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

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FORM 10-Q

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[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

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)

7625 Hayvenhurst Avenue, Suite #49
Van Nuys, CA      91406

(818) 780-6677

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 16, 2010, 230,293,141 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, 2010 (Unaudited) and
December 31, 2009
1Condensed Consolidated Statements of
Operations (Unaudited) — Three and Nine Months Ended September 30, 2010 and 2009
2Condensed Consolidated Statements of Cash
Flows (Unaudited) — Nine Months Ended September 30, 2010 and 2009
3Notes to Condensed Consolidated Financial
Statements (Unaudited)
4Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
11Item 4.
Controls and Procedures
21PART II — OTHER INFORMATION
22Item 6.
Exhibits
22Signatures
23Exhibit IndexPART I — FINANCIAL INFORMATION

ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

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

September 30,

December 31,2010

2009(Unaudited)AssetsCurrent assetsCash

$
196

$
4,973Accounts receivable


486


307Inventories, net


3,045


3,256Prepaid expenses and other current assets


110


65Total current assets


3,837


8,601Property and equipment, net


1,774


1,228Goodwill


-


1,233Other intangible assets, net


-


4,353Deposits and other assets, net


32


173Total assets

$
5,643

$
15,588Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable and accrued expenses

$
1,905

$
851Stockholders' equityCommon stock, $0.001 par value, 750,000,000 million shares authorized,230,293,141 issued and outstanding as of September 30, 2010 (unaudited)and December 31, 2009, respectively


230


230Additional paid-in capital


25,773


25,722Note receivable from stockholder


(50)


(50)Accumulated deficit


(22,215)


(11,165)Total stockholders' equity


3,738


14,737Total liabilities and stockholders' equity

$
5,643

$
15,588The 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 30,2010

2009

2010

2009Net sales

$
771

$
436

$
2,750

$
1,314Cost of sales


1,789


84


2,182


254Gross profit (deficit)


(1,018)


352


568


1,060Research and development expenses


249


123


848


329Selling, general and administrative expenses


1,563


1,440


5,519


4,521Impairment charges


5,283


-


5,283


-Loss from operations


(8,113)


(1,211)


(11,082)


(3,790)Interest and other income, net


-


6


32


22Loss before income tax provision


(8,113)


(1,205)


(11,050)


(3,768)Provision for income taxes


-


-


-


-Net loss

$
(8,113)

$
(1,205)

$
(11,050)

$
(3,768)Net loss available to common stockholders per share:Basic and diluted

$
(0.04)

$
(0.01)

$
(0.05)

$
(0.02)Weighted average shares outstanding:Basic and diluted

230,293,141

206,157,409

230,293,141

204,302,897The 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 30,2010

2009Cash flows from operating activitiesNet loss
$
(11,050)

$
(3,768)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization

967


878Stock option compensation

51


89Impairment of goodwill and other intangible assets

5,283


-Inventory reserve

1,620


-Changes in operating assets and liabilities:Accounts receivable

(178)


(65)Inventories

(1,409)


(1,051)Prepaid expenses and other current assets

(45)


36Accounts payable and accrued expenses

1,054


251Net cash used in operating activities

(3,707)


(3,630)Cash flows from investing activitiesPurchases of property and equipment

(1,070)


(862)Increase in deposit and other assets

-


(189)Net cash used in investing activities

(1,070)


(1,051)Cash flows from financing activitiesProceeds from private placements, net of issuance costs

-


3,193Net cash used in investing activities

-


3,193Net change in cash

(4,777)


(1,488)Cash, beginning of period

4,973


3,095Cash, end of period
$
196

$
1,607Supplemental disclosure of cash flow information:Interest paid
$
-

$
-Income taxes paid
$
-

$
-The accompanying notes are an integral part of these condensed consolidated financial statements.3CARDO MEDICAL, INC.
                    Notes to Condensed Consolidated Financial Statements
                              September 30, 2010
                                   (Unaudited)
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Cardo Medical, Inc. ("Cardo" or the "Company") is an orthopedic medical
device company specializing in designing, developing and marketing high performance 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.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2009, 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, 2010 and for the three and nine months ended September 30, 2010 and 2009, 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, 2010 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, 2009 filed with the SEC on March 31, 2010.

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.

Management's PlanAs reflected in the accompanying financial statements, the Company had
losses from operations of $11,050,000 and negative cash flows from operations of $3,707,000 during the nine months ended
September 30, 2010, an accumulated deficit of $22,215,000 and limited cash to fund its future operations. Management
anticipates that the Company will sustain further losses through the fourth quarter of 2010 and require additional capital to
supplement operations. Thus far, the Company has been able to finance its operating losses through a series of equity
issuances.  Nevertheless, there is no assurance that the Company will be able to finance any future operating losses and as
such, there is substantial doubt about the Company's ability to continue as a going concern. The Company's financial
condition deteriorated rapidly during the quarter ended September 30, 2010. Management is actively seeking various sources
of financing; however, there are no assurances that any such financing can be obtained on favorable terms, if at all. Cardo's
management and board of directors have met frequently during the quarter ended September 30, 2010 and through the date
of this filing to contemplate the steps by which management will follow to maintain operations without business interruptions.

