Exobox Technologies (EXBX) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2008

(Exact name of registrant as specified in its charter)

Nevada	88-0456274
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)
2121 Sage Road, Suite 200, Houston, Texas	77056
(Address of principal executive offices)	(Zip code)

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

Indicate by check mark 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Outstanding Common stock, par value $0.001 per share as of December 11, 2008:  401,878,548 shares

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EXOBOX TECHNOLOGIES CORP.

FORM 10-Q FOR THE QUARTER ENDED October 31, 2008

INDEX

	PAGE
PART I.FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of October 31, 2008and July 31, 2008(Unaudited).	3
Statements of Operations for the three months ended October 31, 2008and 2007 and for the period from Inception to October 31, 2008(Unaudited).	4
Statements of Cash Flows for the three months ended October 31, 2008and 2007 and for the period from Inception to October 31, 2008(Unaudited).	5
Notes to the Financial Statements (Unaudited)	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3. Controls and Procedures	14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	15
Item 3. Defaults Upon Senior Securities	15
Item 6. Exhibits	15
Signatures	16

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EXOBOX TECHNOLOGIES CORP.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

(Unaudited)

ASSETS
	October 31, 2008			July 31, 2008
Current Assets:
Cash	$	20,788		$	767,338
Other Current Assets		26,241			61,972
Prepaid Insurance		13,784			22,628
Total Current Assets		60,813			851,938
Property and equipment, net		389,875			213,223
Other Assets:
Patents, net		52,608			53,590
Intangibles, net		6,617			7,951
TOTAL ASSETS	$	509,913		$	1,126,702
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
Current Liabilities:
Accounts Payable	$	152,883		$	53,451
Accrued Liabilities		420,057			429,217
Total Current Liabilities		572,940			482,668
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock:
Series A convertible preferred stock, $0.001 par, 2,500,000 shares authorized, 6,378 and 6,378 shares issued and outstanding as of October 31, 2008 and July 31, 2008, respectively		6			6
Series B convertible preferred stock, $0.001 par, 2,000,000 shares authorized, 17,568 and 17,658 shares issued and outstanding at October 31, 2008 and July 31, 2008, respectively		18			18
Common stock, $0.001 par value, 500,000,000 shares authorized, 399,579,712 and 398,435,250 shares issued and outstanding at October 31, 2008 and July 31, 2008, respectively		399,580			398,435
Additional paid-in capital		10,138,516			9,952,921
Deficit accumulated during development stage		(10,601,147	)		(9,707,346	)
Total stockholders' equity (deficit)		(63,027	)		644,034
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	509,913		$	1,126,702

See accompanying notes to the financial statements

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EXOBOX TECHNOLOGIES CORP.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

(Unaudited)

	Quarter Ended October 31,			Quarter Ended October 31,			October 21, 2002 (Inception) To Oct 31,
	2008			2007			2008
Revenues	$	-		$	-		$	-
General & administrative		158,746			38,206			1,042,534
Depreciation and amortization		20,785			2,168			59,108
Professional fees		403,497			726,597			3,819,720
Payroll expenses		311,470			288,000			4,855,461
Software development expense		-			-			521,394
Research and development		-			-			288,259
Total Operating Expenses		894,498			1,054,971			10,586,476
Loss from Operations		894,498			1,054,971			10,586,476
Other Income (Expenses)
(Loss) Gain on derivatives		-			2,025,042			100,000
Gain on extinguishment of note		-			(395,000	)		7,137
Interest income		1,323			-			3,412
Interest expense		(625	)		(3,077	)		(125,220	)
Total Other Income (Expenses)		698			1,626,965			(14,671	)
Loss Before Income Taxes		893,800			571,994			10,601,147
Provision for Income Taxes		-			-			-
Net Loss	$	(893,800	)	$	(571,994	)	$	((10,601,147	)
Basic and diluted
Net loss per common share-basic and diluted	$	(0.00	)	$	(0.00	)		n/a
Weighted average shares outstanding-basic and diluted		398,844,9844			363,312,984			n/a

See accompanying notes to the financial statements

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EXOBOX TECHNOLOGIES CORP.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(Unaudited)

