have amended these Transaction Documents on
December 18, 2008 and February 10, 2009 (effective February 1, 2009). The two
amendments are filed herewith as Exhibit 10.6 and Exhibit 10.7. The first
amendment allowed CDEX to raise as Exempt Issuances under the terms of the
Transaction Documents up to $500,000 until April 1, 2009 in common stock
financing subject to defined terms in the amendment, delayed payments due to
Gemini under the Transaction Documents until February 1, 2009, and allowed for
prepayment of the Note before April 1, 2009 without penalty. The second
amendment allowed CDEX to raise as Exempt Issuances under the terms of the
Transaction Documents amounts above $500,000 until May 1, 2009 in common stock
financing subject to defined terms, delayed payments due to Gemini under the
Transaction Documents until May 1, 2009 with reset conversion provisions, reset
the exercise price of 30% of the Transaction Document warrants and allowed
repayment of the Note before May 1, 2009 without penalty.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, CORPORATE GOVERNANCE; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT

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

         NAME                     AGE                  POSITION
         ----                     ---                  --------
Malcolm H. Philips, Jr.            63       President and Chief Executive
                                               Officer and Chairman of the Board
                                               of Directors (1)

Timothy D. Shriver                 58       Chief Operating Officer and Director

Stephen McCommon                   59       Chief Financial Officer and
                                               VP of Finance

George Dials                       63       Director

Carmen J. Conicelli, Jr.           56       Director

Donald W. Strickland               59       Director

Robert H. Foglesong                63       Director


                                       16
<PAGE>

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

         Malcolm H. Philips Jr. has been our Chairman of the Board since October
9, 2007 and our President, Chief Executive Officer and a Member of the Board of
Directors since June 11, 2007. Mr. Philips 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 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.

         Timothy D. Shriver has served as our Chief Operating Officer since
February 2008 and as our Senior Vice President of Technical Operations since
July 2001. Mr. Shriver is a member of our Governance and Nomination Committee.
From 1999 until 2001 Mr. Shriver provided outside consulting services to Ontario
Hydro-Generation and CAMECO, 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 interfaces with the federal
regulators.

         On October 23, 2008, Stephen McCommon was elected to serve as our Chief
Financial Officer effective November 11, 2008. Prior to joining CDEX, from
December 2007 to November 2008, Mr. McCommon was president of TMC Financial
Services, LLC a financial consulting company. Mr. McCommon was the Vice
President of Finance and Chief Accounting Officer at Applied Energetics, Inc.
from March 2005 to December 2007 and was the Accounting Manager at Applied
Energetics from July 2004 to March 2005. Mr. McCommon has over 26 years
experience in financial reporting and internal auditing for publicly held
companies with additional experience in accounting systems conversions and
regulatory compliance. From March 2003 to July 2004, Mr. McCommon was an
independent accounting consultant for various companies. He was the Controller
of Molecular Diagnostics, Inc., a multi-national medical technology products
company, from February 2002 to March 2003 and he was the Corporate Controller of
Heartland Technology, Inc. a hardware technology company from November 1999 to
November 2001. Mr. McCommon obtained a Bachelor of Science degree in Accounting
from Arizona State University, is a Certified Public Accountant in Arizona and a
member of the American Institute of Certified Public Accountants.

         George Dials has been a director of CDEX since July 2001. Mr. Dials is
the Chairman of our Executive Compensation Committee. Currently Mr. Dials is
serving as Executive Vice President of Babcock & Wilcox Technical Services
Group, Inc., responsible for developing and operating business initiatives in
the nuclear fuel cycle. In 2006-2008, Mr. Dials served as 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,

                                       17
<PAGE>

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.

         Donald W. Strickland was appointed to serve as a Director on February
3, 2006. Mr. Strickland is the Chairman of our Governance and Nomination
Committee and a member of our Audit Committee. 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. He currently consults with European companies developing global
markets and is a frequent lecturer at academic and business forums. 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.

         Carmen J. Conicelli, Jr., was appointed to serve as a Director on
October 9, 2007. Mr. Conicelli is the Chairman of our Audit Committee. He has
served in senior management positions in a number of companies over the past 34
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.

         General Robert H. Foglesong, U.S. Air Force (Retired), was appointed to
serve as a Director on May 1, 2008. General Foglesong (ret) is the President and
Executive Director of the Appalachian Leadership and Education Foundation, a
non-profit organization operating to identify and support the next generation of
leaders in Appalachia. General Foglesong (ret) served as the 18th President of
Mississippi State University and was nominated by the President, confirmed by
the US Senate, and served as a four star general in the US Air Force. While in
the Air Force, he served in various positions including Commander, U.S. Air
Forces in Europe; Commander, Allied Air Component Command; Air Component
Commander, U.S. European Command (NATO) and Vice Chief of Staff of the U.S. Air
Force. General Foglesong (ret) has been designated by the President of the
United States to be Co-Chairman of the Joint US - Russia Commission on POWs/MIAs
in former Soviet Union countries. A member of the Council on Foreign Relations,
his 65 publications cover a range of subjects including technical and leadership
topics. A graduate of West Virginia University (BS, MS, PhD - chemical
engineering), he holds numerous academic and leadership honoraries, as well as
30 military awards for leadership and technical skills. He has also qualified
for and finished the Boston Marathon six times and is a Director on the Boards
of Massey Energy and Michael Baker Corporation.

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.

                                       18
<PAGE>

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

       Section 16(a) of the Securities Exchange Act of 1934 requires certain
officers and directors of CDEX, and any persons who own more than ten-percent of
the common stock outstanding to file forms reporting their initial beneficial
ownership of shares and subsequent changes in that ownership with the SEC and
the NASDAQ Global Market. Officers and directors of CDEX, and greater than
ten-percent beneficial owners are also required to furnish us with copies of all
such Section 16(a) forms they file. Based solely on a review of the copies of
the forms furnished to us, we believe that during the fiscal year ended October
31, 2008 all section 16(a) filing requirements were met except that Malcolm H.
Philips, Jr., Carmen J. Conicelli, Jr., August F. DeLuca, our former Chief
Financial Officer, and Donald W. Strickland were late filing Form 3. Malcolm H.
Philips, Jr., Timothy D. Shriver, Donald Strickland and BD Liaw, a former
director, were late filing Form 4. Additionally, George Dials, a Director, and
Mr. Jeffery Brumfield, an investor, have not filed required Form 3.

