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**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, 2007**

**OR**

| **o** | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------|

**Commission      File No. 0-51172**

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**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Exact      name of registrant as specified in its charter)**

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|                                                                                                |   |                                                                      |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|
| **Delaware**                                                                                        |   | **33-0795984**                                                            |
| **(State                or other jurisdiction of****incorporation                or organization)** |   | **(I.R.S.                Employer****Identification                No.)** |

**1635      Village Center Circle, Suite 250**

**Las      Vegas, Nevada**

**(Address      of principal executive offices)**

**89134**

**(Zip      Code)**

**702-839-7200**

**(Registrant's      telephone number, including area code)**

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**Cardiovascular      Biotherapeutics, Inc.**

**FORM      10-Q**

**FOR      THE QUARTER ENDED SEPTEMBER 30, 2007**

**INDEX**

|                                                                                                                   |    |                                                                                                                                                                                                                                                  |    | **Page** |
|------------------------------------------------------------------------------------------------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|----------|
| **Part                I - Financial Information**                                                                      |    | 3                                                                                                                                                                                                                                                     |
|                                                                                                                   |         |                                                                                                                                                                                                                                                  |
| Item 1.                                                                                                           |    | Financial                Statements                                                                                                                                                                                                                   |    | 3        |
|                                                                                                                   |    | Balance                Sheets as of December 31, 2006 and September 30, 2007                (Unaudited)                                                                                                                                               |    | 3        |
|                                                                                                                   |    | Statements                of Operations (Unaudited) for the Nine Month and Three Month Periods                Ended                September 30, 2006, 2007 and for the period from March 11, 1998                (inception) to September 30, 2007   |    | 4        |
|                                                                                                                   |    | Statements                of Stockholders' Equity (Deficit) (Unaudited) for the period from                March                11, 1998 (inception) to September 30, 2007                                                                            |    | 5        |
|                                                                                                                   |    | Statements                of Cash Flows (Unaudited) for the Nine Month Periods Ended September                30,                2006 and 2007 and for the period from March 11, 1998 (inception)                to                September 30, 2007 |    | 8        |
|                                                                                                                   |    | Notes                to Unaudited Financial Statements                                                                                                                                                                                                |    | 10       |
| Item 2.                                                                                                           |    | Management's                Discussion and Analysis of Financial Condition and Results of                Operations                                                                                                                                   |    | 44       |
| Item 3.                                                                                                           |    | Quantitative                and Qualitative Disclosures About Market Risk                                                                                                                                                                             |    | 54       |
| Item 4.                                                                                                           |    | Controls                and Procedures                                                                                                                                                                                                                |    | 54       |
|                                                                                                                   |         |
| **Part                II - Other Information**                                                                         |    |                                                                                                                                                                                                                                                  |
|                                                                                                                   |         |                                                                                                                                                                                                                                                  |
| Item 1.                                                                                                           |    | Legal                Proceedings                                                                                                                                                                                                                      |    | 55       |
| Item 1A.                                                                                                          |    | Risk                Factors                                                                                                                                                                                                                           |    | 55       |
| Item 2.                                                                                                           |    | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                                                                                                            |    | 58       |
| Item 3.                                                                                                           |    | Defaults                Upon Senior Securities                                                                                                                                                                                                        |    | 58       |
| Item 4.                                                                                                           |    | Submission                of Matters to a Vote of Security Holders                                                                                                                                                                                    |    | 58       |
| Item 5.                                                                                                           |    | Other                Information                                                                                                                                                                                                                      |    | 59       |
| Item 6.                                                                                                           |    | Exhibits                                                                                                                                                                                                                                              |    | 59       |
| SIGNATURES                                                                                                             |    | 62                                                                                                                                                                                                                                                    |
| EX-31.1                                                                                                                |    |                                                                                                                                                                                                                                                  |    |     |
| EX-31.2                                                                                                                |    |                                                                                                                                                                                                                                                  |    |     |
| EX-32                (Certifications required under Section 906 of the Sarbanes-Oxley Act                of 2002) |    |                                                                                                                                                                                                                                                  |

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**PART      I. FINANCIAL INFORMATION**

| **Item 1.** | **Financial                Statements** |
|------------------|-----------------------------------------|

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Formerly      CARDIOVASCULAR GENETIC ENGINEERING, INC.)**

**(A      Development Stage Company)**

**BALANCE      SHEETS**

**DECEMBER      31, 2006 AND SEPTEMBER 30, 2007 (UNAUDITED)**

|                                                                                                                                                                                                                                                     |   | **December 31,****2006**               |       | **September 30,****2007** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|------------|--------------------------------|--------|
|                                                                                                                                                                                                                                                     |   | ***(Unaudited)***                           |       |
|                                                                                                                                                                                                                                                     |   | ***(Dollars                in thousands)*** |       |
| **ASSETS**                                                                                                                                                                                                                                               |   |                                        |       |                           |   |
| **Current                Assets:**                                                                                                                                                                                                                       |   |                                        |       |                           |   |
| Cash                and cash equivalents                                                                                                                                                                                                                 |   | $                                           | 8,503      |                           | $      | 242 |   |
| Restricted                cash                                                                                                                                                                                                                           |   |                                        | 172        |                           |   | 60 |   |
| Due                from an affiliate                                                                                                                                                                                                                     |   |                                        | 38         |                           |   | 23 |   |
| Prepaid                and other current assets (including related party amounts of $396                and $0,                as of December 31, 2006 and September 30, 2007,                respectively)                                    |   |                                        | 1,266      |                           |   | 742 |   |
| **Total                current assets**                                                                                                                                                                                                                  |   | **$**                                       | **9,979**  |                           | **$**  | **1,067** |   |
|                                                                                                                                                                                                                                                     |   |                                        |            |                           |   |  |   |
| Property                and equipment, net of accumulated depreciation ($164 and $377, as                of                December 31, 2006 and September 30, 2007,                respectively)                                              |   |                                        | 887        |                           |   | 733 |   |
| Deferred                financing costs, net of amortization ($403 and $1,488, as of                December 31, 2006 and September 30, 2007,                respectively)                                                                     |   |                                        | 1,481      |                           |   | 280 |   |
| Other                assets                                                                                                                                                                                                                              |   |                                        | 80         |                           |   | 81 |   |
| **Total                Assets**                                                                                                                                                                                                                          |   | **$**                                       | **12,427** |                           | **$**  | **2,161** |   |
| **LIABILITIES**                                                                                                                                                                                                                                          |   |                                        |            |                           |   |  |   |
| **Current                Liabilities:**                                                                                                                                                                                                                  |   |                                        |            |                           |   |  |   |
| Accrued                interest payable                                                                                                                                                                                                                  |   | $                                           | 557        |                           | $      | 257 |   |
| Due                to affiliates                                                                                                                                                                                                                         |   |                                        | 111        |                           |   | 128 |   |
| Accounts                payable                                                                                                                                                                                                                          |   |                                        | 861        |                           |   | 2,527 |   |
| Accrued                payroll and payroll taxes                                                                                                                                                                                                         |   |                                        | 223        |                           |   | 245 |   |
| Deferred                rent                                                                                                                                                                                                                             |   |                                        | 158        |                           |   | 183 |   |
| **Total                current liabilities**                                                                                                                                                                                                             |   | $                                           | **1,910**  |                           | **$**  | **3,340** |   |
| **Derivative                Liabilities**                                                                                                                                                                                                                |   |                                        |            |                           |   |  |   |
| Convertible                notes payable and embedded derivatives                                                                                                                                                                                        |   |                                        | 11,635     |                           |   | 6,601 |   |
| Warrants                derivatives                                                                                                                                                                                                                      |   |                                        | 366        |                           |   | 58 |   |
| Option                derivatives                                                                                                                                                                                                                        |   |                                        | 1,406      |                           |   | 330 |   |
| **Total                Liabilities**                                                                                                                                                                                                                     |   | **$**                                       | **15,317** |                           | **$**  | **10,329** |   |
| **Commitments                and contingencies**                                                                                                                                                                                                         |   |                                        |            |                           |   |  |   |
| **STOCKHOLDERS'                EQUITY (DEFICIT)**                                                                                                                                                                                                        |   |                                        |            |                           |   |  |   |
| Convertible                preferred stock, $0.001 par value; 10,000 shares authorized; 52,850                shares                issued; and no shares outstanding at December 31, 2006 and                September 30, 2007, respectively |   |                                        | —    |                           |   | — |   |
| Common                stock, $0.001 par value, 400,000 shares authorized; 125,458 and 141,627                shares issued and outstanding at December 31, 2006 and                September 30, 2007, respectively*(shares in thousands)*     |   |                                        | 125        |                           |   | 142 |   |
| Additional                paid in capital                                                                                                                                                                                                                |   |                                        | 31,713     |                           |   | 51,614 |   |
| Deficit                accumulated during the development stage                                                                                                                                                                                          |   |                                        | (34,728    | )                              |   | (59,924 | ) |
| **Total                stockholders' equity (deficit)**                                                                                                                                                                                                  |   |                                        | (2,890     | )                              |   | (8,168 | ) |
| **Total                Liabilities and Stockholder's Equity (Deficit)**                                                                                                                                                                                  |   | **$**                                       | **12,427** |                           | **$**  | **2,161** |   |

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**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Formerly      CARDIOVASCULAR GENETIC ENGINEERING, INC.)**

**(A      Development Stage Company)**

**STATEMENTS      OF OPERATIONS**

**(UNAUDITED)**

**FOR      THE NINE MONTHS AND THREE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 AND      FOR**

**THE      PERIOD FROM MARCH 11, 1998 (INCEPTION) TO SEPTEMBER 30,      2007**

|                                                                                                                                                      |   | **Nine                Months Ended****September                30** |    | **Three                Months Ended****September                30** |   | **For                the Period****from March 11,****1998 (Inception)****to                September 30,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|---------|----------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                      |   | **2006**                                                            |    | **2007**                                                             |   | **2006**                                                                                                                  |   | **2007** |   | **2007** |   |
|                                                                                                                                                      |   | ***(In                thousands except per share data)***           |    |
| **Operating                expenses:**                                                                                                                    |   |                                                                |    |                                                                 |   |                                                                                                                      |   |   |   |   |   |
| Research                and development (a)                                                                                                               |   | $                                                                   | 4,757   |                                                                 | $      | 4,743                                                                                                                     |   | $ | 1,555 |   | $ | 1,411 |   | $ | 21,356 |   |
| Selling,                general and administrative (b)                                                                                                    |   |                                                                | 8,801   |                                                                 |   | 9,524                                                                                                                     |   |   | 3,151 |   |   | 1,356 |   |   | 35,787 |   |
| Total                operating expenses                                                                                                                   |   |                                                                | 13,558  |                                                                 |   | 14,267                                                                                                                    |   |   | 4,706 |   |   | 2,767 |   |   | 57,143 |   |
|                                                                                                                                                      |   |                                                                |         |                                                                 |   |                                                                                                                      |   |   |   |   |   |  |   |   |   |   |
| **Operating                loss**                                                                                                                         |   | $                                                                   | (13,558 | )                                                                    | $      | (14,267                                                                                                                   | )      | $ | (4,706 | ) | $ | (2,767 | ) | $ | (57,143 | ) |
| **Other                income (expenses)**                                                                                                                |   |                                                                |    |                                                                 |   |                                                                                                                           |   |   |  |   |   |   |   |   |   |   |
| Interest                income                                                                                                                            |   |                                                                | 605     |                                                                 |   | 140                                                                                                                       |   |   | 206 |   |   | 13 |   |   | 1,195 |   |
| Interest                expense                                                                                                                           |   |                                                                | (3,589  | )                                                                    |   | (7,658                                                                                                                    | )      |   | (1,776 | ) |   | (1,467 | ) |   | (19,109 | ) |
| Other                expenses                                                                                                                             |   |                                                                | — |                                                                 |   | —                                                                                                                   |   |   | — |   |   | — |   |   | (5 | ) |
| Adjustments                to fair value of derivatives                                                                                                   |   |                                                                | 8,633   |                                                                 |   | (5,365                                                                                                                    | )      |   | 4,941 |   |   | 4,719 |   |   | 2,809 |   |
| Adjustments                to fair value of derivatives- Options and Warrants                                                                             |   |                                                                | 7,998   |                                                                 |   | 1,954                                                                                                                     |   |   | 3,059 |   |   | 554 |   |   | 12,344 |   |
| Equity                in loss of unconsolidated investee                                                                                                  |   |                                                                | — |                                                                 |   | —                                                                                                                   |   |   | — |   |   | — |   |   | (15 | ) |
| Net                other income (expenses)                                                                                                                |   |                                                                | 13,647  |                                                                 |   | (10,929                                                                                                                   | )      |   | 6,430 |   |   | 3,819 |   |   | (2,781 | ) |
| **Net                (loss) Income before Provision for Income Taxes**                                                                                    |   |                                                                | 89      |                                                                 |   | (25,196                                                                                                                   | )      |   | 1,724 |   |   | 1,052 |   |   | (59,924 | ) |
| Provision                for income taxes                                                                                                                 |   |                                                                | — |                                                                 |   | —                                                                                                                   |   |   | — |   |   | — |   |   | — |   |
| **Net                (loss) Income**                                                                                                                      |   | $                                                                   | 89      |                                                                 | $      | (25,196                                                                                                                   | )      | $ | 1,724 |   | $ | 1,052 |   | $ | (59,924 | ) |
| **(Loss)                Earnings per share**                                                                                                              |   |                                                                |    |                                                                 |   |                                                                                                                      |   |   |   |   |   |   |   |   |  |   |
| Basic                (loss) earnings per share                                                                                                            |   |                                                                | 0.00    |                                                                 |   | (0.19                                                                                                                     | )      |   | 0.01 |   |   | 0.01 |   |   |  |   |
| Diluted                (loss) earnings per share                                                                                                          |   |                                                                | 0.00    |                                                                 |   | (0.18                                                                                                                     | )      |   | 0.02 |   |   | 0.01 |   |   |  |   |
| **Shares                used to calculate (loss) earnings per share*****(In                thousands)***                                                  |   |                                                                |         |                                                                 |   |                                                                                                                           |   |   |   |   |   |  |   |   |  |   |
| Basic                (loss) earnings per share                                                                                                            |   |                                                                | 124,030 |                                                                 |   | 131,767                                                                                                                   |   |   | 124,082 |   |   | 136,707 |   |   |  |   |
| Diluted                (loss) earnings per share (c)                                                                                                      |   |                                                                | 127,129 |                                                                 |   | 137,694                                                                                                                   |   |   | 127,181 |   |   | 142,634 |   |   |  |   |
| (a)    Research                and development with related parties (Notes 3 and 11)                                                  |   | $                                                                   | 2,272   |                                                                 | $      | 1,216                                                                                                                     |   | $ | 1,141 |   | $ | 289 |   |   |  |   |
| (b)    Selling                general and administrative expenses with related parties (Notes 3                and                11) |   | $                                                                   | 1,729   |                                                                 | $      | 29                                                                                                                        |   | $ | 165 |   | $ | 3 |   |   |  |   |
| (c)                As discussed in Note 4 - Loss per share calculation                                                                                    |   |                                                                |         |                                                                 |   |                                                                                                                           |   |   |  |   |   |  |   |   |  |   |

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**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Formerly      CARDIOVASCULAR GENETIC ENGINEERING, INC.)**

**(A      Development Stage Company)**

**STATEMENTS      OF STOCKHOLDERS' EQUITY (DEFICIT)**

**(UNAUDITED)**

**FOR      THE PERIOD FROM MARCH 11, 1998 (INCEPTION) TO SEPTEMBER 30,      2007**

|                                                                                                     |   |                                                                                                                                                             |       | **Price Per****Equity** |   | **Preferred Stock****Series                  A,****Convertible** |   | **Common                  Stock** |    | **Committed**    |   | **Additional****Paid-In** |   | **Accumulated** |        |        |   |
|----------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|--------|-----------------------------------------------------------------------|--------|-----------------------------------|---------|------------------|--------|---------------------------|--------|-----------------|-------------|-------------|--------|
|                                                                                                     |   | **Date/Note**                                                                                                                                                    |       | **Unit**                     |   | **Shares**                                                            |   | **Amount**                   |    | **Shares**  |   | **Amount**           |   | **Stock**       |        | **Capital** |   | **Deficit** |   | **Total**  |   |
|                                                                                                     |   | ***(In                  thousands except price per equity unit                  data)***             |       |
| **Balance,                  March 11, 1998 (date of inception)**                                    |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             | $      | —                   |   |            | —     |        | $      | — |   |   | — |   | $ | — |   | $ | — |   | $ | — |   |
| Issuance                  of common stock to founders                                                    |   |                                                                                                                                                             | (1         | )                            | $      | 0.001                                                                 |   |                              | — |             |   | —                   |   |            | 93,050      |        |   | 93 |   |   | — |   |   | (92 | ) |   | — |   |   | 1 |   |
| Issuance                  of common stock for cash                                                       |   |                                                                                                                                                             | 7/9/1998   |                         |   | 0.10                                                                  |   |                              | — |             |   | —                   |   |            | 300         |        |   | — |   |   | — |   |   | 30 |   |   | — |   |   | 30 |   |
| Issuance                  of preferred stock for cash                                                    |   |                                                                                                                                                             | (1         | )                            |   | 9.85                                                                  |   |                              | 53      |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 520 |   |   | — |   |   | 520 |   |
| Net                  loss (Unaudited)                                                                    |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              |         |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | (568 | ) |   | (568 | ) |
| **Balance,                  December 31, 1998**                                                     |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | **53**  |             | **$**  | —                   |   |            | **93,350**  |        | $      | 93 |   |   | — |   | **$** | **458** |   | **$** | (568 | ) | $ | (17 | ) |
| Issuance                  of common stock to founders                                                    |   |                                                                                                                                                             | (2         | )                            | $      | 0.001                                                                 |   |                              | — |             |   | —                   |   |            | 4,580       |        |   | 5 |   |   | — |   |   | (5 | ) |   | — |   |   | — |   |
| Issuance                  of common stock for cash                                                       |   |                                                                                                                                                             | 6/25/1999  |                         |   | 0.30                                                                  |   |                              | — |             |   | —                   |   |            | 67          |        |   | — |   |   | — |   |   | 20 |   |   | — |   |   | 20 |   |
| Issuance                  of common stock for cash                                                       |   |                                                                                                                                                             | 6/25/1999  |                         |   | 0.30                                                                  |   |                              | — |             |   | —                   |   |            | 100         |        |   | — |   |   | — |   |   | 30 |   |   | — |   |   | 30 |   |
| Issuance                  of common stock for cash                                                       |   |                                                                                                                                                             | 10/5/1999  |                         |   | 0.30                                                                  |   |                              | — |             |   | —                   |   |            | 340         |        |   | — |   |   | — |   |   | 102 |   |   | — |   |   | 102 |   |
| Issuance                  of stock options for services                                                  |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 82 |   |   | — |   |   | 82 |   |
| Net                  loss                                                                                |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | (655 | ) |   | (655 | ) |
| **Balance,                  December 31, 1999**                                                     |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | **53**  |             | **$**  | —                   |   |            | **98,437**  |        | $      | 98 |   |   | — |   | **$** | **687** |   | **$** | (1,223 | ) | $ | (438 | ) |
| Issuance                  of common stock to founders                                                    |   |                                                                                                                                                             | (3         | )                            | $      | 0.001                                                                 |   |                              | — |             |   | —                   |   |            | 2,120       |        |   | 2 |   |   | — |   |   | (2 | ) |   | — |   |   | — |   |
| Issuance                  of common stock for cash                                                       |   |                                                                                                                                                             | 12/21/2000 |                         |   | 0.4117                                                                |   |                              | — |             |   | —                   |   |            | 8,750       |        |   | 9 |   |   | — |   |   | 3,593 |   |   | — |   |   | 3,602 |   |
| Issuance                  of common stock for conversion of convertible preferred                  stock |   |                                                                                                                                                             | (4         | )                            |   | 0.10                                                                  |   |                              | (2      | )                |   | —                   |   |            | 150         |        |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Issuance                  of common stock for services                                                   |   |                                                                                                                                                             | (5         | )                            |   |                                                                       |   |                              | — |             |   | —                   |   |            | 583         |        |   | 1 |   |   | — |   |   | (1 | ) |   | — |   |   | — |   |
| Issuance                  of stock options for services                                                  |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 74 |   |   | — |   |   | 74 |   |
| Net                  loss                                                                                |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | (2,233 | ) |   | (2,233 | ) |
| **Balance,                  December 31, 2000**                                                     |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | **51**  |             | **$**  | —                   |   |            | **110,040** |        | $      | 110 |   |   | — |   | **$** | **4,351** |   | **$** | (3,456 | ) | $ | 1,005 |   |
| Issuance                  of common stock for cash                                                       |   |                                                                                                                                                             | 8/10/2001  |                         |   | 0.80                                                                  |   |                              | — |             |   | —                   |   |            | 150         |        |   | — |   |   | — |   |   | 120 |   |   | — |   |   | 120 |   |
| Net                  loss                                                                                |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | (1,665 | ) |   | (1,665 | ) |
| **Balance,                  December 31, 2001**                                                     |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | **51**  |             | **$**  | —                   |   |            | **110,190** |        | $      | 110 |   |   | — |   | **$** | **4,471** |   | **$** | (5,121 | ) | $ | (540 | ) |
| Net                  loss                                                                                |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              |         |             |   |                           |   |            |             |        |   |  |   |   |   |   |   |  |   |   | (1,328 | ) |   | (1,328 | ) |
| **Balance,                  December 31, 2002**                                                     |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | **51**  |             | **$**  | —                   |   |            | **110,190** |        | $      | 110 |   |   | — |   | **$** | **4,471** |   | **$** | (6,449 | ) | $ | (1,868 | ) |
| Issuance                  of stock options for services                                                  |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 47 |   |   | — |   |   | 47 |   |
| Issuance                  of warrants for services                                                       |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 120 |   |   | — |   |   | 120 |   |
| Net                  loss                                                                                |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | — |             |   | —                   |   |            | —     |        |   | — |   |   | — |   |   |  |   |   | (2,329 | ) |   | (2,329 | ) |
| **Balance,                  December 31, 2003**                                                     |   |                                                                                                                                                             |            |                         |   |                                                                       |   |                              | **51**  |             | **$**  | —                   |   |            | **110,190** |        | $      | 110 |   |   | — |   | **$** | **4,638** |   | **$** | (8,778 | ) | $ | (4,030 | ) |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Formerly      CARDIOVASCULAR GENETIC ENGINEERING, INC.)**