	Quarter Ended October 31,			Quarter Ended October 31,			October 21, 2002 (Inception) to October 31,
	2008			2007			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(893,800	)	$	571,994		$	(10,601,147	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		186,740			-			2,308,990
Warrant issued for consulting services		-			434,165			446,660
Stock issued for services		-			213,948			1,547,318
Depreciation and amortization		20,785			2,168			59,108
(Gain) Loss on derivative		-			(1,630,042	)		5,000
(Gain) Loss on debt extinguishment		-			-			(7,137	)
Changes in operating assets and  liabilities
Prepaid and other current assets		44,577			(3,911)			(40,021	)
Accounts payable		99,429			27,841			152,881
Accrued expenses		(9,160)			290,137			1,852,574
Accounts payables to stockholders		-			715			0
NET CASH USED IN OPERATING ACTIVITIES		(551,429	)		(92,985	)		(4,275,774	)
CASH FLOW FROM INVESTING ACTIVITIES
Investment in patents		-			-			(67,233	)
Investment in intangible assets		-			-			(16,000	)
Investment in property and equipment		(195,121	)		-			(424,977	)
NET CASH USED IN INVESTING ACTIVITIES		(195,121	)		-			(508,210	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock		-			-			4,774,000
Advances from stockholders		-			80,500			400,702
Proceeds from warrants exercised		-			13,500			31,500
Repayment of advances from stockholders		-			(9,000	)		(401,430	)
Payments to third party		-			-			(100,000	)
Convertible note proceeds		-			-			100,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		0			85,000			4,804,772
NET CHANGE IN CASH AND CASH EQUIVALENTS		(746,550	)		(7,985	)		20,788
Cash and cash equivalents at beginning of period		767,338			8,363			-
Cash and cash equivalents at end of period	$	20,788		$	378		$	20,788
SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	625		$	3,077
Cash paid for income taxes		-			-
NON-CASH TRANSACTIONS
Conversion of Preferred shares to Common Shares	$	-			-

See accompanying notes to the financial statements

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EXOBOX TECHNOLOGIES CORP.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES

The accompanying unaudited interim financial statements of Exobox Technologies Corporation, a Nevada corporation, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in Exobox’s latest Annual Report filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year, July 31, 2008, as reported in Form 10-KSB, have been omitted.

NOTE 2 - GOING CONCERN

From Inception to October 31, 2008, Exobox has accumulated losses of $10,601,147. The ability of Exobox to emerge from the development stage with respect to any planned principal business activity is dependent upon its success in raising additional equity financing and/or attaining profitable operations. Management is seeking additional capital because it feels the $2.9 million that it  raised isn’t sufficient to continue  the complete coding of its expanded software products and introduce the resulting products to market. There is no guarantee that Exobox will be able to complete any of the above objectives. These factors raise substantial doubt regarding Exobox's ability to continue as a going concern.

NOTE 3 - PROPERTY AND EQUIPMENT

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

Description	Life	Amount
Furniture and fixtures	5 years	$	169,039
Leasehold improvements	5 years		154,803
Computers	3 years		58,886
Telephone system	5 years		37,960
Copier	5 years		4,288
			424,976
Less: accumulated depreciation			(35,101	)
		$	389,875

Depreciation expense totaled $ 18,469 and $ 2,168 for the quarters ending October 31 2008 and October 31, 2007, respectively.

NOTE 4 – PATENTS

Exobox has two technological inventions with patents pending in United States and throughout the world.   The rights and interest include, among other things, (i) the patent applications and any changes or amendments thereto, (ii) the invention, (iii) the technical information, trade secrets, identities of customers, studies, plans, drawings, blueprints and specifications, production methods, (iv) the embodiment of any claim described and claimed in any valid claim of the patent application, (v) right to file foreign patent applications, and (vi) any all patents resulting from current patent applications.

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Patents are mainly comprised of legal services paid to a shareholder and patent application fees.  Exobox began amortizing these costs since the patents have been granted.  Amortization totaled $983 and $0 during the quarters ended October 31, 2008 and October 31, 2007, respectively.

NOTE 5 – STOCKHOLDERS’ EQUITY

Stock Option, Stock Warrant and Stock Award Plan

On September 15, 2005, Exobox adopted a stock option, stock warrant and stock award plan for officers, directors, consultants and key employees of Exobox. Exobox reserved 1,630,125 shares of common stock, warrants, options, preferred stock or any combination thereof for the plan.

On June 18, 2007 Exobox filed with the SEC an S-8 registration statement registering 20,000,000 shares reserved for officers, directors, consultants and key employees of Exobox.

