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 September 30, 2009

OR

[  ]  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 0-21419

Cardo Medical, Inc.(Exact name of Registrant as Specified in its Charter)



|Delaware                                                       | 23-2753988                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

9701 Wilshire Blvd., Suite 1100
Beverly Hills, CA      90212

(310) 274-2036

N/A

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 definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer      ̈ | Accelerated filer     ̈ | Non-accelerated filer     ̈ (Do not check if a smaller reporting company) | 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     ̈ NO    x As of November 9, 2009, 212,535,304 shares of the issuer's common stock, par value of $0.001 per share, were outstanding.
Note:PDF provided as a courtesy
CARDO MEDICAL, INC.


Table of Contents
PagePart I. — FINANCIAL INFORMATION
1Item 1.
Financial Statements
1Condensed Consolidated Balance Sheets at September 30, 2009 (Unaudited) and
December 31, 2008
1Condensed Consolidated Statements of
Operations (Unaudited) — Three and Nine Months Ended September 30, 2009 and 2008
2Condensed Consolidated Statements of Cash
Flows (Unaudited) — Nine Months Ended September 30, 2009 and 2008
3Notes to Condensed Consolidated Financial
Statements (Unaudited)
4Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
10Item 4T.
Controls and Procedures
21Part II. — Other Information
21Item 6.
Exhibits
21Signatures
22Index to ExhibitsPART I — FINANCIAL INFORMATION

ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

CARDO MEDICAL, INC.
                                  CONDENSED CONSOLIDATED BALANCE SHEETS
                           (In thousands, except share amounts) 

September 30,

December 31,2009

2008(Unaudited)AssetsCurrent assetsCash

$
1,607

$
3,095Accounts receivable


251


186Inventories


1,993


942Prepaid expenses and other current assets


71


107Total current assets


3,922


4,330Property and equipment, net


1,226


716Goodwill


1,233


1,233Other intangible assets, net


4,515


5,003Deposits and other assets, net


343


192Total assets

$
11,239

$
11,474Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable and accrued expenses

$
1,028

$
777Stockholders' equityCommon stock, $0.001 par value, 750,000,000 million shares authorized,211,121,018 and 203,360,271 issued and outstanding as ofSeptember 30, 2009 (unaudited) and December 31, 2008, respectively


211


203Additional paid-in capital


19,410


16,631Common stock issuable


495


-Note receivable from stockholder


(50)


(50)Accumulated deficit


(9,855)


(6,087)Total stockholders' equity


10,211


10,697Total liabilities and stockholders' equity

$
11,239

$
11,474The accompanying notes are an integral part of these condensed consolidated financial statements.1CARDO MEDICAL, INC.
                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                           (In thousands, except share amounts)
                                           (Unaudited) 


Three Months Ended


Nine Months EndedSeptember 30,


September 30,2009

2008

2009

2008(Restated)




(Restated)Net sales
$
436

$
411

$
1,314

$
932Cost of sales

84


66


254


139Gross profit

352


345


1,060


793Research and development expenses

123


142


329


1,288Selling, general and administrative expenses

1,440


1,089


4,521


2,488Loss from operations

(1,211)


(886)


(3,790)


(2,983)Interest income (expense), net

6


5


22


(37)Loss before income tax provision

(1,205)


(881)


(3,768)


(3,020)Provision for income taxes

-


-


-


-Net loss

(1,205)


(881)


(3,768)


(3,020)Less: Net income attributable to non-controlling interest

-


-


-


(148)Net loss attibutable to Cardo Medical, Inc.
$
(1,205)

$
(881)

$
(3,768)

$
(3,168)Net loss available to common stockholders per share:Basic and diluted
$
(0.01)

$
(0.00)

$
(0.02)

$
(0.02)Weighted average shares outstanding:Basic and diluted
206,157,409

196,005,332

204,302,897

157,102,579The accompanying notes are an integral part of these condensed consolidated financial statements.2CARDO MEDICAL, INC.
                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (In thousands)
                                           (Unaudited) 


Nine Months EndedSeptember 30,2009

2008(Restated)Cash flows from operating activitiesNet loss
$
(3,768)

$
(3,168)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization

878


334In-process research and development expenses

-


938Stock option compensation

89


11Net income attributable to non-controlling interest

-


148Changes in operating assets and liabilities:

-Accounts receivable

(65)


(81)Inventories

(1,051)


(419)Prepaid expenses and other current assets

36


39Accounts payable and accrued expenses

251


585Net cash used in operating activities

(3,630)


(1,613)Cash flows from investing activitiesPurchases of property and equipment

(862)


(99)Deposits for Vertebron, Inc. transaction

(130)


-Payments made to acquire minority interest of subsidiaries

-


(3,487)Proceeds from reverse merger transaction with Clicknsettle.com, Inc.

-


2,245Increase in deposits and other assets

(59)


(143)Net cash used in investing activities

(1,051)


(1,484)Cash flows from financing activitiesCapital contributions

-


12,925Proceeds from private placements, net of issuance costs

3,193


-Proceeds from notes payable

-


1,200Repayment of notes payable

-


(1,200)Distributions to Accin shareholders

-


(6,150)Net cash provided by financing activities

3,193


6,775Net change in cash

(1,488)


3,678Cash, beginning of period

3,095


904Cash, end of period
$
1,607

$
4,582Supplemental disclosure of cash flow information:Interest paid
$
-

$
48Income taxes paid
$
-

$
-Supplemental disclosure of non-cash investing and financing activities:Capital contributions through note receivable from members
$
-

$
50The accompanying notes are an integral part of these condensed consolidated financial statements.3CARDO MEDICAL, INC.
                    Notes to Condensed Consolidated Financial Statements
                              September 30, 2009
                                   (Unaudited)
NOTE 1 — DESCRIPTION OF BUSINESS

Cardo Medical, Inc. ("Cardo" or the "Company") is an early-stage
orthopedic medical device company specializing in designing, developing and marketing reconstructive joint devices and
spinal surgical devices. Reconstructive joint devices are used to replace knee, hip and other joints that have deteriorated
through disease or injury. Spinal surgical devices involve products to stabilize the spine for fusion and reconstructive
procedures. Within these areas, Cardo intends to focus on the higher-growth sectors of the orthopedic industry, such as
advanced minimally invasive instrumentation and bone-conserving high-performance implants. Cardo is focused on
developing surgical devices that will enable surgeons to bridge the gap between soft tissue-driven sports medicine
techniques and classical reconstructive surgical procedures.

NOTE 2 —  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2008, which has
been derived from Cardo's audited financial statements as of that date, and the unaudited condensed consolidated
financial information of Cardo as of September 30, 2009 and for the three and nine months ended September 30, 2009
and 2008, has been prepared in accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article
8-03 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position at
such date and the operating results and cash flows for such periods. Operating results for the interim periods ended
September 30, 2009 are not necessarily indicative of the results that may be expected for the entire year.

Certain information and footnote disclosure normally included in financial statements in
accordance with generally accepted accounting principles have been omitted pursuant to the rules of the United States
Securities and Exchange Commission ("SEC"). These unaudited financial statements should be read in
conjunction with our audited financial statements and accompanying notes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2008 filed on March 31, 2009.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Cardo, Accelerated
Innovation, Inc. ("Accelerated"), Uni-Knee LLC ("Uni") and Cervical Xpand LLC
("Cervical"). All significant intercompany transactions have been eliminated in consolidation.  The
non-controlling and minority interests in these companies is represented by a single balance in the condensed consolidated
balance sheets.

Liquidity and Capital Resources

At September 30, 2009, we had $1.6 million in cash; however, subsequent to the balance sheet
date, the Company used $1.17 million in order to complete the Vertebron, Inc, transaction (refer to Note 7) and raised
net proceeds of approximately $3.2 million through a private placement (refer to Note 7). With this subsequent net cash
infusion, the available funds are still not projected to meet all of the Company's working capital needs for the next twelve
months. The fact that the Company will sustain losses through the remainder of 2009 and still requires outside sources
of additional capital to supplement operations continues to create an uncertainty about the Company's ability to
continue as a going concern.