**(A      Development Stage Company)**

**STATEMENTS      OF STOCKHOLDERS' EQUITY (DEFICIT)--(Continued)**

**(UNAUDITED)**

**FOR      THE PERIOD FROM MARCH 11, 1998 (INCEPTION) TO SEPTEMBER 30,      2007**

|                                                                                                                   |   |                                                                    |   | **Price                  Per Equity** |   | **Preferred Stock****Series                  A,****Convertible** |   | **Common                  Stock** |    | **Committed** |   | **Additional****Paid-In** |   | **Accumulated** |        |        |   |
|------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|---------------------------------------|--------|-----------------------------------------------------------------------|--------|-----------------------------------|---------|---------------|--------|---------------------------|--------|-----------------|-------------|-------------|--------|
|                                                                                                                   |   | **Date/Note**                                                           |   | **Unit**                              |   | **Shares**                                                            |   | **Amount**                        |    | **Shares**    |   | **Amount**                |   | **Stock**       |        | **Capital** |   | **Deficit** |   | **Total** |   |
|                                                                                                                   |   | ***(In                  thousands except price per equity unit data)*** |   |
| Issuance                  of common stock for conversion of convertible notes                                          |   |                                                                    | (6     | )                                     |   |                                                                  |   |                              | — |          |   | —                   |   |            | 1,650       |        |   | 2 |   |   | — |   |   | 4,529 |   |   | — |   |   | 4,531 |   |
| Conversion                  of convertible preferred stock                                                             |   |                                                                    | (7     | )                                     |   |                                                                       |   |                              | (28     | )             |   | —                   |   |            | 810         |        |   | 1 |   |   | 2 |   |   | (3 | ) |   | — |   |   | — |   |
| Interest                  on benefit conversion feature                                                                |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 2,050 |   |   | — |   |   | 2,050 |   |
| Issuance                  of stock options for services                                                                |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 79 |   |   | — |   |   | 79 |   |
| Net                  loss                                                                                              |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | (8,013 | ) |   | (8,013 | ) |
| **Balance,                  December 31, 2004**                                                                        |   |                                                                    |        |                                  |   |                                                                       |   |                              | **23**  |          | **$**  | —                   |   |            | **112,650** |        | **$**  | **113** |   | **$** | **2** |   | **$** | **11,293** |   | **$** | (16,791 | ) | **$** | (5,383 | ) |
| Issuance                  of common stock for cash                                                                     |   |                                                                    | (8     | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 1,725       |        |   | 2 |   |   | — |   |   | 14,709 |   |   | — |   |   | 14,711 |   |
| Conversion                  of convertible notes                                                                       |   |                                                                    | (6     | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 4,228       |        |   | 4 |   |   | — |   |   | 10,327 |   |   | — |   |   | 10,331 |   |
| Conversion                  of convertible preferred stock                                                             |   |                                                                    | (7     | )                                     |   |                                                                       |   |                              | (23     | )             |   | —                   |   |            | 4,325       |        |   | 4 |   |   | (2 | ) |   | (2 | ) |   | — |   |   | — |   |
| Exercise                  of options                                                                                   |   |                                                                    | (10    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 123         |        |   | — |   |   | — |   |   | 83 |   |   | — |   |   | 83 |   |
| Issuance                  of warrant for cash                                                                          |   |                                                                    | (9     | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Issuance                  of stock options for services                                                                |   |                                                                    | (11    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 1,812 |   |   | — |   |   | 1,812 |   |
| Warrants                  exercised                                                                                    |   |                                                                    | (12    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 848         |        |   | 1 |   |   | — |   |   | (1 | ) |   | — |   |   | — |   |
| Net                  loss                                                                                              |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | (12,366 | ) |   | (12,366 | ) |
| **Balance,                  December 31, 2005**                                                                        |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          | **$**  | —                   |   |            | **123,899** |        | **$**  | **124** |   | **$** | — |   | **$** | **38,221** |   | **$** | (29,157 | ) | **$** | **9,188** |   |
| Warrants                  exercised                                                                                    |   |                                                                    | (12    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 89          |        |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Options                  and warrants derivative                                                                       |   |                                                                    | (14    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | (12,278 | ) |   | — |   |   | (12,278 | ) |
| Reclassification                  of option derivative for options exercise                                            |   |                                                                    | (16    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 1,318 |   |   | — |   |   | 1,318 |   |
| Reclassification                  of conversion and interest conversion derivative on note                  conversion |   |                                                                    | (18    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 1,332 |   |   | — |   |   | 1,332 |   |
| Reclassification                  of interest conversion derivative on actual interest paid                            |   |                                                                    | (17    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 482 |   |   | — |   |   | 482 |   |
| Exercise                  of options                                                                                   |   |                                                                    | (10    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 465         |        |   | — |   |   | — |   |   | 230 |   |   | — |   |   | 230 |   |
| Issuance                  of stock for services                                                                        |   |                                                                    | (13    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Conversion                  of convertible notes                                                                       |   |                                                                    | (15    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 1,005       |        |   | 1 |   |   | — |   |   | 1,929 |   |   | — |   |   | 1,930 |   |
| Stock                  based compensation                                                                              |   |                                                                    | (11    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 479 |   |   | — |   |   | 479 |   |
| Net                  loss                                                                                              |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | (5,571 | ) |   | (5,571 | ) |
| **Balance,                  December 31, 2006**                                                                        |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          | **$**  | —                   |   |            | **125,458** |        | **$**  | **125** |   | **$** | — |   | **$** | **31,713** |   | **$** | (34,728 | ) | **$** | (2,890 | ) |
| Exercise                  of options                                                                                   |   |                                                                    | (10    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 440         |        |   | — |   |   | — |   |   | 132 |   |   | — |   |   | 132 |   |
| Issuance                  of stock for services as independent directors                                               |   |                                                                    | (19    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 48          |        |   | — |   |   | — |   |   | 48 |   |   | — |   |   | 48 |   |
| Option                  and warrant derivative                                                                         |   |                                                                    | (14    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            |             |        |   |  |   |   |   |   |   | (168 | ) |   | — |   |   | (168 | ) |
| Conversion                  of convertible notes                                                                       |   |                                                                    | (15    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 11,835      |        |   | 12 |   |   | — |   |   | 10,598 |   |   | — |   |   | 10,610 |   |
| Reclassification                  of conversion and interest conversion derivative on note                  conversion |   |                                                                    | (18    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 4,909 |   |   | — |   |   | 4,909 |   |
| Reclassification                  of interest conversion derivative on actual interest paid                            |   |                                                                    | (17    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 586 |   |   | — |   |   | 586 |   |
| Sale                  of common shares                                                                                 |   |                                                                    | (20    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | 3,650       |        |   | 5 |   |   | — |   |   | 3,470 |   |   | — |   |   | 3,475 |   |
| Stock                  based compensation                                                                              |   |                                                                    | (11    | )                                     |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | 162 |   |   | — |   |   | 162 |   |
| ** **Issuance                  of common stock for interest                  payments                             |   |                                                                    | (21    | )                                     |   |                                                                  |   |                              | — |          |   | —                   |   |            | 196         |        |   | — |   |   | — |   |   | 164 |   |   | — |   |   | 164 |   |
| **Net                  loss (Unaudited)**                                                                              |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          |   | —                   |   |            | —     |        |   | — |   |   | — |   |   | — |   |   | (25,196 | ) |   | (25,196 | ) |
| **Balance,                  September 30, 2007 (Unaudited)**                                                           |   |                                                                    |        |                                  |   |                                                                       |   |                              | — |          | **$**  | —                   |   |            | **141,627** |        | **$**  | **142** |   | **$** | — |   | **$** | **51,614** |   | **$** | (59,924 | ) | **$** | (8,168 | ) |

----

| (1) | Multiple                transactions valued at the per share price in the year ended                December 31, 1998 |
|-----|----------------------------------------------------------------------------------------------------------------------------|

----

| (2) | Multiple                transactions valued at the per share price in the year ended                December 31, 1999 |
|-----|----------------------------------------------------------------------------------------------------------------------------|

| (3) | Multiple                transactions valued at the per share price in the year ended                December 31, 2000 |
|-----|----------------------------------------------------------------------------------------------------------------------------|

| (4) | Preferred                    stock converted to common                    stock |
|-----|---------------------------------------------------------------------------------|

| (5) | Offering                        costs associated with issuance of common stock for                        services |
|-----|--------------------------------------------------------------------------------------------------------------------|

| (6) | Multiple                transactions at $2.00 and $4.00 in the year ended December 31, 2004                and 2005 |
|-----|--------------------------------------------------------------------------------------------------------------------------|

| (7) | Multiple                transactions at 100:1 conversion rate in the year ended December 31,                2004 and 2005 |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

| (8) | Public                    offering of 1,725,000 common shares at $10.00 per                    share |
|-----|------------------------------------------------------------------------------------------------------|

| (9) | Underwriters                          warrants sold with the public                          offering |
|-----|-------------------------------------------------------------------------------------------------------|

| (10) | Multiple                employee and non-employee option exercises (exercise price range                $0.30-$10.00) |
|------|-----------------------------------------------------------------------------------------------------------------------|

| (11) | Stock                    options to directors and                    employees |
|------|--------------------------------------------------------------------------------|

| (12) | Warrants                        exercised (exercise price                        $0.80) |
|------|-----------------------------------------------------------------------------------------|

| (13) | Issuance                of 20 commemorative shares to directors and executives with aggregate                value of $122 |
|------|----------------------------------------------------------------------------------------------------------------------------|

| (14) | For                      the nine months ended September 30, 2007, reclassification                      from equity to                      liability of the fair value of employee stock options transferred                      to a                      non-employee, by function of law, in the amount of $124,861                      and                      reclassifications from liability to equity of the fair value                      of options                      exercised by non-employees of $43,873. Option                      derivative of $12,209,055 and non-employee derivative of $69,430                      for the                      year ended December 31,                      2006 |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | Conversion                of senior secured convertible notes and interest related to those                notes at                various prices |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                             |   | **Nine                  Month Periods Ended****September                  30,** |   | **From                  March 11, 1998****(inception)                  to September 30,** |   |
|------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|
|                                                                                                             |   | **2006**                                                                        |   | **2007**                                                                                  |   | **2007** |   |
|                                                                                                             |   | ***(In                  thousands)***                       |   |
| 1)                  Amount of senior secured convertible notes                                                   |   |                                                                            |   |                                                                                      |   |   |   |   |   |   |
| converted                  to uncommitted shares                                                                 |   | $                                                                               | 225    |                                                                                      | $      | 10,598 |   | $ | 12,134 |   |
|                                                                                                             |   |                                                                            |   |                                                                                      |   |   |   |   |   |   |
| 2)                  Senior secured convertible notes                                                             |   |                                                                            |   |                                                                                      |   |   |   |   |   |   |
| converted                  to uncommitted shares - See line 1                                                    |   |                                                                            | 83     |                                                                                      |   | 11,835 |   |   | 12,840 |   |
|                                                                                                             |   |                                                                            |   |                                                                                      |   |   |   |   |   |   |
| 3)                  Amount of senior secured convertible notes                                                   |   |                                                                            |   |                                                                                      |   |   |   |   |   |   |
| converted                  to committed shares                                                                   |   | $                                                                               | 70     |                                                                                      |   | 211 |   |   | — |   |
|                                                                                                             |   |                                                                            |   |                                                                                      |   |   |   |   |   |   |
| 4)                  Senior secured convertible notes Converted                  to committed shares - See line 3 |   |                                                                            | 28     |                                                                                      |   | 389 |   |   | — |   |
|                                                                                                             |   |                                                                            |   |                                                                                      |   |   |   |   |   |   |
| 5)                  Interest on senior secured convertible notes                                                 |   |                                                                            |   |                                                                                      |   |   |   |   |   |   |
| paid                  in common stock                                                                            |   | $                                                                               | 8      |                                                                                      | $      | 327 |   | $ | 360 |   |

| (16) | Reclassification                    from liability to equity for options                    exercised |
|------|-------------------------------------------------------------------------------------------------------|

| (17) | Reclassification                      of interest conversion derivative from liability to equity                      for interest                      paid in cash |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (18) | Reclassification                        of adjustment to embedded derivatives, conversion and interest                        conversion                        feature, from liability to equity for conversion of notes                        and interest                        related to those notes to common                        stock |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (19) | Issuance                          of stock for services for the independent                          directors |
|------|----------------------------------------------------------------------------------------------------------------|

| (20) | Sale                            of common stock at $1.00 per                            share |
|------|-----------------------------------------------------------------------------------------------|

| (21) | Issuance                                of common stock for interest payments on senior secured                                notes |
|------|--------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Formerly      CARDIOVASCULAR GENETIC ENGINEERING, INC.)**

**(A      Development Stage Company)**

**STATEMENTS      OF CASH FLOWS**

**(UNAUDITED)**

**FOR      THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006, AND 2007 AND      FOR**

**THE      PERIOD FROM MARCH 11, 1998 (INCEPTION) TO SEPTEMBER 30, 2007      (UNAUDITED)**

|                                                                                                                                                      |   |         |   | **Nine                  Month Periods****Ended                  September 30,**                    |   | **For                  the Period****from                  March 11,****1998                  (Inception) to****September                  30,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|----------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                      |   |    |   | **2006**                                                                                 |   | **2007**                                                                                                                               |   | **2007**   |   |
|                                                                                                                                                      |   |    |   | ***(Dollars                  in                  thousands)***       |   |
| **Cash                  flows from operating activities:**                                                                                                |   |    |   |                                                                                          |   |                                                                                                                                        |   |    |   |
| Net                  (loss) income                                                                                                                        |   |         |   |                                                                                               | $      | 89                                                                                                                                               |   | $ | (25,196 | ) | $ | (59,924 | ) |
| Adjustments                  to reconcile net (loss) income to net cash used in operating                  activities:                                    |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                              |   |         |   |                                                                                               |   | 92                                                                                                                                               |   |   | 213 |   |   | 383 |   |
| Termination                  of financing cost                                                                                                            |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | 466 |   |   | 466 |   |
| Amortization                  of beneficial conversion feature                                                                                            |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | 2,050 |   |
| Amortization                  of deferred financing costs                                                                                                 |   |         |   |                                                                                               |   | 273                                                                                                                                              |   |   | 915 |   |   | 3,453 |   |
| Interest                  paid in common stock                                                                                                            |   |         |   |                                                                                               |   | 8                                                                                                                                                |   |   | 327 |   |   | 360 |   |
| Stock                  based compensation                                                                                                                 |   |         |   |                                                                                               |   | 369                                                                                                                                              |   |   | 162 |   |   | 2,736 |   |
| Stock                  issued for services rendered                                                                                                       |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | 48 |   |   | 48 |   |
| Warrants                  issued for services rendered                                                                                                    |   |         |   |                                                                                               |   | 801                                                                                                                                              |   |   | 401 |   |   | 1,722 |   |
| Amortization                  of discount related to warrants derivatives                                                                                 |   |         |   |                                                                                               |   | 419                                                                                                                                              |   |   | 596 |   |   | 1,214 |   |
| Amortization                  of discount related to conversion feature                                                                                   |   |         |   |                                                                                               |   | 871                                                                                                                                              |   |   | 2,758 |   |   | 4,376 |   |
| Amortization                  of discount related to interest on conversion feature                                                                       |   |         |   |                                                                                               |   | 692                                                                                                                                              |   |   | 2,190 |   |   | 3,475 |   |
| Adjustments                  to fair value of derivatives                                                                                                 |   |         |   |                                                                                               |   | (8,633                                                                                                                                           | )      |   | 5,365 |   |   | (2,809 | ) |
| Adjustments                  to fair value of derivatives - warrant and option                  derivatives                                               |   |         |   |                                                                                               |   | (7,998                                                                                                                                           | )      |   | (1,954 | ) |   | (12,344 | ) |
| Equity                  in loss of unconsolidated investee                                                                                                |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | 15 |   |
| (Increase)                  decrease in:                                                                                                                  |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| Due                  from affiliate                                                                                                                       |   |         |   |                                                                                               |   | (63                                                                                                                                              | )      |   | 16 |   |   | (23 | ) |
| Prepaid                  and other current assets (including $396,000 paid to related party                  in                  2006, none paid in 2007) |   |         |   |                                                                                               |   | (1,581                                                                                                                                           | )      |   | 524 |   |   | (742 | ) |
| Other                  assets                                                                                                                             |   |         |   |                                                                                               |   | (52                                                                                                                                              | )      |   | — |   |   | (96 | ) |
| (Increase)                  decrease in:                                                                                                                  |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| Due                  to affiliate                                                                                                                         |   |         |   |                                                                                               |   | 8                                                                                                                                                |   |   | 17 |   |   | 128 |   |
| Accounts                  payable                                                                                                                         |   |         |   |                                                                                               |   | 351                                                                                                                                              |   |   | 1,666 |   |   | 2,527 |   |
| Accrued                  payroll and payroll taxes                                                                                                        |   |         |   |                                                                                               |   | (23                                                                                                                                              | )      |   | 23 |   |   | 245 |   |
| Accrued                  interest                                                                                                                         |   |         |   |                                                                                               |   | 618                                                                                                                                              |   |   | (300 | ) |   | 257 |   |
| Accrued                  rent                                                                                                                             |   |         |   |                                                                                               |   | 79                                                                                                                                               |   |   | 24 |   |   | 183 |   |
| Net                  cash used in operating activities                                                                                                    |        |              | (a     | )                                                                                                  | $      | (13,680                                                                                                                                          | )      | $ | (11,739 | ) | $ | (52,300 | ) |
|                                                                                                                                                      |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| **Cash                  flows from investing activities:**                                                                                                |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| Purchase                  of restricted cash                                                                                                              |   |         |   |                                                                                               |   | (34                                                                                                                                              | )      |   | 112 |   |   | (60 | ) |
| Purchase                  of property and equipment                                                                                                       |   |         |   |                                                                                               |   | (578                                                                                                                                             | )      |   | (60 | ) |   | (1,117 | ) |
| Net                  cash (used) provided by investing activities                                                                                    |   |         | (b     | )                                                                                                  | $      | (612                                                                                                                                             | )      | $ | 52 |   | $ | (1,177 | ) |
|                                                                                                                                                      |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| **Cash                  flows from financing activities**                                                                                                 |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| Proceeds                  from sale of preferred stock - Pre IPO                                                                                          |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | 520 |   |
| Proceeds                  from sale of common stock - Pre IPO                                                                                             |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | 3,904 |   |
| Proceeds                  from issuance of notes payables - Pre IPO                                                                                       |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | 14,092 |   |
| Proceeds                  from notes payable issued under Reg D - Pre IPO                                                                                 |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | 800 |   |
| Proceeds                  from sale of common stock - IPO                                                                                                 |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | 15,548 |   |
| Proceeds                  from notes payable issued under Reg D - Post IPO                                                                                |   |         |   |                                                                                               |   | 20,000                                                                                                                                           |   |   | — |   |   | 20,000 |   |
| Proceeds                  from sale of common shares under Reg S                                                                                          |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | 3,474 |   |   | 3,475 |   |
| Proceeds                  from exercise of options and warrants                                                                                           |   |         |   |                                                                                               |   | 129                                                                                                                                              |   |   | 132 |   |   | 444 |   |
|                                                                                                                                                      |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| Payment                  of financing cost - private placements - Pre IPO                                                                                 |   |         |   |                                                                                               |   | (1,648                                                                                                                                           | )      |   | (180 | ) |   | (4,198 | ) |
| Cash                  paid for deferred offering costs                                                                                                    |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | (866 | ) |
| Due                  to net increase (decrease) in affiliates                                                                                             |   |         |   |                                                                                               |   | —                                                                                                                                          |   |   | — |   |   | — |   |
| Net                  cash provided by financing activities                                                                                                |   |         | (c     | )                                                                                                  | $      | 18,481                                                                                                                                           |   | $ | 3,426 |   | $ | 53,719 |   |
|                                                                                                                                                      |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| Increase                  (decrease) in cash and cash equivalents                                                                                         |   |         |   |                                                                                               |   | 4,189                                                                                                                                            |   |   | (8,261 | ) |   | 242 |   |
| **Cash                  and cash equivalents at beginning of period**                                                                                     |   |         |   |                                                                                               |   | 8,675                                                                                                                                            |   |   | 8,503 |   |   | — |   |
| **Cash                  and cash equivalents at end of period**                                                                                           |   |         |   |                                                                                               | **$**  | **12,864**                                                                                                                                       |   | **$** | **242** |   | **$** | **242** |   |
| **Supplemental                  disclosure of cash flow information**                                                                                     |   |         |   |                                                                                               |   |                                                                                                                                             |   |   |   |   |   |   |   |
| Interest                  paid                                                                                                                            |   |         |   |                                                                                               | **$**  | 697                                                                                                                                              |   | **$** | 1,185 |   | **$** | 3,852 |   |
| California                  Franchise Taxes paid                                                                                                          |   |         |   |                                                                                               | **$**  | —                                                                                                                                          |   | **$** | — |   | **$** | 6 |   |

