UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 30, 2015
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to ____
Commission File Number 000-49845
CDEX INC.
(Exact Name of Registrant as Specified in Its Charter)
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Nevada
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52-2336836
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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4555 South Palo Verde Road, Suite 123, Tucson, Arizona
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85714
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant's Telephone Number, Including Area Code 520-745-5172
Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer: o Accelerated filer: o Non-accelerated filer: o Smaller reporting company: x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o
As of June 12, 2015, 81,452,520 shares of the registrants Class A common stock, par value $.005 per share, were outstanding.
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CDEX, INC.
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QUARTERLY REPORT ON FORM 10-Q
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TABLE OF CONTENTS
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Part I FINANCIAL INFORMATION
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ITEM 1. Financial Statements
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Balance Sheets as of April 30, 2015 (unaudited) and
October 31, 2014
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1
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Statements of Operations for the three months ended
April 30, 2015 and 2014 (unaudited)
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2
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Statements of Operations for the six months ended
April 30, 2015 and 2014 (unaudited)
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3
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Statements of Cash Flow for the six months ended
April 30, 2015 and 2014 (unaudited)
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4
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Notes to Financial Statements (unaudited)
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5
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
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9
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ITEM 4. Controls and Procedures
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12
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Part II OTHER INFORMATION
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ITEM 5. Other Information
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14
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ITEM 6. Exhibits
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14
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Signatures
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15
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CDEX INC.
BALANCE SHEETS
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April 30, 2015
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October 31. 2014
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Unaudited
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Assets
|
|
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|
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Current assets
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|
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Cash
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$ |
49,273 |
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$ |
90,915 |
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Accounts receivable
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5,535 |
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6,935 |
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Inventory - net
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250,126 |
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250,751 |
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Prepaid expenses and deposits
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2,938 |
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19,078 |
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Total current assets
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307,872 |
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367,679 |
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Property and equipment, net
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18,438 |
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28,709 |
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Patents, net
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44,863 |
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46,913 |
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Other assets
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1,399 |
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1,399 |
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Total assets
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$ |
372,572 |
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$ |
444,700 |
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Liabilities and stockholders' equity
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Current liabilities
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Accounts payable and accrued expenses
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$ |
46,087 |
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$ |
72,885 |
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Deferred revenue - current
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61,000 |
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67,000 |
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Line of credit payable
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499,401 |
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135,288 |
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Total current liabilities
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606,488 |
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275,173 |
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Total liabilities
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606,488 |
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275,173 |
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Commitments and Contingencies
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Stockholders' equity
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Preferred stock - undesignated - $.005 par value per share,
350,000 shares authorized and none outstanding
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- |
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- |
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Preferred stock - series A - $.005 par value per share,
150,000 shares authorized and 6,250 outstanding at
April 30, 2015 and at October 31, 2014
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31 |
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31 |
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Class A common stock - $.005 par value per share, 300,000,000
shares authorized and 69,452,958 outstanding at April 30,
2015 and at October 31, 2014
|
|
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347,263 |
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|
347,263 |
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Additional paid in capital
|
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|
35,619,772 |
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35,619,772 |
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Accumulated (deficit)
|
|
|
(36,200,982 |
) |
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(35,797,539 |
) |
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Total stockholders' equity (deficit)
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(233,916 |
) |
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169,527 |
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Total liabilities and stockholders' equity
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$ |
372,572 |
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|
$ |
444,700 |
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The accompanying notes are an integral part of these financial statements.
CDEX INC.
STATEMENTS OF OPERATIONS
(unaudited)
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For the three months ended |
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April 30, |
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2015
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2014
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Revenue
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$ |
36,762 |
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$ |
50,277 |
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|
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Cost of revenue
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9,532 |
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6,239 |
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|
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Gross profit
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27,230 |
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|
44,038 |
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Operating Expenses
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Selling, general and administrative
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139,119 |
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152,769 |
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Research and development
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39,971 |
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34,596 |
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Total operating expenses
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179,090 |
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187,365 |
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Loss from operations
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(151,860 |
) |
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(143,327 |
) |
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Other income
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Interest expense
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(47,434 |
) |
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- |
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Other income
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7,931 |
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|
- |
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Total other income
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(39,503 |
) |
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|
- |
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Net loss
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$ |
(191,363 |
) |
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$ |
(143,327 |
) |
| |
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Basic net loss
per common share:
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$ |
(0.01 |
) |
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$ |
(0.01 |
) |
| |
|
|
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Basic weighted average
common shares outstanding
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|
69,452,958 |
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54,344,042 |
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The accompanying notes are an integral part of these financial statements.
CDEX INC.
STATEMENTS OF OPERATIONS
(unaudited)
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For the six months ended |
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April 30 |
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2015
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2014
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|
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Revenue
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$ |
58,884 |
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$ |
126,284 |
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| |
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Cost of revenue
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16,252 |
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25,904 |
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Gross profit
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42,632 |
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|
100,380 |
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Operating Expenses
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Selling, general and administrative
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|
284,114 |
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|
|
274,796 |
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Research and development
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|
84,686 |
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|
91,151 |
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|
Total operating expenses
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368,800 |
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|
365,947 |
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| |
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Loss from operations
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(326,168 |
) |
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|
(265,567 |
) |
| |
|
|
|
|
|
|
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Other income (expense)
|
|
|
|
|
|
|
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Interest expense
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(87,386 |
) |
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|
- |
|
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Other income
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|
10,111 |
|
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|
6,805 |
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|
Total other income (expense)
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(77,275 |
) |
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|
6,805 |
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| |
|
|
|
|
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Net loss
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|
$ |
(403,443 |
) |
|
$ |
(258,762 |
) |
| |
|
|
|
|
|
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|
Basic net loss
per common share:
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
| |
|
|
|
|
|
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Basic weighted average
common shares outstanding
|
|
|
69,452,958 |
|
|
|
53,645,503 |
|
The accompanying notes are an integral part of these financial statements.
CDEX INC.