Management intends to use borrowings and securities sales to mitigate the effects of our use of
that cash.  However, Cardo cannot assure you that debt or equity financing, if and when required, will be available.
Cardo's ability to continue as a going concern is dependent upon receiving additional funds either through the issuance of debt or

4

---



through common and/or preferred stock and the success of management's plan to expand sales. Although
Cardo may obtain external financing through the sales of its own securities, there can be no assurance that such
financing will be available, or if available, that any such financing would be on terms acceptable to the Company. If
Cardo is unable to fund its cash flow needs, it may have to reduce or stop planned growth or scale back operations and
reduce staff. The condensed consolidated financial statements do not include any adjustments that may result from the
outcome of this uncertainty.

Net Loss Per Share

The basic loss per share is calculated by dividing the net loss attributable to common
shareholders by the weighted average number of common shares outstanding. Diluted loss per share is computed
similar to basic loss per share except that the denominator is increased to include the number of additional common
shares that would have been outstanding if the potential shares had been issued and if the additional shares were
dilutive. Common equivalent shares are excluded from the computation of net loss per share if their effect is
anti-dilutive.

For the three and nine months ended September 30, 2009, 2,358,400 potentially dilutive shares
were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per
share, respectively.

Concentrations

The Company had three customers that accounted for 24%, 21% and 11% of accounts
receivable as of September 30, 2009. At December 31, 2008, the Company had five customers that accounted for 23%,
16%, 15%, 12% and 11% of its accounts receivable. The Company had three customers that accounted for 29%, 25%
and 15% of sales during the nine months ended September 30, 2009. Three customers accounted for 24%, 21% and
15% of sales during the three months ended September 30, 2009. During the nine months ended September 30, 2008,
four customers accounted for 49%, 11%, 11% and 10% of sales. Four customers accounted for 40%, 19%, 12% and
11% of sales during the three months ended September 30, 2008.

Reclassifications

Certain amounts from prior periods have been reclassified to conform to the current period
presentation.

Recent Accounting Pronouncements

In July 2009, the FASB issued ASC 105-10 (Prior authoritative literature: SFAS No. 168, The
FASB Accounting Standards CodificationTMand the Hierarchy of Generally Accepted Accounting
Principles), which will become the single source of authoritative GAAP recognized by the FASB.  ASC
105-10 does not change current U.S. GAAP, but on the effective date, the FASB Accounting Standards Codification
("ASC")TM will supersede all then existing non-SEC accounting and reporting
standards.  The ASC is effective for interim and annual reporting periods ending after September 15,
2009.  Cardo adopted ASC 105-10 during the quarter ended September 30, 2009 and revised its
referencing of GAAP accounting standards in these financial statements to reflect the new standards.

In May 2009, the FASB issued ASC 855-10 (Prior authoritative literature: SFAS No. 165,
Subsequent Events) which provides guidance on management's assessment of subsequent
events.  It is not expected to significantly change practice because its guidance is similar to that in
American Institute of Certified Public Accountants Professional Standards U.S. Auditing Standards Section 560,
Subsequent Events, with some modifications.  The Company adopted ASC 855-10 during the
quarter ended June 30, 2009. The adoption of ASC 855-10 did not have a material impact on the Company's results of
operations, financial position or cash flows.

In April 2009, FASB issued ASC 820-10 (Prior authoritative literature: FSP No. FAS 157-4,
Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly). It does not change the definition of fair value as previously
detailed, but provides additional guidance for estimating fair value when the volume and level of activity for the asset or
liability have significantly decreased. Cardo adopted ASC 820-10 during the quarter ended June 30, 2009. The adoption
of ASC 820-10 did not have a material impact on the Company's results of operations, financial position or cash flows.

5

---



In April 2009, the FASB issued ASC 320-10 (Prior authoritative literature: FSP No. FAS 115-2
and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments). ASC 320-10 amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities and provides additional disclosure
requirements for other-than-temporary impairments for debt and equity securities. ASC 320-10 addresses the
determination as to when an investment is considered impaired, whether that impairment is other than temporary, and
the measurement of an impairment loss. Cardo adopted ASC 320-10 during the quarter ended June 30, 2009. The
adoption of ASC 320-10 did not have a material impact on the Company's results of operations, financial position or
cash flows.

In April 2009, the FASB issued ASC 825-10 (Prior authoritative literature: FSP No. FAS 107-1
and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments). FASB ASC 825-10 requires that
disclosures about the fair value of a company's financial instruments be made whenever summarized financial
information for interim reporting periods is made. Cardo adopted ASC 825-10 during the quarter ended September 30,
2009. The adoption of ASC 825-10 did not have a material impact on the Company's results of operations, financial
position or cash flows.

In June 2009, the FASB issued the following new accounting standards, which remain
authoritative until such time that each is integrated into the Codification:

- SFAS No. 166, Accounting for Transfers of Financial Assets - an
amendment of FASB Statement No. 140
- SFAS No. 167, Amendments to FASB Interpretation No. 46(R).SFAS
No. 167 amends FASB Interpretation No. ("FIN") 46, Consolidation of Variable Interest Entities
(revised December 2003) - an interpretation of ARB No. 51

SFAS No. 166 seeks to improve the relevance and comparability of the information that a
reporting entity provides in its financial statements about transfers of financial assets; the effects of the transfer on its
financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred
financial assets. SFAS No. 166 eliminates the concept of a qualifying special-purpose entity, creates more
stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting
criteria, and changes the initial measurement of a transferor's interest in transferred financial assets. SFAS
No. 166 is effective for interim and annual reporting periods beginning after November 15, 2009. The
Company has not completed its evaluation, but does not expect the adoption of SFAS No. 166 to have a material
impact on its consolidated financial statements.

SFAS No. 167 requires an enterprise to determine whether its variable interest or interests give it
a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the
enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly
impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could
potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially
be significant to the variable interest entity. SFAS No. 167 also amends FIN 46(R) to require ongoing
reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 167 is
effective for interim and annual reporting periods beginning after November 15, 2009. The Company has not
completed its evaluation, but does not expect the adoption of SFAS No. 167 to have a material impact on its
consolidated financial statements.

NOTE 3 — INVENTORY

Inventories consisted of the following at:

|(In thousands)  | September 30, |             | December 31,
|--------------- | ------------- | ----------- | ------------
|                | 2009          |             | 2008        
|                |               | (Unaudited) |             
|                |               |             |             
|Work in process | $             | 649         |             
|Finished goods  |               | 1,344       |             
|                | $             | 1,993       |             

6

---



NOTE 4 — SHARE BASED PAYMENT

On August 29, 2008, the Company issued options to certain employees and Board members to
purchase membership units in Cardo. The options give the grantees the right to purchase up to 2,398,400 shares of the
Company's common stock at an exercise price of $0.23 per share.  The options vest 20% each year over a five-year
period and expire after ten years.  The weighted average grant date fair value of options granted was $0.13 per option,
for a total fair value of $300,000, which will be reflected as an operating expense over the vesting period of the options.
Stock option compensation recognized for the three and nine months ended September 30, 2009 in the accompanying
condensed consolidated statements of operations amounted to $27,105 and $89,562, respectively. Stock option
compensation was $11,103 for the three and nine months ended September 30, 2008.