| (a)    | Including                amount with related parties of $4,001,033, $2,162,143, and $15,541,982,                respectively            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                    |
| (b)    | Including                amount with related parties of $0, $0 and $0,                respectively                                      |
|   |                                                                                                                                    |
| (c)    | Including                amount with related parties of $(1,757,975), $(2,421), and                $(3,988,573), respectively |

----

**Supplemental      Disclosure of Non-Cash Financing Activities**

|                                                                                                                                              |   |  **Nine                  Month Periods Ended**   |    |  **For                  the Period from March 11, 1998 to** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|---------|------------------------------------------------------------------|--------|
|                                                                                                                                              |   |  **September                  30,**                        |    |  **September                  30,**                         |   |  **September                  30,** |   |
| **Supplemental                  Disclosure of Non-Cash Financing Activities**                                                                     |   |  **2006**                                                  |    |  **2007**                                                   |   |  **2007** |   |
| 1)                  Number of shares of post-split adjusted common stock to                  founders                                             |   |                                                            | — |                                                             |   | — |   |   | 99,750,000 |   |
| 2)                  Number of shares of post-split adjusted common stock for                  services                                            |   |                                                            | — |                                                             |   | — |   |   | 583,000 |   |
| 3)                  Beneficial conversion feature in connection with issuance of convertible                  notes payable Series I, II, and IIa |   |                                                            | — |                                                             |   | — |   | $ | 2,050,000 |   |
| 4)                  Number of convertible preferred stock converted to common                  stock                                              |   |                                                            | — |                                                             |   | — |   |   | 52,850 |   |
| 5)                  Convertible preferred stock converted to common stock (b) - See                  line                  4                      |   |                                                            | — |                                                             |   | — |   |   | 5,285,000 |   |
| 6)                  Convertible notes payable converted to common stock                                                                           |   |                                                            | — |                                                             |   | — |   | $ | 14,862,200 |   |
| 7)                  Convertible notes payable converted to common stock - See line                  6                                             |   |                                                            | — |                                                             |   | — |   |   | 5,877,550 |   |
| 8)                  Amount of Senior secured convertible notes payable converted to                  uncommitted common stock (a)                 |   | $                                                               | 225,361 |                                                             | $      | 10,597,710 |   | $ | 12,134,012 |   |
| 9)                  Senior secured convertible notes payable converted to uncommitted                  common-                  See line 8        |   |                                                            | 82,500  |                                                             |   | 11,835,421 |   |   | 12,840,374 |   |
| 10)                  Amount of senior secured convertible notes payable converted to                  committed                  common           |   | $                                                               | 70,362  |                                                             | $      | $210,706 |   | $ | — |   |
| 11)                  Senior secured convertible notes payable converted to committed                  common -                  See line 10       |   |                                                            | 28,000  |                                                             |   | 388,636 |   |   | — |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**NOTE 1.      DESCRIPTION OF BUSINESS**

**NOTE 2.      BASIS OF PRESENTATION**

**Management's      Plan**

|                                      |   | **As                  of**                |   |
|-------------------------------------------|--------|-------------------------------------------|--------|
|                                      |   | **December                  31,****2006** |   | **September                  30,****2007** |   |
|                                      |   |                                      |   |   |   |
|                                      |   | ***(In                  thousands)***     |   |
|                                      |   |                                      |   |   |   |
| Cash                  and cash equivalent |   | $                                         | 8,503  |   | $ | 242 |   |
| Restricted                  cash          |   |                                      | 172    |   |   | 60 |   |
| Stockholders'                  deficit    |   |                                      | (2,890 | ) |   | (8,168 | ) |

|                             |   | **Three                Month Periods Ended September 30,** |   |
|----------------------------------|--------|------------------------------------------------------------|--------|
|                             |   | **2006**                                                   |   | **2007** |   |
|                             |   |                                                       |   |   |   |
|                             |   | ***(In                thousands)***                        |   |
|                             |   |                                                       |   |   |   |
| Net                Income (Loss) |   | $                                                          | 1,724  |   | $ | 1,052 |   |

|   | · |   | On                May 21, 2007, the company entered into an agreement to sell 15,000,000                of                the Company’s common stock at a purchase price of $1.00 per share in                connection with a Private Placement to the investor and certain other                subscribers pursuant to a subscription agreement. As of October 12,                2007,                the Company issued 3,650,000 shares and received gross proceeds in                the                amount of $3,650,000. The agreement, as amended, provides for commissions                of 10% of the amount placed in addition to warrants to purchase 3,700,000                shares of the Company’s common stock at an exercise price of $1.00 per                share.  The investor paid $3,700 for the warrants.  The                agreement, as amended, expired November 9, 2007. The Company decided                not to sell common stock below $1.00 per share through November 9,                2007.                The Company is in discussions to extend the agreement, but                there can be no assurance that the agreement will be extended nor                that the                remaining funds will be raised. |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | Developing                additional sources of debt and equity financing to satisfy the Company's                current and future operating                requirements. |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | Pursuing                opportunities for licensing of drug indications for co-development,                clinical trials, marketing and distribution.                  |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                     |
|   | · |   | Pursuing                opportunities for partnerships and joint ventures for co-development,                clinical trials, marketing and                distribution. |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**NOTE 3.      TRANSACTIONS AND CONTRACTUAL RELATIONSHIPS WITH AFFILIATED      ENTITIES**

|   | · |   | Phage                is a developer of recombinant protein pharmaceuticals; certain of                the                Company's officers and directors, and the Company control percentages                of                the common stock of Phage; |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Ownership                in Phage**           |   | **Cardio’s                Directors and****Officers                %** |   | **Cardio                %** |   |
|-------------------------------------------------|--------|------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                            |   |                                                                         |   |                        |   |
| Percentage                of ownership in Phage |   |                                                                         | 26.7   |                        |   | 4.3 |   |

|   | · |   | CPI                is a distributor for the future products for both Cardio and Phage                in                locations throughout the world other than United States and Canada,                Europe, Japan, and, with respect to Cardio only, the Republic of                Korea,                China, and Taiwan. Cardio and Phage each own approximately 43% of                CPI and                each has the right to appoint 45% of CPI's                directors. |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | Sribna                was developing a treatment for cancer utilizing cancer cell apoptosis                (currently inactive); |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | Proteomics                was developing a non-injection method for medical protein (currently                inactive); |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · |   | Zhittya                was researching adult stem cells (currently inactive);                and |
|--------|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · |   | Qure                was developing commercial medical applications (currently inactive);                Qure                owns less than 1% of the Company's common                stock. |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Joint      Patent Agreement**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

|                                          |   | **Nine                Month Periods Ended****September                30,** |   | **For                the Period from March 11, 1998 (inception) to September 30,** |   |
|-----------------------------------------------|--------|-----------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|--------|
|                                          |   | **2006**                                                                    |   | **2007**                                                                           |   | **2007** |   |
|                                          |   | ***(In                thousands)***                                         |   |
|                                          |   |                                                                        |   |                                                                               |   |   |   |
| Technical                development services |   | $                                                                           | 1,820  |                                                                               | $      | 1,217 |   | $ | 5,153 |   |

|                                                    |   | **Nine                Month Periods Ended****September                30,**  |   | **For                the Period from March 11, 1998                (inception) to September 30, ** |   |
|---------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|
|                                                    |   | **2006**                                                                     |   | **2007**                                                                                           |   | **2007**  |   |
|                                                    |   | ***(In                thousands)***                                          |   |
|                                                    |   |                                                                              |   |                                                                                                    |   |   |   |
| Administrative                support provided by Phage |   | $                                                                                 | 122    |                                                                                                    | $      | 29 |   | $ | 1,190 |   |

**Distribution      Agreement**

**Royalty      Agreement**

**Asia      Exclusive Patent License and Distribution Agreement**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Guaranty      of Rental Agreements for Phage (Now Terminated)**

**Guaranty      from Daniel C. Montano**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**NOTE 4.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Development      Stage Enterprise**

**Stock      Split**

**Use      of Estimates**

**Cash      and Cash Equivalents**

**Restricted      Cash**

|                           |   | **As                of**                |   |
|--------------------------------|--------|-----------------------------------------|--------|
|                           |   | **December                31,****2006** |   | **September                30, 2007** |   |
|                           |   |                                    |   |   |   |
|                           |   | ***(In                thousands)***     |   |
|                           |   |                                    |   |   |   |
| Restricted                cash |   | $                                       | 172    |   | $ | 60 |   |

**Property      and Equipment**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Deferred      Rent**

**Income      Taxes**

|                                             |   | **As                of**                |   |
|--------------------------------------------------|--------|-----------------------------------------|--------|
|                                             |   | **December                31,****2006** |   | **September                30,****2007** |   |
|                                             |   |                                    |   |
| Net                Operating Loss carry forward: |   | ***(In                thousands)***     |   |
|                                             |   |                                    |   |   |   |
| Federal                income taxes              |   | $                                       | 45,147 |   | $ | 59,132 |   |
| State                income taxes (California)   |   |                                    | 44,185 |   |   | 43,600 |   |

|                                                                 |   | **As                of****September                30,****2007** |   |
|----------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|
|                                                                 |   |                                                             |   |
|                                                                 |   | ***(In                thousands)***                              |   |
|                                                                 |   |                                                             |   |
| Federal                research and development credit carry forward |   | $                                                                | 828    |   |

|                                      |   | **Three                Months Ended****September                30,****2007** |   |
|-------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                      |   |                                                                          |   |
|                                      |   | ***(In                thousands)***                                           |   |
|                                      |   |                                                                          |   |
| Recognized                tax benefit (a) |   | $                                                                             | 377    |   |

**Fair      Value of Financial Instruments**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Valuation      of Derivative Instruments**

*”*

**Research      and Development Costs**

**Non-Monetary      Transactions**

**Deferred      Financing Costs**

|                                                        |   | **As                of**                |   |
|-------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                        |   | **December                31,****2006** |   | **September                30,****2007** |   |
|                                                        |   |                                    |   |   |   |
|                                                        |   | ***(In                thousands)***     |   |
|                                                        |   |                                    |   |   |   |
| Deferred                financing costs (a)                 |   | $                                       | 1,883  |   | $ | 1,768 |   |
| Amortization                of the deferred costs           |   |                                    | 402    |   |   | 1,488 |   |
| Deferred                financing cost, net of amortization |   |                                    | 1,481  |   |   | 280 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Marketing      Expense**

|                              |   | **As                of**                 |   |
|-----------------------------------|--------|------------------------------------------|--------|
|                              |   | **September                30,****2006** |   | **September                30, 2007** |   |
|                              |   | ***(In                thousands)***      |   |
|                              |   |                                     |   |   |   |
| Marketing                expenses |   | $                                        | 2,649  |   | $ | 201 |   |

**Concentrations      of Credit Risk**

|                          |   | **As                of**                |   |
|-------------------------------|--------|-----------------------------------------|--------|
|                          |   | **December                31,****2006** |   | **September                30, 2007** |   |
|                          |   | ***(In                thousands)***     |   |
|                          |   |                                    |   |   |   |
| Uninsured                Cash |   | $                                       | 8,475  |   | $ | 202 |   |

**Loss      per Share**

|                                     |   | **As                of**                   |   |
|------------------------------------------|--------|--------------------------------------------|--------|
|                                     |   | **December 31,****2006**              |   | **September 30,****2007** |   |
|                                     |   | ***(Shares                in thousands)*** |   |
| Stock                options             |   |                                       | 2,455  |   |   | 1,023 |   |
| Warrants                                 |   |                                       | 110    |   |   | — |   |
| Convertible                notes payable |   |                                       | 467    |   |   | 4,903 |   |

**Stock-Based      Compensation**

*“*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

|                                                |   | **Nine                Month Periods Ended****September                30,** |   |
|-----------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|
|                                                |   | **2006**                                                                    |   | **2007** |   |
|                                                |   |                                                                        |   |
|                                                |   | ***(In                thousands)***                                         |   |
|                                                |   |                                                                        |   |   |   |
| Stock-based                compensation expense (a) |   | $                                                                           | 369    |   | $ | 162 |   |

|                                                                  |   | **Nine                Months Ended****September                30,****2007** |   |
|-----------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                                                                  |   |                                                                         |   |
|                                                                  |   | ***(In                thousands)***                                          |   |
|                                                                  |   |                                                                         |   |
| Stock-based                compensation in research and development   |   | $                                                                            | 102    |   |
|                                                                  |   |                                                                         |        |   |
| Stock-based                compensation in general and administration |   | $                                                                            | 60     |   |

| **Period**                      |   | **Estimated Fair****Market                Value** |    | **Expected****Volatility (%)** |   | **Risk-Free Interest Rate****(%)** |   | **Weighted Average****Expected Life (years)** |   | **Expected****Dividend Yield****(%)** |   |
|---------------------------------|--------|--------------------------------------------------------|---------|-------------------------------------|--------|----------------------------------------------|--------|--------------------------------------------------------------|--------|--------------------------------------------|--------|
|                            |   |                                                   |    |                                |   |                                         |   |                                                         |   |                                       |   |
| 1st Quarter-2006           |   | $                                                      | 240,254 |                                |   | 76                                           |   |                                                         | 4.785  |                                       |   | 5 |   |   | 0 |   |
| 2nd Quarter-2006           |   |                                                   | 13,270  |                                |   | 79                                           |   |                                                         | 5.125  |                                       |   | 5 |   |   | 0 |   |
| 3rd Quarter-2006           |   |                                                   | 11,272  |                                |   | 77                                           |   |                                                         | 4.570  |                                       |   | 10 |   |   | 0 |   |
| 4th Quarter-2006           |   |                                                   | 235,920 |                                |   | 77                                           |   |                                                         | 4.670  |                                       |   | 10 |   |   | 0 |   |
| Total-2006                      |   | $                                                      | 500,716 |                                |   |                                              |   |                                                         |        |                                       |   |  |   |   |  |   |
| 1st Quarter-2007           |   |                                                   | 309     |                                |   | 69                                           |   |                                                         | 4.640  |                                       |   | 10 |   |   | 0 |   |
| 2nd Quarter-2007           |   |                                                   | 1,982   |                                |   | 68                                           |   |                                                         | 4.480  |                                       |   | 10 |   |   | 0 |   |
| 3rd                Quarter-2007 |   |                                                   | 377     |                                |   | 68                                           |   |                                                         | 5.030  |                                       |   | 10 |   |   | 0 |   |
| Total-2007                      |   | $                                                      | 2,668   |                                |   |                                              |   |                                                         |        |                                       |   |  |   |   |  |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Recently      Issued Accounting Pronouncements**

*”,*
*“*
*”.*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**NOTE 5.      CASH, CASH EQUIVALENTS AND RESTRICTED CASH**

|                           |   | **As                of**      |   |
|--------------------------------|--------|-------------------------------|--------|
|                           |   | **December 31,****2006** |   | **September                30,****2007** |   |
|                           |   | ***(In thousands)***     |   |
| Cash                in bank    |   | $                             | 8,503  |   | $ | 242 |   |
| Restricted                cash |   |                          | 172    |   |   | 60 |   |
| Total                          |   | $                             | 8,675  |   | $ | 302 |   |