CODE OF ETHICS

         CDEX has adopted a Code of Business Conduct and Ethics that applies to
all of CDEX' employees and directors, including its principal executive officer,
principal financial officer and principal accounting officer. CDEX' Code of
Business Conduct and Ethics covers all areas of professional conduct including,
but not limited to, conflicts of interest, disclosure obligations, insider
trading, confidential information, as well as compliance with all laws, rules
and regulations applicable to CDEX' business.

         Upon request made to us in writing at the following address, our Code
of Ethics and Business Conduct will be provided without charge:

         CDEX, Inc.
         4555 W. Palo Verde Road, Suite 123
         Tucson, AZ 85714

AUDIT COMMITTEE:

         The Audit Committee of the Board of Directors is comprised of Messrs.
Conicelli and Strickland. The Audit Committee makes recommendations concerning
the engagement of independent public accountants, reviews with the independent
public accountants the scope and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of our internal accounting
controls. In addition, our board of directors has determined that Mr. Conicelli
is an "audit committee financial expert" as defined under Item 407(d) of
Regulation S-B of the SEC. Refer to his summary of the business experience above
for Mr. Conicelli's qualifications.

                                       19
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

         The following table discloses for the periods presented the
compensation for the persons who served as our Chief Executive Officer and our
two most highly compensated other executive officers (not including the Chief
Executive Officer) or significant employee whose total individual compensation
exceeded $100,000 for the fiscal years October 31, 2008 and 2007 (the "Named
Executives"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
    Name And Principal Position             Fiscal Year       Salary (1)     Option Awards (2)        Total
    ---------------------------             -----------       ----------     -----------------        -----

<S>                                            <C>            <C>                <C>                <C>
Malcolm H. Philips, Jr.                        2008           $231,461           $    754           $232,215
  President and Chief Executive                2007           $ 62,999           $280,595           $343,594
  Officer and Chairman of the Board
  of Directors

Timothy D. Shriver                             2008           $201,769           $    754           $202,523
  Chief Operating Officer and Director         2007           $163,690           $142,235           $305,925

August F. DeLuca                               2008           $100,810           $ 32,157           $132,967
  Former Chief Financial Officer (3)
</TABLE>

         (1) During fiscal years 2008 and 2007, Messrs. Philips and Shriver
deferred a portion of their cash salary. See discussion under Employment
Agreements below for greater detail on the terms of employment including
compensation.

         (2) The amounts included in the "Option Awards" column represent the
compensation cost recognized by the company in the fiscal year 2008 related to
stock option awards, computed in accordance with SFAS No. 123R. For a discussion
of valuation assumptions, see Note 8 to our 2008 Financial Statements.

         (3) Mr. DeLuca served as our Chief Financial Officer from January 16,
2008 to October 17, 2008.

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.

                                       20
<PAGE>

         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. Accordingly, Mr. Philips'
salary in the table above reflects only his service for the remaining portion of
fiscal year 2007. The agreement provides for an award of 350,000 stock options
with an exercise 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. Effective February 1, 2008, the Board of directors
increased Mr. Philips' annual salary to $240,000.

         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 an exercise price the fair market value at the time of
granting with 50% vesting immediately and 25% vesting in both 12 and 24 months.
Effective February 1, 2008, the Board of directors increased Mr. Shriver's
annual salary to $200,000.

            OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

         The following table discloses unexercised options held by the Named
Executives at October 31, 2008

<TABLE>
<CAPTION>
                                                                     Option Awards
                               ---------------------------------------------------------------------------------
                                  Number of
                                 Securities              Number of
                                 Underlying             Securities
                                Unexercised             Underlying
                                  Options          Unexercised Options     Options Exercise    Option Expiration
       NAME                    Exercisable (#)       Unexercisable (#)        Price ($)              Date
       ----                    ---------------       -----------------        ---------              ----
<S>                                  <C>                  <C>                   <C>               <C>
Malcolm H. Philips, Jr.              100,000                    -               0.15              07/17/2010
                                     350,000                    -               0.22              06/11/2012
                                           -              175,000 (1)           0.17


Timothy D. Shriver                   200,000                    -               0.15              07/17/2010
                                           -              175,000 (1)           0.17              04/30/2012

August F. DeLuca                     100,000              100,000 (2)           0.46              09/16/2010
                                           -               50,000(1)            0.17              04/30/2012
</TABLE>


   (1)   Performance Options: Pursuant to an employee option incentive program
         covering all employees, the Board granted options based on company
         performance. 40% of the bonus options would vest when the Company has
         positive cash flow from operations for one fiscal quarter and the
         remaining 60% of the bonus would vest when the company has positive
         operating cash flow for two consecutive quarters. If the Company does
         not accomplish both milestones by April 30, 2010, any unvested part of
         the bonus options will lapse.
   (2)   Vest on January 4, 2009.

                                       21
<PAGE>

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 an
employee 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 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. 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. At the annual meeting of shareholders on April 9,
2008, the shareholders approved to limit the number of shares issuable under the
Company's Stock Incentive Plans to 25% of the authorized shares of the Company.
This action resulted in limiting the number of shares issuable under the plans
to 25,000,000.

                                       22
<PAGE>

DIRECTORS COMPENSATION

       The following table discloses our director compensation for the fiscal
year ended October 31, 2008:

                      NAME                    Option Awards (1)
                      ----                    -----------------
               George Dials                       $16,192 (2)

               Carmen J. Conicelli, Jr.           $20,738 (3)

               Donald W. Strickland               $16,192 (4)

               Robert H. Foglesong                $ 9,054 (5)

   (1)   The amounts included in the "Option Awards" column represent the
         compensation cost recognized by the company in the fiscal year 2008
         related to stock option awards, computed in accordance with SFAS No.
         123R. For a discussion of valuation assumptions, see Note 8 to our 2008
         Financial Statements.
   (2)   Mr. Dials was granted options to purchase 280,000 shares of Class A
         common stock in April 2008 which vests 70,000 shares each on April 16,
         2009, 2010, 2011 and 2012. The option has a grant date fair value,
         computed in accordance with SFAS 123R, of $45,423, of which $16,192 was
         recognized in fiscal year 2008 for financial reporting purposes in
         accordance with SFAS 123R. Mr. Dials has options to purchase 360,000
         shares of Class A common stock outstanding.
   (3)   Mr. Conicelli was granted options to purchase 315,000 shares of Class A
         common stock in April 2008 which vested 45,000 upon issuance and vests
         90,000 shares each on April 16, 2009, 2010 and 2011. The option has a
         grant date fair value, computed in accordance with SFAS 123R, of
         $46,252, of which $20,738 was recognized in fiscal year 2008 for
         financial reporting purposes in accordance with SFAS 123R. Mr.
         Conicelli has options to purchase 315,000 shares of Class A common
         stock outstanding.
   (4)   Mr. Strickland was granted options to purchase 280,000 shares of Class
         A common stock in April 2008 which vests 70,000 shares each on April
         16, 2009, 2010, 2011 and 2012. The option has a grant date fair value,
         computed in accordance with SFAS 123R, of $45,423, of which $16,192 was
         recognized in fiscal year 2008 for financial reporting purposes in
         accordance with SFAS 123R. Mr. Strickland has options to purchase
         400,000 shares of Class A common stock outstanding.
   (5)   Gen. Foglesong (ret.) was granted options to purchase 210,000 shares of
         Class A common stock in May 2008 which vests 70,000 shares each on
         April 16, 2009, 2010 and 2011. The option has a grant date fair value,
         computed in accordance with SFAS 123R, of $29,635, of which $9,054 was
         recognized in fiscal year 2008 for financial reporting purposes in
         accordance with SFAS 123R. Gen. Foglesong (ret.) has options to
         purchase 210,000 shares of Class A common stock outstanding.