The fair value of each option award is estimated on the date of grant
using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Because the
Black-Scholes option valuation model incorporate ranges of assumptions for inputs, those ranges are disclosed. To
estimate volatility of the options over their expected terms, the Company measures the historical volatility of the
components of the small cap sector of the Dow Jones medical equipment index for a period equal to the expected life of
the Cardo options. It also measures the volatility of other public companies with similar size and industry characteristics
to Cardo for the same period. These measurements are averaged and the result is used as expected volatility. As there
is no history of option lives at Cardo, the expected term of options granted is the midpoint between the vesting periods
and the contractual life of the options. The risk-free rate for periods within the contractual life of the option is based on
the U.S. Treasury yield curve in effect at the time of grant. The forfeiture rate is based on an analysis of the nature of the
recipients' jobs and relationships to the Company.

A summary of stock option activity as of September 30, 2009, and
changes during the period then ended is presented below.

|                                              |           |  |   |           |  | Weighted-    |  |   |          
|--------------------------------------------- | --------- |  | - | --------- |  | ------------ |  | - | ---------
|                                              |           |  |   | Weighted- |  | Average      |  |   |          
|                                              |           |  |   | Average   |  | Remaining    |  |   | Aggregate
|                                              |           |  |   | Exercise  |  | Contractual  |  |   | Intrinsic
|                                              | Options   |  |   | Price     |  | Life (Years) |  |   | Value    
|                                              |           |  |   |           |  |              |  |   |          
|Outstanding at December 31, 2008              | 2,398,400 |  | $ | 0.23      |  |              |  |   |          
|Granted                                       | -         |  |   | -         |  |              |  |   |          
|Exercised                                     | -         |  |   | -         |  |              |  |   |          
|Forfeited                                     | (40,000)  |  | $ | 0.23      |  |              |  |   |          
|Outstanding at September 30, 2009 (unaudited) | 2,358,400 |  | $ | 0.23      |  | 8.92         |  | $ | 1,721,632
|Exercisable at September 30, 2009 (unaudited) | 471,680   |  | $ | 0.23      |  | 8.92         |  | $ | 344,326  

The aggregate intrinsic value represents the closing stock price as of
September 30, 2009 less the exercise price, multiplied by the number of options that have an exercise price that is less
than the closing stock price.

NOTE 5 — STOCKHOLDERS' EQUITY

On June 30, 2009, Cardo completed a private placement with investors to purchase 8,689,319
shares ("Purchaser Shares") of the Company's common stock, par value $0.001 per share at a price of $0.35
per share for aggregate total proceeds of $3,023,013 (net of legal fees of $18,247). The Purchaser Shares have a
24-month lock up provision.

As of September 30, 2009, the Company had not yet issued a portion
of the Purchaser Shares and has recorded this amount as common stock issuable. The Company subsequently issued
these shares on October 6, 2009.

During the quarter ended September 30, 2009, the Company received
$170,000 towards a private placement subject to the terms of the June 30, 2009 private placement. The private
placement closed on September 21, 2009 but the common shares were not issued until October 6, 2009. Accordingly,
the $170,000 is included in common stock issuable at the balance sheet date.

7

---



NOTE 6 — SEGMENT INFORMATION

Cardo's businesses are currently organized into the following two reportable segments;
reconstructive products (the "Reconstructive Division") and spine products (the "Spine Division").
The Reconstructive Division segment is comprised of activity relating to Cardo's unicompartmental knee, patella-femoral
products, and reconstructive knee products.  The Spine Division segment is comprised of the spinal lumbar fusion
system and cervical plate and screw systems.

These reportable segments are based on the nature of the products
offered.  Management evaluates performance and allocates resources based on several factors, of which the primary
financial measure is segment operating results.  Due to the distinct nature of the products in the Reconstructive Division,
and the fact that it has a more developed market for its products, it is considered by management as a separate
segment.  The Spine Division is still in the process of developing the market and obtaining instrumentation necessary to
sell the products in greater quantities.  As a result, the Spine Division is considered by management as a separate
segment.  The accounting policies of the reportable segments are the same as those described in Note 1.

As of September 30, 2009, the Reconstructive Division includes
$1,232,823 of goodwill and $4,515,157 in other intangible assets relating to Cardo's unicompartmental knee product.
These amounts are expected to be deductible for income tax purposes.

The following table sets forth financial information by reportable
segment as of September 30, 2009 and for the nine and three months ended September 30, 2009 and 2008:

|(In thousands)                                               | Reconstructive |       | Spine    |   |           |  |       |         | 
|------------------------------------------------------------ | -------------- | ----- | -------- | - | --------- |  | ----- | ------- | 
|                                                             | Division       |       | Division |   | Corporate |  | Total
|                                                             |                |       |          |   |           |  |       |         | 
|Nine Months Ended September 30, 2009 (unaudited)            
|Net sales                                                    | $              | 1,175 |          | $ | 139       |  | $     | -       | 
|Total cost of sales and operating expenses                   |                | 226   |          |   | 28        |  |       | 3,972   | 
|Depreciation and amortization                                |                | 848   |          |   | 4         |  |       | 26      | 
|Interest income, net                                         |                | -     |          |   | -         |  |       | 22      | 
|Net income (loss)                                            | $              | 101   |          | $ | 107       |  | $     | (3,976) | 
|                                                             |                |       |          |   |           |  |       |         | 
|Property and equipment acquisitions                          | $              | 789   |          | $ | 14        |  | $     | 59      | 
|Total assets                                                 | $              | 9,169 |          | $ | 269       |  | $     | 1,801   | 
|                                                             |                |       |          |   |           |  |       |         | 
|Nine Months Ended September 30, 2008 (unaudited - restated) 
|Net sales                                                    | $              | 885   |          | $ | 47        |  | $     | -       | 
|Total cost of sales and operating expenses                   |                | 125   |          |   | 14        |  |       | 3,590   | 
|Depreciation and amortization                                |                | 319   |          |   | 3         |  |       | 12      | 
|Interest expense, net                                        |                | -     |          |   | -         |  |       | 37      | 
|Net income (loss)                                            | $              | 441   |          | $ | 30        |  | $     | (3,639) | 
|                                                             |                |       |          |   |           |  |       |         | 
|Three Months Ended September 30, 2009 (unaudited)           
|Net sales                                                    | $              | 351   |          | $ | 85        |  | $     | -       | 
|Total cost of sales and operating expenses                   |                | 76    |          |   | 8         |  |       | 1,250   | 
|Depreciation and amortization                                |                | 303   |          |   | 2         |  |       | 8       | 
|Interest income, net                                         |                | -     |          |   | -         |  |       | 6       | 
|Net income (loss)                                            | $              | (28)  |          | $ | 75        |  | $     | (1,252) | 
|                                                             |                |       |          |   |           |  |       |         | 
|Three Months Ended September 30, 2008 (unaudited - restated)
|Net sales                                                    | $              | 386   |          | $ | 25        |  | $     | -       | 
|Total cost of sales and operating expenses                   |                | 62    |          |   | 8         |  |       | 1,011   | 
|Depreciation and amortization                                |                | 211   |          |   | 1         |  |       | 4       | 
|Interest expense, net                                        |                | -     |          |   | -         |  |       | 5       | 
|Net income (loss)                                            | $              | 113   |          | $ | 16        |  | $     | (1,010) | 

8

---



All of the Company's net sales were attributable to activity in the
United States. There were no long-lived assets held in foreign countries.

NOTE 7 — SUBSEQUENT EVENTS

At a hearing held on September 15, 2009, Cardo, the successful bidder at an auction sale, was
authorized to purchase substantially all of the assets of Vertebron, Inc. ("Vertebron") free and clear of all liens by the
United States Bankruptcy Court for the District of Connecticut (the "Bankruptcy Court"). On September 29, 2009, the
Bankruptcy Court issued an order memorializing the hearing held on September 15, 2009 (the "Order").

As a result of the Order, on September 30, 2009, Cardo entered into an Asset Purchase
Agreement (the "Agreement") with Vertebron, as a debtor-in-possession, to purchase substantially all of Vertebron's
assets, excluding certain assets, such as accounts receivable, cash and cash equivalents as of the closing date.
Pursuant to the Agreement, the purchase price for the assets is $1,300,000 to be paid in cash.