**NOTE 6.      PREPAID AND OTHER CURRENT ASSETS**

|                                                          |   | **As                of**              |   |
|---------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                          |   |  **December 31,****2006**   |   |  **September 30,****2007** |   |
|                                                          |   |  ***(In thousands)***  |   |
| Prepaid                clinical trial costs (a)               |   | $                                     | 142    |   | $ | 222 |   |
| Prepaid                clinical trial costs-related party (b) |   |                                  | 396    |   |   | — |   |
| Prepaid                insurance (c)                          |   |                                  | 83     |   |   | 158 |   |
| Prepaid                professional and legal fees (d)        |   |                                  | 312    |   |   | 79 |   |
| Prepaid                trade shows (e)                        |   |                                  | 51     |   |   | — |   |
| Prepaid                and current assets (other) (f)         |   |                                  | 282    |   |   | 283 |   |
| Total                                                         |   | $                                     | 1,266  |   | $ | 742 |   |

|   | (a) | Includes                prepaid amounts associated with clinical trials conducted by contractors                such as: bioRASI, Perry Scientific, Beacon Bioscience and Orthopaedic                Education & Research. The balance includes approximately $91,000                for clinical trial study involving magnetic resonance imaging (“MRI”) of                patients with chronic back pain and $128,000 for characterized mutant                forms of FGF-1 designed to increase the thermo stability of the protein.                These amounts are to be applied against the final invoices and will                be                recognized in the Company’s “Statement of Operations” as research and                development upon the completion of these                trials. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Includes                a prepaid amount to Phage Biotechnology, a related party. In August                2006,                the Company requested Phage conduct the pack-and-fill of the drug                product                for the PAD Phase I clinical trial. The Company agreed to have Phage                conduct the pack-and-fill provided Phage does not exceed the amount                of the                third-party proposal the Company received. The Company has paid $396,000                to Phage for this project as of June 30,                2007. Phage has performed per the Company's contract and is waiting                for                delivery instructions from the Company. The Company has recognized                this                expense in its “Statement of Operations” as research and development                during the second quarter of 2007. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Includes                prepaid insurance associated with directors and officers, which is                amortized over a 12 month period to our “Statement of Operations” as                general and administrative expense. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Includes                prepaid professional and legal fees associated with SEC counsel,                research                and development studies, tax advisory services, legal retainer fees                and                investor relations programs. Legal prepayments are retainer amounts                required by our legal providers to initiate services. These retainers                remain recorded as prepaid until the relationship or the project                is                completed. At that time, these retainers will be recognized in our                “Statement of Operations” as legal expense. Includes approximately $50,000                legal counseling fees and $20,000 of research                study. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Includes                prepaid amounts associated with trade shows in San Francisco, Florida,                London, Las Vegas and Washington D.C. These items were recognized                in the                Company’s “Statement of Operations” as general and administrative expense                as they occur. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Includes                approximately $27,000 of rent for October 2007 and $120,000 consulting                fees for a comprehensive business analysis. Includes other prepaid                expenses associated with software licenses, office expenses and                miscellaneous consulting fees. These items were recognized in the                Company’s “Statement of Operations” as general and administrative expense                as they occur. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

|   | (a) | Includes                prepaid amounts associated with clinical trials conducted by contractors                such as: bioRASI, Inc. These amounts are to be applied against the                final                invoices and will be recognized in the Company’s “Statement of Operations”                as research and development upon the completion of these                trials. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Is                a prepaid amount to Phage Biotechnology a related party. In August                2006,                the Company requested Phage conduct the pack-and-fill of the drug                product                for the PAD Phase I clinical trial. The Company agreed to have Phage                conduct the pack-and-fill provided Phage does not exceed the amount                of the                third-party proposal the Company received. The Company has paid $396,000                to Phage for this project as of March 31, 2007. Phage has performed                per the Company's contract and is waiting for delivery instructions                from                the Company. The Company will recognize this expense in its “Statement of                Operations” as research and development upon transfer of the goods in                2007. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Includes                prepaid insurance associated with directors and officers, which is                amortized over a 12 month period to the “Statement of Operations” as                general and administrative expense. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Includes                prepaid legal fees associated with investor relations, SEC counsel,                tax                advisory services and legal retainer fees. Legal prepayments are                retainer                amounts required by our legal providers to initiate services. These                retainers remain recorded as prepaid until the relationship or the                project                is completed. At that time, these retainers will be recognized in                the                Company’s “Statement of Operations” as legal                expense. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Includes                prepaid amounts associated with trade shows in San Francisco, London,                Las                Vegas and Washington D.C. These items were recognized in the Company’s                “Statement of Operations” as general and administrative expense as they                occur. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Includes                $50,848 prepaid amounts associated with consultants who are paid                in the                beginning of each month, and $47,704 of rent. These items will be                recognized in the Company’s “Statement of Operations” as general and                administrative expense as they                occur. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**NOTE 7.      PROPERTY AND EQUIPMENT**

|                                                                  |   | **As                of**                           |   |
|-----------------------------------------------------------------------|--------|---------------------------------------------------------|--------|
|                                                                  |   | **December 31,****2006**                      |   | **September 30,****2007** |   |
|                                                                  |   | ***(In thousands)***      |   |
| Furniture,                fixtures, computer software, and equipment  |   | $                                                       | 679    |   | $ | 736 |   |
| Scientific                equipment                                   |   |                                                    | 86     |   |   | 86 |   |
| Leasehold                improvements                                 |   |                                                    | 286    |   |   | 288 |   |
| Less                accumulated depreciation                          |   |                                                    | (164   | ) |   | (377 | ) |
| Property                and equipment net of accumulated depreciation |   | $                                                       | 887    |   | $ | 733 |   |

|                                    |   | **As                of****September                30,****2006** |   | **As                of****September                30,****2007** |   | **For                the Period from March 11, 1998 (inception) to September 30,                2007** |   |
|-----------------------------------------|--------|------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|
|                                    |   |                                                             |   |                                                             |   |                                                                                                   |   |
|                                    |   | ***(Unaudited;                Dollars in thousands)***           |   |
| Depreciation                expense (a) |   | $                                                                | 92     |                                                             | $      | 213                                                                                                    |   | $ | 383 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**NOTE 8.      DUE TO AND FROM AFFILIATES**

|                          |   |  **As                of** |   |
|-------------------------------|--------|--------------------------------|--------|
|                          |   | **December 31,****2006**  |   | **September 30,****2007** |   |
|                          |   | ***(In thousands)***      |   |
| Due                to Phage   |   | $                              | (111   | ) | $ | (128 | ) |
| Due                from Phage |   |                           | 38     |   |   | 23 |   |
| Total                         |   | $                              | (73    | ) | $ | (105 | ) |

**NOTE 9.      CONVERTIBLE NOTES PAYABLE**

**Convertible      Senior Secured Notes**

| **Period**                                                                              |   | **Fair                  valued at March 31, 2007** |   | **Fair                  valued from March 31, 2007 to May 21, 2007** |   | **Fair                  Valued from****May                  21, 2007 to****May                  21, 2007** |   | **Fair                  Valued from****May                  21, 2007 to****June                  30, 2007** |   | **Fair                  Valued****from****June                  30, 2007 to****September                  30, 2007** |   |
|-----------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------|--------|
| ***(In thousands)***                                                               |   |
| Warrants                                                                                |   | $                                                  | 61     |                                                                 | $      | 7                                                                                                          |   | $                                                                                                           | 1,566  |                                                                                                                 | $      | 2,058 |   | $ | 132 |   |
| Convertibility                  Feature                                                 |   |                                               | 84     |                                                                 |   | 8                                                                                                          |   |                                                                                                        | 3,433  |                                                                                                                 |   | 3,998 |   |   | 293 |   |
| Interest                  Convertibility Feature                                        |   |                                               | 40     |                                                                 |   | 14                                                                                                         |   |                                                                                                        | 15     |                                                                                                                 |   | 414 |   |   | 35 |   |
| Total                  fair value of derivatives at respective                  periods |   | $                                                  | 185    |                                                                 | $      | 29                                                                                                         |   | $                                                                                                           | 5,014  |                                                                                                                 | $      | 6,470 |   | $ | 460 |   |

| **Net                    decrease (increase) recorded as****adjustment                    to FV**                 |   | **Quarter                    Ended March 31, 2007** |   | **Quarter                    Ended****June                    30, 2007** |   | **Quarter                    Ended September 30, 2007** |   | **Nine                    Months Ended****September                    30, 2007** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|--------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|
| ***(In thousands)***                                                                                         |   |
| Change                    between reporting periods                                                               |   | $                                                   | 406    |                                                                     | $      | (6,285                                                  | )      | $                                                                                 | 6,010  |   | $ | 130 |   |
| Reclass                    of derivatives from liability to equity due                    to actual interest paid |   |                                                | (264   | )                                                                        |   | (89                                                     | )      |                                                                              | (53    | ) |   | (406 | ) |
| Reclass                    of derivatives from liability to equitydue                    to conversions           |   |                                                | (2,268 | )                                                                        |   | (1,584                                                  | )      |                                                                              | (1,238 | ) |   | (5,089 | ) |
| Total                                                                                                             |   | $                                                   | (2,126 | )                                                                        | $      | (7,958                                                  | )      | $                                                                                 | (4,719 | ) | $ | (5,365 | ) |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Conversion      of senior secured notes:**

| **Period**                              |   | **Amount of Senior****Secured                  Notes****Converted** |       |   **Converted to****Number of Shares** |   | **Average Share Price** |   | **Interest Paid During****the Period with****Common Stock** |   |
|-----------------------------------------|--------|-------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|--------|-----------------------------------|--------|--------------------------------------------------------------------------------------|--------|
|                                    |   |                                                                     |       |                                                            |   |                         |   |                                                                            |   |
| 3rd                  quarter - 2006     |   | $                                                                             | 295,723    |                                                            |   | 110,500                           |   | $                                                                                    | 2.76   |   | $ | 7,576 |   |
| 4th                  quarter - 2006     |   |                                                                          | 1,601,791  |                                                            |   | 968,971                           |   |                                                                                 | 1.84   |   |   | 25,454 |   |
| Total                  - 2006           |   | $                                                                             | 1,897,514  |                                                            |   | 1,079,471                         |   |                                                                                 |        |   | $ | 33,030 |   |
| 1st                  quarter - 2007     |   |                                                                          | 3,561,835  |                                                            |   | 3,730,511                         |   |                                                                                 | 1.00   |   |   | 72,225 |   |
| 2nd                  quarter - 2007     |   |                                                                          | 3,279,394  |                                                            |   | 3,455,148                         |   |                                                                                 | 0.99   |   |   | 32,409 |   |
| 3rd                  quarter - 2007 (a) |   |                                                                          | 3,545,775  |                                                            |   | 4,649,762                         |   |                                                                                 | 0.76   |   |   | 222,578 |   |
| Committed                  Stock        |   |                                                                          | 210,706    |                                                            |   | —                           |   |                                                                                 |   |   |   | — |   |
| Total                  - 2007           |   | $                                                                             | 10,597,710 |                                                            |   | 11,835,421                        |   |                                                                                 |   |   | $ | 327,212 |   |
| Total                  - 2006 and 2007  |   | $                                                                             | 12,495,224 |                                                            |   | 12,914,892                        |   |                                                                                 |        |   | $ | 360,242 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

|                                                                                                                        |   | ***(In thousands)***  |    |
|-----------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|
| Convertible                Notes at face value at March 20, 2006                                                       |   | $                               | 20,000  |   |
| Notes                converted into common stock                                                                            |   |                            | (12,345 | ) |
| Convertible                Notes at face value at September 30, 2007                                                   |   |                            | 7,655   |   |
| Discounts                on Notes:                                                                                          |   |                            |    |   |
| Embedded                derivatives                                                                                         |   |                            | (8,195  | ) |
| Warrant                derivative                                                                                           |   |                            | (2,383  | ) |
| Amortization                of discount from derivatives                                                                    |   |                            | 9,065   |   |
| Convertible                notes net of discounts at September 30, 2007                                                     |   |                            | 6,142   |   |
| Embedded                derivatives at fair value at September 30, 2007                                                |   |                            | 327     |   |
| Warrant                derivative at fair value at September 30, 2007                                                  |   |                            | 132     |   |
| Net                Convertible notes, embedded derivatives and warrant derivative at                September 30, 2007 |   | $                               | 6,601   |   |

| **Item #** |    | **Derivatives**                                             |    | **Definition**                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------|--------------|-------------------------------------------------------------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1               |    | Warrants                Derivative                          |    | The                Company sold warrants in connection with the sale of senior secured                convertible notes on March 20, 2006. The warrants were fair valued                at                March 20, 2006 and subsequently are revalued at the end of each                quarter.                                                                                                                                                                    |
|            |         |                                                        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 2               |    | Conversion                Feature Embedded Derivative       |    | As                part of the sale of the senior secured convertible notes on March                20,                2006, the buyer has the right to convert up to 10% of the initial                balance                in to common stock each month starting August 20, 2006. The conversion                feature derivatives were fair valued at March 20, 2006 and subsequently                have been and are revalued at the end of each quarter.    |
|            |         |                                                        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 3               |         | Interest                Conversion Embedded Derivative      |         | As                part of the sale of the senior secured convertible notes at March                20,                2006, the Company has the right to pay interest with its common stock                upon                the registration effective June 12, 2006. The interest conversion                derivatives were fair valued at March 20, 2006 and subsequently have                been                and are revalued at the end of each quarter. |
|            |         |                                                        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4               |         | Options                issued to non-employees Derivatives  |         | As                part of the sale of the senior secured convertible notes at March                20,                2006, the Company was required to reclassify previously and subsequently                issued options to non-employees as option derivatives, which are                revalued                at the end of each quarter.                                                                                                                    |
|            |         |                                                        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 5               |    | Warrants                issued to non-employees Derivatives |    | As                part of the sale of the senior secured convertible notes at March                20,                2006, the Company was required to reclassify previously and subsequently                issued warrants to non-employees as warrant derivatives, which are                revalued at the end of each                quarter.                                                                                                                  |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| **Derivatives**                                                             |   | **Dividend                  Yield %** |   | **Expected****Volatility                  %** |   | **Risk-Free****Interest****%** |   | **Expected                  Life (years)** |                         | **CVBT                  Stock Price** |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------|--------|-----------------------------------------------|--------|--------------------------------|--------|--------------------------------------------|------------------------------|---------------------------------------|--------|
|                                                                        |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |
|                                                                        |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |
| Warrant                  derivative - Convertible Note                      |   |                             |   |                                     |   |                      |   |                                  |                         |                             |   |
| As                  of March 20, 2006                                       |   |                                  | 0      |                                          |   | 74.6                           |   |                                       | 4.59                         |                                  |   | 3 |   | $ | 7.15 |   |
| As                  of December 31, 2006                                    |   |                                  | 0      |                                          |   | 71.44                  - 84.04 |   |                                       | 4.62                  - 4.83 |                                  |   | 2 |   | $ | 1.48 |   |
| March                  31, 2007 - May 21, 2007                              |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - May 21, 2007                                |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - June 30, 2007                               |   |                                  | 0      |                                          |   | 78.21                          |   |                                       | 4.89                         |                                  |   | 2 |   | $ | 0.89 |   |
| As                  of September 30, 2007                                   |   |                                  | 0      |                                          |   | 44.56                          |   |                                       | 3.97                         |                                  |   | 1.5 |   | $ | 0.50 |   |
|                                                                        |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |   |   |   |   |   |
| Conversion                  feature embedded derivative - Convertible Note  |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |   |   |   |   |   |
| As                  of March 20, 2006                                       |   |                                  | 0      |                                          |   | 74.6                           |   |                                       | 4.59                         |                                  |   | 3 |   | $ | 7.15 |   |
| As                  of December 31, 2006                                    |   |                                  | 0      |                                          |   | 71.44                  - 84.04 |   |                                       | 4.62                  - 4.83 |                                  |   | 2 |   | $ | 1.48 |   |
| March                  31, 2007 - May 21, 2007                              |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - May 21, 2007                                |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - June 30, 2007                               |   |                                  | 0      |                                          |   | 78.21                          |   |                                       | 4.89                         |                                  |   | 2 |   | $ | 0.89 |   |
| As                  of September 30, 2007                                   |   |                                  | 0      |                                          |   | 44.56                          |   |                                       | 3.97                         |                                  |   | 1.5 |   | $ | 0.50 |   |
|                                                                        |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |   |   |   |   |   |
| Interest                  Conversion embedded derivative - Convertible Note |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |   |   |   |   |   |
| As                  of March 20, 2006                                       |   |                                  | 0      |                                          |   | 74.6                           |   |                                       | 4.59                         |                                  |   | 3 |   | $ | 7.15 |   |
| As                  of December 31, 2006                                    |   |                                  | 0      |                                          |   | 71.44                  - 84.04 |   |                                       | 4.62                  - 4.83 |                                  |   | 2 |   | $ | 1.48 |   |
| March                  31, 2007 - May 21, 2007                              |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - May 21, 2007                                |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - June 30, 2007                               |   |                                  | 0      |                                          |   | 78.21                          |   |                                       | 4.89                         |                                  |   | 2 |   | $ | 0.89 |   |
| As                  of September 30, 2007                                   |   |                                  | 0      |                                          |   | 44.56                          |   |                                       | 3.97                         |                                  |   | 1.5 |   | $ | 0.50 |   |
|                                                                        |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |   |   |   |   |   |
| Options                  issued to non-employees derivative                 |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |   |   |   |   |   |
| As                  of March 20, 2006                                       |   |                                  | 0      |                                          |   | 74.6                           |   |                                       | 4.59                         |                                  |   | (a | ) | $ | 7.15 |   |
| As                  of December 31, 2006                                    |   |                                  | 0      |                                          |   | 71.44                  - 84.04 |   |                                       | 4.62                  - 4.83 |                                  |   | (a | ) | $ | 1.48 |   |
| March                  31, 2007 - May 21, 2007                              |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - May 21, 2007                                |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - June 30, 2007                               |   |                                  | 0      |                                          |   | 78.21                          |   |                                       | 4.89                         |                                  |   | 2 |   | $ | 0.89 |   |
|  As                  of September 30, 2007                             |   |                                  | 0      |                                          |   | 44.56                          |   |                                       | 3.97                         |                                  |   | 1.5 |   | $ | 0.50 |   |
|                                                                        |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |   |   |   |   |   |
| Warrants                  issued to non-employees derivative                |   |                                  |   |                                          |   |                           |   |                                       |                         |                                  |   |   |   |   |   |   |
| As                  of March 20, 2006                                       |   |                                  | 0      |                                          |   | 74.6                           |   |                                       | 4.59                         |                                  |   | (a | ) | $ | 7.15 |   |
| As                  of December 31, 2006                                    |   |                                  | 0      |                                          |   | 71.44                  - 84.04 |   |                                       | 4.62                  - 4.83 |                                  |   | (a | ) | $ | 1.48 |   |
| March                  31, 2007 - May 21, 2007                              |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - May 21, 2007                                |   |                                  | 0      |                                          |   | 79.65                          |   |                                       | 4.74                         |                                  |   | 2 |   | $ | 0.75 |   |
| May                  21, 2007 - June 30, 2007                               |   |                                  | 0      |                                          |   | 78.21                          |   |                                       | 4.89                         |                                  |   | 2 |   | $ | 0.89 |   |
| As                  of September 30, 2007                                   |   |                                  | 0      |                                          |   | 44.56                          |   |                                       | 3.97                         |                                  |   | 1.5 |   | $ | 0.50 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| **Adjustments                  to fair value of derivatives**                       |   | **Balance                  as of December 31, 2006** |   | **Adjustment                  to Fair Value of Derivative** |   | **Net                  Additions/ Deletions for new issuance****exercise** |    | **Adjustment                  to Paid in Capital for Conversion** |    | **Balance                  as of September 30,****2007** |   |
|-------------------------------------------------------------------------------------|--------|------------------------------------------------------|--------|-------------------------------------------------------------|--------|----------------------------------------------------------------------------|---------|-------------------------------------------------------------------|---------|----------------------------------------------------------|--------|
|                                                                                |   | ***(In                  thousands)***                |   |
| Warrant                  derivative - convertible note                              |   | $                                                    | 172    |                                                        | $      | (40                                                                        | )  | $                                                                 | — |                                                     | $      | — |   | $ | 132 |   |
|                                                                                |   |                                                 |   |                                                        |   |                                                                       |    |                                                              |    |                                                     |   |   |   |   |   |   |
| Conversion                  feature embedded derivative - convertible note          |   |                                                 | 321    |                                                        |   | 5,237                                                                      |    |                                                              | — |                                                     |   | (5,265 | ) |   | 293 |   |
| Interest                  conversion feature embedded derivative - convertible note |   |                                                 | 98     |                                                        |   | 168                                                                        |    |                                                              | — |                                                     |   | (231 | ) |   | 35 |   |
| Total                  embedded derivatives                                         |   |                                                 | 419    |                                                        |   | 5,405                                                                      |    |                                                              | — |                                                     |   | (5,496 | ) |   | 328 |   |
|                                                                                |   |                                                 |   |                                                        |   |                                                                       |    |                                                              |    |                                                     |   |   |   |   |   |   |
| Option                  derivative - non-employees                                  |   |                                                 | 1,406  |                                                        |   | (1,245                                                                     | )       |                                                              | 43      |                                                     |   | 126 |   |   | 330 |   |
| Warrant                  derivative - non-employees                                 |   |                                                 | 366    |                                                        |   | (709                                                                       | )       |                                                              | 401     |                                                     |   | — |   |   | 58 |   |
| Total                  warrant and options derivative non-employees                 |   |                                                 | 1,772  |                                                        |   | (1,954                                                                     | )       |                                                              | 444     |                                                     |   | 126 |   |   | 388 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| **Period**                                                   |   | **Options                  Granted** |    | **Exercise                  Price -****Non-Employees** |   | **Estimated****Fair                  Value on the date options granted or Transferred** |   | **Fair                  Value of Portion Vested as of****September                  30, 2007** |    | **Option                  Derivatives** |   | **Transfer                  of fully vested employee stocks to non-employee** |   |
|--------------------------------------------------------------|--------|--------------------------------------|---------|--------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|---------|-----------------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                                         |   |                                 |    |                                                   |   |                                                                                    |   |                                                                                           |    |                                    |   |                                                                          |   |
| During                  quarter ended December 31, 2006 (a)  |   |                                 | 150,000 |                                                   | $      | 10.00                                                                                   |   | $                                                                                              | 228,000 |                                    | $      | 14,242                                                                        |   | $ | 97,913 |   |   | — |   |
| During                  the quarter ended March 31, 2007 (b) |   |                                 | — |                                                   |   | 0.30                                                                                    |   |                                                                                           | 435,600 |                                    |   | —                                                                       |   |   | — |   |   | 440,000 |   |
| During                  the quarter ended June 30, 2007      |   |                                 | — |                                                   |   | —                                                                                 |   |                                                                                           | — |                                    |   | —                                                                       |   |   | — |   |   | — |   |
| During                  the quarter ended September 30, 2007 |   |                                 | — |                                                   |   | —                                                                                 |   |                                                                                           | — |                                    |   | —                                                                       |   |   | — |   |   | — |   |

| **Adjustments                  to fair value of derivatives - options and                  warrants** |   | **At                  March 31,****2007** |   | **At                  June 30,****2007** |   | **At                  September 30,****2007** |   | T**otal** |   |
|-------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|------------------------------------------|--------|-----------------------------------------------|--------|-----------|--------|
|                                                                                                  |   |                                      |   |                                     |   |                                          |   |
|                                                                                                  |   | ***(In                  thousands)***     |   |                                     |   |
|                                                                                                  |   |                                      |   |                                     |   |                                          |   |      |   |
| Adjustment                  to the fair value of option derivatives (a)                          |   | $                                         | (64    | )                                        | $      | (727                                          | )      | $         | (454   | ) | $ | (1,245 | ) |
| Adjustment                  to the fair value of warrant derivatives                                  |   |                                      | (488   | )                                        |   | (121                                          | )      |      | (100   | ) |   | (709 | ) |
| Total                  adjustments to fair value                                                      |   | $                                         | (552   | )                                        | $      | (848                                          | )      | $         | (554   | ) | $ | (1,954 | ) |