STATEMENTS OF CASH FLOWS
(unaudited)
| |
|
For the six months ended |
|
| |
|
April 30, |
|
| |
|
2015
|
|
|
2014
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(403,443 |
) |
|
$ |
(258,762 |
) |
Adjustments to reconcile net loss to cash used by
operating activities
|
|
|
|
|
|
|
|
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|
Depreciation and amortization
|
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|
8,293 |
|
|
|
11,491 |
|
|
Non-cash amortization of bonus interest
on notes payable
|
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|
44,640 |
|
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|
- |
|
|
Non-cash amortization of warrants issued
on notes payable
|
|
|
24,424 |
|
|
|
- |
|
|
Share-based compensation
|
|
|
- |
|
|
|
8,780 |
|
|
Interest expense
|
|
|
18,322 |
|
|
|
- |
|
|
(Gain) loss recognized on disposal of equipment
|
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|
(10,111 |
) |
|
|
- |
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,400 |
|
|
|
7,348 |
|
|
Inventory
|
|
|
625 |
|
|
|
8,282 |
|
|
Deferred costs and other assets
|
|
|
2,000 |
|
|
|
2,607 |
|
|
Current liabilities
|
|
|
(32,798 |
) |
|
|
109,382 |
|
|
Net cash used by operating activities
|
|
|
(346,648 |
) |
|
|
(110,872 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
Proceeds on sale of equipment
|
|
|
14,139 |
|
|
|
- |
|
|
Purchase of equipment
|
|
|
- |
|
|
|
(10,212 |
) |
|
Net cash provided (used) by investing activities
|
|
|
14,139 |
|
|
|
(10,212 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds received under line of credit
|
|
|
305,000 |
|
|
|
- |
|
Proceeds from warrant exchange offer
|
|
|
- |
|
|
|
140,000 |
|
|
Repayment under line of credit
|
|
|
(14,133 |
) |
|
|
- |
|
|
Net cash provided by financing activities
|
|
|
290,867 |
|
|
|
140,000 |
|
| |
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(41,642 |
) |
|
|
18,916 |
|
| |
|
|
|
|
|
|
|
|
|
Cash, beginning of the period
|
|
|
90,915 |
|
|
|
98,967 |
|
|
Cash, end of the period
|
|
$ |
49,273 |
|
|
$ |
117,883 |
|
| |
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
Cash payments for interest expense
|
|
$ |
14,133 |
|
|
$ |
- |
|
The accompanying notes are an integral part of these financial statements.
CDEX Inc.
NOTES TO FINANCIAL STATEMENTS
April 30, 2015
(Unaudited)
1. Basis of Presentation
The accompanying interim unaudited condensed financial statements include the accounts of CDEX Inc. as of April 30, 2015. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented have been made. The results for the three-month and six-month periods ended April 30, 2015 may not be indicative of the results for the entire year. The interim unaudited condensed financial statements should be read in conjunction with the Company's audited financial statements contained in our Annual Report on Form 10-K. Our lack of earnings history and continued future losses could adversely affect our financial position and if we are unable to generate funds or obtain funds on acceptable terms, we may not be able to continue operations.
The accompanying unaudited financial statements are presented pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
Recent Developments
We have experienced net losses since our inception and, as of April 30, 2015, had an accumulated deficit of approximately $36 million. We do not expect to have positive cash flow from operations until we have deployed a sufficient number of our ValiMedTM G4 drug validation systems. As of April 30, 2015, we had approximately $49,000 in cash which was provided primarily through proceeds from our Lines of Credit.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles 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.
Recent Accounting Pronouncements
The Company has reviewed, and continues to review, issued accounting pronouncements with the intent of adopting any that are applicable to it. The Company does not expect any recent pronouncements to have an impact on its results of operations or financial position.
Our inventories consisted of the following:
CDEX Inc.
NOTES TO FINANCIAL STATEMENTS
April 30, 2015
(Unaudited)
| |
|
April 30, 2015
|
|
|
October 31, 2014
|
|
| |
|
|
|
|
|
|
|
Raw materials
|
|
$ |
228,311 |
|
|
$ |
223,464 |
|
|
Finished goods
|
|
|
47,651 |
|
|
|
52,301 |
|
|
Subtotal
|
|
|
275,962 |
|
|
|
275,765 |
|
|
Obsolescence reserve
|
|
|
(25,836 |
) |
|
|
(25,014 |
) |
| |
|
|
|
|
|
|
|
|
|
Total inventory
|
|
$ |
250,126 |
|
|
$ |
250,751 |
|
|
3
|
Property and equipment, net
|
Our property and equipment consisted of the following:
| |
|
April 30, 2015
|
|
|
October 31, 2014
|
|
| |
|
|
|
|
|
|
|
Furniture, fixtures and leasehold improvements
|
|
$ |
2,931 |
|
|
$ |
2,931 |
|
|
Equipment
|
|
|
502,244 |
|
|
|
605,007 |
|
|
Leased equipment
|
|
|
70,654 |
|
|
|
70,654 |
|
| |
|
|
|
|
|
|
|
|
|
Total
|
|
|
575,829 |
|
|
|
678,592 |
|
| |
|
|
|
|
|
|
|
|
|
Less accumulated depreciation
|
|
|
(557,391 |
) |
|
|
(649,883 |
) |
| |
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
$ |
18,438 |
|
|
$ |
28,709 |
|
Our patents consisted of the following:
| |
|
April 30, 2015
|
|
|
October 31, 2014
|
|
| |
|
|
|
|
|
|
|
Patents
|
|
$ |
100,000 |
|
|
$ |
100,000 |
|
| |
|
|
|
|
|
|
|
|
|
Less accumulated amortization
|
|
|
(55,137 |
) |
|
|
(53,087 |
) |
| |
|
|
|
|
|
|
|
|
|
Net patents
|
|
$ |
44,863 |
|
|
$ |
46,913 |
|
CDEX Inc.