On October 1, 2009, the Company completed the transaction by wiring the $1.17 million balance
due under the Agreement.  Pursuant to the Agreement, Cardo did not establish control of the assets acquired in this
transaction until full consideration was received by Vertebron; therefore, the condensed consolidated financial
statements as of September 30, 2009 do not reflect this transaction. Included in deposits and other assets at September
30, 2009 are cash deposits required by the Bankruptcy Court totaling $130,000 and $29,033 of direct costs associated
with the Vertebron transaction.

On October 27, 2009, the Company sold 9,949,276 shares of its common stock, par value
$0.001 per share, at a price of $0.35 per share for aggregate gross proceeds of $3,482,250 as part of a private
placement for maximum gross proceeds of $6,500,000. The placement agent is a related party through a significant
common shareholder.

In connection with this private placement, the Company paid a finder's fee of 8% on a portion of
the gross proceeds and granted 379,398 share purchase warrants. Each share purchase warrant entitles the holder to
purchase one share of the Company's common stock at an exercise price of $0.44 per share for a period of up to five
years.

The Company evaluated subsequent events through November 12, 2009, the date this Quarterly Report on Form 10-Q was filed with the SEC.





9

---



ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis of our financial condition and results of operations are based
on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the
United States of America.  The preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting
periods.  On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below.
We base our estimates on historical experience and on various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources.  Actual results may differ from these estimates under different
assumptions or conditions.

The following discussion and analysis excludes the impact of clickNsettle.com, Inc.
("CKST")'s financial condition and results of operations prior to the Merger on August 29, 2008 because they
were not material in relation to the financial information for any of the periods presented below.

All amounts, other that share amounts, are stated in thousands.

As used in this "Management's Discussion and Analysis of Financial Condition and Results
of Operation," except where the context otherwise requires, the term "we," "us,"
"our" or "Cardo" refers to the business of Cardo Medical, Inc.

The following discussion should be read together with the information contained in the
unaudited condensed consolidated financial statements and related notes included in Item 1, "Financial
Statements," in this Form 10-Q. All dollar amounts are in thousands unless otherwise specified.

Overview

Cardo Medical, Inc. is an early-stage orthopedic medical device company specializing in
designing, developing and marketing reconstructive joint devices and spinal surgical devices.  Reconstructive joint
devices are used to replace knee, hip and other joints that have deteriorated through disease or injury.  Spinal surgical
devices involve products to stabilize the spine for fusion and reconstructive procedures.  Within these areas, Cardo
intends to focus on the higher-growth sectors of the orthopedic industry, such as advanced minimally invasive
instrumentation and bone-conserving high-performance implants. Cardo is focused on developing surgical devices that
will enable surgeons to bridge the gap between soft tissue-driven sports medicine techniques and classical
reconstructive surgical procedures. Cardo commercializes its reconstructive joint devices through its Cardo Orthopedics
division and its spine devices through its Cardo Spine division. The Company launched and commenced sales of its first
product in late 2006, which was a high-performance, unicompartmental knee replacement.  The Company commenced
sales of its reconstructive and spine products in 2008.



On June 18, 2008, Cardo entered into a Merger Agreement and Plan of Reorganization with
CKST and Cardo Acquisition, LLC, a California limited liability company and wholly-owned subsidiary of CKST.  Upon
the consummation of the transactions contemplated by the Merger Agreement, CKST acquired Cardo through a merger
of Cardo with Cardo Acquisition, with Cardo continuing as the surviving entity in the Merger and a wholly-owned
subsidiary of CKST.  Pursuant to the Merger Agreement, all of the issued and outstanding units of Cardo's membership
interests were converted into the right to receive shares of the common stock of CKST.

We are headquartered in Beverly Hills, California.  In connection with the consummation of the
Merger, CKST proposed to its shareholders an amendment to its Amended and Restated Certificate of Incorporation to
change its name from "clickNsettle.com, Inc." to "Cardo Medical, Inc." CKST's trading symbol
was "CKST.OB," which has changed to "CDOM.OB" in connection with the name change.
CDOM's common stock is quoted on the National Association of Securities Dealers, Inc.'s, Over-the-Counter Bulletin
Board, or the OTC Bulletin Board.

10

---



Critical Accounting Policies

Use of Estimates

Financial statements prepared in accordance with accounting
principles generally accepted in the United States require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.  Among other things, management makes estimates relating to
allowances for doubtful accounts, excess and obsolete inventory items, the estimated depreciable lives of property and
equipment, the impairment of goodwill and other intangible assets, share-based payment, deferred tax assets and the
allocation of the purchase price paid for the minority interests in Uni, Cervical and Accelerated.  Given the short
operating history of Cardo, actual results could differ from those estimates.

Income Taxes

On August 29, 2008, Cardo consummated a reverse takeover
of CKST thereby adopting CKST as the taxpaying entity.

The Company's deferred tax assets and liabilities are recognized to reflect the estimated future
tax effects, calculated at currently effective tax rates, of future deductible or taxable amounts attributable to events that
have been recognized on a cumulative basis in the financial statements. A valuation allowance related to a deferred tax
asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. The
estimated value of the deferred tax assets are subject to significant change based on the company's future profitability.
Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of
enactment.

In June 2008, the Financial Accounting Standards Board ("FASB") sought to reduce
the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes.
FASB prescribed a recognition threshold and measurement requirement for the financial statement recognition of a tax
position that has been taken or is expected to be taken on a tax return and also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. As such, the Company
may only recognize or continue to recognize tax positions that meet a "more likely than not" threshold. Based
on this analysis, the Company's tax position is unlikely to change.

Revenue Recognition

The Company recognizes revenue when it's realizable and earned.
The Company considers revenue to be realizable and earned when the following criteria are met: persuasive evidence
of an arrangement exists, delivery has occurred or services have been rendered, the seller's price to the buyer is fixed or
determinable, and collectability is reasonably assured. Persuasive evidence of the arrangements occurs when the
Company receives a signed contract from the hospital in which the surgery will be performed. Within that contract is the
price at which the hospital will buy the device. Delivery occurs on the day of surgery when the device is implanted by the
surgeon. Collectability is reasonably assured as we have continuing relationships with the hospitals and we can pursue
collections if necessary. As the Company does not accept returns and does not have any post-sale obligations, the date
of revenue recognition is generally on the day of the surgery.

Intangible and Long-Lived Assets

The Company evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such
factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with
the related asset or group of assets over their estimated useful lives against their respective carrying amount.
Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when
available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is
made. The Company's management currently believes there is no impairment of its long-lived assets. There can be no
assurance, however, that market conditions will not change or demand for the Company's products will continue. Either
of these could result in future impairment of long-lived assets. The first step of the Company's goodwill impairment test
compares the fair value of a reporting unit with its carrying amount, including goodwill.   If the fair value of a reporting unit exceeds its carrying amount,

11

---



goodwill of the reporting unit is considered not impaired, thus the second step of the
impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the
goodwill impairment test shall be performed to measure the amount of impairment loss, if any.
The second step of the goodwill impairment test
compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.   If the carrying
amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized
in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill. After a goodwill
impairment loss is recognized, the adjusted carrying amount of goodwill shall be its new accounting basis. Subsequent
reversal of a previously recognized goodwill impairment loss is prohibited once the measurement of that loss is
completed. The testing for impairment needs to be conducted at the reporting unit, or component level, which is one
level below the operating unit.  In Cardo's case, the operating units are the Reconstructive and Spine product lines.  The
reporting units are one level below that.   In the case of the Reconstructive Division, the reporting units are the knee and
hip products. For the Spine Division, the reporting units are the licensed and internally developed products.