** **

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| **Stock                    Option Transactions- Non-Employees** |   | **Number                    of Option****Exercised** |    | **Dividend                    Yield****%** |   | **Expected                    Volatility****%** |   | **Risk                    Free Interest****Rate                    %** |                            | **Expected                    Remaining Life****(years)** |   | **Decrease****In                    the FV of Option Derivatives** |   |
|-----------------------------------------------------------------|--------|------------------------------------------------------|---------|--------------------------------------------|--------|-------------------------------------------------|--------|------------------------------------------------------------------------|---------------------------------|-----------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                                            |   |                                                 |    |                                       |   |                                            |   |                                                                   |                            |                                                      |   |                                                               |   |
| Quarter                    1- 2007                              |   |                                                 | 160,000 |                                       |   | 0                                               |   |                                                                   | 70.97                    -71.15 |                                                      |   | 4.45-4.87                                                          |   |   | 2.80-3.03 |   | $ | 122,698 |   |
| Quarter                    2- 2007                              |   |                                                 | 180,000 |                                       |   | 0                                               |   |                                                                   | 69.58-70.94                     |                                                      |   | 4.55-4.98                                                          |   |   | 2.50 |   |   | 163,400 |   |
| Quarter                    3- 2007                              |   |                                                 | 40,000  |                                       |   | 0                                               |   |                                                                   | 73.36                           |                                                      |   | 4.56                                                               |   |   | 2.25 |   |   | 24,640 |   |
| Total-2007                                                      |   |                                                 | 380,000 |                                       |   |                                            |   |                                                                   |                            |                                                      |   |                                                               |   |   |   |   | $ | 310,738 |   |

| **Warrant                  Transactions- Non-Employees Office/Director** |   | **Warrants                  issued** |    | **Dividend                  Yield %** |   | **Expected****Volatility                  %** |   | **Risk-Free****Interest****%** |   | **Expected                  Life (years)** |   | **FV                  on the date warrants granted** |   | **Exercise                  price** |   |
|--------------------------------------------------------------------------|--------|--------------------------------------|---------|---------------------------------------|--------|-----------------------------------------------|--------|--------------------------------|--------|--------------------------------------------|--------|------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                     |   |                                 |    |                                  |   |                                          |   |                           |   |                                       |   |                                                 |   |                                |   |
| April                  -2006 (a)                                         |   |                                 | 250,000 |                                  |   | 0                                             |   |                           | 79     |                                       |   | 5.125                                                |   |                                | 10     |   | $ | 1,602,500 |   | $ | 10.00 |   |

| **Transactions                      from March 30, 2006 through September 30, 2007**                                                                                                               |   | **Deferred****Finance****Costs**          |   | **Discount                      for****Warrant****Derivative** |   | **Discount                      for****Embedded****Derivatives** |   | **Addition                      to****Interest****Expense** |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|----------------------------------------------------------------|--------|------------------------------------------------------------------|--------|-------------------------------------------------------------|---------|
|                                                                                                                                                                                               |   | ***(In                      thousands)*** |   |
| Balance                      March 20, 2006 (close date)                                                                                                                                           |   | $                                         | 1,553  |                                                           | $      | 2,383                                                            |   | $                                                           | 8,196   |   | $ | — |   |
| Percent                      change for conversion to common stock for September 30,                      2007                                                                                     |   |                                      | (903   | )                                                              |   | —                                                          |   |                                                        | — |   |   | (903 | ) |
| Amortization                      for the period March 20, 2006 (close date) through September                      30, 2007                      charged                      to interest expense |   |                                      | (585   | )                                                              |   | (1,214                                                           | )      |                                                        | (7,851  | ) |   | (9,649 | ) |
| Remaining                      deferred costs and discount to be amortized                                                                                                                         |   | $                                         | 65     |                                                           | $      | 1,169                                                            |   | $                                                           | 345     |   | $ | (10,552 | ) |

**Daniel      C. Montano Guaranty**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Pre      IPO Debt**

**Series      I Convertible Promissory Notes**

**Series      II Convertible Promissory Notes**

**Series      IIa Convertible Promissory Notes**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Components      of Interest Expense**

|                                                                   |   | **Nine                Month Periods Ended****September                30,** |    | **For                the Period from March 11, 1998 (inception) to September 30,** |   |
|------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|------------------------------------------------------------------------------------|--------|
| **Convertible                promissory notes series I, II, IIa**      |   | **2006**                                                                    |    | **2007**                                                                           |   | **2007** |   |
|                                                                   |   |                                                                        |    |  ***(In                thousands)***                                          |   |   |   |
| Interest                expense from the beneficial conversion feature |   | $                                                                           | — |                                                                               | $      | — |   | $ | 2,050 |   |
| Total                financing cost                                    |   |                                                                        | — |                                                                               |   | — |   |   | 2,136 |   |
| Interest                expense on series I, II, IIa                   |   |                                                                        | — |                                                                               |   | — |   |   | 1,303 |   |
| Total                                                                  |   | $                                                                           | — |                                                                               | $      | — |   | $ | 5,489 |   |

|                                                               |   | **Nine                  Month Periods Ended****September                  30,** |   | **For                  the Period from March 11, 1998 (inception) to September 30,** |   |
|--------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|
| **Senior                  secured convertible notes - Promethean** |   | **2006**                                                                        |   | **2007**                                                                             |   | **2007** |   |
|                                                               |   |                                                                            |   |  ***(In                  thousands)***                                          |   |   |   |
| Interest                  expense                                  |   | $                                                                               | 1,455  |                                                                                 | $      | 1,199 |   | $ | 3,238 |   |
| Amortization                  of deferred financing cost           |   |                                                                            | 273    |                                                                                 |   | 915 |   |   | 1,317 |   |
| Amortization                  of derivatives                       |   |                                                                            | 1,861  |                                                                                 |   | 5,544 |   |   | 9,065 |   |
| Total                                                              |   | $                                                                               | 3,589  |                                                                                 | $      | 7,658 |   | $ | 13,620 |   |

**NOTE      10. STOCKHOLDERS' EQUITY**

**Preferred      Stock**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Common      Stock**

|                                                  |   | **For                the Year Ended** |                             | **Amount                Converted to Common Stock** |   | **Number                of Shareholders** |   | **Number                of Preferred Stock** |   | **Converted                to Common stock** |   |
|-------------------------------------------------------|--------|---------------------------------------|----------------------------------|-----------------------------------------------------|--------|-------------------------------------------|--------|----------------------------------------------|--------|----------------------------------------------|--------|
| Convertible                preferred shareholders (a) |   |                                  | December                31, 2004 |                                                |   |                                           |   |                                         | 11     |                                         |   | 28,100 |   |   | 2,810,000 |   |
| Convertible                Series I, II, IIa (notes)  |   |                                  | December                31, 2004 |                                                | $      | 4,531,200                                 |   |                                         |        |                                         |   |  |   |   | 1,649,550 |   |
| Convertible                notes payables (b)         |   |                                  | December                31, 2005 |                                                |   |                                           |   |                                         | 9      |                                         |   | 23,250 |   |   | 2,325,000 |   |

| **Period**                                |   | **Amount                    of Senior****Secured                    Notes****Converted** |       | **Converted                    to****Number                    of Shares** |   | **Average                    Share Price** |   | **Interest                    Paid During****the                    Period with****Common                    Stock** |   |
|-------------------------------------------|--------|------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------|--------|--------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------|--------|
|                                      |   |                                                                                     |       |                                                                       |   |                                       |   |                                                                                                                 |   |
| 3rd                    quarter - 2006     |   | $                                                                                        | 295,723    |                                                                       |   | 110,500                                    |   | $                                                                                                                    | 2.76   |   | $ | 7,576 |   |
| 4th                    quarter - 2006     |   |                                                                                     | 1,601,791  |                                                                       |   | 968,971                                    |   |                                                                                                                 | 1.84   |   |   | 25,454 |   |
| Total                    - 2006           |   | $                                                                                        | 1,897,514  |                                                                       |   | 1,079,471                                  |   |                                                                                                                 |   |   | $ | 33,030 |   |
| 1st                    quarter - 2007     |   |                                                                                     | 3,561,835  |                                                                       |   | 3,730,511                                  |   |                                                                                                                 | 1.00   |   |   | 72,225 |   |
| 2nd                    quarter - 2007     |   |                                                                                     | 3,279,394  |                                                                       |   | 3,455,148                                  |   |                                                                                                                 | 0.99   |   |   | 32,409 |   |
| 3rd                    quarter - 2007 (a) |   |                                                                                     | 3,545,775  |                                                                       |   | 4,649,762                                  |   |                                                                                                                 | 0.76   |   |   | 222,578 |   |
| Committed                    Stock        |   |                                                                                     | 210,706    |                                                                       |   | —                                    |   |                                                                                                                 |   |   |   | — |   |
| Total                    - 2007           |   | $                                                                                        | 10,597,710 |                                                                       |   | 11,835,421                                 |   |                                                                                                                 |   |   | $ | 327,212 |   |
| Total                    - 2006 and 2007  |   | $                                                                                        | 12,495,224 |                                                                       |   | 12,914,892                                 |   |                                                                                                                 |   |   | $ | 360,242 |   |

**(a)      **

**Stock      Option Transactions**

| **Date**                            |   | **Number of Option or****Warrant                  Holders** |   | **Number of Options****Exercised** |   | **Number of Warrants ****Exercised** |   | **Exchange for Shares of****Common                  Stock** |    |
|-------------------------------------|--------|----------------------------------------------------------------------------|--------|----------------------------------------------|--------|-----------------------------------------------------|--------|----------------------------------------------------------------------------|---------|
| December                  2005      |   |                                                                       | 1      |                                         |   | —                                             |   |                                                                       | 933,330 |   |   | 848,482 |   |
| Total                  - 2005       |   |                                                                       |        |                                         |   | —                                             |   |                                                                       | 933,330 |   |   | 848,482 |   |
| 1st                  quarter - 2006 |   |                                                                       | 1      |                                         |   | —                                             |   |                                                                       | 100,000 |   |   | 89,116 |   |
| 2nd                  quarter - 2006 |   |                                                                       | 2      |                                         |   | 55,000                                              |   |                                                                       | — |   |   | 55,000 |   |
| 3rd                  quarter - 2006 |   |                                                                       | 1      |                                         |   | 210,000                                             |   |                                                                       | — |   |   | 210,000 |   |
| 4th                  quarter -2006  |   |                                                                       | 1      |                                         |   | 200,000                                             |   |                                                                       | — |   |   | 200,000 |   |
| Total                  - 2006       |   |                                                                       |        |                                         |   | 465,000                                             |   |                                                                       | 100,000 |   |   | 465,000 |   |
| 1st                  quarter - 2007 |   |                                                                       | 1      |                                         |   | 220,000                                             |   |                                                                       | — |   |   | 220,000 |   |
| 2nd                  quarter - 2007 |   |                                                                       | 1      |                                         |   | 180,000                                             |   |                                                                       | — |   |   | 180,000 |   |
| July                  - 2007        |   |                                                                       | 1      |                                         |   | —                                             |   |                                                                       | — |   |   | — |   |
| August                  - 2007      |   |                                                                       | 1      |                                         |   | 40,000                                              |   |                                                                       | — |   |   | 40,000 |   |
| September                  - 2007   |   |                                                                       | 1      |                                         |   | —                                             |   |                                                                       | — |   |   | — |   |
| Total                  - 2007       |   |                                                                       |        |                                         |   | 440,000                                             |   |                                                                       | — |   |   | 440,000 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| **Stock                  Option Transactions** |   | **Options Granted** |    | **Exercise Price** |   | **Estimated Fair Value** |   | **Weighted Average****Expected Life (years)** |    | **Approximate****Volatility (%)** |   |
|------------------------------------------------|--------|--------------------------|---------|-------------------------|--------|------------------------------------|--------|--------------------------------------------------------------|---------|----------------------------------------|--------|
| February                  2006 (a)             |   |                     | 50,000  |                    | $      | 10.00                              |   | $                                                            | 234,830 |                                   |   | 5 |   |   | 76 |   |
| March                  2006 (b)                |   |                     | 1,250   |                    |   | 10.00                              |   |                                                         | 5,424   |                                   |   | 5 |   |   | 76 |   |
| 2nd                  quarter - 2006 (b)        |   |                     | 3,000   |                    |   | 10.00                              |   |                                                         | 13,270  |                                   |   | 5 |   |   | 79 |   |
| 3rd                  quarter - 2006 (b)        |   |                     | 4,800   |                    |   | 10.00                              |   |                                                         | 11,272  |                                   |   | 10 |   |   | 77 |   |
| 4th                  quarter - 2006 (b)        |   |                     | 156,000 |                    |   | 10.00                              |   |                                                         | 235,920 |                                   |   | 10 |   |   | 77 |   |
| Total-2006                                     |   |                     | 215,050 |                    |   |                                    |   | $                                                            | 500,716 |                                   |   |  |   |   |  |   |
|                                           |   |                     |         |                    |   |                                    |   |                                                         |         |                                   |   |  |   |   |  |   |
| 1st                  quarter - 2007 (b)        |   |                     | 500     |                    |   | 10.00                              |   |                                                         | 309     |                                   |   | 10 |   |   | 69 |   |
| 2nd                  quarter - 2007 (b)        |   |                     | 3,000   |                    |   | 10.00                              |   |                                                         | 1,982   |                                   |   | 10 |   |   | 68 |   |
| July                  - 2007 (b)               |   |                     | 1,000   |                    |   | 10.00                              |   |                                                         | 377     |                                   |   | 10 |   |   | 68 |   |
| August                  - 2007 (b)             |   |                     | — |                    |   | —                            |   |                                                         | — |                                   |   | — |   |   | — |   |
| September                  - 2007 (b)          |   |                     | — |                    |   | —                            |   |                                                         | — |                                   |   | — |   |   | — |   |
| Total-2007                                     |   |                     | 4,500   |                    |   |                                    |   | $                                                            | 2,668   |                                   |   |  |   |   |  |   |

| (a) | All                options were issued for the past services and therefore expensed                on the                date of grant. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

| (b) | All                options were issued for future services and will be expensed over                the life                of the options. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------|

| **Stock                    Option Transactions- Non-Employees** |   | **Number                    of Options****Exercised** |    | **Dividend                    Yield****%** |   | **Expected                    Volatility****%** |   |   **Risk                    Free Interest****Rate** |        | **Expected                    Remaining Life** |   | **Decrease****In                    the FV of Option Derivatives** |   |
|-----------------------------------------------------------------|--------|-------------------------------------------------------|---------|--------------------------------------------|--------|-------------------------------------------------|--------|---------------------------------------------------------------|-------------|------------------------------------------------|--------|--------------------------------------------------------------------|--------|
| 1st                    quarter - 2007                           |   |                                                  | 160,000 |                                       |   | 0                                               |   |                                                          | 70.97-71.15 |                                           |   | 4.45-4.87                                                          |   |   | 2.80-3.03 |   | $ | 122,698 |   |
| 2nd                    quarter - 2007                           |   |                                                  | 180,000 |                                       |   | 0                                               |   |                                                          | 69.58-70.94 |                                           |   | 4.55-4.98                                                          |   |   | 2.50 |   |   | 163,400 |   |
| 3rd                    quarter - 2007                           |   |                                                  | 40,000  |                                       |   | 0                                               |   |                                                          | 73.36       |                                           |   | 4.56                                                               |   |   | 2.25 |   |   | 24,640 |   |
| Total-2007                                                      |   |                                                  | 380,000 |                                       |   |                                                 |   |                                                          |             |                                           |   |                                                                    |   |   |  |   | $ | 310,738 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| **Stock                Option Transactions- Non-Employees** |   | **Options ****Granted** |    | **Exercise Price** |   | **Estimated Fair ****Value** |   | **Weighted Average                Expected Life (years)** |      | **Risk                Free Rate of Interest (%)** |   | **Approximate****Volatility (%)** |   |
|-------------------------------------------------------------|--------|------------------------------|---------|-------------------------|--------|----------------------------------------|--------|--------------------------------------------------------------------------|-----------|---------------------------------------------------|--------|----------------------------------------|--------|
| During                the year ended December 31, 2005 (a)  |   |                         | 550,500 |                    | $      | 10.00                                  |   | $                                                                        | 2,387,574 |                                              |   | 5                                      |   |   | 4.06 |   |   | 76 |   |
| During                the year ended December 31, 2004 (b)  |   |                         | 40,000  |                    |   | —                                |   |                                                                     | 57,792    |                                              |   | 5                                      |   |   | 1.03                to 1.50 |   |   | 76 |   |
| During                the year ended December 31, 2004 (c)  |   |                         | 25,000  |                    |   | —                                |   |                                                                     | 21,385    |                                              |   | 5                                      |   |   | 1.02 |   |   | 76 |   |
| During                the year ended December 31, 2003      |   |                         | 90,000  |                    |   | —                                |   |                                                                     | 47,120    |                                              |   | 5                                      |   |   | 1.39 |   |   | 76 |   |
| During                the year ended December 31, 2002 (d)  |   |                         | — |                    |   | —                                |   |                                                                     | —   |                                              |   | —                                |   |   | — |   |   | — |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