NOTES TO FINANCIAL STATEMENTS
April 30, 2015
(Unaudited)
|
5
|
Accounts Payable and Accrued Expenses
|
Accounts payable and accrued expenses consisted of the following:
| |
|
April 30, 2015
|
|
|
October 31, 2014
|
|
|
Legal fees
|
|
$ |
- |
|
|
$ |
61,571 |
|
|
Accrued compensation
|
|
|
10,314 |
|
|
|
3,430 |
|
|
Accounts payable
|
|
|
33,398 |
|
|
|
5,509 |
|
|
Accrued payable to a distributor
|
|
|
2,375 |
|
|
|
2,375 |
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
46,087 |
|
|
$ |
72,885 |
|
Effective October 16, 2014, CDEX Inc. (the “Company”) entered into a Line of Credit Agreement with each of two lenders, one of whom is our CEO, Jeffrey K. Brumfield, and the other of which is a significant shareholder, PEMCO LLC. The Line of Credit Agreements provide for the lenders to make available to the Company an aggregate amount of up to $430,000 in funding, upon which the Company may draw funds as needed at any time from the effective date until the maturity date which has been extended to June 30, 2015. The Lines of Credit are secured by all assets of the Company. Pursuant to each Line of Credit Agreement, the Company has issued each lender a Revolving Note (collectively, the “Notes”) evidencing the net amount drawn by the Company during the term of the Line of Credit Agreement. The Notes bear interest at a rate of 12% per annum. Interest on the balance of the Notes accrues and is payable on the first day of each month beginning on November 1, 2014. On the maturity date, the Company must pay to the lenders an amount equal to 110% of the principal due on the Notes plus any accrued and unpaid interest as of that date. The Company may prepay any principal balance on the Notes, but it must still pay 110% of such principal amount when paid. As additional incentive for the lenders to enter into the Line of Credit Agreements and make available to the Company funds thereunder, the Company has issued to the lenders Warrants to purchase up to 2,150,000 shares of the Company’s Class A common stock in the aggregate. The Warrants are exercisable for a period of five years at an exercise price of $0.25 per share. The following reconciles notes payable as of April 30, 2015 and October 31, 2014:
| |
|
April 30, 2015
|
|
|
October 31, 2014
|
|
| |
|
|
|
|
|
|
|
Line of credit - PEMCO LLC - 12% interest payable monthly - matures
June 30, 2015
|
|
|
350,000 |
|
|
|
105,173 |
|
| |
|
|
|
|
|
|
|
|
|
Line of credit - Jeffrey K Brumfield - 12% interest payable monthly - matures
June 30, 2015
|
|
|
100,000 |
|
|
|
40,039 |
|
| |
|
|
|
|
|
|
|
|
|
Recognition of 10% bonus interest on lines of credit draws
|
|
|
45,000 |
|
|
|
14,500 |
|
|
Recognition of warrant value on lines of credit
|
|
|
(25,075 |
) |
|
|
(25,075 |
) |
|
Accrued Interest
|
|
|
4,401 |
|
|
|
- |
|
|
Amortization of warrant value on lines of credit
|
|
|
25,075 |
|
|
|
651 |
|
| |
|
|
|
|
|
|
|
|
|
Total lines of credit
|
|
|
499,401 |
|
|
|
135,288 |
|
|
7.
|
Share-Based Compensation
|
For the six month periods ended April 30, 2015 there was no share-based compensation expense. For the three and six months ended April 30, 2014, share-based compensation expense was approximately $9,000, primarily attributable to restricted stock grants issued to our independent Directors under the CDEX Inc. Board Compensation Plan.
CDEX Inc.
NOTES TO FINANCIAL STATEMENTS
April 30, 2015
(Unaudited)
During the six month periods ended April 30, 2015 there was no option or stock grant activity. During the six months ended April 30, 2014, 15,000 options were forfeited and approximately 276,000 shares of restricted stock were issued.
We determine the fair value of share-based awards at their grant date, using a Black-Scholes Option Pricing Model. No options were granted for the six month periods ended April 30, 2015 and April 30, 2014.
As of April 30, 2015, there were no unrecognized compensation costs related to unvested restricted stock grants.
During the three month periods ended April 30, 2015 and April 30, 2014, there was no stock activity.
|
9.
|
Commitments and Contingencies
|
Litigation
We may from time to time be involved in legal proceedings arising from the normal course of business. As of the date of this report, we have not received notice of any other legal proceedings and the Company is not aware of any pending claims or assessments which may have a material adverse impact on the Company’s financial position or results of operations.
10. Subsequent Events
The Company’s management has evaluated subsequent events occurring after April 30, 2015, the date of our most recent balance sheet, through the date our financial statements were issued.
Effective May 28, 2015, CDEX Inc. (the “Company”) entered into a Consulting Advisory Services Agreement (the “Agreement”) with Osprey Capital Advisors, LLC, a Florida limited liability company (the “Consultant”). The Agreement calls for the Consultant to provide advisory and consulting services to the Company, including introduction to, and establishing relationships with, individuals and entities for possible investment in the Company, guidance on markets, product distribution, employment, board development and related matters, business plan development, review of the Company’s long- and short-term growth objectives, investor relations and public relations services and the Company’s approach to its business and financial strategy and efforts taken by the Company to date to develop investor interest.
As consideration for such services, the Company has agreed to issue to the Consultant an aggregate of 12 million shares of its Class A common stock, 7.5 million of such shares issuable upon signing of the Agreement. The Agreement has a term of 240 days.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation
Our discussion and analysis of the financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the related disclosures included elsewhere herein and in Management’s Discussion and Analysis of Financial Condition and Results of Operations included as part of our Annual Report on Form 10-K for the fiscal year ended October 31, 2014.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the securities laws. Forward-looking statements include all statements that do not relate solely to the historical or current facts, and can be identified by the use of forward looking words such as "may", "believe", "expect", "expected", "project", "anticipate", "anticipated”, "plans", "strategy", "target", "prospects", ”should”, “intends”, “estimates” "continue" and other words of similar meaning. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations, as well as future results of operations and financial condition and may cause our actual results, performances or achievements to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements.
Important factors that could cause our actual results to differ materially from our expectations are described as Risk Factors in our Annual Report on Form 10-K for the fiscal year ended October 31, 2014. Although we believe that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. We do not assume any obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements.
OVERVIEW
CDEX Inc. (“CDEX,” “we,” “us,” “our” or the “Company”) is a technology development company incorporated in the State of Nevada on July 6, 2001 with a corporate office and research and development facility in Tucson, Arizona. Our Class A common stock is currently being traded on the OTCQB under the symbol "CDEX."
Our Company is widely recognized as a global leader in Enhanced Photoemission Spectroscopy. We have pioneered proprietary, patented technology that has been applied to create and bring to market two in-demand, proprietary product lines: ValiMed™ for the healthcare industry and ID2™ for the security industry.