4During October and November 2010, the Company's management took the following measures:



terminated over half of the Company's employees;
had the Company's Chief Executive Officer and President forego their salaries;
reduced office space by not renewing the corporate headquarters facility lease;
scaled back research and development activities;
deferred manufacturing of inventories required to build additional base-level implant banks; and
engaged an investnent adviser to assist it in seeking alternative sources of capital; including selling of some or all of the
Company's assets and other strategic alternatives.Management continues to closely monitor its operating costs to conserve cash until additional funds
become available through financing or operating activities.

Due to the Company's financial condition and continued inability to raise sufficient funds in order to
fully execute a profitable sales strategy, the Company evaluated the carrying amounts of the Company's goodwill and other
intangible assets for recoverability. Based on the results of these tests, management determined that the fair values of these
assets were less than their respective carrying values. As such, impairment charges totaling $5,283,000 were charged to
operations during the quarter ended September 30, 2010. Additionally, Cardo's management evaluated the net realizable
value of its inventories and, based on reduced future projected revenues, recorded an inventory reserve of $1,620,400 at
September 30, 2010.


In view of the matters described above, recoverability of a major portion of the recorded asset
amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company,
which, in turn, is dependent upon the Company's ability to continue to raise capital and ultimately generate positive cash flows
from operations. The financial statements do not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable
to continue its existence.

Inventory

Inventory is stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out
basis; and the inventory is primarily comprised of work in process and finished goods. Work in process consists of fabrication
costs paid relating to items currently in production. Finished goods are completed knee, spine and hip replacement products
ready for sales 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. Management recorded an excess inventory reserve of $1,620,400 during the quarter ended
September 30, 2010. Cardo did not have any inventory considered by management to be excess or obsolete as of December
31, 2009.

5Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired
businesses after amounts allocated to other intangible assets. Other intangible assets include a royalty agreement, developed
technology and customer relationships which are amortized on a straight-line basis over 2 to 10 years. Goodwill and other
intangible assets were generated when the Company acquired the non-controlling interests of Accelerated, Cervical and
Uni.
Goodwill and Long-Lived Assets Impairment

Goodwill and long-lived assets are assessed for impairment annually or more frequently if events or
circumstances occur that indicate that the carrying amount of the assets may not be recoverable. Cardo conducts its annual
evaluations for impairment at the end of the fourth quarter of each year. The Company concluded that there were no such
events or changes in circumstances during 2009; however, during the quarter ended September 30, 2010, the changes in
Cardo's financial condition and continued inability to raise sufficient funds in order to fully execute a profitable sales strategy
indicated the carrying values of its goodwill and other intangible assets may not be recoverable. Goodwill impairment testing
is based on a two step process, where the first step compares the fair value of the reporting unit to the carrying value of the
unit.  If the first step test indicates impairment, the second step test compares the fair value of a reporting unit with its carrying
value using discounted cash flow projections. Long-lived asset impairment testing compares the projected undiscounted
future cash flows associated with the related 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. These
evaluations require us to make certain assumptions and estimate future revenues and profitability.

Based on the assessments performed for the year ended December 31, 2009, the Company
determined that the fair value of the knee and hip reporting units were in excess of the corresponding assets' carrying value
as of December 31, 2009. Accordingly, no impairment charges were recorded for the year ended December 31,
2009.

During the quarter ended September 30, 2010, Cardo's management performed an assessment of its
goodwill and other intangible assets for impairment. The Company's management determined that the fair value of the knee
and hip reporting units were not in excess of the corresponding assets' carrying value as of September 30, 2010 and recorded
a non-cash impairment charge of $4,050,000 during the quarter then ended. In addition, management recorded a non-cash
impairment charge of $1,233,000 against the goodwill associated with the knee and hip reporting units.

Net Loss Per ShareBasic net (loss) income
per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net
(loss) income per share is computed giving effect to all dilutive potential common shares that were outstanding during the
period. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options or
warrants.  No dilutive potential common shares are included in the computation of any diluted per share amount when a loss
from continuing operations is reported by the Company because they are anti-dilutive.Concentrations

As of September 30, 2010, the Company had two customers that accounted for 28.6% and 10.3%,
respectively, of its accounts receivable. As of December 31, 2009, the Company had four customers that accounted for
28.2%, 15.6%, 15.4% and 10.0%, respectively, of its accounts receivable.


The Company had four customers that comprised 20.5%, 14.0%, 13.4% and 11.4%, respectively, of
the Company's net sales for the three months ended September 30, 2010.  The Company had two customers that comprised
45.3%, and 28.7%, respectively, of the Company's net sales for the three months ended September 30, 2009.