WARRANTS

At October 31, 2008, Exobox had outstanding and exercisable warrants to purchase an aggregate of 11,692,500 shares of common stock. The weighted average remaining life is 2.73 years and the weighted average price per share is $0.61 per share.

The status of the warrants as of October 31, 2008, is as follows:

Warrants Outstanding and Exercisable	Warrants			Weighted Average Exercise Price
OUTSTANDING, July 31, 2007		4,460,000		$	0.20
Granted		7,300,000			0.86
Expired		-			-
Exercised		(67,500	)		0.20
OUTSTANDING, July 31, 2008		11,692,500		$	0.61
Granted		-			-
Expired		-			-
Exercised		-			-
OUTSTANDING, October 31, 2008		11,692,500		$	0.61

Following is the details of warrants outstanding as of October 31, 2008:

Number of Common Stock Equivalents	Expiration Date	Remaining Contracted Life (Years)	Exercise Price
4,342,500	10/31/2010	2.00	$	0.20
1,500,000	9/24/2012	3.95	$	0.30
50,000	7/31/2011	2.75	$	0.25
5,800,000	12/31/2011	2.97	$	1.00

For the quarter ended October 31, 2008, no warrants were exercised.

OPTIONS

On October 14, 2008, Exobox granted an option to two senior developers of Exobox for 100,000 shares each with an exercise price of $.25 a share.  25,000 shares vested immediately for each individual and an additional 25,000 shares per individual shall vest every year until October 14, 2011.

Black-Scholes was applied to value the options totaling $24,759 for the 200,000 shares.  The simplified method was applied in calculating the term.  Exobox recognized $6,190 in the current quarter for the 50,000 shares that vested as of October 31, 2008.  The remaining 150,000 unvested shares have an unrecognized value of $18,569.

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The following assumptions were applied to value the options:

Expected volatility	195.06% - 242.68%
Term (years)	1.5 – 4.5
Risk-free interest rate	1.82% - 3.01%
Expected dividend yield	0%

The status of the options as of October 31, 2008, is as follows:

	Options		Weighted Average Exercise Price
OUTSTANDING, July 31, 2008		-	$	0.00
Granted		200,000	$	0.25
Expired		-		-
Exercised		-		-
OUTSTANDING, October 31, 2008		200,000	$	0.25

Following is the details of options outstanding as of October 31, 2008:

	Number of Common Stock Equivalents	Expiration Date	Remaining Contracted Life (Years)	Exercise Price
	50,000	10/14/2011	3	0.25
	50,000	10/14/2012	4	0.25
	50,000	10/14/2013	5	0.25
	50,000	10/14/2014	6	0.25
Balance	200,000		4.50

The following is a summary of non-vested shares:

	Options
Nonvested shares at July 31, 2008		-
Granted		200,000
Vested		(50,000	)
Expired		-
Exercised		-
Nonvested shares at October 31, 2008		150,000

NOTE 6 – COMMITMENTS

In August 2008, Exobox established a 401K retirement plan, of which, Exobox is required to contribute matching contributions of an amount equal to the participant’s Elective Deferral that does not exceed 3% of the participant’s compensation, plus 50% of the participant’s Elective Deferral that exceeds 3% of the participant’s compensation but does not exceed 5% of the participant’s compensation for the Plan Year. Exobox is current on their contributions as of October 31, 2008.   During the quarter ended October 31, 2008, the Company contributed $9,240 in matching contributions.

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NOTE 7 – SUBSEQUENT EVENTS

During November, a shareholder converted 5,000 shares of Series A Preferred Stock and 17,568 shares of Series B Preferred into 460,295 and 1,617,291 shares of common stock respectively.

During November, the Company issued 221,250 shares of its Common Stock to its consultants and employees pursuant to the Company’s consulting and employment agreements.

PART I

ITEM 2

MANAGEMENT'S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 23E of the Securities Act of 1934, as amended. These statements relate to the Company's expectations regarding future events or future financial performance. Any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "intend", "believe," "estimate," "predict," "potential" or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other entity, assumes responsibility for the accuracy and completeness of the forward-looking statements. The Company is under no obligation to update any of the forward-looking statements after the filing of this Form 10-Q to conform such statements to actual results or to changes in the Company's expectations.