Key competitive differentiators of CDEX’s solutions include:
|
|
·
|
Powerful, real-time chemical detection and medication validation capabilities.
|
|
|
·
|
Highly reliable and accurate measurements.
|
|
|
·
|
Lower in cost to customers when compared to competing or alternative technologies.
|
|
|
·
|
Reduces potential errors in human interpretation.
|
|
|
·
|
CDEX has created an extensive and very valuable library of reference signatures (200+ for current CCT Model) and an ever expanding signature library for the ValiMed G4 of substances of interest, such as selected narcotics and high risk liquid compounded admixtures. Proprietary software validates a substance of interest by comparing its signature against the known reference signature of the substance of interest. 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.
|
|
|
·
|
Our technology is not centered on packaging schemes such as holograms, inks, ingredient taggants or Radio Frequency Identification (RFID) tags, all of which can be defeated by determined counterfeiters.
|
|
|
·
|
Our technology can be adapted to other products and markets, including identifying counterfeit drugs, protecting brands and identifying explosives’ signatures, among others.
|
Virtually all CDEX product development has been 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 and development efforts have centered on, but are 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, which can be used as signatures to validate and authenticate the substances.
CDEX creates reference signatures of substances of interest, such as select narcotics, explosive compounds and medicines. CDEX software validates a substance of interest by comparing its signature against the known reference signature of the substance of interest in the 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 contained in the database. This provides rapid validation and authentication that the substance is genuine. CDEX technology is not centered on packaging schemes such as holograms, inks, ingredient taggants or Radio Frequency Identification (or RFID) tags, all of which can be defeated by determined counterfeiters.
Products.
We are currently focusing our resources on marketing and improving real-time (within seconds) chemical detection products using proprietary, patented and patents pending technologies. Our primary focus in 2014, which continued through the six months ended April 30, 2015, was the continued development and enhancement of our ValiMed G4 system (“VG4”) for use in the pharmaceutical market and sales of our ID2 product for the security markets with our principal product lines noted below. The Company continues to explore unique opportunities where its proprietary technology may provide low cost/real time solutions to growing security or liability concerns such as conducting urine, blood and saliva analysis for detecting illegal drugs and performance enhancement substances in the work place or sporting environment.
Healthcare Market.
Our ValiMed Medication Validation System (“MVS”) product line – consists of two products: our third generation ValiMed system, marketed as ValiMed CCT (“CCT”)and the ValiMed G4 (“VG4”). Both ValiMed systems help healthcare providers ensure patient safety and control costs by reducing medication errors and mitigating drug diversion, utilizing our patented and patent pending process known as Enhanced Photoemission Spectroscopy.
The VG4 system uses a patented detection process providing a real time (within seconds), quantitative (strength/concentration) and qualitative (identification of known) analysis of high-risk single component compounded medications and treatment solutions. The CCT system, which is operating in numerous hospital settings around the country, provides the healthcare industry with the ability to verify a known substance, specifically a known drug with a known strength/concentration, in a known diluent. The CCT system also utilizes our proprietary cuvettes in the process. Both devices help healthcare facilities comply with Joint Commission on Accreditation of Healthcare Organizations compliance requirements and United States Pharmacopeia's General Chapter 797 Pharmaceutical Compounding—Sterile Preparations (“USP 797”) guidelines for compounding sterile preparations. Both systems also provide a recurring revenue stream and address three problem areas in the healthcare market: (i) human error in the compounding of medications, with an emphasis on, but not limited to high risk medications; (ii) harmful counterfeit medications and (iii) diversion of hospital narcotics.
In the near future, we expect the VG4 product line to address multi component compounded admixtures, such as total parenteral nutrition. We expect to add oncology drugs to our formulary in 2016 as well. One of the most significant improvements with the VG4 is the capability to analyze through most containers that are currently being used in pharmaceutical settings. This provides our end users with a more streamlined application, with less labor and without compromising the sterility of the compounded admixtures.
Security Market.
Our ID2 product line – provides solutions for real time (within seconds) detection of specified illegal drugs. This product line currently comprises two devices, both which are hand-held models that detect methamphetamine. The ID2 Meth Scanner is a device that is used for the detection of methamphetamine in the home inspection industries, by housing authorities, the hotel industry and in our nation’s prisons and correctional facilities. The Pocket ID2 is a pocket-sized hand-held device that currently detects visible and prosecutable quantities of methamphetamine. We expect to expand our detection capabilities to include other drugs such as cocaine, heroin, OxyContin and Ecstasy in the near future.
We continue to explore opportunities to apply the ID2 technology to a table top device that will be portable and able to detect trace amounts of specified illegal drugs and explosives in real-time. Our ID2 products have applications in all areas of law enforcement, including local police and sheriff departments, U.S. border patrol, port authorities, TSA, FBI, U.S. Military, and other agencies engaged in counternarcotics.
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 ours 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 our 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’s attention, and/or require CDEX to enter into costly royalty or licensing arrangements to prevent further infringement, any of which could adversely affect our operating results. The Company makes business decisions regarding which inventions to patent, and in what countries.
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.
RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2015 AND 2014:
| |
|
2015
|
|
|
2014
|
|
| |
|
|
|
|
|
|
|
Revenue
|
|
$ |
36,762 |
|
|
$ |
50,277 |
|
|
Cost of revenue
|
|
|
9,532 |
|
|
|
6,239 |
|
|
Selling, general and administrative
|
|
|
139,119 |
|
|
|
152,769 |
|
|
Research and development
|
|
|
39,971 |
|
|
|
34,596 |
|
|
Other income
|
|
|
(39,503 |
) |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(191,363 |
) |
|
$ |
(143,327 |
) |
REVENUE
Revenue was approximately $37,000 and $50,000 during the three months ended April 30, 2015 and 2014, respectively. The decrease in revenue of approximately $13,000 resulted primarily from a reduction of sales of our ID2 Meth Scanners of $12,000 and a reduction in maintenance fees of $5,000, partially offset by a $3,000 increase in revenues from the sale of customer supplies.
COST OF REVENUE
Cost of revenue was approximately $10,000 and $6,000 during the three months ended April 30, 2015 and 2014, respectively, a decrease of approximately $4,000. The gross margin percentage decreased from approximately 88% to 74%.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were approximately $139,000 during the three months ended April 30, 2015, compared with $153,000 during the three months ended April 30, 2014. The decrease of approximately $14,000 resulted primarily from a decrease in employee compensation of $24,000, consulting and professional expenses of $12,000, general expenses of $6,000, partially offset by an increase marketing and travel of $14,000 and equipment rent expense of $11,000.