Property and Equipment

Property and equipment are recorded at historical cost and
depreciated on a straight-line basis over their estimated useful lives, which range from three to five years. This estimate
is based on the useful life of the individual items. When items are retired or disposed of, income is charged or credited
for the difference between the net book value of the asset and the proceeds realized thereon. Ordinary maintenance and
repairs are charged to expense as incurred, and replacements and betterments are capitalized. This estimate is unlikely
to experience any differences from what is reflected in the financial statements.

Share Based Payment

In order to determine compensation on options issued to consultants,
and employees' options, the fair value of each option granted is estimated on the date of grant using the Black-Scholes
option-pricing model. The Company estimates the requisite service period used in the Black-Scholes calculation based
on an analysis of vesting and exercisability conditions, explicit, implicit, and/or derived service periods, and the
probability of the satisfaction of any performance or service conditions. The Company also considers whether the
requisite service has been rendered when recognizing compensation costs. Because the Black-Scholes option valuation
model incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on the
historical volatility of the components of the small cap sector of the Dow Jones medical equipment index for a period
equal to the expected life of the Cardo options. It also measures the volatility of other public companies with similar size
and industry characteristics to Cardo for the same period. These measurements are averaged and the result is used as
expected volatility.  As there is no history of option lives at Cardo, the expected term of options granted is the midpoint
between the vesting periods and the contractual life of the options. The risk-free rate for periods within the contractual
life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The forfeiture rate is based on an
analysis of the nature of the recipients' jobs and relationships to the Company.

Inventory

Inventory is stated at the lower of cost or net realizable value as
determined by assessing the gross profit less selling costs of each inventory item. Cost is determined on a first-in,
first-out basis; and the inventory is comprised of work in process and finished goods. Work in process consists of fabrication
costs paid relating to items not physically received. Finished goods are completed knee, spine and hip replacement
products ready for resale to customers.

At each balance sheet date, the Company evaluates its ending inventories for excess quantities
and obsolescence.  This evaluation includes an analysis of sales levels by product type.  Among other factors, the
Company considers current product configurations, historical and forecasted demand, market conditions and product life
cycles when determining the net realizable value of the inventory.  Provisions are made to reduce excess or obsolete
inventories to their estimated net realizable values.  Once established, write-downs are considered permanent
adjustments to the cost basis of the excess or obsolete inventory.  The Company did not have any inventory considered
by management to be excess or obsolete as of December 31, 2008 and September 30, 2009. Based on the forecasted
sales amounts, we do not expect any changes in net realizable value in the near future.

12

---



Recent Accounting Pronouncements

In July 2009, the FASB issued ASC 105-10 (Prior
authoritative literature: SFAS No. 168, The FASB Accounting Standards CodificationTMand the
Hierarchy of Generally Accepted Accounting Principles, which will become the single source of authoritative GAAP
recognized by the FASB.  ASC 105-10 does not change current U.S. GAAP, but on the effective date, the
FASB Accounting Standards Codification ("ASC")TM will supersede all then existing non-SEC
accounting and reporting standards.  The ASC is effective for interim and annual periods ending after
September 15, 2009.  Cardo adopted ASC 105-10 during the quarter ended September 30, 2009 and
revised the referencing of GAAP accounting standards in our financial statements to reflect the new standards.

In May 2009, the FASB issued ASC 855-10 (Prior authoritative literature: SFAS No. 165,
Subsequent Events) which provides guidance on management's assessment of subsequent
events.  It is not expected to significantly change practice because its guidance is similar to that in
American Institute of Certified Public Accountants Professional Standards U.S. Auditing Standards Section 560,
Subsequent Events, with some modifications.  The Company adopted ASC 855-10 during the
quarter ended June 30, 2009. The adoption of ASC 855-10 did not have a material impact on our results of operations,
financial position or cash flows.

In April 2009, FASB issued ASC 820-10 (Prior authoritative literature: FSP No. FAS 157-4,
Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly). It does not change the definition of fair value as previously
detailed, but provides additional guidance for estimating fair value when the volume and level of activity for the asset or
liability have significantly decreased. Cardo adopted ASC 820-10 during the quarter ended June 30, 2009. The adoption
of ASC 820-10 did not have a material impact on our results of operations, financial position or cash flows.

In April 2009, the FASB issued ASC 320-10 (Prior authoritative literature: FSP No. FAS 115-2
and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments). ASC 320-10 amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities and provides additional disclosure
requirements for other-than-temporary impairments for debt and equity securities. ASC 320-10 addresses the
determination as to when an investment is considered impaired, whether that impairment is other than temporary, and
the measurement of an impairment loss. Cardo adopted ASC 320-10 during the quarter ended June 30, 2009. The
adoption of ASC 320-10 did not have a material impact on our results of operations, financial position or cash flows.

In April 2009, the FASB issued ASC 825-10 (Prior authoritative literature: FSP No. FAS 107-1
and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments). FASB ASC 825-10 requires that
disclosures about the fair value of a company's financial instruments be made whenever summarized financial
information for interim reporting periods is made. Cardo adopted ASC 825-10 during the quarter ended September 30,
2009. The adoption of ASC 825-10 did not have a material impact on our results of operations, financial position or cash
flows.

In June 2009, the FASB issued the following new accounting standards, which remain
authoritative until such time that each is integrated into the Codification:

- SFAS No. 166, Accounting for Transfers of Financial Assets - an
amendment of FASB Statement No. 140
- SFAS No. 167, Amendments to FASB Interpretation No. 46(R).SFAS
No. 167 amends FASB Interpretation No. ("FIN") 46, Consolidation of Variable Interest Entities
(revised December 2003) - an interpretation of ARB No. 51

SFAS No. 166 seeks to improve the relevance and comparability of the information that a
reporting entity provides in its financial statements about transfers of financial assets; the effects of the transfer on its
financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred
financial assets. SFAS No. 166 eliminates the concept of a qualifying special-purpose entity, creates more
stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting
criteria, and changes the initial measurement of a transferor's interest in transferred financial assets. SFAS
No. 166 is effective for interim and annual reporting periods beginning after November 15, 2009. The
Company has not completed its evaluation, but does not expect the adoption of SFAS No. 166 to have a material
impact on our consolidated financial statements.

13

---



SFAS No. 167 requires an enterprise to determine whether its variable interest or interests give it
a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the
enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly
impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could
potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially
be significant to the variable interest entity. SFAS No. 167 also amends FIN 46(R) to require ongoing
reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 167 is
effective for interim and annual reporting periods beginning after November 15, 2009. The Company has not
completed its evaluation, but does not expect the adoption of SFAS No. 167 to have a material impact on our
consolidated financial statements.

Results of Operations for the Three Months Ended September 30, 2009 as Compared to the
Three Months Ended September 30, 2008.

The following is a comparison of the consolidated results of operations for Cardo for the
three months ended September 30, 2009 and 2008:

|(In thousands)                                            |      | Three Months Ended |      |            |          |  |  
|--------------------------------------------------------- | ---- | ------------------ | ---- | ---------- | -------- |  | -
|                                                          |      | September 30,      |      |            |          |  |  
|                                                          | 2009 |                    | 2008 |            | Variance
|                                                          |      |                    |      | (Restated) |          |  |  
|Net sales                                                 | $    | 436                |      | $          | 411      |  | $
|Cost of sales                                             |      | 84                 |      |            | 66       |  |  
|Gross profit                                              |      | 352                |      |            | 345      |  |  
|Research and development expenses                         |      | 123                |      |            | 142      |  |  
|Selling, general and administrative expenses              |      | 1,440              |      |            | 1,089    |  |  
|Loss from operations                                      |      | (1,211)            |      |            | (886)    |  |  
|Interest income (expense), net                            |      | 6                  |      |            | 5        |  |  
|Loss before income tax provision                          |      | (1,205)            |      |            | (881)    |  |  
|Provision for income taxes                                |      | -                  |      |            | -        |  |  
|Net loss                                                  |      | (1,205)            |      |            | (881)    |  |  
|Less: Net income attributable to non-controlling interest |      | -                  |      |            | -        |  |  
|Net loss attibutable to Cardo Medical, Inc.               | $    | (1,205)            |      | $          | (881)    |  | $

Revenues

During the quarter ended September 30, 2009, we generated
revenues of $436 compared to $411 for the same period in 2008. The wider acceptance of our Hip and Spine products
by orthopedic and back surgeons has resulted in higher sales volume in the current year. Accordingly, sales of Hip and
Spine products increased $122 in the current quarter as compared to 2008. We launched our Hip product in the first
quarter of 2009 which resulted in $78 of sales during the quarter ended September 30, 2009. Comparable sales for the
same period in 2008 were nominal. The increases in Hip and Spine sales were offset by a drop in Knee sales in 2009
compared to 2008. Our Knee and Hip products accounted for 79% of total sales during the three months ended
September 30, 2009. During the quarter ended September 30, 2008, Knee products totaled 93% of sales.