The following discussion should be read in conjunction with the Company's condensed consolidated financial statements, related notes and the other financial information appearing elsewhere in this Form 10-Q. Readers are also urged to carefully review and consider the various disclosures made by the Company, which attempt to advise interested parties of the factors which affect the Company's business, including without limitation, the disclosures made under the caption "Certain Factors That May Affect Future Performance."

Certain Factors that may Affect Future Performance

We have a limited operating history with significant losses and expect losses to continue for the foreseeable future.

We have incurred annual operating losses since our inception. As a result, at October 31, 2008, we had an accumulated deficit of $10,601,147. We had no gross revenues for the quarter ended October 31, 2008, and a loss from operations of $893,800.  As we pursue our business plan, we expect our operating expenses to increase significantly, especially in the areas of sales and marketing. As a result we expect continued losses in fiscal 2009 and thereafter.

We will not be able to continue our business operations unless we raise additional financing.

We are a development stage company and as such have generated no revenues or profits to date.  Our success will depend on the ability to attract external financing for our working capital needs and to develop our patent rights in connection with our software solutions.  As of the date hereof, we do not have sufficient funding to satisfy our working capital needs or to develop our products and, the failure to obtain sufficient funding, will preclude us from conducting meaningful business operations. We have historically financed our operations through best efforts private equity and debt financings. We do not have any commitments for equity or debt funding at this time, and additional funding may not be available to us on favorable terms, if at all.

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We may not be able to meet our current and future liabilities and remain in operation until we receive additional capital.

As of October 31, 2008, we have current assets of $60,813and current liabilities of $572,940, of which $419,502  is for an accrued liability.   Our current liquidity position only allows us to meet nominal working capital needs.  We will need $750,000 to meet our working capital needs through fiscal 2009.  Any failure to obtain such financing could force us to abandon or curtail our operations.

We will need to raise additional funds to fund product development and acquisitions.

Our cash does not afford us adequate liquidity to fund our product development.  In order to fund our full product development, including marketing and testing, we will need to raise at least $9,000,000.  We may also issue additional shares of common stock to finance future acquisitions. We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. There is no assurance that we can raise additional capital from external sources, the failure of which could cause us to sell assets or curtail operations.

Ours auditor has substantial doubts as to our ability to continue as a going concern.

Our auditor's report on our July 31, 2008 financial statements expresses an opinion that substantial doubt exists as to whether we can continue as an ongoing business.  Because we do not have sufficient capital, we may be required to suspend or cease the implementation of our business plans within 12 months. Substantial doubt exists as to whether we can continue as a going concern it may be more difficult for us to attract investors.  Our future is dependent upon our ability to obtain financing and upon future profitable operations from the sale of our products.

Additional capital may dilute current stockholders.

In order to provide capital for the operation of our business we may enter into additional financing arrangements. These arrangements may involve the issuance of new common stock, preferred stock that is convertible into common stock, debt securities that are convertible into common stock or warrants for the purchase of common stock. Any of these items could result in a material increase in the number of shares of common stock outstanding which would in turn result in a dilution of the ownership interest of existing common shareholders. In addition, these new securities could contain provisions, such as priorities on distributions and voting rights, which could affect the value of our existing common stock.

The market price of our common stock is very volatile and the value of your investment may be subject to sudden decreases.

The trading price for our common stock has been, and we expect it to continue to be, volatile. For example, the price of our stock has fluctuated between $1.15 per share and $0.03 per share since January 1, 2007. The price at which our common stock trades depends upon a number of factors, including our historical and anticipated operating results, and general market and economic conditions, which are beyond our control.  In addition, the stock market has, from time to time, experienced extreme price and volume fluctuations. These broad market fluctuations may lower the market price of our common stock. Moreover, during periods of stock market price volatility, share prices of many companies have often fluctuated in a manner not necessarily related to their operating performance. Accordingly, our common stock may be subject to greater price volatility than the stock market as a whole.

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We lack an operating history which you can use to evaluate us, making any investment in us risky.

We lack an operating history which investors can use to evaluate our previous earnings. This makes it harder for you as an investor to predict how we may do in the future. Therefore, an investment in us is risky because we have no business history and it is hard to predict what kind of return our stock will have in the future, if at all.

There can be no assurance that we will successfully commercialize any products or services.