RESEARCH AND DEVELOPMENT
Research and development (“R&D”) costs were approximately $40,000 during the three months ended April 30, 2015, compared with $35,000 during the three months ended April 30, 2014, an increase of approximately $5,000, which is primarily attributable to an increase in R&D compensation of $16,000 partially offset by a $12,000 decrease in R&D material.
OTHER INCOME (EXPENSE)
Other expense (net) for the three months ended April 30, 2015 was approximately $40,000 compared to $-0- for the three months ended April 30, 2014 a change of approximately $40,000 which is primarily due to approximately $47,000 amortization/interest expense on the Lines of Credit in 2015, offset by approximately $8,000 proceeds from the sale of obsolete equipment in 2015.
NET LOSS
The net loss was approximately $191,000 during the three months ended April 30, 2015, compared with a net loss of $143,000 during the three months ended April 30, 2014, due to the foregoing factors.
RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2015 AND 2014:
| |
|
2015
|
|
|
2014
|
|
| |
|
|
|
|
|
|
|
Revenue
|
|
$ |
58,884 |
|
|
$ |
126,284 |
|
|
Cost of revenue
|
|
|
16,252 |
|
|
|
25,904 |
|
|
Selling, general and administrative
|
|
|
284,114 |
|
|
|
274,796 |
|
|
Research and development
|
|
|
84,686 |
|
|
|
91,151 |
|
|
Other income (expense)
|
|
|
(77,275 |
) |
|
|
6,805 |
|
| |
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(403,443 |
) |
|
$ |
(258,762 |
) |
REVENUE
Revenue was approximately $59,000 and $126,000 during the six months ended April 30, 2015 and 2014, respectively. The decrease in revenue of approximately $67,000 resulted primarily from a recognition in the first six months of fiscal 2014 of $34,000 from a client opting out of their supply contract in 2014 and electing to pay the contracted exit fee as well as reduced pay-per-use revenues and a reduction in ValiMed maintenance revenues of $15,000 and a reduction of sales of our ID2 Meth Scanners of $12,000 partially offset by a $2,000 increase in revenues from the sale of customer supplies.
COST OF REVENUE
Cost of revenue was approximately $16,000 and $26,000 during the six months ended April 30, 2015 and 2014, respectively, a decrease of approximately $10,000. The gross margin percentage decreased from approximately 79% to 72%.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were approximately $284,000 during the six months ended April 30, 2015, compared with $275,000 during the six months ended April 30, 2014. The increase of approximately $9,000 resulted primarily from an increase marketing and travel of $28,000 and equipment leasing of $11,000, partially offset by decreases in consulting and professional expenses of $15,000, general expenses of $14,000 and compensation of $5,000.
RESEARCH AND DEVELOPMENT
Research and development (“R&D”) costs were approximately $85,000 during the six months ended April 30, 2015, compared with $91,000 during the six months ended April 30, 2014, a decrease of approximately $6,000, which is primarily attributable to decreases in R&D material of $14,000 and R&D Travel of $6,000 partially offset by an increase in R&D compensation of $14,000.
OTHER INCOME (EXPENSE)
Other expense (net) for the six months ended April 30, 2015 was approximately $77,000 compared to other income (net) of $7,000 for the six months ended April 30, 2014 a change of approximately $84,000 which is primarily due to approximately $87,000 amortization/interest expense on the Lines of Credit in 2015, partially offset by approximately $10,000 in gains from the sale of obsolete equipment in 2015.
NET LOSS
The net loss was approximately $403,000 during the six months ended April 30, 2015, compared with a net loss of $259,000 during the six months ended April 30, 2014, due to the foregoing factors.
LIQUIDITY AND CAPITAL RESOURCES
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have experienced net losses since our inception and, as of April 30, 2015, had an accumulated deficit of approximately $36 million. We do not expect to have positive cash flow from operations until we have deployed a sufficient number of our ValiMed G4 drug validation systems. As of April 30, 2015, we had approximately $49,000 in cash.
We had a net decrease in cash of approximately $42,000 during the six months ended April 30, 2015 primarily from the use of cash in operating activities offset by cash provided by our financing activities and cash provided from our investing activities. This amount is comprised primarily of our net loss of approximately $403,000 and a decrease in our current liabilities of $33,000, gain recognized on disposal of equipment of $10,000, offset by amortization/interest expense on the Lines of Credit of $87,000, depreciation and amortization of $8,000 offset by $305,000 from the proceeds received under the line of credit and $14,000 proceeds provided by the sale of obsolete equipment.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures.
The Company’s Chairman and Chief Executive Officer and its Vice President of Finance and Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of April 30, 2015, have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, as amended, is recorded, processed and summarized and reported on a timely basis and is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.
There were no changes in the Company’s internal control over financial reporting during the Company’s fiscal quarter ended April 30, 2015 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
|
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
| |
|
|
| |
Not Applicable
|
| |
|
|
|
ITEM 5. Other Information
|
| |
|
|
| |
(a) Not Applicable
|
| |
|
| |
(b) The Company has not adopted formal procedures for the nomination by stockholders of candidates to serve on its Board of Directors.
|
| |
|
|
|
ITEM 6. Exhibits
|
| |
|
|
|
10.1
|
Form of Consulting Agreement.
|
| |
|
|
|
31.1
|
Certification of Chief Executive Officer.
|
| |
|
|
|
31.2
|
Certification of Chief Financial Officer.
|
| |
|
|
|
32.1
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
|
| |
|
|
|
32.2
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
|
| |
|
|
|
101.INS
|
XBRL Instance Document
|
| |
|
|
|
101.SCH
|
XBRL Schema Document
|
| |
|
|
|
101.CAL
|
XBRL Calculation Linkbase Document
|
| |
|
|
|
101.DEF
|
XBRL Definition Linkbase Document
|
| |
|
|
|
101.LAB
|
XBRL Label Linkbase Document
|
| |
|
|
|
101.PRE
|
XBRL Presentation Linkbase Document
|
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 June 12, 2015.