Gross Profit

During the quarter ended September 30, 2009, we had cost of sales
of $84 compared to $66 during the quarter ended September 30, 2008.  Our gross profit percentage was 80.7% for the
three months ended September 30, 2009 compared to 83.9% for the corresponding period in 2008. This decrease is
attributed to sales of Hip products in 2009, which generate lower margins than Knee products, and a slight decrease in
the profit margin from Knee products. During the quarter ended September 30, 2008, there were minimal sales of Hip
products so the profit margin was indicative of our Knee product. As Cardo moves forward, we expect that our current
product costs will be maintained and the gross profits shall remain mostly in-line with the current year percentages.

14

---



Research and Development Expenses

During the quarter ended September 30, 2009, we had research and
development costs of $123 compared to $142 for the same period in 2008.  The decrease in the current year is
indicative of reduced research activity as most of our products are on the market. Research costs associated with our
Total Knee product have slowed because it is nearing its launch in mid-2010; however, research is underway on a new
Hip product so research and development expenses are likely to increase in the upcoming quarters.

Selling, General and Administrative Expenses

During the quarter ended September 30, 2009, we had selling general
and administrative expenses of $1,440 compared to $1,089 in the same period of 2008. During 2009, labor and
labor-related expenses increased $342 compared to 2008 as we expanded our operations in order to meet current and
anticipated growth. Depreciation and amortization expense increased by $93 during the quarter ended September 30,
2009 because of the acquisition of additional instrumentation required to support base inventory levels and expected
future sales increases, and the purchase of the non-controlling interest in Accelerated Innovation, LLC in June 2008
which resulted in $5,328 of amortizable intangible assets. Rent, travel and office expenses were slightly higher in 2009
as we added office space and our overall business activity was greater than it was in 2008. These cost increases were
partially offset by a drop in professional fees during 2009 of $154 and commission expense which was higher in 2008
due to greater incentives to initiate sales. There were significant legal and accounting costs associated with the
purchase of the non-controlling interest in Accelerated Innovation, LLC in June 2008 and the reverse merger transaction
with clickNsettle.com, Inc. which was completed in August 2008.

Interest Income/(Expense)

During the quarter ended September 30, 2009, we had interest
income of $6 compared to $5 during the quarter ended September 30, 2008. Interest income is earned on our excess
cash balances, which were comparable in both periods.

Results of Operations for the Nine Months Ended September 30, 2009 as Compared to the
Nine Months Ended September 30, 2008.

The following is a comparison of the consolidated results of operations for Cardo for the
nine months ended September 30, 2009 and 2008:

|(In thousands)                                            |      | Nine Months Ended |      |            |          |  |  
|--------------------------------------------------------- | ---- | ----------------- | ---- | ---------- | -------- |  | -
|                                                          |      | September 30,     |      |            |          |  |  
|                                                          | 2009 |                   | 2008 |            | Variance
|                                                          |      |                   |      | (Restated) |          |  |  
|Net sales                                                 | $    | 1,314             |      | $          | 932      |  | $
|Cost of sales                                             |      | 254               |      |            | 139      |  |  
|Gross profit                                              |      | 1,060             |      |            | 793      |  |  
|Research and development expenses                         |      | 329               |      |            | 1,288    |  |  
|Selling, general and administrative expenses              |      | 4,521             |      |            | 2,488    |  |  
|Loss from operations                                      |      | (3,790)           |      |            | (2,983)  |  |  
|Interest income (expense), net                            |      | 22                |      |            | (37)     |  |  
|Loss before income tax provision                          |      | (3,768)           |      |            | (3,020)  |  |  
|Provision for income taxes                                |      | -                 |      |            | -        |  |  
|Net loss                                                  |      | (3,768)           |      |            | (3,020)  |  |  
|Less: Net income attributable to non-controlling interest |      | -                 |      |            | (148)    |  |  
|Net loss attibutable to Cardo Medical, Inc.               | $    | (3,768)           |      | $          | (3,168)  |  | $

15

---



Revenues

During the nine months ended September 30, 2009, we generated
revenues of $1,314 compared to $932 for the same period in 2008. The increase of $382 was attributed to the wider
acceptance of our Knee, Hip and Spine products by orthopedic and back surgeons that resulted in higher sales volume
in the current year. We launched our Hip product in the first quarter of 2009 which resulted in $278 of sales thus far in
2009 compared to $45 in 2008. Our Knee and Hip products accounted for 89% of total sales during the nine months
ended September 30, 2009. Knee was the primary product with 90% of total sales during the nine months ended
September 30, 2008.

Gross Profit

During the nine months ended September 30, 2009, we had cost of
sales of $254 compared to $139 during 2008.  Our gross profit percentage was 80.7% for the nine months ended
September 30, 2009 compared to 85.1% for the corresponding period in 2008. This decrease was attributed to
significant sales of Hip products in 2009, which generate lower margins than Knee products, and a slight decrease in the
profit margin from Knee products. During the nine months ended September 30, 2008, sales of Hip products were
minimal so the profit margin was mostly indicative of our Knee product. As Cardo moves forward, we expect that our
current product costs will be maintained and the gross profits shall remain mostly in-line with the current year
percentages.

Research and Development Expenses

During the nine months ended September 30, 2009, we had research
and development costs of $329 compared to $1,288 for the same period in 2008.  The decrease was primarily due to a
one-time charge of $938 of in-process research and development acquired in connection with the purchase of the non-
controlling interest in Accelerated Innovation, LLC in June 2008. The acquired in-process research and development
related to development costs associated with our Uni Knee system. Aside from the in-process research and
development, spending on research and development was fairly consistent from 2008 to 2009. During 2008, we incurred
more costs associated with Hip products. Research costs associated with our Total Knee product have slowed because
it is nearing its launch in mid-2010; however, research is underway on a new Hip product so research and development
expenses are likely to increase some in the upcoming quarters.

Selling, General and Administrative Expenses

During the nine months ended September 30, 2009 our selling
general and administrative expenses were $4,521 compared to $2,488 for the same period in 2008, a net increase of
$2,033. During 2009, labor and labor-related expenses increased $1,626 compared to 2008 as we expanded our
operations in order to meet current and anticipated growth. Depreciation and amortization expense increased by $558
during the quarter ended September 30, 2009 because of the acquisition of additional instrumentation required to
support base inventory levels and expected future sales increases, and the purchase of the non-controlling interest in
Accelerated Innovation, LLC in June 2008 which resulted in $5,328 of amortizable intangible assets. Commission
expense increased accordingly with the increase in sales. Rent, travel, warehouse, insurance and office expenses were
also higher during the nine months ended September 30, 2009 as we added office space and our overall business
activity was greater than it was in 2008. These cost increases were partially offset by a drop in professional fees during
2009 of $442. There were significant legal and accounting costs associated with the purchase of the non-controlling
interest in Accelerated Innovation, LLC in June 2008 and the reverse merger transaction (the "Merger") with
clickNsettle.com, Inc. which was completed in August 2008.