There can be no assurance that we will successfully commercialize any products and services based on our technology or manage the related manufacturing, marketing, sales, licensing and customer support operations in a profitable manner. In particular, our prospects must be considered in light of the problems, delays, expenses and difficulties encountered by any company in the startup stage, many of which may be beyond our control. These problems, delays, expenses and difficulties include unanticipated problems relating to product development and formulation, testing, quality control, production, inventory management, sales and marketing and additional costs and competition, any of which could have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that our products and services can be successfully marketed or that it will ever achieve significant revenues or profitable operations.

There can be no assurance that we will ever be profitable.

To be profitable, we must successfully commercialize our technologies. We are in the early stages of development and will require significant further research, development and testing, and are subject to the risks of failure inherent in the development of products based on innovative or novel technologies.

Our industry changes rapidly due to evolving technology standards and our future success will depend on our ability to adapt to market change.

Our future success will depend on our ability to address the increasingly sophisticated needs of the market. We will have to keep pace with technological developments, evolving industry standards and changing customer requirements. We expect that we will have to respond quickly to rapid technological change, changing customer needs, frequent new product introductions and evolving industry standards that may render our contemplated products obsolete. We may not have sufficient resources to make the necessary investments, which could have a material adverse effect on our business.

We depend upon our intellectual property and our failure to protect existing intellectual property or secure and enforce such rights for new proprietary technology could adversely affect our future growth and success.

Our ability to successfully protect our proprietary technology is essential to our success. We have filed trademark and patent applications to protect intellectual property rights for technology that we have developed. Our future success also may depend upon our ability to obtain additional licenses for other intellectual properties. We may not be successful in acquiring additional intellectual property rights with significant commercial value on acceptable terms. Even if we are successful in acquiring such rights, it can provide no assurance that we will be successful in adapting or deploying them as to the timing or cost of such development efforts or as to the commercial success of the resulting products or services.

Our competitors may develop non-infringing products or technologies that adversely affect our future growth and revenues.

It is possible that our competitors will produce proprietary technologies similar to ours without infringing on our intellectual property rights. We also rely on unpatented proprietary technologies. It is possible that others will independently develop the same or similar technologies or otherwise obtain access to the unpatented technologies upon which we rely for future growth and revenues. Failure to meaningfully protect our trade secrets, know-how or other proprietary information could adversely affect our future growth and revenues.

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Our success is dependent upon our ability to protect our proprietary technologies.

Our success is substantially dependent upon our proprietary technologies and our ability to protect our intellectual property rights. Exobox received a formal “Notice of Allowance” from the United States Patent and Trademark Office (USPTO) for its second patent, Application No. 11/591,112, issued on August 9, 2007. We currently have filed for 22 patent applications with the U.S. Patent Office and other foreign patent offices that relate to software security solutions. We rely upon our patent applications and trade secret laws, non-disclosure agreements with our employees, consultants and third parties to protect our intellectual property rights. The complexity of patent and common law, combined with our limited resources, create risk that our efforts to protect our proprietary technologies may not be successful. We cannot assure you that our patent applications will be upheld or that third parties will not invalidate our patent rights. In the event our intellectual property rights are not upheld, such an event would have a material adverse effect on us. In addition, there is a risk that third parties may independently develop substantially equivalent or superior technologies.

Any litigation to protect our intellectual property or any third party claims to invalidate our patents could have a material adverse effect on our business.

Our success depends on our ability to protect our intellectual property rights. In the future, it may be necessary for us to commence patent litigation against third parties whom we believe require a license to our patents. In addition, we may be subject to third-party claims seeking to invalidate our patents. These types of claims, with or without merit, may subject us to costly litigation and diversion of management’s focus. In addition, based on our limited financial resources, we may not be able to pursue litigation as aggressively as competitors with substantially greater financial resources. Based on our limited financial resources, it may be necessary for us to engage third party professionals on a contingency basis pursuant to which such parties would be entitled to share in the proceeds of any successful enforcement of our intellectual property rights. If third parties making claims against us seeking to invalidate our patent are successful, they may be able to obtain injunctive or other equitable relief, which effectively could block our ability to license or otherwise capitalize on our proprietary technologies. Successful litigation against us resulting in a determination that our patent applications are invalid would have a material adverse effect on us.

We may be unable to successfully compete against companies with resources greater than ours, if we are unable to protect our patent rights and trade secrets, or if we infringe on the proprietary rights of third parties.