CDEX INC.
|
By:
|
/s/ Jeffrey K. Brumfield
|
| |
Jeffrey K. Brumfield
|
| |
Chief Executive Officer
|
| |
|
| |
|
|
By:
|
/s/ Stephen A. McCommon
|
| |
Stephen A. McCommon
|
| |
Chief Financial Officer and
|
| |
Vice President of Finance
|
16
CONSULTING ADVISORY SERVICES AGREEMENT
THIS CONSULTING ADVISORY SERVICES AGREEMENT (this “Agreement”) is entered into and is effective as of the ____ day of May 2015, by and between Osprey Capital Advisors, LLC, a Florida limited liability company having its principal address at 2158 Summit Way, Palm Harbor FL 34684 (the “Consultant”) and CDEX Inc., a Nevada corporation with principal offices located at 4555 South Palo Verde Road, Suite 123, Tucson, AZ 85714 (the “Company”). The Consultant and the Company are sometimes individually referred to herein as a “Party,” and collectively as the “Parties.”
WHEREAS, the Company desires to engage the Consultant to provide the Company with advisory and consulting services pertaining to financial and investor relations in accordance with the terms and conditions set forth herein; and
WHEREAS, the Consultant, which is regularly engaged and experienced in providing such types of services to public companies such as the Company, desires to be engaged by and provide such services to the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual terms and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. Purpose. The Company hereby engages the Consultant on a non-exclusive basis for the Term, as defined under Section 4 below, to render advisory and consulting services to the Company relating to financial and investor relations upon the terms and conditions set forth herein.
2. Description of Advisory and Consulting Advisory Services.
2.1 The Consultant shall, generally, on a non-exclusive basis, as an advisor and consultant, provide the Company with the following advisory and consulting services (the “Services”):
2.1.1 Assist the Company in marketing and improving its corporate presence to better enable the Company to raise capital to fund its operations through private placements, public offerings or otherwise, including establishing relationships with individuals, banks, funds and other investors to evaluate a possible investment in the Company and to provide guidance regarding funding structure and terms;
2.1.2 Work with, and report directly to, the Company’s Chief Executive Officer to provide guidance on establishing a market. distribution of products, licensing, employment, board development and cost savings and to provide reports, projections or assessments to enhance and strengthen the Company’s market presence, provided such reports, projections or assessments are expressly requested by the Company in writing to the Consultant during the Term of this Agreement;
2.1.3 Review the Company’s business plan and corporate strategy, assist the Company in and provide advice relating thereto;
2.1.4 Meet (in person or telephonically) with the Company’s Chief Executive Officer, weekly for the first three weeks of this Agreement and thereafter as needed, and any other persons deemed appropriate by the Consultant or the Company, to review the Company’s long-term and short- term financing and growth objectives;
2.1.5 Provide investor relations and public relations services, including advice on preparation of press releases pertaining to major corporate events and arranging for publication thereof; and
2.1.6 Advise the Company regarding its business and financial strategy and efforts taken by the Company in developing investor interest in the Company.
2.2 The Parties agree that the Consultant shall have the right, but not the obligation, to utilize any one or more other persons and/or entities to assist the Consultant in performing the Services described in this Section 2, as the Consultant deems appropriate, provided that the Parties hereto agree that the Consultant shall bear and assume all costs and responsibilities in connection with it utilizing any one or more of such other persons and/or entities to assist the Consultant in performing the Services. In connection therewith, the Consultant shall take reasonable efforts to ensure that any person and/or entity utilized by the Consultant to undertake any of the Services shall maintain any and all information and documents concerning the Company provided by the Company and/ or the Consultant to such person or entity as confidential and not utilize the information for any purpose other than as listed in Sections 1 and 2 of this Agreement during or after the Term of this Agreement, or its earlier expiration, other than to assist the Consultant in performing its obligations pursuant hereto.
3. Compensation. In consideration for the Services described under Section 2 of this Agreement, the Company hereby agrees to pay to the Consultant or its designee(s), and the Consultant hereby agrees to accept from the Company, Twelve Million (12,000,000) shares of restricted Class A common stock, of which Seven Million Five hundred thousand (7,500,000) shares shall be due and payable upon execution of this Agreement. The remainder of the shares shall be issuable from time to time at the request of the Consultant, each issuance in an amount not to exceed (i) 9.99% of the total issued and outstanding shares of the Company’s common stock less (ii) the number of shares then beneficially owned by the Consultant or its affiliates, such that at no time shall the Consultant or any of its affiliates, individually or as a group, own in excess of 9.9% of the issued and outstanding shares of the Company’s Class A common stock or otherwise be deemed an affiliate of the Company. The payment to the Consultant under this Section 3 shall deemed earned in full within Seven (7) calendar days of the execution of this Agreement. In addition to the foregoing, the Company shall reimburse the Consultant for any and all actual, reasonable, out-of- pocket expenses for travel in connection with the Consulting Services performed under this Agreement, provided that the Company must approve all expenditures exceeding Two Hundred Dollars ($200.00). The Consultant shall submit accurate and complete supporting documents for reimbursement of such expenses and shall follow any policies, requirements or reasonably instructions directed by the Company in connection with such expenses. The Consultant shall provide the Company with IRS Form W-9 and any other information the Company may reasonably request in order to comply with IRS and other regulatory reporting obligations.
4. Term. The term (the “Term”) of this Agreement shall be for a period of Two hundred forty (240) calendar days from the date first set forth above, subject to its earlier termination for any reason or no reason by either Party upon Thirty (30) calendar days’ prior written notice (except as provided in the immediate following sentence). Notwithstanding the foregoing, the Consultant may not terminate this Agreement if the Consultant has been timely compensated by the Company pursuant to Section 3 above. Any termination of this Agreement for any reason, or no reason, shall not have any effect on the obligation of the Company to reimburse the Consultant for any costs and expenses, if any, previously approved, by the Company in writing, or the obligation of the Consultant to preserve and hold and to cause its employees and agents to hold all information, in whatever form, provided by the Company not otherwise previously made public by the Company in trust and confidence for the benefit of the Company, and to not use any of such information for any purpose whatsoever after the termination of this Agreement.