Interest Income

During the nine months ended September 30, 2009, we had interest income of $22 for the nine
months ended September 30, 2009 compared to interest expense of $37 in the corresponding period of 2008. In the first
and second quarter of 2008, we had interest expense stemming from a short-term note payable which was fully repaid in
July 2008. Interest income is earned on our excess cash balances, which were significantly higher throughout 2009
compared to 2008.

16

---



Segment Information

Our businesses are currently organized into the following two
reportable segments; reconstructive products (the "Reconstructive Division") and spine products (the
"Spine Division").  The Reconstructive Division segment is comprised of activity relating to Cardo's
unicompartmental knee, patella-femoral products, and reconstructive knee products.  The Spine Division segment is
comprised of the spinal lumbar fusion system and cervical plate and screw systems.

These reportable segments are based on the nature of the products
offered.  Management evaluates performance and allocates resources based on several factors, of which the primary
financial measure is segment operating results.  Due to the distinct nature of the products in our Reconstructive Division,
and the fact that it has a more developed market for its products, it is considered by management as a separate
segment.  Our Spine Division is still in the process of developing the market and obtaining instrumentation necessary to
sell the products in greater quantities.  As a result, the Spine Division is considered by management as a separate
segment.  The accounting policies of the reportable segments are the same as those described in Note 1.

As of September 30, 2009, the Reconstructive Division includes
$1,233 of goodwill and $4,515 in other intangible assets relating to the Company's unicompartmental knee product.
These amounts are expected to be deductible for income tax purposes.

The following table sets forth summarized financial results by reportable segment for the three
and nine months ended September 30, 2009 and 2008 (In thousands):

|                                                             | Reconstructive |       | Spine    |   |           |  |       |         | 
|------------------------------------------------------------ | -------------- | ----- | -------- | - | --------- |  | ----- | ------- | 
|                                                             | Division       |       | Division |   | Corporate |  | Total
|                                                             |                |       |          |   |           |  |       |         | 
|Nine Months Ended September 30, 2009 (unaudited)            
|Net sales                                                    | $              | 1,175 |          | $ | 139       |  | $     | -       | 
|Total cost of sales and operating expenses                   |                | 226   |          |   | 28        |  |       | 3,972   | 
|Depreciation and amortization                                |                | 848   |          |   | 4         |  |       | 26      | 
|Interest income, net                                         |                | -     |          |   | -         |  |       | 22      | 
|Net income (loss)                                            | $              | 101   |          | $ | 107       |  | $     | (3,976) | 
|                                                             |                |       |          |   |           |  |       |         | 
|Nine Months Ended September 30, 2008 (unaudited - restated) 
|Net sales                                                    | $              | 885   |          | $ | 47        |  | $     | -       | 
|Total cost of sales and operating expenses                   |                | 125   |          |   | 14        |  |       | 3,590   | 
|Depreciation and amortization                                |                | 319   |          |   | 3         |  |       | 12      | 
|Interest expense, net                                        |                | -     |          |   | -         |  |       | 37      | 
|Net income (loss)                                            | $              | 441   |          | $ | 30        |  | $     | (3,639) | 
|                                                             |                |       |          |   |           |  |       |         | 
|Three Months Ended September 30, 2009 (unaudited)           
|Net sales                                                    | $              | 351   |          | $ | 85        |  | $     | -       | 
|Total cost of sales and operating expenses                   |                | 76    |          |   | 8         |  |       | 1,250   | 
|Depreciation and amortization                                |                | 303   |          |   | 2         |  |       | 8       | 
|Interest income, net                                         |                | -     |          |   | -         |  |       | 6       | 
|Net income (loss)                                            | $              | (28)  |          | $ | 75        |  | $     | (1,252) | 
|                                                             |                |       |          |   |           |  |       |         | 
|Three Months Ended September 30, 2008 (unaudited - restated)
|Net sales                                                    | $              | 386   |          | $ | 25        |  | $     | -       | 
|Total cost of sales and operating expenses                   |                | 62    |          |   | 8         |  |       | 1,011   | 
|Depreciation and amortization                                |                | 211   |          |   | 1         |  |       | 4       | 
|Interest expense, net                                        |                | -     |          |   | -         |  |       | 5       | 
|Net income (loss)                                            | $              | 113   |          | $ | 16        |  | $     | (1,010) | 

All of the Company's net sales were attributable to activity in the United States. There were no
long-lived assets held in foreign countries.

17

---



Liquidity and Capital Resources

Net cash used in operating activities was $3,630 for the nine months ended September 30, 2009
compared to $1,613 for the same period in 2008. The primary use of cash in 2009 beyond wages and other operating
costs was the build-up of inventory which has increased $1,051 during the current year.

Net cash used in investing activities was $1,051 for the nine months ended September 30, 2009
compared to $1,484 for the same period in 2008. The cash used by investment activities during the nine months ended
September 30, 2009 was mostly attributed to the purchase of equipment to accommodate our operational and corporate
growth as well as additional instrumentation required in order to support current and anticipated future sales levels. The
current year also includes $130 of deposits associated with the October 2009 purchase of certain Vertebron, Inc.
assets.

Our net cash provided by financing activities was $3,193 for the nine months ended September
30, 2009 compared to $6,775 for the same period in 2008. During the current quarter, we completed two equity
investment transactions to provide us additional working capital needed to maintain and build certain inventory and
instrumentation levels to meet expected increases in future sales and product development.

At September 30, 2009, we had $1,607 in cash; however, in October 2009 we used $1,170 in
order to complete the Vertebron, Inc. transaction and raised net proceeds of $3,189 through a private placement. With
this subsequent net cash infusion, the available funds are still not projected to meet all of our working capital needs for
the next twelve months. The fact that Cardo will sustain losses through the remainder of 2009 and still requires outside
sources of additional capital to supplement operations continues to create substantial doubt about our ability to continue
as a going concern.

Management intends to use borrowings and securities sales to mitigate the effects of our use of
that cash.  However, we cannot assure you that debt or equity financing, if and when required, will be available.  Our
ability to continue as a going concern is dependent upon receiving additional funds either through the issuance of debt
or equity and the success of management's plan to expand sales. Although we may obtain external financing through
the sales of our own securities, there can be no assurance that such financing will be available, or if available, that any
such financing would be on terms acceptable to us. If we are unable to fund our cash flow needs, we may have to
reduce or stop planned growth or scale back operations and reduce staff.

Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q are "forward-looking
statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by the use of words such as "may," "will," "should,"
"anticipate," "estimate," "expect," "plan," "believe,"
"predict," "potential," "project," "target," "forecast,"
"intend," "assume," "guide," "seek" and similar expressions. Forward-looking
statements do not relate strictly to historical or current matters. Rather, forward-looking statements are predictive
in nature and may depend upon or refer to future events, activities or conditions. Although we believe that these
statements are based upon reasonable assumptions, we cannot provide any assurances regarding future results. We
undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking
statements, whether as a result of new information, future events or otherwise.