|                                                                 |   | **Employees** |      | **Non-Employees**                     |   | **Total**   |   |
|----------------------------------------------------------------------|--------|---------------|-----------|---------------------------------------|--------|-------------|--------|
|                                                                 |   | **Shares**    |      | **Exercise                    Price** |   | **Shares**  |   | **Exercise                    Price** |   | **Shares** |   | **Exercise                    Price** |   |
| **Outstanding                    at December 31, 2005**              |   |          | 1,170,500 |                                  | $      | 0.30-$10.00 |   |   | 1,990,500 |   | $ | 0.30-$10.00 |   |   | 3,161,000 |   | $ | 0.30-$10.00 |   |
| Granted                                                              |   |          | 15,050    |                                  |   | 10.00       |   |   | 200,000 |   |   | 10.00 |   |   | 215,050 |   |   | 10.00 |   |
| Exercised                                                            |   |          | —   |                                  |   | —     |   |   | (465,000 | ) |   | 0.30-0.50 |   |   | (465,000 | ) |   | 0.30-0.50 |   |
| Forfeitures                                                          |   |          | —   |                                  |   | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |
| **Outstanding                    at December 31, 2006**              |   |          | 1,185,550 |                                  | $      | 0.30-$10.00 |   |   | 1,725,500 |   | $ | 0.30-$10.00 |   |   | 2,911,050 |   | $ | 0.30-$10.00 |   |
| Granted                                                              |   |          | 4,500     |                                  |   | 10.00       |   |   | — |   |   | — |   |   | 4,500 |   |   | 10.00 |   |
| Terminated                                                           |   |          | (2,000    | )                                     |   | 10.00       |   |   | — |   |   | — |   |   | (2,000 | ) |   | 10.00 |   |
| Reclassified                                                         |   |          | (440,000  | )                                     |   | 0.30        |   |   | 440,000 |   |   | 0.30-$0.50 |   |   | — |   |   | 0.30 |   |
| Exercised                                                            |   |          | (60,000   | )                                     |   | 0.30        |   |   | (380,000 | ) |   | 0.30 |   |   | (440,000 | ) |   | 0.30-$0.50 |   |
| Cancelled                                                            |   |          | (750      | )                                     |   | 10.00       |   |   | (150,000 | ) |   | 10.00 |   |   | (150,750 | ) |   | 10.00 |   |
| Forfeited                                                            |   |          | —   |                                  |   | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |
| **Outstanding                    at September 30, 2007 (unaudited)** |   |          | 687,300   |                                  | $      | 0.30-$10.00 |   |   | 1,635,500 |   | $ | 0.30-$10.00 |   |   | 2,322,800 |   | $ | 0.30-$10.00 |   |

|                                                      |   | **Number                  of****Shares** |      | **Weighted****Average****Exercise****Price** |   | **Weighted****Average****Remaining****Contractual****Life                  Years** |   | **Intrinsic****Value** |   |
|-----------------------------------------------------------|--------|------------------------------------------|-----------|----------------------------------------------|--------|------------------------------------------------------------------------------------|--------|------------------------|--------|
| **As                  of December 31, 2006**              |   |                                     |      |                                         |   |                                                                               |   |                   |   |
| Employees—outstanding                               |   |                                     | 1,185,550 |                                         | $      | 1.80                                                                               |   |                   | 3.86   |   | $ | 2,133,990 |   |
| Employees—expected                  to vest         |   |                                     | 229,758   |                                         |   | 1.80                                                                               |   |                   | 3.86   |   |   | 413,564 |   |
| Employees—exercisable                               |   |                                     | 955,792   |                                         |   | 1.80                                                                               |   |                   | 3.86   |   |   | 1,720,425 |   |
| Non-Employees—outstanding                           |   |                                     | 1,725,500 |                                         |   | 3.61                                                                               |   |                   | 6.21   |   |   | 1,221,300 |   |
| Non-Employees—expected                  to Vest     |   |                                     | 112,500   |                                         |   | 10.00                                                                              |   |                   | 9.75   |   |   | — |   |
| Non                  Employees—exercisable          |   |                                     | 1,613,000 |                                         |   | 3.61                                                                               |   |                   | 6.21   |   |   | 1,221,300 |   |
| **As                  of September 30, 2007 (unaudited)** |   |                                     |           |                                         |   |                                                                                    |   |                   |        |   |   |  |   |
| Employees—outstanding                               |   |                                     | 687,300   |                                         |   | 2.91                                                                               |   |                   | 3.91   |   |   | 100,000 |   |
| Employees—expected                  to vest         |   |                                     | 58,060    |                                         |   | 1.72                                                                               |   |                   | 7.95   |   |   | — |   |
| Employees—exercisable                               |   |                                     | 629,240   |                                         |   | 2.26                                                                               |   |                   | 3.91   |   |   | 100,000 |   |
| Non-Employees—outstanding                           |   |                                     | 1,635,500 |                                         |   | 2.90                                                                               |   |                   | 5.39   |   |   | 219,000 |   |
| Non-Employees—expected                  to vest     |   |                                     | 84,384    |                                         |   | 2.60                                                                               |   |                   | 9.19   |   |   | — |   |
| Non                  Employees—exercisable          |   |                                     | 1,551,116 |                                         |   | 2.72                                                                               |   |                   | 5.39   |   |   | 219,000 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Warrants**

| **Warrant                  activities prior to 2006** |   | **Warrants                  issued****for                  purchase of****Common                  Stock** |    | **Estimated                  Fair Value** |   | **Exercise                  Price Per Share** |   | **Weighted                  Average Expected Life****(years)** |    | **Risk                  Free Rate of Interest (%)** |   | **Approximate****Volatility                  (%)** |   | **Expected                  Dividend Yield** |    |
|-------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|---------|-------------------------------------------|--------|-----------------------------------------------|--------|----------------------------------------------------------------|---------|-----------------------------------------------------|--------|----------------------------------------------------|--------|----------------------------------------------|---------|
| December                  2000 (a)                    |   |                                                                                                      | 933,330 |                                      | $      | 115,475                                       |   | $                                                              | 0.40    |                                                |   | 3.5                                                |   |                                         | 5.02    |   |   | 0 |   |   | 0 |   |
| January                  2001 (b)                     |   |                                                                                                      | 100,000 |                                      |   | —                                       |   |                                                           | 0.80    |                                                |   | 5                                                  |   |                                         | 4.89    |   |   | 0 |   |   | 0 |   |
| June                  2003 (c)                        |   |                                                                                                      | 200,000 |                                      |   | 119,744                                       |   |                                                           | 2.00    |                                                |   | 5                                                  |   |                                         | 0.94    |   |   | 76 |   |   | 0 |   |
| February                  2005 (d)                    |   |                                                                                                      | 75,000  |                                      |   | —                                       |   |                                                           | — |                                                |   | —                                            |   |                                         | — |   |   | — |   |   | — |   |
| April                  2006 (e)                       |   |                                                                                                      | 250,000 |                                      |   | 1,602,500                                     |   |                                                           | 10.00   |                                                |   | 10                                                 |   |                                         | 5.12    |   |   | 79 |   |   | 0 |   |

|                                                        |   | **Warrants****Outstanding** |      | **Weighted****Average****Exercise****Price** |   |
|-------------------------------------------------------------|--------|-----------------------------|-----------|----------------------------------------------|--------|
| Outstanding                  at December 31, 2005           |   |                        | 375,000   |                                         | $      | 3.78 |   |
| Granted                                                     |   |                        | 250,000   |                                         |   | 10.00 |   |
| Sold                                                        |   |                        | 705,882   |                                         |   | 8.50 |   |
| Exercised                                                   |   |                        | (100,000  | )                                            |   | 0.80 |   |
| Forfeited                                                   |   |                        | —   |                                         |   | — |   |
| Outstanding                  at December 31, 2006           |   |                        | 1,230,882 |                                         | $      | 7.88 |   |
| Granted                                                     |   |                        | —   |                                         |   | — |   |
| Sold                  / Reissued (a)                        |   |                        | 5,999,997 |                                         |   | 1.00 |   |
| Exercised                                                   |   |                        | —   |                                         |   | — |   |
| Forfeited                  / Cancelled (a)                  |   |                        | (705,882  | )                                            |   | 8.50 |   |
| Outstanding                  at September 30, 2007          |   |                        | 6,524,997 |                                         | $      | 1.51 |   |
| Warrants                  exercisable at December 31, 2005  |   |                        | 375,000   |                                         |   | 3.78 |   |
| Warrants                  exercisable at December 31, 2006  |   |                        | 1,168,382 |                                         |   | 7.88 |   |
| Warrants                  exercisable at September 30, 2007 |   |                        | 6,524,997 |                                         |   | 1.51 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| **Exercise                  Prices** |   | **Warrants****Outstanding** |      | **Weighted****Average****Remaining****Life****(Years)** |   | **Weighted****Average****Exercise****Price** |   | **Warrants****Exercisable** |   | **Weighted****Average****Exercise****Price** |   |
|--------------------------------------|--------|-----------------------------|-----------|---------------------------------------------------------|--------|----------------------------------------------|--------|-----------------------------|--------|----------------------------------------------|--------|
| $2.00                                |   |                        | 200,000   |                                                    |   | 5.73                                         |   | $                           | 2.00   |                                         |   | 200,000 |   | $ | 2.00 |   |
| $1.00                  (a)           |   |                        | 5,999,997 |                                                    |   | 1.47                                         |   |                        | 1.00   |                                         |   | 5,999,997 |   |   | 1.00 |   |
| $10.00                               |   |                        | 250,000   |                                                    |   | 8.54                                         |   |                        | 10.00  |                                         |   | 250,000 |   |   | 10.00 |   |
| $12.50                               |   |                        | 75,000    |                                                    |   | 1.38                                         |   |                        | 12.50  |                                         |   | 75,000 |   |   | 12.50 |   |
| Total                                |   |                        | 6,524,997 |                                                    |   |                                         |   |                        |   |                                         |   | 6,524,997 |   |   |   |   |

**Authorized      Shares**

**NOTE 11.      RELATED PARTY TRANSACTIONS**

|                                                                                                                                                     |   | **Nine                  Month Periods Ended****September                  30,** |    | **For                  the****Period                  from****March 11, 1998****(Inception)                  to****September                  30,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Fees                  Paid to:**                                                                                                                       |   | **2006**                                                                        |    | **2007**                                                                                                                                                      |   |  **2007** |   |
|                                                                                                                                                     |   | ***(In                  thousands)***                                           |    |                                                                                                                                                          |   |
| Daniel                  C. Montano (Chairman of the Board, Co-President and Chief Executive                  Office) (a)                                 |   | $                                                                               | — |                                                                                                                                                          | $      | — |   | $ | 200 |   |
| Daniel                  C. Montano (Chairman of the Board, Co-President and Chief Executive                  Office) (b)                                 |   |                                                                            | 369     |                                                                                                                                                          |   | 363 |   |   | 2,179 |   |
| Vizier                  Management Company (c)                                                                                                           |   |                                                                            | — |                                                                                                                                                          |   | — |   |   | 116 |   |
| GHL                  Financial Services Ltd. (“GHL”) (d)                                                                                     |   |                                                                            | 20      |                                                                                                                                                          |   | 133 |   |   | 2,358 |   |
| Dr. Thomas                  Stegmann M.D. (the Company's Co-founder, Co- President, and Chief                  Medical                  Officer (a) |   |                                                                            | 375     |                                                                                                                                                          |   | 360 |   |   | 1,849 |   |
| C.K.                  Capital International and C&K Capital Corporation (f)                                                                          |   |                                                                            | 1,218   |                                                                                                                                                          |   | — |   |   | 1,763 |   |
| Dr. Wolfgang                  Priemer (the Company's founder) (e)                                                                                   |   |                                                                            | 55      |                                                                                                                                                          |   | 60 |   |   | 342 |   |
| Total                                                                                                                                                    |   | $                                                                               | 2,037   |                                                                                                                                                          | $      | 916 |   | $ | 8,807 |   |

----

| (a) | Consulting                fees |
|-----|--------------------------------|

| (b) | Employment                Services. |
|-----|-------------------------------------|

| (c) | Vizier                Management Company is controlled by Daniel C. Montano. The Company                paid                Vizier for consulting. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | A                director is a principal and owns 4.12% of the Company for the overseas                sale of the Company's convertible notes payable and Preferred                Stock. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | Fees                were paid for assisting the Company with the European Compliance                Committee                which monitors the Company's activities in Europe from the legal,                regulatory and tax compliance                perspectives. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (f) | C.K.                Capital International and C&K Capital Corporation are controlled by                Alex Montano, son of Daniel C.                Montano |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**NOTE 12.      INCOME TAXES**

|  Net                Operating Loss carry forward: |   | **As                of****December                31,****2006** |   | **As                of****September                30, 2007** |   |
|--------------------------------------------------------|--------|-----------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                                   |   | ***(In                thousands)***                             |   |
|                                                   |   |                                                            |   |                                                          |   |
| Federal                income taxes                    |   | $                                                               | 45,147 |                                                          | $      | 59,132 |   |
| State                income taxes (California)         |   |                                                            | 44,185 |                                                          |   | 43,600 |   |

|                                                                 |   | **As                of****September                30, 2007** |   |
|----------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                                                 |   | ***(In                thousands)***                           |   |
|                                                                 |   |                                                          |   |
| Federal                research and development credit carry forward |   | $                                                             | 828    |   |

|                                      |   | **Three                Months Ended September 30,****2007** |   |
|-------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                      |   | ***(In                thousands)***                         |   |
|                                      |   |                                                        |   |
| Recognized                tax benefit (a) |   | $                                                           | 377    |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**NOTE 13.      COMMITMENTS AND CONTINGENCIES**

**Leases**

|                               |   | **Nine                Month Periods Ended****September                30,** |   |
|------------------------------------|--------|-----------------------------------------------------------------------------|--------|
| **Paid                rent:**      |   | **2006**                                                                    |   | **2007** |   |
|                               |   | *(In thousands)*                                                       |   |
| Total                rent paid (a) |   | $                                                                           | 127    |   | $ | 113 |   |

| **Deferred                rent as of September 30, 2007** |   | **Amount**            |   |
|-----------------------------------------------------------|--------|-----------------------|--------|
|                                                      |   | *(In thousands)* |   |
| Corporate                headquarters                     |   | $                     | 33     |   |
| Expanded                space- corporate headquarters     |   |                  | 6      |   |
| San                Diego lab facility                     |   |                  | 101    |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| **Year**   |   | **Amount**            |   |
|------------|--------|-----------------------|--------|
|       |   | *(In thousands)* |   |
| 2007       |   | $                     | 97     |   |
| 2008       |   |                  | 523    |   |
| 2009       |   |                  | 541    |   |
| 2010       |   |                  | 559    |   |
| 2011       |   |                  | 275    |   |
| Thereafter |   |                  | 322    |   |
| Total      |   | $                     | 2,317  |   |

**Phage      Lease Guaranty (Now Terminated)**

**Employment      Agreements**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Consulting      Agreements**

|                                   |   | **As                  of September 30,** |   | **For                  the Period from March 11, 1998 (inception) to****September                  30,** |   |
|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|
| **Consulting                  fees:**  |   | **2006**                                 |   | **2007**                                                                                                 |   | **2007** |   |
|                                   |   | ***(In                  thousands)***    |   |                                                                                                     |   |
| Consulting                  agreements |   | $                                        | 593    |                                                                                                     | $      | 1,960 |   |   | 4,663 |   |

| **Item #** |   | **Contract**                                |   | **Agreement                Name**                |   | **Start**   |   | **End                Date** |
|-----------------|--------|---------------------------------------------|--------|--------------------------------------------------|--------|-------------|--------|-----------------------------|
| 1               |   | Mickael                Flaa                 |   | Chief                Financial Officer           |   | 1-Jun-2003  |   | Ongoing                     |
| 2               |   | Investor                relation consultant |   | Investor                Relations                |   | 20-Mar-1998 |   | Ongoing                     |
| 3               |   | Investor                Awareness           |   | Public                Relation                   |   | 1-Nov-2004  |   | 1-Jun-06                    |
| 4               |   | Schwartz                Communications      |   | Public                Relation                   |   | 1-Jul-2006  |   | Ongoing                     |
| 5               |   | VP                Corporate Development     |   | VP                Corporate Development          |   | 1-Sep-2006  |   | Ongoing                     |
| 6               |   | Marketing                director           |   | Director                of Corporate Development |   | 1-Dec-2006  |   | Ongoing                     |
| 7               |   | Medical                consultant           |   | Medical                Expert                    |   | 1-Oct-2006  |   | Ongoing                     |
| 8               |   | Medical                consultant           |   | Medical                Expert                    |   | 1-Sep-2006  |   | Ongoing                     |

**Service      Agreements**

| **Item #** |   | **Contract**                                                                                                             |   | **Agreement                Name**                                                                                      |   | **Start**   |   | **End                Date** |
|-----------------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|-----------------------------|
| 1               |   | Phage                Biotechnology                                                                                       |   | Joint                patent agreement                                                                                  |   | 28-Feb-2007 |   | 1-Mar-2020                  |
| 2               |   | Cardio                Phage International (“CPI”)                                                            |   | Distribution                agreement                                                                                  |   | 16-Aug-2004 |   | 16-Aug-2013                 |
| 3               |   | Korea                Bio-Development Corporation                                                                         |   | Manufacturing                and distribution agreement                                                                |   | 15-Dec-2000 |   | 15-Dec-2099                 |
| 4               |   | Hesperion,                Inc. (TouchStone, formerly “Clinical CardioVascular Research,                LLC”) |   | Clinical                development of investigational drugs and devices for Cardiovascular                indications |   | 24-Oct-2001 |   | Ongoing                     |
| 5               |   | CVBT                Founder                                                                                              |   | Royalty                agreement                                                                                       |   | 16-Aug-2004 |   | 31-Dec-2013                 |
| 6               |   | Catheter                and Disposables Technologies, Inc                                                                |   | Product                development                                                                                     |   | 1-Jun-2004  |   | 31-Dec-2006                 |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| 1) | Cardio                entered into a joint patent agreement with Phage as of February 28,                2007. Cardio plans to develop and commercialize therapeutic methods                related to the induction of angiogenesis or wound healing by                administration of Fibroblast Growth Factor (“FGF”); and, Phage plans to                develop and commercialize recombinant DNA methods for producing                peptides/proteins. Cardio and Phage entered into a joint patent ownership                and license agreement dated as of August 16, 2004, which was later                amended and restated as of May 23, 2006 (the “Joint Ownership                Agreement”), for consideration the sufficiency of which was acknowledged                in each agreement, pursuant to which Phage granted Cardio a 50% ownership                interest in certain patents and patent applications listed in the                Joint                Ownership Agreement, as well as certain future patent rights, and                the                parties acknowledge that Cardio would have exclusive rights within                a                defined field, while Phage would have exclusive rights outside that                field.                Cardio and Phage entered a new agreement as of February 28, 2007                superseding the Joint Ownership Agreement so as to specify those                future                patents and patent applications that are to be subject to joint ownership                and so as to restate the licenses granted in the Joint Ownership                Agreement. Cardio and Phage acknowledged that the jointly owned and                cross-licensed rights are vital to the parties' respective plans                for                development and commercialization and further clarified the parties'                respective rights and provided for continued access to the necessary                rights in the event of insolvency. In consideration for the grant                of the                exclusive right to the patent rights in the field, Cardio shall pay                a 6%                royalty to Phage on the net sales price of finished product to end                customer or distributor. The rights and obligations set forth in                this                agreement shall commence as of the effective date of this agreement                and                end upon the later of (a) the expiration of the last to expire                Jointly Owned Patent and (b) the abandonment of the last pending                Jointly Patent Application. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2) | CPI                will act as distributor for the products of both Phage and Cardio                in                locations throughout the world other than United States, Canada,                Europe,                Japan, China, and the Republic of Korea. CPI is obligated to pay                Cardio an                amount equal to 50% of CPI's gross revenue from sales of the Company's                products less CPI's direct and indirect                costs. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3) | As                part of this agreement, KBDC arranged the purchase of 8,750,000 shares                of                Cardio's common stock for $3,602,000 by Cardio Korea, Ltd. KBDC agreed                to                fund all of the regulatory approval process in Korea for any of the                Company's products. In addition, KBDC agreed to pay Cardio a royalty                of                ten percent net revenue from sales in its Asian                territories. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4) | Hesperion                will assist Cardio with the FDA approval process for our                drug. |
|----|--------------------------------------------------------------------------------------------------------|

| 5) | The                Company's royalty agreement with its Founder will provide him with                a one                percent royalty on net revenue from the sale of the Company's drug                candidates, if any, measured quarterly and payable 90 days after                quarter                end. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6) | Catheter                and Disposables Technologies, Inc. will design, develop, and fabricate                two                different prototype catheter products that will facilitate the                administration of CVBT-141A by catheter                delivery. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Item #** |   | **Contract**                                                |   | **Agreement                Name**                |   | **Start**   |   | **End                Date**                                         |
|-----------------|--------|-------------------------------------------------------------|--------|--------------------------------------------------|--------|-------------|--------|---------------------------------------------------------------------|
| 7               |   | bioRASI,                LLC                                 |   | CRO                agreement                     |   | 8-Aug-2005  |   | 20-Aug-2007                                                         |
| 8               |   | Phage                Biotechnology Corporation              |   | Lease                Guarantee- San Diego        |   | 15-Mar-2006 |   | 15-Aug-13                                                           |
| 9               |   | Promethean                                                  |   | Convertible                Notes                 |   | 20-Mar-2006 |   | 19-Mar-09                                                           |
| 10              |   | Chief                Executive Officer                      |   | Guarantee                agreement               |   | 20-Mar-2006 |   | First date of generatingrevenue                      |
| 11              |   | Chief                Executive Officer                      |   | Guarantee                reimbursement agreement |   | 20-Mar-2006 |   | First                date of generating revenue                     |
| 12              |   | Kendle                (formerly Charles River Laboratories) |   | CRO                agreement                     |   | 8-Aug-2006  |   | Completion                of Phase II Severe Coronary Heart Disease |
| 13              |   | The                Bruckner Group                           |   | Feasibility                Study                 |   | 4-Aug-2006  |   | Upon                completion of study                             |
| 14              |   | Investment                Banking                           |   | Investment                Banker                 |   | 6-Jun-2006  |   | Ongoing                                                             |
| 15              |   | Public                Accounting Firm                       |   | Professional                Services             |   | 1-July-2006 |   | Ongoing                                                             |