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

         The following table sets forth information regarding the beneficial
ownership of the Company's Class A common stock, based on information provided
by the persons named below in publicly available filings, as of January 26,
2009:

         >>       each of the our directors and executive officers;

         >>       all directors and executive officers of ours as a group; and
                  each person who is known by us to beneficially own more than
                  five percent of the outstanding shares of our Common Stock.

                                       23
<PAGE>

         Unless otherwise indicated, the address of each beneficial owner is
care of CDEX, Inc., 4555 South Palo Verde Road, Suite 123, Tucson, Arizona
85714. Unless otherwise indicated, the company believes that all persons named
in the following table have sole voting and investment power with respect to all
shares of common stock that they beneficially own.

         For purposes of this table, a person is deemed to be the beneficial
owner of the securities if that person has the right to acquire such securities
within 60 days of January 26, 2009, 2008 upon the exercise of options or
warrants. In determining the percentage ownership of the persons in the table
below, we assumed in each case that the person exercised all options and
warrants which are currently held by that person and which are exercisable
within such 60 day period, but that options and warrants held by all other
persons were not exercised, and based the percentage ownership on 60,551,512
shares outstanding on January 26, 2009.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
  Name And Address Of Beneficial                                                        Amount Of
            Owner                                       Position                        Beneficial          Percent Of Class
                                                                                        Ownership                 (1)
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>        <C>        <C>
Mr. Jeffery K. Brumfield                   Investor                                      11,124,442 (2)        15.5%

Malcolm H. Philips, Jr.                    Executive Officer and Director                4,497,886  (3)         6.9%

Timothy D. Shriver                         Executive Officer and Director                1,459,322  (4)         2.4%

Donald W. Strickland                       Director                                         479,086 (5)          *

George Dials                               Director                                         382,510 (6)          *

Carmen J. Conicelli                        Director                                         352,750 (7)          *

Robert H. Foglesong                        Director                                               -              *

Stephen McCommon                           Executive Officer                                      -              *

Shares of all named executives and
directors as a group (7 persons)                                                          7,171,554

* Less than 1%
</TABLE>


   (1)   Computed based upon the total number of shares of Class A common stock,
         shares of common stock underlying options and shares of common stock
         underlying warrants held by that person that are exercisable within 60
         days of January 29, 2009.

   (2)   Based on information known by the Company. Represents: 6,260,806 shares
         of Class A common stock and 4,863,636 warrants exercisable within 60
         days of January 29, 2009.

   (3)   Represents: 3,321,743 shares of Class A common stock held by entities
         in which Mr. Philips has a controlling interest, 726,143 warrants
         exercisable within 60 days of January 29, 2009 held by entities in
         which Mr. Philips has a controlling interest and 450,000 options
         exercisable within 60 days of January 29, 2009.

                                       24
<PAGE>

   (4)   Represents: 1,259,322 shares of Class A common stock and 200,000
         options exercisable within 60 days of January 29, 2009.

   (5)   Represents: 179,543 shares of Class A common stock, 179,543 warrants
         exercisable within 60 days of January 29, 2009 and 120,000 options
         exercisable within 60 days of January 29, 2009.

   (6)   Represents: 216,255 shares of Class A common stock, 86,255 warrants
         exercisable within 60 days of January 29, 2009 and 80,000 options
         exercisable within 60 days of January 29, 2009

   (7)   Represents: 307,750 shares of Class A common stock and 45,000 options
         exercisable within 60 days of January 29, 2009.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During fiscal year ended October 31, 2008, an entity controlled by a
Director loaned the Company $75,150. The notes pay interest at the rate of 10%
per year, are convertible into common stock and warrants and are payable upon
demand or matures twelve months from the date of the loan. The Company issued to
that same entity, 1,259,167 shares of Class A Common Stock and an equal number
of two year warrants as payment of four notes payable and accrued interest in
the amount of $151,000 or $.12 share. The warrants have an exercise price of
$.24 per share.


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

3.2         By-Laws of the Company adopted July 6, 2001 (incorporated by
            reference to the Registrant's Registration Statement on Form SB-2,
            as filed with the Securities and Exchange Commission on February 2,
            2004).

3.3         Amended and Restated By-laws of the Registrant (incorporated by
            reference to the comparable exhibit filed with the Registrant's form
            8-K filed with the SEC on December 4, 2007).

4.1         Specimen certificate for shares of Company common stock
            (incorporated by reference to Amendment No. 2 to the Registrant's
            Registration Statement on Form SB-2, as filed with the Securities
            and Exchange Commission on June 21, 2004).

4.2         2002 Stock Incentive Plan (Privileges (incorporated by reference to
            the Registrant's Registration Statement on Form SB-2, as filed with
            the Securities and Exchange Commission on February 2, 2004).

4.3         2003 Stock Incentive Plan (Privileges (incorporated by reference to
            the Registrant's Registration Statement on Form SB-2, as filed with
            the Securities and Exchange Commission on February 2, 2004).

                                       25
<PAGE>

4.4         Form of Securities Purchase Agreement (incorporated by reference to
            Amendment No. 2 to the Registrant's Registration Statement on Form
            SB-2, as filed with the Securities and Exchange Commission on June
            21, 2004).

10.1        Employment Agreement dated June 11, 2007 between the Registrant and
            Malcolm H. Philips, Jr. (incorporated by reference to the comparable
            exhibit filed with the Registrant's form 8-K filed with the SEC on
            June 15, 2007).

10.2        Employment Agreement effective November 11, 2008 between the
            Registrant and Stephen McCommon (incorporated by reference to the
            comparable exhibit filed with the Registrant's form 8-K filed with
            the SEC on October 23, 20088).