The Company had three customers that comprised 17.6%, 14.9% and 14.0%, respectively, of the
Company's net sales for the nine months ended September 30, 2010.  The Company had three customers that comprised
31.2%, 26.6%, and 14.9%, respectively, of the Company's net sales for the nine months ended September 30, 2009.

Reclassifications

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

6Recent Accounting Pronouncements

There are no recently issued accounting pronouncements that the Company has yet to adopt that are
expected to have a material effect on its financial position, results of operations, or cash flows.

NOTE 2 — INVENTORY

Inventories consisted of the following at:

(In thousands)
September 30,

December 31,2010

2009(Unaudited)Packaging materials
$
85

$
24Work in process

927


360Finished goods

3,653


2,8724,665


3,256Less: inventory reserve

(1,620)


-$
3,045

$
3,256During the quarter ended September 30, 2010, the Company's recorded an
inventory reserve of $1,620,400 to reflect excess inventory on-hand or in-process implant components as of September 30,
2010. Of this amount, $567,000 was allocable to Cardo's Recon Division and $1,053,400 was allocable to Cardo's Spine
Division. The inventory reserve is included with inventory usage in cost of goods sold in the accompanying condensed
consolidated statements of operations for the three and nine months ended September 30, 2010.

NOTE 3 — GOODWILL AND INTANGIBLE ASSET IMPAIRMENT

In 2008, the Company completed the acquisition of the Uni, Cervical and Accelerated minority
interests, which were accounted for using the purchase accounting method.  The transactions resulted in the following
goodwill and intangible assets as of December 31, 2008 and 2009.

(in thousands)

Uni


Cervical


Accelerated


TotalEstimated fair value of tangible netassets acquired
$
15

$
(19)

$
786

$
782In-process research and development

-


-


938


938Other tangible assets

2,034


-


3,293


5,327Goodwill

-


1,457


1,233


2,690Total purchase price
$
2,049

$
1,438

$
6,250

$
9,737Other intangible assets identified in the transactions related to a royalty
agreement, developed technology and customer relationships. These assets belong in the knee and hip reporting units under
the Reconstructive segment. The goodwill resulting from the acquisition of Accelerated belongs in the knee and hip reporting
units and the goodwill resulting from the acquisition of Cervical belongs in the internally developed reporting unit under the
Spine segment. The amounts allocated to in-process research and development for Accelerated were recorded as research
and development expenses in the consolidated statement of operations during the year ended December 31, 2008.  Goodwill
associated with the purchase of Cervical was deemed to be impaired and written off during the year ended December 31,
2008.

During the quarter ended September 30, 2010, due to the Company's financial condition and
continued inability to raise sufficient funds in order to fully execute a profitable sales strategy, the Company determined an
interim impairment test was necessary. Based upon the assessments, it was determined that the fair value of the Company's
knee and hip reporting units were below their respective assets' carrying values at September 30, 2010. Accordingly, the
Company recognized a non-cash goodwill impairment charge of $1,233,000 and an impairment charge to its7other intangible assets of $4,050,000 in the accompanying condensed consolidated statements of operations for the three and nine months
ended September 30, 2010. As a result of these impairment charges, the goodwill and other intangible assets had no
remaining book value as of September 30, 2010. There was no income tax effect as the corresponding income tax assets
were offset by a full valuation account.
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 nine months ended September 30, 2010 and 2009 in the accompanying condensed
consolidated statements of operations amounted to $51,082 and $89,562, respectively. Stock option compensation
recognized for the three months ended September 30, 2010 and 2009 in the accompanying condensed consolidated
statements of operations amounted to $15,486 and $27,105, respectively.The fair value of each option award was 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 incorporates ranges of assumptions for inputs, those ranges are disclosed. To estimate
volatility of the options over their expected terms, the Company measured 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 measured the volatility of other public companies with similar size and industry characteristics to Cardo for the same
period. These measurements were averaged and the result was used as expected volatility. As there was no history of option
lives at Cardo, the expected term of options granted was 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 was based on the U.S. Treasury yield curve
in effect at the time of grant. The forfeiture rate was 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, 2010, and changes
during the period then ended is presented below.

Weighted-Weighted-

AverageAverage

Remaining


AggregateExercise

Contractual


IntrinsicOptions


Price

Life (Years)


ValueOutstanding at December 31, 2009
2,036,000

$
0.23Granted
-


-Exercised
-


-Forfeited
(69,600)

$
0.23Outstanding at September 30, 2010 (unaudited)
1,966,400

$
0.23

7.92

$
334,288Exercisable at September 30, 2010 (unaudited)
589,920

$
0.23

7.92

$
100,286The aggregate intrinsic value represents the closing stock price as of September 30, 2010 less the
exercise price, multiplied by the number of options that have an exercise price that is less than the closing stock price.