----

| 7) | This                agreement is for the purpose of assisting in the Company's clinical                trials                in Russia. bioRASI is the strategic initiative of the Russian Academy                of                Sciences (RAS) and is responsible for commercializing RAS' bio-sciences                and clinical resources. bioRASI is a contract research organization                (CRO)                providing services for its collaborative R&D clients in the areas of                drug development, biologicals, and medical                devices. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8) | This                agreement is for a new manufacturing facility in San Diego, CA. The                lease                provides for minimum monthly rent and additional rent for shared                costs,                which aggregate approximately $20,000 per                month. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**ARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

| 9) | The                Company entered into a Securities Purchase Agreement with certain                investors to place $20,000,000 of senior secured notes together with                warrants to purchase 705,882 shares of the Company's common stock.                On May                21, 2007, the aggregate number of shares acquirable upon exercise                of such                warrants increased to 5,999,997. The notes are convertible into shares                of                the Company's common stock at any time at $12 per share until the                price                re-set as of May 21, 2007 at $1.00 per share (the “Fixed Conversion                Price”). In addition, the notes are convertible after five months from                the                closing date at 94% of the average of the preceding five days weighted                average trading price, if the result is lower than $12 per share.                Conversion of the senior secured notes into the Company's common                stock at                other than the Fixed Conversion Price is limited to no more than                10% of                the original $20,000,000 note balance per calendar month. The notes                mature                in March 2009, and bear a resetting floating interest rate of three                month                LIBOR plus 7%. The warrants may be exercised anytime up to March                2009. The                warrant exercise price is $8.50 per share until the price was re-set                as of                May 21, 2007 at $1.00 per share. Substantially all of the Company's                assets                secure the notes. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10) | Daniel                C. Montano, Chairman, Co-President and CEO of the Company, entered                into a                Guaranty Agreement whereby he guaranteed any and all of the Company's                obligations resulting from the sale on March 20, 2006 of $20,000,000                of senior secured notes and warrants. The guaranty remains in effect                until                the first date on which the Company receives revenue from the sale                of                drugs with FGF-1                141                as                API after such drug has been approved by the FDA, provided that on                such                date the Company is not in default of any provisions of the obligations                or                triggering events contained in the agreements for the senior secured                notes                and warrants and such default is not continuing. However, the guaranty                will terminate upon the payment in full of the notes including conversion                of the notes into our common stock. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11) | After                the Company's obligations contained in the agreements for the senior                secured notes and warrants have been paid in full, if Daniel C. Montano                was required to make any payments pursuant to this guaranty prior                to the                payment in full of the Company's obligations, the Company will reimburse                Daniel C. Montano for any such payments plus simple interest at                7% per annum from the date of the advance by Daniel C. Montano to the                date reimbursed by the Company. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12) | Kendle                (formerly Charles River Laboratories Clinical Services International                Ltd.                or “Charles River Laboratories”) will support the Company in its Phase II                Severe Coronary Heart Disease clinical trial ensuring that the protocol                and study adhere to FDA regulatory requirements. The total direct                and                indirect costs are estimated to be                $3,917,810. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13) | The                Bruckner Group Incorporated has been assisting us in exploring the                potential economic consequences of applying FGF-1141to                a variety of clinical scenarios and patent types. There are three                distinct                components in this project that will be performed simultaneously                by the                Bruckner Group. This project has an approximate total cost of $450,000.                As                of September 30, 2007 two components have been completed. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14) | The                purpose of this agreement is to                act as advisor for listing on the London Stock Exchange's Alternative                Investment Market (“AIM”). The Company paid 100,000 GBP before admission                to AIM and another 50,000 GBP in                January 2007. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15) | A                provider of accountancy and business services to                audit and review the Company’s financial reports for listing on                the                London Stock Exchange's Alternative Investment Market, or                AIM. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                        |   |  **As                  of September 30,**                      |    |  **For                  the****Period from****March 11, 1998****(Inception)                  to****September 30,** |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                        |   |  **2006**                                                      |    |  **2007**                                                                                                                              |   |  **2007** |   |
|                                                                        |   |  ***(Unaudited;                  Dollars in thousands)*** |    |
|  Service                  Fees Paid for Major Contractual Obligations: |   |                                                           |    |
| Hesperion                  (formerly TouchStone Research, Inc.)             |   | $                                                                   | 1,509   |                                                                                                                                        | $      | 334 |   | $ | 4,882 |   |
| Catheter                  and Disposables Technologies                      |   |                                                                | 19      |                                                                                                                                        |   | — |   |   | 81 |   |
| bioRASI                                                                     |   |                                                                | 668     |                                                                                                                                        |   | 159 |   |   | 1,086 |   |
| Kendle                  (formerly Charles River Laboratories)               |   |                                                                | 772     |                                                                                                                                        |   | 483 |   |   | 1,416 |   |
| Bruckner                  Group                                             |   |                                                                | 238     |                                                                                                                                        |   | 443 |   |   | 681 |   |
| Investment                  Banker                                          |   |                                                                | 94      |                                                                                                                                        |   | 101 |   |   | 202 |   |
| Public                  Accounting Firm                                     |   |                                                                | — |                                                                                                                                        |   | 372 |   |   | 540 |   |
| Total                                                                       |   | $                                                                   | 3,300   |                                                                                                                                        | $      | 1,892 |   | $ | 8,888 |   |

**NOTE        14. SUBSEQUENT EVENT**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**NOTES      TO FINANCIAL STATEMENTS--(Continued)**

**(UNAUDITED)**

**SEPTEMBER      30, 2007**

**Securities      Act Compliance**

**Government      Regulation**

| Phase I   |    | Clinical                trials are conducted with a small number of subjects to determine                the                early safety profile, maximum tolerated dose and pharmacokinetics                of the                product in human volunteers.                                         |
|----------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |         |
| Phase II  |    | Clinical                trials are conducted with groups of patients afflicted with a specific                disease in order to determine preliminary efficacy, optimal dosages                and                expanded evidence of safety.                                                        |
|           |         |
| Phase III |    | Large                scale, multi-center, comparative trials are conducted with patients                afflicted with a target disease in order to provide enough data to                demonstrate with substantial evidence the efficacy and safety the                FDA                requires. |

**Litigation**

----

| **Item 2.** | **Management's                Discussion and Analysis of Financial Condition and Results of                Operations** |
|------------------|-------------------------------------------------------------------------------------------------------------------------|

*This      Form 10-Q, including but not limited to this section, may contain      forward-looking statements. These statements relate to future events or our      future financial performance and involve known and unknown risks, uncertainties      and other factors that may cause our or our industry's actual results, levels      of      activity, performance or achievements to be materially different from any future      results, levels of activity, performance or achievements expressed or implied      by      the forward-looking statements. These risks and other factors include those      listed under “Risk Factors” and elsewhere in this Form 10-Q. We believe that the      section entitled “Risk Factors” includes all material risks that could harm our      business. In some cases, you can identify forward-looking statements by      terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,”“believes,” “estimates,” “predicts,” “intends,” “potential,” “continue” or the      negative of these terms or other comparable terminology. These statements are      only predictions. Actual events or results may differ      materially.*

*We      believe it is important to communicate our future expectations to our investors.      However, there may be events in the future that we are not able to accurately      predict or control and that may cause our actual results to differ materially      from the expectations we describe in our forward-looking statements.      Stockholders are cautioned that all forward-looking statements involve risks      and      uncertainties, and actual results may differ materially from those discussed      as      a result of various factors, including those factors described in the “Risk      Factors” section of this Form 10-Q. Stockholders should not place undue reliance      on our forward-looking statements.*

*Although      we believe that the expectations reflected in the forward-looking statements      are      reasonable, we cannot guarantee future results, levels of activity, performance      or achievements.*

*You      should read the following discussion and analysis of our financial condition      and      results of operations together with our financial statements and the related      notes appearing in Item 1 of this Form 10-Q. Some of the information      contained in this discussion and analysis or set forth elsewhere in this Form      10-Q, including information with respect to our plans and strategy for our      business and related financing, includes forward-looking statements that involve      risks and uncertainties. You should review the “Risk Factors” set forth below in      this section of this Form 10-Q for a discussion of important factors that could      cause actual results to differ materially from the results described in or      implied by the forward-looking statements contained in the following discussion      and analysis.*

| **1.** | **Overview** |
|--------|--------------|

----

| **2.** | **Results                of Operations** |
|--------|------------------------------------------|

**Nine      months Ended September 30, 2006 and 2007**

**FDA      Authorized Clinical Trials**

| **Drug                Candidate** |   | **Indication**                                                                           |
|-----------------------------------|--------|------------------------------------------------------------------------------------------|
| · CVBT-141A             |   | Severe                Coronary Heart Disease (“CHD”)—surgical delivery |
| · CVBT-141B             |   | Dermal                Ulcers (Wound Healing)                                             |
| · CVBT-141C             |   | Peripheral                Artery Disease (“PAD”)                             |

**Proof      of Concept clinical trials: **

| **Drug                Candidate** |   | **Indication**               |
|-----------------------------------|--------|------------------------------|
| · CVBT-141D             |   | Disc                Ischemia |

**Pre-Clinical      Research and Development: **

| **Drug                Candidate** |   | **Indication**                                   |
|-----------------------------------|--------|--------------------------------------------------|
| · CVBT-141E             |   | Lumbar                Ischemia                   |
| · CVBT-141H             |   | CHD                - injection catheter delivery |

**Clinical      Development**

*i*
* *

*ii)*

*iii*
* *

*iv*
* *

----

*v*
* *

*vi*

**Pre-Clinical      Development**

*i*
*      Bone*

*      Diabetes:*

|                                        |   |   | **Nine                Month Periods Ended****September                30,** |   |
|---------------------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|
|                                        |   |   | **2006**                                                                    |   |   | **2007** |   |   | **$****Change** |   |   | **%****Change** |   |
|                                        |   |   | ***(Dollars                in thousands)***                                 |   |
| Research                and development (a) |   | $      | 4,757                                                                       |   | $ | 4,743 |   | $ | 14 |   |   | (0.3 | )% |

| (a) | Includes                $1,820,227 and $1,216,200 paid to Phage Biotechnology                Corporation. |
|-----|-----------------------------------------------------------------------------------------------------------|

|                                          |   |   | **Nine Month Periods Ended****September                30,** |   |
|-----------------------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|
|                                          |   |   | **2006**                                                                    |   |   | **2007** |   |   | **$****Change** |   |   | **%****Change** |   |
|                                          |   |   | ***(Dollars                in thousands)***                                 |
| General                and administrative (b) |   | $      | 8,801                                                                       |   | $ | 9,524 |   | $ | 722 |   |   | 8 | % |

| (b) | Includes                $121,575 and $29,223 paid to Phage Biotechnology                Corporation. |
|-----|------------------------------------------------------------------------------------------------------|

----

|                           |   | **Nine Month Periods Ended****September                30,** |   |
|--------------------------------|--------|-----------------------------------------------------------------------------|--------|
|                           |   | **2006**                                                                    |   | **2007** |   | **$****Change** |   | **%****Change** |   |
|                           |   | ***(Dollars                in thousands)***             |   |
| Interest                income |   | $                                                                           | 605    |   | $ | 140 |   | $ | 465 |   |   | (77 | )% |

|                            |   |  **Nine Month Periods Ended****September                30,** |   |
|---------------------------------|--------|-----------------------------------------------------------------------------------|--------|
|                            |   |  **2006**                                                                    |   |  **2007** |   |  **$****Change** |   |  **%****Change** |   |
|                            |   |  ***(Dollars                in thousands)***                                 |   |
| Interest                expense |   | $                                                                                 | 3,589  |   | $ | 7,658 |   | $ | 4,069 |   |   | 113 | % |

|                                                          |   |  **Nine                Month Periods Ended****September                30,** |   |
|---------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|
|                                                          |   |  **2006**                                                                    |   |  **2007** |   |
|                                                          |   |  ***(Dollars                in thousands)***                                 |   |
| Adjustment                to fair value of derivatives        |   | $                                                                                 | 8,633  |   | $ | (5,365 | ) |
|                                                          |   |                                                                              |   |   |   |   |   |
| Adjustment                to fair value of derivatives- other |   | $                                                                                 | 7,999  |   | $ | 1,954 |   |

**Three      months Ended September 30, 2006 and 2007**

|                                        |   |  **Three Month Periods Ended ****September                30,** |   |
|---------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
|                                        |   |  **2006**                                                                           |   |  **2007** |   |  **$****Change** |   |    **%****Change** |   |
|                                        |   |  ***(Dollars                in thousands)***                                        |   |
| Research                and development (a) |   | $                                                                                        | 1,555  |   | $ | 1,411 |   | $ | (144 | ) |   | (9 | )% |

| (a) | Includes                $1,013,773 and $289,084 paid to Phage Biotechnology                Corporation. |
|-----|---------------------------------------------------------------------------------------------------------|

----

|                                          |   |  **Three Month Periods Ended ****September                30,** |   |
|-----------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
|                                          |   |  **2006**                                                                           |   |  **2007** |   |  **$****Change** |   |  **%****Change** |   |
|                                          |   |  ***(Dollars                in thousands)***                                        |   |
| General                and administrative (b) |   | $                                                                                        | 3,151  |   | $ | 1,356 |   | $ | 1,795 |   |   | (57 | )% |

| (b) | Includes                $25,434 and $3,405 paid to Phage Biotechnology                Corporation. |
|-----|----------------------------------------------------------------------------------------------------|

|                           |   |  **Three Month Periods Ended****September                30,** |   |
|--------------------------------|--------|------------------------------------------------------------------------------------|--------|
|                           |   |  **2006**                                                                     |   |  **2007** |   |  **$****Change** |   |  **%****Change** |   |
|                           |   |  ***(Dollars                in thousands)***                                  |   |
| Interest                income |   | $                                                                                  | 206    |   | $ | 13 |   | $ | 193 |   |   | (94 | )% |

|                            |   |  **Three Month Periods Ended ****September                30,** |   |
|---------------------------------|--------|------------------------------------------------------------------------------------------|--------|
|                            |   |  **2006**                                                                           |   |  **2007** |   |  **$****Change** |   |  **%****Change** |   |
|                            |   |  ***(Dollars                in thousands)***                                        |   |
| Interest                expense |   | $                                                                                        | 1,776  |   | $ | 1,467 |   | $ | (309 | ) |   | (17 | )% |

|                                                                         |         | **Three                Month Periods Ending****September                30,** |         |
|------------------------------------------------------------------------------|--------------|-------------------------------------------------------------------------------|--------------|
|                                                                         |    | **2006**                                                                      |    | **2007** |    |
|                                                                         |         | ***(Dollars                in thousands)***                                   |         |
| Adjustment                to fair value of derivatives                       |    | $                                                                             | 4,941        |   | $ | 4,719 |   |
|                                                                         |         |                                                                          |         |   |   |   |   |
| Adjustment                to fair value of derivatives- options and warrants |    | $                                                                             | 3,059        |   | $ | 554 |   |

----

| **3.** | **Liquidity                and Capital Resources** |
|--------|----------------------------------------------------|

**Sources      of Liquidity**

| **Security**                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Net                Proceeds**        |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | ***(Dollars in thousands)*** |   |
| Pre                USA IPO                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                   |   |
| Convertible                preferred stock converts to common stock at 100/1, non-voting, no                dividend                                                                                                                                                                                                                                                                                                                                  |   | $                                      | 520    |   |
| Common                stock                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                   | 3,904  |   |
| Total                net proceeds for issuance of our pre-IPO convertible notes                payable                                                                                                                                                                                                                                                                                                                                                |   |                                   | 14,892 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                   |   |   |
| Post                USA IPO                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                   |   |   |
| Proceeds                from the IPO 1,725,000                shares of common stock sold at $1.00 per share net of the options                exercised                                                                                                                                                                                                                                                                                              |   |                                   | 14,682 |   |
| 1,117,582                stock option and warrants exercised                                                                                                                                                                                                                                                                                                                                                                                          |   |                                   | 445    |   |
| Net                proceeds from private placement of senior secured convertible note                of                Senior Secured Notes with warrantsto                purchase 705,882 shares of Company's. On May 21, 2007, the aggregate                number of shares acquirable upon exercise of such warrants increased                to                5,999,997 due to price re-set from $12.00 to $1.00 per share.                (b) |   |                                   | 20,000 |   |
| Proceeds                from private placement under Reg S (a)                                                                                                                                                                                                                                                                                                                                                                                        |   |                                   | 3,475  |   |
| Total                proceeds from financing through September 30, 2007                                                                                                                                                                                                                                                                                                                                                                          |   | $                                      | 57,918 |   |
| Deferred                financing cost                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                   | (4,199 | ) |
| Net                proceeds per statement of cash flow                                                                                                                                                                                                                                                                                                                                                                                                |   | $                                      | 53,719 |   |

----

| **4.** | **Cash                Flow** |
|--------|------------------------------|

**Nine      months ended September 30, 2006 and 2007**

|                                                                         |   | **Nine Month Periods Ended ****September 30,**                                                                                       |    |
|------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                         |   | **2006**                                                                                                                                                      |    | **2007** |   | **$****Change** |   | **%****Change** |   |
|                                                                         |   | ***(Dollars                    in thousands)***                                                                       |
| Cash                  flow used in operating activities            |   | $                                                                                                                                                             | (13,680 | ) | $ | (11,739 | ) | $ | (1,941 | ) |   | (14 | )% |
| Cash                  flow (used in) provided from investing activities |   |                                                                                                                                                          | (612    | ) |   | 52 |   |   | 664 |   |   | 109 | % |
| Cash                  flow provided from financing activities (a)            |   |                                                                                                                                                          | 18,482  |   |   | 3,426 |   |   | (15,056 | ) |   | (81 | )% |

| **5.** | **Funding                Requirements** |
|--------|-----------------------------------------|

|   | ** **·  | our                ability to successfully obtain marketing approval for and to commercially                launch one of our new drug candidates; |
|--------|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                   |                                                                                                                                               |
|   |  ·      | the                success of our other pre-clinical and clinical development programs;                and                                         |
|   |                   |                                                                                                                                               |
|   |  ·      | the                receptivity of the capital markets to financing by biotechnology                companies.                                      |
|   |                   |                                                                                                                                               |
|   |  ·      | our                revenues, if any, from successful development and commercialization                of our                potential products.    |