10.3        Form of Securities Purchase Agreement with Gemini Master Fund, Ltd.
            dated June 25, 2008 (incorporated by reference to the comparable
            exhibit filed with the Registrant's form 8-K filed with the SEC on
            June 30, 2008).

10.4        Form of 12% Senior Convertible Note with Gemini Master Fund, Ltd.
            dated June 25, 2008 (incorporated by reference to the comparable
            exhibit filed with the Registrant's form 8-K filed with the SEC on
            June 30, 2008).

10.5        Form of Common Stock Purchase Warrant Agreement with Gemini Master
            Fund, Ltd. dated June 25, 2008 (incorporated by reference to the
            comparable exhibit filed with the Registrant's form 8-K filed with
            the SEC on June 30, 2008)

10.6        Form of Waiver and Amendment with Gemini Master Fund, Ltd. dated
            December 18, 2008 (filed herewith).

10.7        Form of Second Waiver and Amendment with Gemini Master Fund, Ltd.
            Dated February 10, 2009 (filed herewith).

31.1        Certification of Chief Executive Officer (filed herewith).

31.2        Certification of Chief Financial Officer (filed herewith).

32.1        Section 1350 Certification of Chief Executive Officer (filed
            herewith).

32.2        Section 1350 Certification of Chief Financial Officer (filed
            herewith).


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, and Aronson and Company, our prior independent
auditors, for professional services rendered for the year ended October 31, 2007
and S.E. Clark and Co., our independent auditor, for professional services
rendered for the fiscal year ended October 31, 2008:

                   Description                FY2007       FY2008
                                              ------       ------

                     Audit fees              $57,007      $46,206
                     Other services            6,850          400
                                             -------      -------

                     Total                   $63,857      $46,606
                                             =======      =======

                                       26
<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 March 12, 2009.


                                    CDEX INC.

                       By:    /s/ Malcolm H. Philips
                             -----------------------
                             Name:  Malcolm H. Philips
                             Title: President and Chief Executive
                                     Officer and 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/A, 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 March 12,
2009.


Name                                        Title

                                            President and Chief Executive
                                             Officer and Chairman of the Board
 /s/ Malcolm H. Philips                      of Directors
-------------------------------------------
MALCOLM H. PHILIPS

 /s/ Timothy D. Shriver                     Chief Operating Officer and Director
-------------------------------------------
TIMOTHY D. SHRIVER

                                            Chief Financial Officer and
 /s/ Stephen A. McCommon                     VP of Finance
-------------------------------------------
STEPHEN A. MCCOMMON

 /s/ George Dials                           Director
-------------------------------------------
GEORGE DIALS

 /s/ Donald W. Strickland                   Director
-------------------------------------------
DONALD W. STRICKLAND

 /s/ Malcolm H. Philips                     Director
-------------------------------------------
MALCOLM H. PHILIPS

 /s/ Carmen J. Conicelli                    Director
-------------------------------------------
CARMEN J. CONICELLI

                                       27
<PAGE>

                                   CDEX, Inc.
                      Index to Audited Financial Statements
                   For The Fiscal Year Ended October 31, 2008
--------------------------------------------------------------------------------



                                                                           Page
                                                                           ----

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

Audited Financial Statements:

   Balance Sheet.......................................................     F3

   Statements of Operations............................................     F4

   Statements of Changes in Stockholder's Equity/(Deficit).............     F5

   Statements of Cash Flows............................................     F6

   Notes to Financial Statements.......................................     F7



                                      F-1
<PAGE>

                            S.E.Clark & Company, P.C.
--------------------------------------------------------------------------------
           Registered Firm: Public Company Accounting Oversight Board


             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, 2008 and the related statements of operations, changes in
stockholders' deficit, and cash flows for the years ended October 31, 2007 and
2008. 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 audits 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. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. 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 audits provide 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, 2008
and the results of its operations and its cash flows for the years ended October
31, 2007 and 2008 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 12 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 12 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
February 9, 2009



--------------------------------------------------------------------------------
 744 N. Country Club Road, Tucson, AZ 85716 (520) 323-7774, Fax (520) 323-8174,
                               seclarkcpa@aol.com

                                      F-2
<PAGE>

                                    CDEX Inc.
                      Balance Sheet as of October 31, 2008

<TABLE>
<CAPTION>
<S>                                                                                     <C>
Assets
        Current assets
            Cash and cash equivalents                                                   $     26,373
            Accounts receivable                                                              220,688
            Inventory - net                                                                  298,287
            Prepaid expenses                                                                 100,078
                                                                                        ------------
        Total current assets                                                                 645,426

        Net property and equipment                                                            50,595

        Net patents                                                                           88,851

        Other assets                                                                          90,661

                                                                                        ------------
Total assets                                                                            $    875,533
                                                                                        ============

Liabilities and stockholders' deficit

        Current liabilities
            Accounts payable and accrued expenses                                       $  1,394,727
            Notes payable and accrued interest                                               614,231
            Advance payments                                                                  21,576
            Deferred revenue                                                                 119,575
                                                                                        ------------
        Total current liabilities                                                          2,150,109

        Long term liabilities

            Notes payable and accrued interest, net of unamortized
               debt discount                                                                 369,456
                                                                                        ------------

        Total long term liabilities                                                          369,456

        Total liabilities                                                                  2,519,565

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 59,247,991 outstanding                                      296,244
        Additional paid in capital                                                        25,851,967
        Accumulated deficit                                                              (27,792,276)
                                                                                        ------------
Total stockholders' deficit                                                               (1,644,032)

Total liabilities and stockholders' deficit                                             $    875,533
                                                                                        ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>

                                    CDEX Inc.
                            Statements of Operations

<TABLE>
<CAPTION>
                                                                                 Years Ended
                                                                                  October 31
                                                                                  ----------
                                                                           2007               2008
<S>                                                                   <C>                <C>
Revenue                                                               $    505,193       $    835,764


Cost of revenue                                                            176,208            220,316
                                                                      ------------       ------------

Gross profit                                                               328,985            615,448


Operating Expenses
      Research and development costs                                       639,869            943,416
      General and administrative expenses                                2,151,498          1,598,969
                                                                      ------------       ------------
Total operating expenses                                                 2,791,367          2,542,385

Loss from operations                                                    (2,462,382)        (1,926,937)

Other income (expense)
      Interest income                                                            -              3,807
      Interest expense                                                     (21,587)          (211,042)
                                                                      ------------       ------------
Total other (expense) income                                               (21,587)          (207,235)

                                                                      ------------       ------------
Net loss                                                              $ (2,483,969)      $ (2,134,172)
                                                                      ============       ============