5. Representations of the Consultant. The Consultant represents and warrants to the Company as of the date hereof as follows:
5.1 Authority. The Consultant is a limited liability company duly organized, validly existing and in good standing under the laws of the state in which it is organized. The Consultant has all requisite power and authority to execute, deliver and perform all of its obligations under this Agreement. The Consultant’s execution, delivery and performance of this Agreement have been duly and validly authorized by all necessary action on the part of the Consultant, and no third party consent or authorization is needed on the part of the Consultant to execute, deliver and perform all of its obligations hereunder. The Agreement constitutes the legal, valid and binding obligation of the Consultant enforceable in accordance with its terms against the Consultant except as may be limited by laws affecting the enforcement of creditors’ rights or equitable principles generally.
5.2 No Restrictions against Performance. Neither the execution, delivery or performance of this Agreement by the Consultant will, with or without the giving of notice or the passage of time, or both, violate any provisions of, conflict with, result in a breach of, constitute a default under, or result in the creation or imposition of any lien or condition under: (i) any and all organizational documents of the Consultant, including its articles of organization, as same may be amended, operating agreement, as same may be amended; (ii) any federal, state or local law, statue, ordinance, rule or regulation which may be applicable to the Consultant; (iii) any contract, instrument or agreement by which the Consultant is bound; (iv) any order, judgment, writ, injunction, decree, license, permit or other authorization of any federal, state or local court, governmental agency or quasi-governmental agency by which the Consultant is or may be bound or subject.
5.3 Release of Information about the Company; Related Matters. The Consultant shall not release any financial or other information or data about the Company without the express prior consent and approval of the Company, which consent and approval shall only be evidenced by the signature of the Company’s President or Chief Executive Officer on such release. Notwithstanding the foregoing, the Consultant may disclose information pursuant to any judicial order, requirement of a governmental agency or by operation of law. The Consultant shall not conduct any meetings with any prospective financial investors without the express prior consent and approval of the Company of the proposed meeting and the format or agenda of such meeting, in which case, if approved, the Company may elect to have a representative attend such meeting.
5.4 Regulatory Matters. Neither the Consultant nor any of its managers, officers, directors, members or affiliates nor any person or entity with whom the Consultant may seek assistance in performing its duties hereunder is subject to any action, proceeding, investigation or inquiry by any federal and/ or state regulatory authority or quasi- regulatory authority nor is any such action, proceeding, investigation or inquiry pending or, to the best knowledge of the Consultant, threatened against the Consultant and/ or any of its managers, officers, directors, members, or affiliates nor any person or entity with whom the Consultant may seek assistance in performing its duties hereunder.
6. Representations of the Company. The Company represents and warrants to the Consultant as of the date hereof as follows:
6.1 Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated. The Company has all requisite power and authority to execute, deliver and perform all of its obligations under this Agreement. The Company’s execution, delivery and performance of this Agreement have been duly and validly-authorized by all necessary action on the part of the Company, and no third party consent or authorization is needed on the part of the Company to execute, deliver and perform all of its obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms against the Company except as may be limited by laws affecting the enforcement of creditors’ rights or equitable principles generally.
6.2 No Restrictions against Performance. Neither the execution, delivery or performance of this Agreement by the Company will, with or without the giving of notice or the passage of time, or both, violate any provisions of, conflict with, result in a breach of, constitute a default under, or result in the creation or imposition of any lien or condition under: (i) any and all organizational documents of the Company, including its articles of incorporation, as same may be amended, or bylaws, as same may be amended; (ii) any federal, state or local law, statue, ordinance, rule or regulation which may be applicable to the Company; (iii) any contract, instrument or agreement by which the Company is bound; (iv) any order, judgment, writ, injunction, decree, license, permit or other authorization of any federal, state or local court, governmental agency or quasi-governmental agency by which the Company is or may be bound or subject.
6.3 Representation. The Company acknowledges that, to the best of its knowledge, the Company is not the subject of any investigation, claim, decree or judgment involving any violation of the rules promulgated by the Securities and Exchange Commission or securities laws. The Company further acknowledges that, to the best of its knowledge, the Consultant is not a Securities Broker Dealer or a Registered Investment Advisor. The Company acknowledges that, to the best of its knowledge, it has not violated any rule or provision of any regulatory agency having jurisdiction over the Company.
7. Obligations of Company. The Company shall provide the Consultant with a copy of all available Company documents, internal and confidential business plans, corporate strategy memorandums, and all related reports, schedules, exhibits, and all related documentation reasonably needed by the Consultant for the tasks assigned to the Consultant and described in Section 2 of this Agreement. The Company agrees that all information and documents that it provides the Consultant regarding the Company (the “Company Documents”) at the inception of this Agreement and at all times thereafter, will be accurate and complete and that the Company will, at all times during the Term of this Agreement, assume and retain an obligation to promptly and without delay update and correct all information and documents provided to the Consultant and provide the Consultant with copies of all press releases, public statements, filings, and all other disclosures that it makes so as to ensure that the Consultant does not use or employ any information regarding the Company that is inaccurate or incomplete in any material respect. The obligations imposed on the Company under this Section 7 are to be broadly construed.
8. Company Documentation/Information. The Company agrees that it shall, at all times during the Term of this Agreement, assume full responsibility to provide the Consultant with accurate and complete Company Documents and information regarding the Company and its affairs, prospects and plans, to the extent necessary for the Consultant to provide its Services under Section 2 above.
9. Matter of Confidentiality and Proprietary Information. It is understood and agreed that, in the course of providing the Services hereunder and through the activities contemplated by this Agreement, the Consultant on behalf of itself and on behalf of all of the Consultant’s employees and agents, agrees to keep and hold, and to cause its employees and agents to keep and to hold any and all information, in whatever form, provided by the Company not otherwise previously made public by the Company in trust and confidence for the benefit of the Company, and to not use any such information for any purpose during or after the Term of this Agreement, or its earlier expiration, other than in furtherance of the Consultant performing its duties hereunder. Upon request of the Company, the Consultant shall promptly return, and shall cause its employees and agents to promptly return to the Company all printed information provided by the Company in whatever form, including e-mail correspondence, and in addition, notes in whatever form made by the Consultant, its employees, and agents concerning the Company, and not retain any copies thereof.
10. Indemnification. Each of the Parties hereto agrees to indemnify and hold harmless the other Party and its officers, directors, employees, agents, affiliates and equity owners from and against any and all claims, demands, actions, suits, proceedings, losses, damages (including reasonable attorneys’ fees and costs) arising out of or relating to any breach by either Party of any of the terms and conditions of this Agreement or of any breach of their respective representations and warranties, and in the case of the Consultant, as a result of its gross negligence or intentional misconduct in disseminating information regarding the Company or otherwise in its provision of services to the Company under this Agreement.