Because forward-looking statements relate to matters that have not yet occurred, these
statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to
differ materially from the activities and results anticipated in forward-looking statements. Information regarding our risk
factors appears in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the
year ended December 31, 2008 includes, but is not limited to, the following:



18

---



- Cost containment measures, pressure from our competitors and availability of medical
reimbursement may impact our ability to sell our products at prices necessary to expand our operations and reach
profitability.
- Sales of our products will depend on the availability of adequate reimbursement from
third-party payors (such as governmental programs, for example, Medicare and Medicaid, private insurance plans and
managed care programs) both in terms of the sales volumes and prices for our products.
- Legislative or administrative reforms to the United States or international reimbursement
systems in a manner that significantly reduces reimbursement for procedures using our medical devices or denies
coverage for those procedures could have a material adverse effect on our business, financial condition or results of
operations.
- We must convince orthopedic and spine surgeons that our products are an attractive
alternative to existing surgical treatments of orthopedic and spine disorders.
- Our business plan relies on certain assumptions about the market for our products, which, if
incorrect, may adversely affect our business and profitability.
- We expect to face significant competition as a result of the rapid technological changes in
the medical devices industry, which could have an adverse effect on our business, financial condition or results of
operations.
- Hospitals, surgeons, distributors and agents may have existing relationships with other
medical device companies that make it difficult for us to establish new relationships with them. As a result, we may not
be able to sell and market our products effectively.
- Our manufacturers may be unsuccessful in manufacturing products at the levels required to
meet future market demand.
- We rely on single source manufacturers, which could impair our ability to meet demand for
delivering our products in a timely manner or within our budget.
- Our growth will depend on developing new products or product enhancements, requiring
significant research and development, clinical trials and regulatory approvals, all of which are expensive and
time-consuming and may not result in a commercially viable product.
- If we choose to grow our business by acquiring new and complementary businesses,
products or technologies, we may be unable to complete these acquisitions or successfully integrate them in a
cost-effective and non-disruptive manner.
- We rely on our independent sales distributors and sales representatives to market and sell
our products.
- We are dependent on the services of Andrew A. Brooks, M.D. and Mikhail Kvitnitsky, and
the loss of either of them could harm our business.
- Failure to attract and retain skilled personnel and cultivate key academic collaborations will
delay product development programs and business development efforts.
- If we fail to properly manage our anticipated growth, our business could suffer.
- If we decide to market and sell our devices and products internationally, we would be
subject to various risks relating to our international activities, which could negatively impact our business and financial
results.
- We are subject to substantial governmental regulation that could change and thus force us
to make modifications to how we develop, manufacture and price our products.
- Federal regulatory reforms may adversely affect our ability to sell our products
profitably.
- We have not yet collected long-term clinical data to support the safety of our products, and
our products may, therefore, prove to be less safe and effective than initially thought.
- The FDA requires us to obtain new Section 510(k) clearances or premarket approvals for
modifications to our approved products. Otherwise, we may have to cease marketing, or to recall, the modified products
until clearances are obtained.
- If we or our third-party manufacturers fail to comply with the FDA's Quality System
Regulations, the manufacture of our products could be interrupted and our product sales and operating results could
suffer.
- We are subject to various complex laws and regulations. Compliance with these laws and
regulations is costly and time-consuming, and failure to comply with them can have adverse consequences on our
business.
- We are an early-stage orthopedic medical device company with a limited operating history
and our business may not become profitable.
- Our quarterly financial results are likely to fluctuate significantly because our sales prospects
are uncertain.
- If we cannot adequately protect our patents and other intellectual property rights, we may
lose market share to our competitors and be unable to operate our business profitably.
- Changes to intellectual property laws may negatively impact our ability to protect our
intellectual property.
- Patent infringement lawsuits brought against us could have a material adverse affect on our
commercial success, and our ability to develop and sell our products and to operate profitably.

19

---



- The medical device industry is characterized by patent and other intellectual property
litigation, and we could become subject to litigation that could be costly, result in diverting management's time and
efforts, require us to pay damages, and/or prevent us from marketing our existing or future products.
- We may be subject to damages resulting from claims that we or our employees or
consultants have wrongfully used or disclosed alleged trade secrets of their former employers.
- Fluctuations in the cost and availability of insurance could adversely affect our profitability or
our risk management profile.
- Potential future product liability claims and other litigation, including contract litigation, may
adversely affect our business, reputation and ability to attract and retain customers.
- Any claims relating to our making improper payments to physicians for consulting services,
or other potential violations of regulations governing interactions between us and healthcare providers, could be
time-consuming and costly.
- Our common stock may be thinly traded.
- We expect that the price of our common stock will fluctuate substantially, potentially
adversely affecting the ability of investors to sell their shares.
- Securities analysts may elect not to report on our common stock or may issue negative
reports that adversely affect the price of our common stock.
- Anti-takeover provisions in our charter documents and Delaware law may discourage or
prevent a change in control, even if an acquisition would be beneficial to our shareholders, which could affect our stock
price adversely and prevent attempts by our shareholders to replace or remove our current management.
- Because our common stock may be a "penny stock," it may be more difficult for
investors to sell shares of our common stock, and the market price of our common stock may be adversely
affected.
- A significant number of shares will become eligible for future sale by our shareholders and
the sale of those shares could adversely affect the stock price.
- Directors, executive officers, principal shareholders and affiliated entities own a significant
percentage of our capital stock, and they may make decisions that you do not consider to be in the best interests of our
shareholders.
- Our stock price could decline as a result of our failure to meet reporting and other regulatory
requirements.
- If we do not implement necessary improvements to our internal control over financial
reporting in an efficient and timely manner, or if we discover additional deficiencies and weaknesses in existing systems
and controls, we could be subject to regulatory enforcement and investors may lose confidence in our ability to operate
in compliance with existing internal control rules and regulations, either of which could result in a decline in our share
price.
- Our status as a public company may make it more difficult to attract and retain officers and
directors.
- Compliance with changing regulations concerning corporate governance and public
disclosure may result in additional expenses.
- We do not intend to pay cash dividends. Any return on investment may be limited to the
value of our common stock, if any.
- Shareholders may experience significant dilution if future equity offerings are used to fund
operations or acquire complementary businesses.
- Our Certificate of Incorporation grants our Board of Directors the power to designate and
issue additional shares of common and/or preferred stock.

Additional information concerning these risk factors can be found in our other filings made with
the SEC. Forward-looking statements in this Quarterly Report on Form 10-Q should be evaluated in light of these
important factors.



20

---



ITEM 4T — CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in company reports filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in
the Securities and Exchange Commission's rules and forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed
or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including
our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required
disclosure. As required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, our chief executive
officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of September 30, 2009.  Based upon their evaluation, and as a result of
previously identified material weakness in internal control over financial reporting as discussed in our Annual Report on
Form 10-K for the year ended December 31, 2008, they concluded that our disclosure controls and procedures were not
effective as of September 30, 2009. The previously reported material weaknesses in internal control over financial
reporting related to (1) adequate qualified staff necessary to effectively apply the process, and (2) methods and
practices employed to report unusual transactions such as our reverse merger.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30,
2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

PART II - OTHER INFORMATION

ITEM 6 — EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into this
Report:



|ExhibitNumber |  | Exhibit Title                                                                                                                                                            
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                          
|31.1          |  | Certification of Chief Executive Officer of Cardo Medical, Inc., as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                   
|31.2          |  | Certification of Chief Financial Officer of Cardo Medical, Inc., as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                   
|32.1          |  | Certification of Chief Executive Officer of Cardo Medical, Inc. pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2          |  | Certification of Chief Financial Officer of Cardo Medical, Inc. pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

21

---



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 by the undersigned thereunto duly authorized.



|                  | CARDO MEDICAL, INC.
|----------------- | -------------------
|                  |                    
|                  |                    
|November 12, 2009 | By:                
|                  |                    
|                  |                    
|                  |                    
|                  |                    
|November 12, 2009 | By:                
|                  |                    
|                  |                    

22

---



INDEX TO EXHIBITS



|ExhibitNumber |  | Exhibit Title                                                                                                                                                                   
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1          |  | Certification of Chief Executive Officer of Cardo Medical, Inc., as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.    PDF                                   
|31.2          |  | Certification of Chief Financial Officer of Cardo Medical, Inc., as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.    PDF                                   
|32.1          |  | Certification of Chief Executive Officer of Cardo Medical, Inc. pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    PDF
|32.2          |  | Certification of Chief Financial Officer of Cardo Medical, Inc. pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    PDF