Basic and diluted net loss
      per common share:                                               $      (0.05)      $      (0.04)
                                                                      ============       ============
Basic and diluted weighted average
      common shares outstanding                                         45,831,502         57,247,193
                                                                      ============       ============
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>

                                    CDEX Inc.
             Statement of Changes in Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                     Shares of       Shares of  Class A                         Class A  Common
                                                  Preferred Stock      Common Stock          Preferred Stock         Stock
                                                  ------------------------------------------------------------------------------
<S>                                                         <C>              <C>               <C>                   <C>
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
Share-based compensation expense                                -                     -                 -                     -
Net loss                                                        -                     -                 -                     -
                                                  ------------------------------------------------------------------------------
Balance, October 31, 2007                                   6,675            51,569,407        $       33            $  257,852

Sale of common stock for cash (Class A
  restricted 144)                                               -               825,928                 -                 4,130
Exercise of warrants                                            -             3,953,846                 -                19,769
Exercise of stock options                                       -               210,000                 -                 1,049
Conversion of notes payable                                     -             1,688,310                 -                 8,442
Shares issued for compensation                                  -             1,000,500                 -                 5,003
Share-based compensation expense                                -                     -                 -                     -
Fair value of warrant and convertible debt                      -                     -                 -                     -
Net loss                                                        -                     -                 -                     -
                                                  ------------------------------------------------------------------------------
Balance, October 31, 2008                                   6,675            59,247,991        $       33            $  296,244
                                                  ==============================================================================

<CAPTION>
                                                                     Additional Paid-in
                                                                           Capital        Accumulated Deficit          Total
                                                                     -----------------------------------------------------------
<S>                                                                        <C>               <C>                   <C>
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
Share-based compensation expense                                                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)

Sale of common stock for cash                                                   264,390                 -               268,520
Exercise of warrants                                                            679,036                 -               698,805
Exercise of stock options                                                        30,900                 -                31,949
Conversion of Notes Payable                                                     193,687                 -               202,128
Shares issued for compensation                                                  299,573                 -               304,575
Share-based compensation expense                                                103,540                 -               103,540
Fair value of warrant and convertible debt                                      352,258                 -               352,258
Net Loss                                                                              -        (2,134,172)           (2,134,172)
                                                                     -----------------------------------------------------------
Balance, October 31, 2008                                                  $ 25,851,967      $(27,792,276)         $ (1,644,033)
                                                                     ===========================================================
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>

                                    CDEX Inc.
                            Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                 Years Ended
                                                                                  October 31
                                                                                  ----------
                                                                           2007               2008
                                                                           ----               ----
<S>                                                                   <C>                <C>
Cash Flows from Operating Activities
  Net loss                                                            $(2,483,969)       $(2,134,172)
  Adjustments to reconcile net loss to cash used by
    operating activities
      Depreciation and amortization                                        34,714             29,243
      Stock and deferred compensation                                     930,723            493,499
      Noncash interest expense                                             21,162            210,558
    Changes in operating assets and liabilities
      Inventory                                                           153,698           (208,197)
      Accounts receivable                                                 (56,472)          (151,764)
      Prepaid expenses and other assets                                    (7,575)             5,142
      Current liabilities                                                 (51,507)          (165,581)
                                                                      -----------        -----------
Net cash used by operating activities                                  (1,459,226)        (1,921,272)

Cash Flows from Investing Activities
  Capitalized patent costs                                                (50,000)                 -
  Purchase of and deposit for property and equipment                       (8,958)           (21,443)
                                                                      -----------        -----------
Net cash used by investing activities                                     (58,958)           (21,443)

Cash Flows from Financing Activities
  Proceeds from sale of preferred stock                                   216,540                  -
  Proceeds from sale of common stock and warrants                       1,518,640            999,274
  Proceeds from note payable                                              213,100            942,430
  Repayment of preferred stock proceeds                                  (239,040)                 -
  Repayment of notes payable                                             (220,000)                 -
                                                                      -----------        -----------
Net cash provided by financing activities                               1,489,240          1,941,704

Net increase (decrease) in cash                                           (28,944)            (1,011)

Cash and cash equivalents, beginning of the period                         56,328             27,384

                                                                      -----------        -----------
Cash and cash equivalents, end of the period                          $    27,384        $    26,373
                                                                      ===========        ===========

Supplemental Cash Flow Information
  Cash payments for interest expense                                  $       425        $         -

  Deferred compensation included in
    stock and dreferred compensation                                  $         -        $    85,384
  Conversion of notes payable and accrued interest
  to common stock                                                     $         -        $   202,129
  Transfer from inventory to fixed assets                             $         -        $    47,245
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

1.       Organization and significant accounting policies

         CDEX Inc. ("CDEX", "we", "us" or the "Company") 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.

         The preparation of financial statements in conformity with United
States generally accepted accounting principles, which requires management to
make estimates, judgments and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Management bases its
assumptions on historical experiences and on various other assumptions that it
believes to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. In addition, Management
considers the basis and methodology used in developing and selecting these
estimates, the trends in and amounts of these estimates, specific matters
affecting the amount of and changes in these estimates, and any other relevant
matters related to these estimates, including significant issues concerning
accounting principles and financial statement presentation. Such estimates and
assumptions could change in the future as more information becomes known which
could impact the amounts reported and disclosed herein. Significant estimates
include revenue recognition, the valuation of inventory and stock-based
compensation expense. Certain reclassifications have been made to prior period
financial statement amounts to conform to the current presentation.

         Revenue is recognized in compliance with Staff Accounting Bulletin 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.

                                      F-7
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

         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 $69,575 on ValiMed(TM) units
issued under conditional sales agreements and $50,000 from the Missouri State
Highway Patrol for the Meth Gun Pilot Test Program as the program was not
completed by October 31, 2008.

         In fiscal years 2007 and 2008, revenue was recognized from sales to 11
and 32 customers, respectively. Six customers in 2008 represented more than 5%
of total sales. Sales to Baxa Corporation were 79% of fiscal year 2007 revenue.
No other customer in 2007 represented more than 5% of total sales.

         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 $29,322 and $23,487 for the years ended October 31,
2007 and 2008, 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. Due to the nature of our inventory, we analyze
inventory on an item-by-item basis for obsolescence.

         Advertising and marketing costs: The cost of advertising and marketing
is expensed as incurred. Advertising and marketing expense was $26,320 and
$67,925 for the years ended October 31, 2007 and 2008, 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: For the fiscal year ended October 31, 2007,
we determined 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.

         For the fiscal year ended October 31, 2008, 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.