On April 8, 2010, the Board of Directors approved the 2010 Equity Incentive Plan (the "2010
Incentive Plan"), which was voted on and approved by the Company's stockholders at the Annual Meeting held on June
16, 2010. The 2010 Incentive Plan authorizes the Company to grant up to 23,000,000 incentive stock options, stock
appreciation rights, restricted stock grants, restricted stock units, performance shares, performance units or cash awards. As
of the date of this filing, no awards have been granted under the 2010 Incentive Plan.

8NOTE 5 — STOCKHOLDERS' EQUITY

The Company's authorized capital consists of 750,000,000 shares of common stock and 50,000,000
shares of preferred stock.  The Company's preferred stock may be designated into series pursuant to authority granted by its
Certificate of Incorporation, and on approval from its Board of Directors.  As of September 30, 2010, the Company did not
have any preferred stock issued.
NOTE 6 — SEGMENT INFORMATION

The Company'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 the Company's unicompartmental knee, patellofemoral
products, and the total knee and hip products.  The Spine Division segment is comprised of the spinal lumbar fusion system,
cervical plate and screw systems, and various interbody products.

The division into these reportable segments is 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 Company's 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 Company's 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 of the unique characteristics of this product line, the Spine Division is
considered by management as a separate segment.

Prior to September 30, 2010, the Company's Reconstructive Division included $1,233,000 of goodwill
and $4,050,000 in other intangible assets, net of amortization, relating to the Company's unicompartmental knee and hip
products. These assets were determined by Cardo's management to be fully impaired during the current quarter.


9The following table sets forth financial information by reportable segment as of September 30, 2010
and for the three and nine months ended September 30, 2010 and 2009:

(In thousands)
Reconstructive

SpineDivision

Division

Corporate

TotalNine Months Ended September 30, 2010 (unaudited)Net sales
$
1,686

$
1,064

$
-

$
2,750Total cost of sales and operating expenses

896


1,286


5,400


7,582Depreciation and amortization

916


10


41


967Impairment charges

5,283


-


-


5,283Interest and other income, net

-


-


32


32Net loss
$
(5,409)

$
(232)

$
(5,409)

$
(11,050)Property and equipment acquisitions
$
805

$
135

$
130

$
1,070Total assets
$
4,257

$
832

$
554

$
5,643Nine Months Ended September 30, 2009 (unaudited)Net sales
$
1,175

$
139

$
-

$
1,314Total cost of sales and operating expenses

226


28


3,972


4,226Depreciation and amortization

848


4


26


878Interest and other income, net

-


-


22


22Net income (loss)
$
101

$
107

$
(3,976)

$
(3,768)Three Months Ended September 30, 2010 (unaudited)Net sales
$
597

$
174

$
-

$
771Total cost of sales and operating expenses

692


1,097


1,531


3,320Depreciation and amortization

262


4


15


281Impairment charges

5,283


-


-


5,283Interest and other income, net

-


-


-


-Net loss
$
(5,640)

$
(927)

$
(1,546)

$
(8,113)Three Months Ended September 30, 2009 (unaudited)Net sales
$
351

$
85

$
-

$
436Total cost of sales and operating expenses

76


8


1,250


1,334Depreciation and amortization

303


2


8


313Interest and other income, net

-


-


6


6Net income (loss)
$
(28)

$
75

$
(1,252)

$
(1,205)Included in cost of
sales for the three and nine months ended September 30, 2010 in the Reconstructive Division is $567,000 of inventory
reserves. Included in cost of sales for the three and nine months ended September 30, 2010 in the Spine Division is
$1,053,400 of inventory reserves. 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

In November 2010, the Company entered into two secured promissory notes (collectively, the
"Notes") with two individuals (collectively, the "Lenders"). The aggregate proceeds from the Notes
were $500,000. One of the Lenders is the brother of the Company's Chief Executive Officer. The Notes mature on March 2,
2011 and March 4, 2011, respectively, which may be extended for up to 60 days by the Company, provided the Company
gives the Lenders notice of such extension period at least two business days prior to the maturity date, and bear simple
interest at 12% per annum.
In connection with the Notes, the Company entered into a security agreement with each lender,
in which the Company granted a security interest, up to the amount of the principal and interest, in all of the Company's right,
title and interest in all of the Company's assets, other than its accounts receivable.

10ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONSThe 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.

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 in conjunction 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.

Overview
Cardo Medical, Inc. is an orthopedic medical device company specializing in designing, developing
and marketing high performance 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, we are focused on developing surgical
devices, instrumentation and techniques that will enable surgeons to move what are typically inpatient surgical procedures to
the outpatient world. We commercialize our reconstructive joint devices through our Reconstructive division and our spine
devices through our Spine division. We launched and commenced sales of our first product in December 2006, which was a
high performance unicompartmental knee replacement. We commenced sales of our other reconstructive products in 2007 and
our spine products in 2008.