We will need to obtain additional patents on our technology to protect our rights to our technology. To obtain a patent on an invention, one must be the first to invent it or the first to file a patent application for it. We cannot be sure that the inventors of subject matter covered by patents and patent applications that we own or may license in the future were the first to invent, or the first to file patent applications for, those inventions. Furthermore, patents we own or may license in the future may be challenged, infringed upon, invalidated, found to be unenforceable, or circumvented by others, and our rights under any issued patents may not provide sufficient protection against competing software or otherwise cover commercially valuable software or processes.

We seek to protect trade secrets and other un-patented proprietary information, in part by means of confidentiality agreements with our collaborators, employees, and consultants. If any of these agreements is breached, we may be without adequate remedies. Also, our trade secrets may become known or be independently developed by competitors.

Our industry is competitive and as such competitive pressures could prevent us from obtaining profits, forcing us to abandon or curtail our business plan and possibly liquidate our assets.

One of the main factors in determining in whether we will be able to realize any profits and/or be able to continue its business plan will be whether or not we are able to successfully compete in the software industry. The virus protection software industry is highly competitive and we may be competing against companies with greater resources and more experience in the industry. If we are unable to compete in the marketplace and fail to generate any profits, we may be forced to liquidate its assets and any investment in us could be lost.

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We rely upon key personnel and if any one leaves us our business plan and our business operations could be adversely effected.

We rely on our executives for our success. Their experience and inputs create the foundation for our business and they are responsible for the implementation and control over our development activities. We currently have five employment contracts and we do not hold “key man” insurance on any of these people. Moving forward, should they be lost for any reason, we will incur costs associated with recruiting replacement personnel and could face potential delays in operations. If we are unable to replace any one of them with other suitably trained individuals, we may be forced to scale back or curtail our business plan. As a result of this, your securities in us could become devalued.

Investors may face significant restrictions on the resale of our common stock due to federal regulations of penny stocks.

Our common stock is listed on the OTC Bulletin Board, however, it will be subject to the requirements of Rule 15(g)9, promulgated under the Securities Exchange Act, as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser’s consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on Nasdaq that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.

RESULTS OF OPERATIONS

NET SALES. The Company has no sales since inception.

RESEARCH AND DEVELOPMENT EXPENSES. The Company had no research and development expenses for the three months ended October 31, 2008and 2007. The Company incurred $288,259 in research and development expenses since inception.

GENERAL ANDADMINISTRATIVE EXPENSES("G&A"). The Company's G&A expenses for the three months ended October 31, 2008 and 2007 increased from $38,206 to $158,746, respectively. The increase was primarily due to moving into the Company’s new offices. Company income (loss) before income taxes for the three months ended October 31, 2008 and 2007 increased from $571,994 to $893,800. The change was primarily due to having more employees, moving into the companies new offices and legal fees.

LIQUIDITY AND CAPITAL RESOURCES. As of October 31, 2008, the Company had a working capital deficit of $512,127. As of October 31, 2007, the Company’s working capital deficit was $1,884,812. During the periods from July 31, 2008 through October 31,2008 and July 31, 2007 through October 31, 2007, the Company's working capital deficit decreased by $881,397 and $1,860,129. The decreases were the result incurring company expenses, raising no additional capital during the period and having no income during the period.

The Company will require additional capital to support the development stage activities of the development of its proprietary software. There can be no assurance that any required capital will be available on terms acceptable to the Company, if at all, at such time or times as required by the Company. The Company has been funded primarily for the last two years by the $3,900,000 equity raised from its private placement, a $500,000 unregistered sale of its securities and non interest bearing loans from the companies officers and affiliates.

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ITEM 3. CONTROLS AND PROCEDURES

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the "CEO") and our Chief Financial Officer (the "CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Act")) as of the end of the fiscal quarter covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective in providing reasonable assurance that (a)the information required to be disclosed by us in the reports that we file or submit under the Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.

EXOBOX TECHNOLOGIES CORP. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not a party to any litigation and to the best of the Company's knowledge no litigation is threatened.

Item 3. Defaults Upon Senior Securities

None

Item 6. Exhibits

(a) Exhibits

31.1 Certification of CEO, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of CFO, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of CEO, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of CFO, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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EXOBOX TECHNOLOGIES CORP.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized.

	EXOBOX TECHNOLOGIES CORP.
Dated: December 15, 2008	By: /s/ Robert B. Dillon
	Robert B. Dillon
	Chief Executive Officer
	(Principal Executive Officer)
Dated: December 15, 2008	By: /s/ Michael G. Wirtz
	Michael G. Wirtz
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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