         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 $5,756 for 2007 and 2008, respectively.

                                      F-8
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

         Income taxes: Income taxes are accounted for in accordance with SFAS
No. 109 "Accounting for Income Taxes". Accordingly, deferred tax assets and
liabilities are recognized currently for the future tax consequences
attributable to the temporary differences between the financial statement
carrying amounts of assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. A valuation allowance is recorded to reduce the carrying
amounts of deferred tax assets if it is more likely that such assets will not be
realized.

         We consider all available evidence, both positive and negative, to
determine whether, based on the weight of that evidence, a valuation allowance
is needed for some portion or all of a net deferred tax asset. Judgment is used
in considering the relative impact of negative and positive evidence. In
arriving at these judgments, the weight given to the potential effect of
negative and positive evidence is commensurate with the extent to which it can
be objectively verified. We record a valuation allowance to reduce our deferred
tax assets and review the amount of such allowance annually. When we determine
certain deferred tax assets are more likely than not to be utilized, we will
reduce our valuation allowance accordingly.

         We adopted the provisions of Financial Standards Accounting Board
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48")
an interpretation of SFAS 109 on November 1, 2007. The adoption of FIN 48 did
not impact the balance sheet, results of operations or cash flows. We recognize
interest and penalties related to unrecognized tax benefits in income tax
expense.

         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 transactions

         During fiscal year ended October 31, 2008, an entity controlled by a
Director loaned the Company $75,150. The notes pay interest at the rate of 10%
per year, are convertible into common stock and warrants and are payable upon
demand or matures twelve months from the date of the loan. The Company issued to
that same entity, 1,259,167 shares of Class A Common Stock and an equal number
of two year warrants as payment of four notes payable and accrued interest in
the amount of $151,000 or $.12 share. The warrants have an exercise price of
$.24 per share.

3.       New accounting standards

Fair Value Measurements

         In 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," which
provides enhanced guidance for using fair value to measure assets and
liabilities. SFAS 157 also responds to investors' requests for expanded
information about the extent to which entities measure assets and liabilities at
fair value, the information used to measure fair value, and the effect of fair
value measurements on earnings. SFAS 157 applies whenever other standards
require or permit assets or liabilities to be measured at fair value but does
not expand the use of fair value in any new circumstances.

         Under SFAS 157, fair value refers to the price that would be received
from the sale of an asset or paid to transfer a liability in an orderly
transaction between market participants in the market in which the reporting

                                      F-9
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

entity transacts business. SFAS 157 clarifies the principle that fair value
should be based on the assumptions market participants would use when pricing
the asset or liability. In support of this principle, the standard establishes a
fair value hierarchy that prioritizes the information used to develop those
assumptions. The fair value hierarchy gives the highest priority to quoted
prices in active markets and the lowest priority to unobservable data, for
example, the reporting entity's own data. Fair value measurements are required
to be separately disclosed by level within the fair value hierarchy.

         SFAS 157 was effective for financial statements issued for fiscal years
beginning after November 15, 2007 and for all interim periods within those
fiscal years. The adoption of SFAS 157 did not have any impact on the amounts
reported for financial assets and liabilities in CDEX' 2008 financial
statements.

         In February 2008, the FASB issued Staff Position FAS 157-2, which
delays the effective date of SFAS No. 157 for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).
The delay is intended to allow the FASB and constituents additional time to
consider the effect of various implementation issues that have arisen, or that
may arise, from the application of SFAS No. 157. Examples of items to which the
deferral applies include the following:
          o    Nonfinancial assets and nonfinancial liabilities initially
               measured at fair value in a business combination or other new
               basis event, but not measured at fair value in subsequent
               periods (nonrecurring fair value measurements).
          o    Reporting units measured at fair value in the first step of a
               goodwill impairment test (measured at fair value on a recurring
               basis, but not necessarily recognized or disclosed in the
               financial statements at fair value).
          o    Nonfinancial assets and nonfinancial liabilities measured at
               fair value in the second step of a goodwill impairment test
               (measured at fair value on a nonrecurring basis to determine the
               amount of goodwill impairment, but not necessarily recognized or
               disclosed in the financial statements at fair value).
          o    Nonfinancial long-lived assets (asset groups) measured at fair
               value for an impairment assessment (nonrecurring fair value
               measurements).
          o    Nonfinancial liabilities for exit or disposal activities
               initially measured at fair value (nonrecurring fair value
               measurements).

         CDEX elected to delay the adoption of SFAS No. 157 related to its
nonfinancial assets and nonfinancial liabilities disclosed herein.

         Fair Value Option

         In 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities," which provides companies with an
option to report selected financial assets and liabilities at fair value. The
objective of SFAS 159 is to reduce both the complexity in accounting for
financial instruments and the volatility in earnings caused by measuring related
assets and liabilities differently.

         Different measurement attributes have been required under GAAP for
different assets and liabilities that can create artificial volatility in
earnings. SFAS 159 helps to mitigate this type of accounting-induced volatility
by enabling companies to report related assets and liabilities at fair value.
SFAS 159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities.

         SFAS 159 requires a company to provide additional information that will
help investors and other users of financial statements to more easily understand
the effect of the company's choice to use fair value on its earnings. SFAS 159
also requires entities to display the fair value of those assets and liabilities
for which the company has chosen to use fair value on the face of the balance
sheet. SFAS 159 does not eliminate disclosure requirements included in other
accounting standards, including requirements for disclosures about fair value
measurements included in SFAS 157 and SFAS 107, "Disclosures about Fair Value of
Financial Instruments."

                                      F-10
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

         SFAS 159 was effective as of the beginning of an entity's first fiscal
year beginning after November 15, 2007. CDEX elected not to report any financial
assets or liabilities at fair value under SFAS 159 in its 2008 financial
statements.