We are headquartered in Van Nuys, California. In connection with the consummation of the merger
with clickNsettle.com, Inc. ("CKST"), CKST approved through its stockholders 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 was changed to "CDOM.OB" in connection
with the name change. Cardo Medical's common stock is quoted on the National Association of Securities Dealers, Inc., Over-the-Counter Bulletin Board.

Critical Accounting Policies

Use of EstimatesFinancial statements prepared in accordance with United States generally
accepted accounting principles ("U.S. GAAP") 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 income tax assets and the allocation of the purchase
price paid for the minority interests in Accelerated Innovation, Inc. ("Accelerated"), Cervical Xpand LLC
("Cervical ") and Uni-Knee LLC ("Uni"). Given the short operating history of Cardo, actual results could
differ from those estimates.

11Revenue Recognition

We recognize revenue when it is realizable and earned. Management 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 we receive 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 can pursue collections if necessary. As we do not accept returns and do not have any
post-sale obligations, the date of revenue recognition is on the date of surgery.

Inventory

Inventory is stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out
basis; and the inventory is primarily 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, hip and spine replacement products
ready for resale to customers.

At each balance sheet date, management evaluates the ending inventories for excess quantities and
obsolescence. This evaluation includes an analysis of sales levels by product type. Among other factors, we consider 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. Management recorded an inventory reserve of $1,620,400 during the quarter ended September 30, 2010

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.

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired
businesses after amounts allocated to other intangible assets. Other intangible assets include a royalty agreement, developed
technology and customer relationships which are amortized on a straight-line basis over 2 to 10 years. Goodwill and other
intangible assets were generated when we acquired the non-controlling interests of Accelerated, Cervical and Uni.

Goodwill and Long-Lived Assets Impairment

Goodwill and long-lived assets are assessed for impairment annually or more frequently if events or
circumstances occur that indicate that the carrying amount of the assets may not be recoverable. We conduct our annual
evaluations for impairment at the end of the fourth quarter of each year. We concluded that there were no such events or
changes in circumstances during 2009; however, during the quarter ended September 30, 2010, the changes in our financial
condition and continued inability to raise sufficient funds in order to fully execute a profitable sales strategy indicated the
carrying values of our goodwill and other intangible assets may not be recoverable. We conduct our annual evaluations for
impairment at the end of the fourth quarter of each year. Goodwill impairment testing is based on a two step process, where
the first step compares the fair value of the reporting unit to the carrying value of the unit.  If the first step test indicates
impairment, the second step test compares the fair value of a reporting unit with its carrying value using discounted cash flow
projections. Long-lived asset impairment testing compares the projected undiscounted future cash flows associated with the
related assets over their estimated useful lives against12their 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. These evaluations require us to make certain
assumptions and estimate future revenues and profitability.

Based on the assessment performed for the year ended December 31, 2009, we determined that the
fair value of the knee and hip reporting units were in excess of the corresponding assets' carrying value as of
December 31, 2009. Accordingly, no impairment charges were recorded for the year ended December 31, 2009.

During the quarter ended September 30, 2010, management performed an assessment of our goodwill
and other intangible assets for impairment. Our management determined that the fair value of the knee and hip reporting units
were not in excess of the corresponding assets' carrying value as of September 30, 2010 and recorded a non-cash impairment
charge of $4,050,000 during the quarter then ended. In addition, management recorded a non-cash impairment charge of
$1,233,000 against the goodwill associated with the knee and hip reporting units.

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. Management
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. Management also considers whether the requisite service has been rendered when recognizing compensation
costs. 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 our options. We also measure the volatility of other public
companies with similar size and industry characteristics to us 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 our company, 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 us.

Income Taxes

On August 29, 2008, Cardo LLC consummated a reverse merger with CKST thereby adopting
CKST as the taxpaying entity.

Our 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, we may only recognize or continue to
recognize tax positions that meet a "more likely than not" threshold.  Based on this analysis, our tax position is
unlikely to change.

Recent Accounting Pronouncements

There are no recently issued accounting pronouncements that we have yet to adopt that are expected
to have a material effect on our financial position, results of operations, or cash flows.

13Results of Operations for the Three Months Ended September 30, 2010 as
Compared to the Three Months Ended September 30, 2009.The following is a comparison of the consolidated results of operations for Cardo for the three
months ended September 30, 2010 and 2009:

(In thousands)

Three Months EndedSeptember 30,2010

2009

VarianceNet sales
$
771

$
436

$
335Cost of sales

1,789


84


1,705Gross profit (loss)

(1,018)


352


(1,370)Research and development expenses

249


123


126Selling, general and administrative expenses

1,563


1,440


123Impairment charges

5,283


-


5,283Loss from operations

(8,113)


(1,211)


(6,902)Interest and other income, net

-


6


(6)Loss before income tax provision

(8,113)


(1,205)


(6,908)Provision for income taxes

-


-


-Net loss
$
(8,113)

$
(1,205)