11.1 The Consultant agrees and acknowledges that in performing the Services pursuant to this Agreement, the Consultant shall be acting as an independent contractor with respect to the Company, and not as an employee, agent, partner or joint venturer of the Company. The Consultant, in its capacity as a hired consultant, shall be free to accept other assignments and undertake other activities on its own account or for the accounts of third parties, provided that such assignments or activities: (i) do not violate this Agreement or any other agreement between the Consultant and the Company; and (ii) do not compete directly or otherwise interfere directly with the business of the Company. The Consultant and the Company hereby acknowledge and agree that nothing in this Agreement constitutes a hiring or employment agreement. In no event shall Consultant have any power or authority to bind the Company in any manner. No form of joint venture, partnership, or similar relationship between the Parties is intended or hereby created as a result of the entry into or performance by the Parties of this Agreement.
11.2 The Consultant shall bear sole responsibility for payment on behalf of itself of any federal, state or local income or employment tax or withholding, unemployment insurance, workers’ compensation insurance or liability insurance. The Consultant agrees to indemnify and hold the Company harmless with respect to all such payments claimed or assessed by any taxing authority, including reasonable attorneys’ fees. The Consultant shall not be eligible to participate in any employee benefit plan or program of the Company, and the Consultant understands and agrees that the Consultant is not eligible for, and the Consultant hereby waives any claim to, wages, compensation incentives, health coverage or any other benefits provided to employees of the Company.
11.3 If at any time the Consultant’s status as an independent contractor is challenged, the Consultant agrees to give the Company immediate notice thereof and to cooperate fully with the Company in defending such challenge, if so requested.
12. Miscellaneous.
12.1 Relationship of Parties. This Agreement does not establish any partnership, joint venture, or other business entity or association between the
Parties and neither Party is intended to have any interest in the business or property of the other (other than in the case of the Consultant, becoming a shareholder in the Company).
12.2 Assignment. This Agreement and the rights and obligations of the Parties hereunder may not be assigned
by either Party in whole or in part without the express prior written consent of the other Party hereto, which consent may be withheld without any liability to such Party, its officers, directors, employees, agents, affiliates and equity owners.
12.3 Successors and Assigns. The provisions of this Agreement shall be deemed to obligate, extend to and inure to the benefit of the successors of each of the Parties to this Agreement, if any, and permitted assigns, if any.
12.4 Survival of Representations, Warranties. Notwithstanding the termination of this Agreement, the representations and warranties of each of the Parties with respect to confidentiality matters under Section 9 and the indemnity provisions under Section 10 hereof shall survive the termination of this Agreement.
12.5 Waiver of Breach. The waiver by either Party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by the other Party.
12.6 Notices. Any notice required or desired to be given under this Agreement or pursuant hereto shall be in writing and shall be deemed given and shall be effective upon actual receipt if delivered by hand, or sent by certified or registered U.S. mail, postage prepaid, and return receipt requested, or by prepaid overnight express service, or via tele copier.
12.7 Entire Agreement; Execution in Counterparts. This Agreement contains the entire agreement of the Parties hereto as to the subject matter hereof and may be modified or changed only by an agreement in writing signed by the Party against whom enforcement of any modification or change is sought. If any provision of this Agreement is declared void, such provision shall be deemed severed by this Agreement, which shall otherwise remain in full force and effect. This Agreement may be executed in counterparts.
12.8 Title and Headings. Titles and headings to Sections and sub-paragraphs are for convenience of reference only and are not intended to effect the meaning or interpretation of this Agreement.
12.9 Expenses. Each of the Parties hereto agrees to bear its own costs, attorney’s fees and related expenses associated with the negotiation of this Agreement.
12.10 Governing Law; Jurisdiction and Venue. This Agreement shall be governed by and construed solely in accordance with the laws of the State of New York, without giving effect to its conflict or choice of law principles. Jurisdiction and venue for any action and/or proceeding relating to or arising out of this Agreement shall be solely in the federal and/or state courts located in New York County, New York.
12.11 Non-Circumvent. During and for Two (2) years after the Term of this Agreement, the Company shall not circumvent or attempt to circumvent the Consultant and enter into any agreement or arrangement with any investor or source of capital or media contact introduced to the Company by the Consultant.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the Parties have executed this Consulting Advisory Services Agreement as of the date first set forth above.
THE COMPANY: CDEX Inc.
By: Name:Jeffrey K. Brumfield
Title: CEO
__________________ ________________________________ ___________________________ ________________
________________________________ ___________________________ ________________
___________________________ ________________
Address: ________________________________ ________________________________ ________________________________
THE CONSULTANT:
OSPREY CAPITAL ADVISORS, LLC
By: _____________________________
Name:
Title:
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14
I, Jeffery K. Brumfield, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CDEX Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Jeffery K. Brumfield
Jeffery K. Brumfield
Chief Executive Officer
Date: June 12, 2015
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14
I, Stephen A. McCommon, certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of CDEX Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ Stephen A. McCommon |
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| Stephen A. McCommon |
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| Chief Financial Officer |
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| Date: June 12, 2015 |
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EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing by CDEX Inc. (the “Company”) of its Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2015 (the “Report”) I, Jeffery K. Brumfield, Chief Executive Officer of the Company certify pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
This certificate is being made for the exclusive purpose of compliance by the Chief Executive Officer of CDEX, Inc. with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be used for any other purposes. A signed original of this written statement required by Section 906 has been provided to CDEX, Inc. and will be retained by CDEX, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
| /s/ Jeffery K. Brumfield |
| Jeffery K. Brumfield |
| Chief Executive Officer |
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| Date: June 12, 2015 |
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing by CDEX Inc. (the “Company”) of its Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2015 (the “Report”) I, Stephen A. McCommon, Chief Financial Officer of the Company certify pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
This certificate is being made for the exclusive purpose of compliance by the Chief Financial Officer of CDEX, Inc. with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be used for any other purposes. A signed original of this written statement required by Section 906 has been provided to CDEX, Inc. and will be retained by CDEX, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
| /s/ Stephen A. McCommon |
| Stephen A. McCommon |
| Chief Financial Officer |
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| Date: June 12, 2015 |