4.       Inventory

         Our inventories consisted of the following at October, 31, 2008:


                           Raw materials                   $141,752

                           Finished goods                   156,535
                                                           --------

                           Total inventory                 $298,287
                                                           ========


5.       Net property and equipment

         Our property and equipment consisted of the following at October, 31,
2008:


         Furniture, fixtures and leasehold improvements             $   2,931

         Equipment                                                    648,395

         Leased equipment                                              47,245
                                                                    ---------

               Total                                                  698,571

         Less accumulated depreciation                               (647,976)
                                                                    ---------

         Net property and equipment                                 $  50,595
                                                                    =========


6.       Net patents

         Our patents consisted of the following at October 31, 2008:


             Patents                                           $ 100,000

             Less accumulated amortization                       (11,149)
                                                               ---------

             Net patents                                       $  88,851
                                                               =========

                                      F-11
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

7.       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:

                                                     Year Ended October 31,
                                                     ----------------------
                                                      2007           2008
                                                      ----           ----
         Federal income taxes at the               $ 844,549       $ 725,618
          maximum statutory rate
         State income taxes, net of                  114,263          98,172
          federal tax effect
         Permanent differences                        11,991          12,397
         Increase in valuation allowance            (970,803)       (836,187)
                                                   ---------       ---------

         Benefit from income taxes                 $       -       $       -
                                                   =========       =========



Deferred income taxes were as follows as of October 31:

                                                        2007           2008
                                                        ----           ----
      Stock based compensation                      $ 1,568,605     $ 1,605,522
      Fixed asset basis difference                       34,087          53,446
      Receivables excluded from income for              (26,605)        (85,185)
       income tax reporting purposes
      Accounts payable and accrued expenses             498,605         489,106
       deducted for financial statement reporting
       purposes, but not for income tax reporting
      Net operating loss carryforwards                5,038,202       5,898,302
                                                    -----------     -----------

      Deferred tax asset                              7,112,894       7,961,191
      Valuation allowance                            (7,112,894)     (7,961,191)
                                                    -----------     -----------

      Total                                         $         -     $         -
                                                    ===========     ===========



         For income tax purposes, the Company has net operating loss
carryforwards of approximately $15.3 million at October 31, 2008 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.

         We adopted the provisions of Financial Standards Accounting Board
Interpretation No. 48 Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement No. 109 on November 1, 2007. As a result of the
implementation of FIN 48, we recognized no material adjustment in the liability
for unrecognized income tax benefits. At the adoption date of November 1, 2007
and at October 31, 2008, we had no unrecognized tax benefits.

         We recognize interest and penalties related to uncertain tax positions
in income tax expense. As of October 31, 2008, we had no uncertain tax positions
and no related accrued interest and penalties.

                                      F-12
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

8. Stock grants and options

         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 25,000,000 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. 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. The Company granted
3,435,000 stock options with a fair value of $375,972 during the year ended
October 31, 2008. We have a practice of issuing new stock to satisfy the
exercises of stock options.

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

                                                 Number of Shares
                                                 ----------------

               Balance at October 31, 2006           9,583,043

               Stock grants                          2,200,000
               Options granted                         150,000
                                                   -----------

               Balance at October 31, 2007          11,933,043

               Options granted                       3,435,000
               Options cancelled                       (25,000)
                                                   -----------

               Balance at October 31, 2008          15,343,043
                                                   ===========


         Total compensation expense related to stock awards for employees and
consultants was $28,750 and $103,540 for the years ended October 31, 2007 and
2008, 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. Options granted were exercisable pursuant to
vesting schedules from immediate to four years.

         The fair value of option awards was estimated using the Black-Scholes
option pricing model with the following assumptions and weighted average fair
values:

<TABLE>
<CAPTION>
                                        For the fiscal year ended October 31, 2008
                                                  2007                       2008
                                                  ----                       ----
<S>                                            <C>                      <C>
Weighted average fair value of grants            $0.57                      $0.11
Expected volatility                               75%                        75%
Expected dividends                                 0%                         0%
Expected term (years)                          3.0 - 5.0                  1.0 - 3.5
Risk free rate                                   4.20%                  1.34% - 2.80%
</TABLE>

                                      F-13
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

         The following summarizes the activity of our stock options for the
fiscal year ended October 31, 2007 and 2008:

                                                              Weighted average
                                         Number of Shares      Exercise Price
                                         ----------------      --------------

         Outstanding at October 31, 2006              -           $      -

         Options Granted                      2,200,000           $   0.17
         Options Exercised                     (140,000)          $   0.15
                                             -----------

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

         Options Granted                      3,435,000           $   0.24
         Options Exercised                     (210,000)          $   0.15
         Options Cancelled                      (25,000)          $   0.15
                                             -----------

         Outstanding at October 31, 2008      5,260,000           $   0.24
                                             ===========

         Exercisable at October 31, 2008      1,865,000           $   0.21
                                             ===========

         The following summarizes the activity of our warrants stock options for
the fiscal year ended October 31, 2007 and 2008:

                                                               Weighted average
                                         Number of Shares       Exercise Price
                                         ----------------       --------------

         Outstanding at October 31, 2006        200,000           $   0.45

         Warrants Issued                     13,350,051           $   0.24
                                             -----------

         Outstanding at October 31, 2007     13,550,051           $   0.24

         Warrants Issued                      4,566,383           $   0.35
         Warrants Exercised                  (4,069,232)          $   0.18
         Warrants Cancelled                  (1,153,847)          $   0.26
                                             -----------

         Outstanding at October 31, 2008     12,893,355           $   0.30
                                             ===========


9.       Stockholders' Equity

         During the fiscal year ended October 31, 2008, the Company sold to
several investors 825,928 shares of restricted Class A Common Stock for
$268,520, or $.33 per share. Several investors exercised 3,953,847 warrants for
an aggregate amount of $698,805, or $.18 per share. The Company granted
1,000,500 restricted Class A Common Shares to five consultants at prices of $.30
per share and $.33 per share as part of negotiated settlement agreements.
Various Notes Payable in the aggregate amount of $202,109 were converted into
1,688,311 Class A Common Shares, or $.12 per share. Several individuals
exercised 210,000 stock options for an aggregate amount of $31,950, or $.15 per
share.

         During the fiscal year ended October 31, 2007, the Company 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.

                                      F-14
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

         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.

10.      Notes Payable

         In April 2008, the Company entered into a $75,000 unsecured Convertible
Note bearing interest at 9.9% per year and maturing in two years. The
Convertible Note and accrued interest is convertible into the Common Stock of
the Company after six months based upon a Conversion Price defined in the
agreement. In October 2008, the Company issued 87,243 shares of Class A common
stock as payment for $10,000 principal on the note or approximately $0.11 per
share.

         In June 2008, The Company entered into a Securities Purchase Agreement
with an accredited investor for the issuance of a 12% Senior Convertible Note
and warrants for total consideration of $1,000,000 minus certain expenses of the
purchaser. The note is for $1,086,957 and has monthly redemptions starting after
6 months which are based upon a 24 month amortization. Final payment is due on
or before June 25, 2010. The note is convertible into shares of Class A Common
Stock of the Company at the rate of $0.30 per share. The warrants permit the
holder to purchase up to 2,717,391 shares of common stock from the Company at
$0.375 per share until five years from the issuance of the warrants. The
warrants also permit the holder to exercise the warrants in a cashless exercise.
The note and the warrants contain anti-dilution clauses whereby, (subject to the
exceptions contained in those instruments) if the Company issues equity
securities or securities convertible into equity at a price below the respective
conversion price of the note or exercise price of the warrant, such conversion
and exercise prices shall be adjusted downward to equal the price of the new
securities.