$
(6,908)RevenuesDuring the quarter ended September 30, 2010, we generated revenues of
$771,000 compared to $436,000 for the same period in 2009. The $335,000 increase resulted from
wider acceptance of our knee and spine products by orthopedic and back surgeons. We experienced significant growth in
knee products sales, an increase of $177,000, in the current quarter as compared to 2009. This was primarily a result of sales
from our total knee system. There were no such comparable total knee sales in 2009. Sales of our spine products also
increased $89,000 in 2010 compared to 2009. We introduced the resale of interbody spinal devices during the 2010 first
quarter, which was a major contributor to the increase in spine sales. There were no such comparable interbody sales in
2009. Hip sales increased $69,000 in 2010 compared to 2009 due to a new customer and higher sales volume. Our knee and
hip products accounted for 61% of total sales during the three months ended September 30, 2010 compared to 79% in
2009.

Gross Profit

During the quarter ended September 30, 2010, we had cost of sales of
$1,789,000, which

Research and Development Expenses

During the quarter ended September 30, 2010, we had research and
development expenses of $249,000 compared to $123,000 for the same period in 2009.  The
increase in the current year is primarily a net result of direct labor allocations and increased volume of customized
instrumentation created for surgeons offset by lower research costs associated with certain hip and total knee products.
Research and development activities will likely decrease during the 2010 fourth quarter and into 2011 as we continue to scale
back our operations to optimize expenses.

14

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Selling, General and Administrative Expenses

During the quarter ended September 30, 2010, we had selling general and
administrative expenses of $6,846,000 compared to $1,440,000 in the same period of 2009, an increase of
$5,406,000. The impairment charges related to our goodwill and other intangible assets accounted for
$5,283,000 of the increase in 2010. Sales commissions increased by $83,000 in 2010 which was mostly consistent with our
higher sales volume and some higher commission rates to certain distributors. Depreciation and amortization expense
decreased by $33,000 in 2010 due to a fully amortized intangible asset and fully depreciated instruments. Professional fees
were also lower in 2010 compared to 2009 as we began to defer corporate expansion projects. Travel to new and prospective
hospitals and industry conferences increased in 2010 along with rent and office expenses as we added office space and our
overall business activity was greater than it was in 2009. Management will continue to explore various ways to optimize such
overhead costs in the fourth quarter of 2010 and into 2011 as we continue our efforts to conserve working capital.

Impairment Charges

During the quarter ended September 30, 2010, our management assessed
the recoverability of the carrying values of our goodwill and other intangible assets. Management determined that the fair
value of the knee and hip reporting units were not in excess of the corresponding assets' carrying value as of September 30,
2010 and recorded a non-cash impairment charge of $4,050,000 during the quarter then ended. In addition, management
recorded a non-cash impairment charge of $1,233,000 against the goodwill associated with the knee and hip reporting
units.

Interest and Other Income

During the quarter ended September 30, 2010, we had nominal interest
income compared to $6,000 during the same period in 2009

Results of Operations for the Nine Months Ended September 30, 2010 as Compared to the Nine
Months Ended September 30, 2009.

The following is a comparison of the consolidated results of operations for Cardo for the nine
months ended September 30, 2010 and 2009:

|(In thousands)                               |      | Nine Months Ended |      |   |          |  |  
|-------------------------------------------- | ---- | ----------------- | ---- | - | -------- |  | -
|                                             |      | September 30,     |      |   |          |  |  
|                                             | 2010 |                   | 2009 |   | Variance
|                                             |      |                   |      |   |          |  |  
|Net sales                                    | $    | 2,750             |      | $ | 1,314    |  | $
|Cost of sales                                |      | 2,182             |      |   | 254      |  |  
|Gross profit                                 |      | 568               |      |   | 1,060    |  |  
|Research and development expenses            |      | 848               |      |   | 329      |  |  
|Selling, general and administrative expenses |      | 5,519             |      |   | 4,521    |  |  
|Impairment charges                           |      | 5,283             |      |   | -        |  |  
|Loss from operations                         |      | (11,082)          |      |   | (3,790)  |  |  
|Interest and other income, net               |      | 32                |      |   | 22       |  |  
|Loss before income tax provision             |      | (11,050)          |      |   | (3,768)  |  |  
|Provision for income taxes                   |      | -                 |      |   | -        |  |  
|Net loss                                     | $    | (11,050)          |      | $ | (3,768)  |  | $

Revenues

During the nine months ended September 30, 2010, we generated
revenues of $2,750,000 compared to $1,314,000 for the same period in 2009

15

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primarily a result of sales from our total knee system. There were nominal comparable total knee
sales in 2009. Hip sales increased $119,000 in 2010 compared to 2009 due to a new customer and higher sales volume. Our
knee and hip products accounted for 61% of total sales during the nine months ended September 30, 2010 compared to 89%
in 2009.