         The Company has determined the convertible debenture contains a
beneficial conversion feature and qualifies for treatment under Emerging Issues
Task Force No. 00-27. The estimated fair value of the detachable warrants of
$359,782 has been determined using Black-Scholes option pricing model using the
following assumptions: stock price volatility of 75%, risk free interest rate of
4.21%; dividend yield of 0% and 2 year term. The face amount of the convertible
note of $1,086,957 was proportionately allocated to the note and the warrants in
the amount of $785,107 and $301,850, respectively. The convertible note
proportionate allocated value of $785,107 was then further allocated between the
note and the beneficial conversion feature. The fair value of the beneficial
conversion feature was determined to be $144,928 and the remaining value of
$640,179 was allocated to the convertible note. The combined total value of the
warrant and beneficial conversion feature of $446,778 has been accounted for as
a debt discount that is being amortized and treated as interest expense over the
term of the convertible debenture under the effective interest method.

         During fiscal year ended October 31, 2008, an entity controlled by a
Director loaned the Company $75,150. The notes pay interest at the rate of 10%
per year, are convertible into common stock and warrants and are payable upon
demand or matures twelve months from the date of the loan. In addition, the
Company issued to this same entity, 1,259,167 shares of Class A Common Stock and
an equal number of two year warrants as payment of four notes payable and
accrued interest in the amount of $151,000 or $0.12 share. The warrants have an
exercise price of $0.24 per share.

                                      F-15
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

         Our notes payable consisted of the following at October, 31, 2008:

<TABLE>
<CAPTION>
  <S>                                                                             <C>
  Gemini Master Fund, Ltd.$1,086,957, 12% convertible note with warrants -        $498,189
    current portion net of unamortized discount
  IAM Investments LLP $109,500 convertible notes, interest rates 9% to 10%,        116,042
   with warrants
                                                                                  --------
  Current liabilities notes payable                                                614,231
                                                                                  --------
  Gemini Master Fund, Ltd.$1,086,957, 12% Convertible Note with warrants -         300,306
   long-term portion
  Tangiers Capital, LLC, $75,000, 9.9% convertible note                             69,150
                                                                                  --------
  Long-term liabilities notes payable                                              369,456
                                                                                  --------
  Total notes payable                                                             $983,687
                                                                                  ========
</TABLE>


11.      Commitments and Contingencies

         Operating  Leases

         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, 2008 is $31,262.

         The future minimum royalty payments required under a patent license
agreement is $50,000 for both calendar years 2009 and 2010 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.

         Litigation

         CDEX may from time to time be involved in legal proceedings arising
from the normal course of business. In June 2008, a lawsuit was filed by
Hutchinson & Steffen in a Nevada District Court, Clark County, against the
Company, alleging, among other things, breach of contract. On July 2, 2008,
Hutchinson & Steffen and the Company entered into a settlement agreement,
staying the legal proceedings pending completion of the terms of the settlement
agreement. As of the date of this report, we have not received notice of any
other legal proceedings.

         Due to the lack of liquidity, the Company is in arrears on a
substantial number of its financial obligations. To date, most creditors have
been willing to renegotiate the obligations as they become due or forestall any
recourse they may have to collect their debts. However, should any of these
creditors pursue recourse, the Company may not be able to continue as a going
concern.

12.      Going Concern

         The Company has incurred losses since its inception of approximately
$27,792,000 and has had limited product sales from its inception through fiscal
year 2008. 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

                                      F-16
<PAGE>

                                   CDEX, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                October 31, 2008

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, 2008, the Company received
$1,941,704 in funding, comprised of:

     o    $942,430 from the net proceeds from five notes payable. These notes
          bear interest from 9.9% to 12% and have maturities up to two years.

     o    $670,000 received from the exercise of 3,811,248 warrants for an
          average price $.18 per share.

     o    $268,520 for 825,928 shares of restricted Class A Common Stock at an
          average price of approximately $0.33 per share. Investors who
          purchased 682,143 of these shares received warrants to purchase up to
          503,571 shares at a weighted average exercise price of $.54 per share
          for a two year period from the effective dates of the share purchases.

     o    $31,950 received from the exercise of 210,000 stock options for an
          average price of approximately $.15 per share.

     o    $28,804 received from the exercise of 142,600 stock options for an
          average price of approximately $.20 per share.

13.      Subsequent Events

Subsequent to October 31, 2008:

         The Company issued 1,026,290 shares of Class A common stock as payment
for $60,000 on a note or approximately $0.06 per share.

         An entity controlled by a Director loaned the Company $112,750 in four
separate notes. The notes pay interest at the rate of 10% per year, are
convertible into common stock and warrants and are payable upon demand or
matures twelve months from the date of the loan. In addition, the Company issued
to this same entity, 89,381 shares of Class A Common Stock and an equal number
of two year warrants as payment of four notes payable and accrued interest in
the amount of $10,726 or $0.12 share. The warrants have an exercise price of
$0.24 per share.

         An investor purchased 500,000 shares of Class A common stock for
$50,000 and was granted a two year warrant.

         Additionally, a Director of the company purchased 250,000 shares of
Class A common stock for $25,000 and was granted a two year warrant.

         On June 25, 2008, Gemini Master Fund, Ltd. ("Gemini") and CDEX entered
into a Securities Purchase Agreement, a 12% Senior Convertible Note, and a
Common Stock Purchase Warrant to purchase up to 2,717,391 shares of Common Stock
(combined these are termed "Transaction Documents"). Subsequently, Gemini and
CDEX have amended these Transaction Documents on December 18, 2008 and February
10, 2009 (effective February 1, 2009). The first amendment allowed CDEX to raise
as Exempt Issuances under the terms of the Transaction Documents up to $500,000
until April 1, 2009 in common stock financing subject to defined terms in the
amendment, delayed payments due to Gemini under the Transaction Documents until
February 1, 2009, and allowed for prepayment of the Note before April 1, 2009
without penalty. The second amendment allowed CDEX to raise as Exempt Issuances
under the terms of the Transaction Documents amounts above $500,000 until May 1,
2009 in common stock financing subject to defined terms, delayed payments due to
Gemini under the Transaction Documents until May 1, 2009 with reset conversion
provisions, reset the exercise price of 30% of the Transaction Document warrants
and allowed repayment of the Note before May 1, 2009 without penalty.

                                      F-17