Gross Profit

During the nine months ended September 30, 2010, we had cost of sales of
$2,182,000, which

Research and Development Expenses

During the nine months ended September 30, 2010, we had research and
development expenses of $848,000 compared to $329,000 for the same period in

Selling, General and Administrative Expenses

During the nine months ended September 30, 2010, we had selling general
and administrative expenses of $10,802,000 compared to $4,521,000 in the same period of

Impairment Charges

During the quarter ended September 30, 2010, our management assessed
the recoverability of the carrying values of our goodwill and other intangible assets. Management determined that the fair
value of the knee and hip reporting units were not in excess of the corresponding assets' carrying value as of September 30,
2010 and recorded a non-cash impairment charge of $4,050,000 during the quarter then ended. In addition, management
recorded a non-cash impairment charge of $1,233,000 against the goodwill associated with the knee and hip reporting
units.

Interest and Other Income

During the nine months ended September 30, 2010, we had interest
income of $10,000 compared to $22,000 during the same period in 2009

16

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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 the Company's unicompartmental
knee, patellofemoral products, and the total knee and hip products.  The Spine Division segment is comprised of the spinal
lumbar fusion system, cervical plate and screw systems, and various interbody products.

The division into these reportable segments is 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 of the unique characteristics of this product line, the Spine Division is considered by management as a
separate segment.

Prior to September 30, 2010, our Reconstructive Division included
$1,233,000 of goodwill and $4,050,000 in other intangible assets, net of amortization, relating to our unicompartmental knee
and hip products. These assets were determined by our management to be fully impaired during the current quarter.

The following table sets forth summarized financial results by reportable segment for the three and
nine months ended September 30, 2010 and 2009:

|(In thousands)                                    | Reconstructive |         | Spine    |   |           |  |       |         | 
|------------------------------------------------- | -------------- | ------- | -------- | - | --------- |  | ----- | ------- | 
|                                                  | Division       |         | Division |   | Corporate |  | Total
|                                                  |                |         |          |   |           |  |       |         | 
|Nine Months Ended September 30, 2010 (unaudited)  |                |         |          |   |           |  |       |         | 
|Net sales                                         | $              | 1,686   |          | $ | 1,064     |  | $     | -       | 
|Total cost of sales and operating expenses        |                | 896     |          |   | 1,286     |  |       | 5,400   | 
|Depreciation and amortization                     |                | 916     |          |   | 10        |  |       | 41      | 
|Impairment charges                                |                | 5,283   |          |   | -         |  |       | -       | 
|Interest and other income, net                    |                | -       |          |   | -         |  |       | 32      | 
|Net loss                                          | $              | (5,409) |          | $ | (232)     |  | $     | (5,409) | 
|                                                  |                |         |          |   |           |  |       |         | 
|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 and other income, net                    |                | -       |          |   | -         |  |       | 22      | 
|Net income (loss)                                 | $              | 101     |          | $ | 107       |  | $     | (3,976) | 
|                                                  |                |         |          |   |           |  |       |         | 
|Three Months Ended September 30, 2010 (unaudited) |                |         |          |   |           |  |       |         | 
|Net sales                                         | $              | 597     |          | $ | 174       |  | $     | -       | 
|Total cost of sales and operating expenses        |                | 692     |          |   | 1,097     |  |       | 1,531   | 
|Depreciation and amortization                     |                | 262     |          |   | 4         |  |       | 15      | 
|Impairment charges                                |                | 5,283   |          |   | -         |  |       | -       | 
|Interest and other income, net                    |                | -       |          |   | -         |  |       | -       | 
|Net loss                                          | $              | (5,640) |          | $ | (927)     |  | $     | (1,546) | 
|                                                  |                |         |          |   |           |  |       |         | 
|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 and other income, net                    |                | -       |          |   | -         |  |       | 6       | 
|Net income (loss)                                 | $              | (28)    |          | $ | 75        |  | $     | (1,252) | 

17

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Included in cost of sales for the three and nine months ended September
30, 2010 in the Reconstructive Division is $567,000 of inventory reserves. Included in cost of sales for the three and nine
months ended September 30, 2010 in the Spine Division is $1,053,400 of inventory reserves. 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.

Liquidity and Capital Resources

Net cash used in operating activities was $3,707,000 for the nine months ended September 30, 2010
compared to $3,630,000 for the same period in 2009. The primary use of cash in 2010 beyond wages and other operating
costs was the continued build-up of inventory, which has increased approximately $1.4 million during the current year.

Net cash used in investing activities was $1,070,000 for the nine months ended September 30, 2010
compared to $1,051,000 for the same period in 2009. The cash used for investment activities during 2010 was 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.

There was no cash raised by financing activities during the nine months ended
September 30, 2010 compared to $3,193,000 in 2009. The prior year amount reflects the net proceeds from two equity
investment transactions. Our working capital at September 30, 2010 along with the subsequently received proceeds of
$500,000 from two promissory notes should allow us to meet our cash needs through the remainder of 2010. Refer to Note 7
of our condensed consolidated financial statements included in Item 1 for a description of the two promissory notes. One of the
individual lenders of the promissory notes is the brother of our Chief Executive Officer.

Our available funds are not projected to meet all of our working capital needs for the next twelve
months. We anticipate that we will sustain further losses through the fourth quarter of 2010, and require additional capital to
supplement operations which creates substantial doubt about our ability to continue as a going concern. Management is
actively seeking various sources of financing; however, there are no assurances that any such financing can be obtained on
favorable terms, if at all. During October and November 2010, the Company's management took the following measures:


terminated over half of the Company's employees;
had the Company's Chief Executive Officer and President forego their salaries;
reduced office space by not renewing the corporate headquarters facility lease;
scaled back research and development activities;
deferred manufacturing of inventories required to build additional base-level implant banks;
and
engaged an investment adviser to assist it in seeking alternative sources of capital, including
selling of some or all of the Company's assets and other strategic alternativesManagement is closely monitoring its operating costs to conserve cash until additional funds become
available through financing or operating activities.

There can be no assurance that our efforts to obtain alternative sources of capital, including selling of
some or all of the Company's assets and other strategic alternatives will be successful or that the terms of such alternative
sources of capital, even if available, will be on terms acceptable to us. Our ability to continue as a going concern is dependent
upon receiving additional funds through one or more of these measures.  If we are unable to fund our cash flow
needs, in order to continue our operations we will have to further reduce or scale back our operations, eliminate our research
and development programs, 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.18We 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, 2009 and includes the following:We may need to raise additional funds in the future to fund our
operations and research, and these funds may not be available on acceptable terms, if at all.



































19

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- If conflicts arise between collaborators or advisors and us, any of these parties may act in its self-
interest, which may be adverse to our interests and the interests of our stockholders.
- If we fail to properly manage our anticipated growth, our business could suffer.
- If we fail to upgrade our management information systems, or if those systems do not operate as
expected, we could experience significant disruption of our business and product developments and our results could
suffer.
- If a natural or man-made disaster strikes a facility in which our products are manufactured, we
could be unable to deliver our products for a substantial amount of time and our sales could decline.
- 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. Compliance with the various complex laws and
regulations is costly and time consuming, and failure to comply can have adverse consequences on our business.
- 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.
- Some proponents have advocated the creation of a national database or registry that tracks how
patients with artificial joints fare.  Any requirement for surgeons to participate in such a registry may adversely affect our
ability to sell our products profitably.
- We are an 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 and our sales are difficult to forecast.
- 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.
- 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.
- Patent infringement lawsuits brought against us could have a material adverse affect on our
ability to develop and sell our products and to operate profitably.
- 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.
- Some countries may require us to grant compulsory licenses to third parties.  These licenses
could be extended to include some of our products or potential product, which may limit our potential revenue
opportunities.
- 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.

20

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- We expect that the price of our common stock will fluctuate substantially, potentially adversely
affecting the ability of investors to sell their shares.
- We may become involved in securities class action litigation that could divert management's
attention and harm its business.
- 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 stockholders, which could affect our stock price adversely
and prevent attempts by our stockholders 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 stockholders and the
sale of those shares could adversely affect the stock price.
- Directors, executive officers, principal stockholders 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
stockholders.
- Our stock price could decline as a result of our failure to meet reporting and other regulatory
requirements.
- Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-
Oxley Act could have a material adverse effect on our business and stock 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.
- Stockholders may experience significant dilution if future equity offerings are used to fund
operations or acquire complementary businesses.
- We do not intend to pay cash dividends.  Any return on investment may be limited to the value of our common stock, if
any.
- 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. Additional risks include the effects on our operations and financial results of reducing our workforce in our sales and
marketing functions, the amount and timing of expenses associated with our workforce reduction, whether we may have to lay
off additional employees, whether we may have to further scale back or cease our operations, whether we are able to identify
and successfully consummate any strategic or liquidity alternatives, and the impact of our current liquidity and financial
uncertainty on customers and vendors and their willingness to continue to conduct business with us on the same terms or at
all.

ITEM 4 — CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are
designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in the Commission's rules and forms, and that such information is
accumulated and communicated to our management, including our principal executive officer and our principal financial
officer, as appropriate, to allow timely decisions regarding required disclosure.

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We carried out an evaluation under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this
quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of September 30, 2010.

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, 2010 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 **
|*             |  | Filed herewith                                                                                                                                                             
|**            |  | Furnished herewith                                                                                                                                                         

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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 22, 2010 | By:                
|                  |                    
|                  |                    
|                  |                    
|                  |                    
|November 22, 2010 | By:                
|                  |                    
|                  |                    

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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
|*             |  | Filed herewith                                                                                                                                                                    
|**            |  | Furnished herewith                                                                                                                                                                









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