----

| **6.** | **Contractual                Obligations and Commercial                Commitments** |
|--------|--------------------------------------------------------------------------------------|

|                                          |   |   | **Total**                           |   |   | **Less than****1                Year** |   |   | **1-3 Years** |   |   | **3-5 Years** |   |   | **More than****5                Years** |   |
|-----------------------------------------------|--------|--------|-------------------------------------|--------|--------|---------------------------------------------|--------|--------|--------------------|--------|--------|--------------------|--------|--------|----------------------------------------------|--------|
|                                          |   |   | ***(In                thousands)*** |
| Long-term                debt obligations(a)  |   | $      | 7,655                               |   |   | —                                     |   | $      | 7,655              |   | $      | —            |   | $      | —                                      |   |
| Operating                lease obligations(b) |   |   | 2,317                               |   |   | 221                                         |   |   | 982                |   |   | 1,100              |   |   | 14                                           |   |
| Total                                         |   | $      | 9,972                               |   | $      | 221                                         |   | $      | 8,637              |   | $      | 1,100              |   | $      | 14                                           |   |

| (a)    | We                sold $20,000,000 of notes that have a floating interest rate of 3                month                LIBOR plus 7%. We have the option to pay the interest with registered                common stock (see Note 9). During the third quarter of 2006, note                holders                converted $295,723 of the convertible senior secured notes to 110,500                shares of common stock for an average share price of $2.76 (including                28,000 committed shares). During the nine months ended September 30,                2007, Convertible note holders elected to convert $10,597,710 of                their                notes receivable to 11,835,421 shares of common stock for an average                price                of $1.00. Should interest rates remain constant and the lenders do                not                convert anymore debt into common stock, and if we choose to make                payments                in cash, we would have a liability of approximately                $1,377,951.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (b)    | In                November 2005, we entered into an operating lease agreement for office                space in Las Vegas, Nevada, which requires monthly payments of                approximately $17,900. We have one five-year option to renew the                lease.                Building operating expenses are reconciled annually, and any increase                over                the base year is billed pro rata among the building's tenants. We                occupied                this property in March 2006. We entered into a second amendment on                September 8, 2006, for the expansion space use of administrative                offices in Las Vegas. The five-year lease obligation is approximately                $1,161,393 including approximately $409,028 in base rent for the                expanded                space throughout the term of the lease. We entered into a Lease Agreement                dated August 7, 2006 with Nancy Ridge LLC, a Delaware Limited                Liability company, for the use of general office and laboratory space                in                San Diego, CA. The lease commences on September 1, 2006 and expires                on May 13, 2013, at which time we will have the option of extending                the lease by five years on the same terms and conditions of the lease.                We                have paid Nancy Ridge a fully refundable security deposit in the                amount of                $57,804, and further agrees to pay $15,228 per month for the term                of the                lease for the use of 6,768 square feet of general office and laboratory                space. |

| **Item #** |    | **Contract**                                                                                               |    | **Agreement                Name**                                                                                      |    | **Start** |    | **End                Date**                                              |
|-----------------|--------------|------------------------------------------------------------------------------------------------------------|--------------|------------------------------------------------------------------------------------------------------------------------|--------------|-----------|--------------|--------------------------------------------------------------------------|
| 1               |    | Phage Biotechnology                Corporation                                                        |    | Technical Services Agreement                                                                                 |    | 1-Mar-00  |    | 1-Mar-20                                                                 |
| 2               |    | Cardio Phage International                (“CPI”)                                    |    | Distribution                agreement                                                                                  |    | 16-Aug-04 |    | 16-Aug-13                                                                |
| 3               |    | Korea                Bio-Development Corporation                                                           |    | Manufacturing                and distribution agreement                                                                |    | 15-Dec-00 |    | 15-Dec-99                                                                |
| 4               |    | Hesperion,                Inc. (TouchStone, formerly Clinical CardioVascular Research,                LLC) |    | Clinical                development of investigational drugs and devices for cardiovascular                indications |    | 24-Oct-01 |    | Ongoing                                                                  |
| 5               |    | CVBT                Founder                                                                                |    | Royalty                agreement                                                                                       |    | 16-Aug-04 |    | 31-Dec-13                                                                |
| 6               |    | Catheter                and Disposables Technologies, Inc.                                                 |    | Product                development                                                                                     |    | 1-Jun-04  |    | Upon delivery of and                payment for catheters |

| 1) | We                agreed to jointly own and license from one another the right to use                certain patents including the patents related to FGF-1141.At                the Company's election and as part of that agreement, we are obligated                to                either (i) pay to Phage ten percent of its net sales or drugs                manufactured for us by Phage or (ii) pay to Phage a six percent                royalty based on the drugs which Phage does not manufacture for                us. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2) | CPI                will act as distributor for the products of both Phage and us in                locations                throughout the world other than United States, Canada, Europe, Japan,                China, and the Republic of Korea. CPI is obligated to pay us an amount                equal to 50% of CPI's gross revenue from sales of our product less                CPI's                direct and indirect costs. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3) | As                part of this agreement, KBDC arranged the purchase of 8,750,000 shares                of                our common stock for $3,602,000 by Cardio Korea, Ltd. KBDC agreed                to fund                all of the regulatory approval process in Korea for any of our products.                In addition, KBDC agreed to pay us a royalty of ten percent net revenue                from sales in its Asian                territories. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4) | Hesperion                will assist us with the FDA approval process for our                drug. |
|----|----------------------------------------------------------------------------------------------------|

| 5) | Our                royalty agreement with Dr. Stegmann will provide him with a one                percent royalty on net revenue from the sale of our drug candidates,                if                any, measured quarterly and payable 90 days after quarter                end. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6) | Catheter                and Disposables Technologies, Inc. will assist us to design, develop,                and                fabricate two different prototype catheter products that will allow                the                administration of our drug candidates by catheter                procedures. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **Item #** |    | **Contract**                                                |    | **Agreement                Name**                |    | **Start** |    | **End                Date**                                         |
|-----------------|--------------|-------------------------------------------------------------|--------------|--------------------------------------------------|--------------|-----------|--------------|---------------------------------------------------------------------|
| 7               |    | bioRASI,                LLC                                 |    | CRO                agreement                     |    | 8-Aug-05  |    | 20-Aug-07                                                           |
| 8               |    | Phage                Biotechnology Corporation              |    | Lease                Guarantee- San Diego        |    | 15-Mar-06 |    | 15-Aug-13                                                           |
| 9               |    | Promethean                                                  |    | Convertible                Notes                 |    | 20-Mar-06 |    | 19-Mar-09                                                           |
| 10              |    | Chief                Executive Officer                      |    | Guarantee                agreement               |    | 20-Mar-06 |    | First                date of generating revenue                     |
| 11              |    | Chief                Executive Officer                      |    | Guarantee                reimbursement agreement |    | 20-Mar-06 |    | First                date of generating revenue                     |
| 12              |    | Kendle                (formerly Charles River Laboratories) |    | CRO                agreement                     |    | 8-Aug-06  |    | Completion                of Phase II Severe Coronary Heart Disease |
| 13              |    | The                Bruckner Group                           |    | Feasibility                Study                 |    | 4-Aug-06  |    | Upon                completion of study                             |
| 14              |    | Investment                banking                           |    | Investment                banking                |    | 6-Jun-06  |    | Ongoing                                                             |
| 15              |    | Public                Accounting Firm                       |    | Professional                Services             |    | 1-July-06 |    | Ongoing                                                             |

| 7) | This                agreement is for the purpose of assisting in our human clinical trials                in                Russia. bioRASI is the strategic initiative of the Russian Academy                of                Sciences (RAS) and is responsible for commercializing RAS' bio-sciences                and clinical resources. bioRASI is a contract research organization                (CRO)                providing services for its collaborative R&D clients in the areas of                drug development, biologicals, and medical                devices. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8) | This                agreement is for a new manufacturing facility in San Diego, CA. The                lease                provides for Minimum Monthly Rent and Additional Rent for shared                costs,                which aggregate approximately $20,000 per                month. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9) | We                entered into a Securities Purchase Agreement with certain investors                to                place $20,000,000 of senior secured notes together with warrants                to                purchase 705,882 shares of our common stock. On May 21, 2007, the                aggregate number of shares acquirable upon exercise of such warrants                increased to 5,999,997. The notes are convertible into shares of                our                common stock at any time at $12 per share until the price re-set                as of May                21, 2007 at $1.00 per share (the “Fixed Conversion Price”). In addition,                the notes are convertible after five months from the closing date                at 94%                of the average of the preceding five days weighted average trading                price,                if the result is lower than $12 per share. Conversion of the senior                secured notes into our common stock at other than the Fixed Conversion                Price is limited to no more than 10% of the original $20,000,000                note                balance per calendar month. The notes mature in March 2009, and bear                a                resetting floating interest rate of three month LIBOR plus 7%. The                warrants may be exercised anytime up to March 2009. The warrant exercise                price is $8.50 per share until the price was re-set as of May 21,                2007 at                $1.00 per share. Substantially all of our assets secure the                notes. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10) | Daniel                C. Montano, our Chairman, Co-President and CEO, entered into a Guaranty                Agreement whereby he guaranteed any and all of our obligations resulting                from the sale on March 20, 2006 of $20,000,000 of senior secured                notes and warrants. The guaranty remains in effect until the first                date on                which we receive revenue from the sale of drugs after such drug has                been                approved by the FDA, provided that on such date we are not in default                of                any provisions of the obligations or triggering events contained                in the                agreements for the senior secured notes and warrants and such default                is                not continuing. However, the guaranty will terminate upon the payment                in                full of the notes including conversion of the notes into our common                stock. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11) | After                our obligations contained in the agreements for the senior secured                notes                and warrants have been paid in full, if Daniel C. Montano was required                to                make any payments pursuant to this guaranty prior to the payment                in full                of our obligations, we will reimburse Daniel C. Montano for any such                payments plus simple interest at 7% per annum from the date of the                advance by Daniel C. Montano to the date reimbursed by                us. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12) | Kendle                (formerly Charles River Laboratories) will support us in our Phase                II                Severe Coronary Heart Disease clinical trial ensuring that the protocol                and study adhere to FDA regulatory requirements. The total direct                and                indirect costs are estimated to be                $3,917,810. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13) | The                Bruckner Group Incorporated has been assisting us in exploring the                potential economic consequences of applying FGF-1141to                a variety of clinical scenarios and patent types. There are three                distinct                components in this project that will be performed simultaneously                by the                Bruckner Group. This project has an approximate total cost of $450,000.                As                of September 30, 2007 two components have been completed. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14) | The                purpose of this agreement is to act                as our advisor for listing on                London Stock Exchange's Alternative Investment Market (“AIM”). We paid                100,000 GBP before admission to AIM and another 50,000 GBP in January                2007. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15) | A                provider of accountancy and business services to audit and review                our                financial reports for listing on London Stock Exchange's Alternative                Investment Market, or AIM. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                    |   | **As                    of****September                    30,** |    | **For                    the****Period                    from****March                    1, 1998****(Inception)                      to****September                      30,** |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                    |   | **2006**                                                         |    | **2007**                                                                                                                                                                          |   | **2007** |   |
|                                                                    |   | ***(Unaudited;                    Dollars in thousands)***       |
| Service                    Fees Paid for Major Contractual Obligations: |   |                                                             |    |                                                                                                                                                                              |   |   |   |
| Hesperion                    (formerly TouchStone Research, Inc.)       |   | $                                                                | 1,509   |                                                                                                                                                                              | $      | 334 |   | $ | 4,882 |   |
| Catheter                    and Disposables Technologies                |   |                                                             | 19      |                                                                                                                                                                              |   | — |   |   | 81 |   |
| BioRASI                                                                 |   |                                                             | 668     |                                                                                                                                                                              |   | 159 |   |   | 1,086 |   |
| Kendle                    (formerly Charles River Laboratories)         |   |                                                             | 772     |                                                                                                                                                                              |   | 483 |   |   | 1,416 |   |
| Bruckner                    Group Incorporated                          |   |                                                             | 238     |                                                                                                                                                                              |   | 443 |   |   | 681 |   |
| Investment                    Banker                                    |   |                                                             | 94      |                                                                                                                                                                              |   | 101 |   |   | 202 |   |
| Public                    Accounting Firm                               |   |                                                             | — |                                                                                                                                                                              |   | 372 |   |   | 540 |   |
|                                                                    |   |                                                             |    |                                                                                                                                                                              |   |   |   |   |   |   |
| Total                                                                   |   | $                                                                | 3,300   |                                                                                                                                                                              | $      | 1,892 |   | $ | 8,888 |   |

| **7.** | **Off-Balance                Sheet Transactions** |
|--------|---------------------------------------------------|

| **8.** | **Recently                Issued Accounting                Pronouncements** |
|--------|-----------------------------------------------------------------------------|

*      Accounting for Uncertainty in Income Taxes -- An Interpretation of FASB      Statement No. 109*
*      Accounting for Income Taxes.*

----

| **Item 3.** | **Quantitative                and Qualitative Disclosures About Market                Risk** |
|------------------|----------------------------------------------------------------------------------------------|

**Interest      Rate Risk**

**Foreign      Currency Risk**

**Derivative      Securities Risk**

| **Item 4.** | **Controls                and Procedures** |
|------------------|--------------------------------------------|

**Evaluation      of Disclosure Controls and Procedures**

**Internal      Control Over Financial Reporting**

**Limitations      on Effectiveness of Control**

----

**PART      II. OTHER INFORMATION**

| **Item 1.** | **Legal                Proceedings** |
|------------------|--------------------------------------|

| **Item 1A.** | **Risk                Factors** |
|-------------------|---------------------------------|

**Risks      Related to the Common Shares**

*The      Company has a history of losses and expects to incur substantial losses and      negative operating cash flows for the foreseeable future, and the Company may      never achieve or maintain profitability.*

|   | ** **· | seek                regulatory approvals for our new drug candidates                                                  |
|--------|------------------|-----------------------------------------------------------------------------------------------------------------------|
|   |             |                                                                                                                  |
|   |  ·     | develop,                formulate, manufacture and commercialize our new drug                candidates               |
|   |             |                                                                                                                  |
|   |  ·     | implement                additional internal systems and infrastructure                                               |
|   |             |                                                                                                                  |
|   |  ·     | hire                additional clinical, scientific, administrative and sales and marketing                personnel. |

----

*If      a      triggering event occurred such that would require the Company to pay off its      convertible notes, the Company may need additional financing to complete the      business plan in a timely manner. Such financing might not be available, or      if      available, the terms might not be satisfactory.*

----

*Conversion      into common stock of the senior secured notes and warrants that we recently      sold      could also cause substantial dilution.*

| **Period**                                             |   | **Amount                  of Senior****Secured                  Notes****Converted** |       | **Converted                  to****Number                  of Shares** |   | **Average                  Share Price** |   | **Interest                  Paid During****the                  Period with****Common                  Stock** |   |
|--------------------------------------------------------|--------|--------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|
| 3rd                  quarter                  - 2006   |   | $                                                                                    | 295,723    |                                                                   |   | 110,500                                  |   | $                                                                                                              | 2.76   |   | $ | 7,576 |   |
| 4th                  quarter                  - 2006   |   |                                                                                 | 1,601,791  |                                                                   |   | 968,971                                  |   |                                                                                                           | 1.84   |   |   | 25,454 |   |
| Total                  - 2006                          |   | $                                                                                    | 1,897,514  |                                                                   |   | 1,079,471                                |   |                                                                                                           |   |   | $ | 33,030 |   |
| 1st                  quarter                  - 2007   |   |                                                                                 | 3,561,835  |                                                                   |   | 3,730,511                                |   |                                                                                                           | 1.00   |   |   | 72,225 |   |
| 2nd                  quarter-2007                      |   |                                                                                 | 3,279,394  |                                                                   |   | 3,455,148                                |   |                                                                                                           | 0.99   |   |   | 32,409 |   |
| 3rd                  quarter-2007                  (a) |   |                                                                                 | 3,545,775  |                                                                   |   | 4,649,762                                |   |                                                                                                           | 0.76   |   |   | 222,578 |   |
| Committed                  Stock                       |   |                                                                                 | 210,706    |                                                                   |   | —                                  |   |                                                                                                           |   |   |   | — |   |
| Total                  - 2007                          |   | $                                                                                    | 10,597,710 |                                                                   |   | 11,835,421                               |   |                                                                                                           |   |   | $ | 327,212 |   |
| Total                  - 2006 and 2007                 |   | $                                                                                    | 12,495,224 |                                                                   |   | 12,914,892                               |   |                                                                                                           |        |   | $ | 360,242 |   |

*The      Company has broad discretion in how it uses the net proceeds from its initial      public offering, its sale of senior secured debt and its more recent sale of      common stock in a private placement pursuant to the exemption provided under      Regulation S of the Securities Act of 1933 (“Reg S Offering”), and it may not      use these proceeds effectively.*

----

| **Item 2.** | **Unregistered                Sales of Equity Securities and Use of                Proceeds** |
|------------------|-----------------------------------------------------------------------------------------------|

|                                                                                            |   |  **As                of****September                30,****2007** |   |
|-------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|
|                                                                                            |   |  *(In thousands)*                                            |   |
| Use                of proceeds from IPO in pre-clinical and clinical trials                     |   | $                                                                      | 5,460  |   |
| Use                of proceeds from IPO in general and administrative                activities |   |                                                                   | 10,141 |   |
| Interest                on senior secured notes                                                 |   |                                                                   | 92     |   |
| Total                                                                                           |   | $                                                                      | 15,693 |   |

|                                                                                                         |   |  **As                of****September                30,****2007** |   |
|--------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|
|                                                                                                         |   |  *(In thousands)*                                            |   |
| Use                of proceeds from Promethean notes in pre-clinical and clinical                trials      |   | $                                                                      | 4,739  |   |
| Use                of proceeds from Promethean notes in general and administrative                activities |   |                                                                   | 11,651 |   |
| Interest                on senior secured notes                                                              |   |                                                                   | 2,207  |   |
| Total                                                                                                        |   | $                                                                      | 18,597 |   |

|                                                                    |   |  **As                of****September                30,****2007** |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|
|                                                                    |   |  *(In thousands)*                                            |   |
| Use                of proceeds in pre-clinical and clinical trials      |   | $                                                                      | 1,061  |   |
| Use                of proceeds in general and administrative activities |   |                                                                   | 2,130  |   |
| Interest                on senior secured notes                         |   |                                                                   | 192    |   |
| Total                                                                   |   | $                                                                      | 3,383  |   |

| **Item 3.** | **Defaults                Upon Senior Securities** |
|------------------|----------------------------------------------------|

| **Item 4.** | **Submission                of Matters to a Vote of Security                Holders** |
|------------------|---------------------------------------------------------------------------------------|

----

| **Item 5.** | **Other                Information** |
|------------------|--------------------------------------|

| **Item 6.** | **Exhibits** |
|------------------|--------------|

|            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Exhibit**     |    | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   3.1 |    | Restated                Certificate of Incorporation, dated July 22, 2004 (incorporated by                reference to Exhibit 3.1 of the Registrant's Registration Statement                on                Form S-1, File No. 333-119199, filed with the Securities and Exchange                Commission on September 23, 2004 (“2004 S-1”)                                                                                                    |
|            |         |
|   4.1 |    | Form                of Series I Convertible Notes outstanding (incorporated by reference                to                Exhibit 3.4 to the 2004 S-1)                                                                                                                                                                                                                                                                                                      |
|            |         |
|   4.2 |    | Form                of Series II Convertible Notes outstanding (incorporated by reference                to                Exhibit 3.5 to the 2004 S-1)                                                                                                                                                                                                                                                                                                     |
|            |         |
|   4.3 |    | Form                of Series IIa Convertible Notes outstanding (incorporated by reference                to                Exhibit 3.6 to the 2004 S-1)                                                                                                                                                                                                                                                                                                         |
|            |         |
| 10.1            |    | Underwriter's                Warrant (incorporated by reference to Exhibit 10.1 of the Registrant's                Amended Registration Statement on Form S-1/A, File No. 333-119199,                filed                with the Securities and Exchange Commission on January 13, 2005 (“2004                S-1/A second update”)                                                                                                                |
|            |         |
| 10.2            |    | Joint                Patent Ownership and License Agreement between CardioVascular                BioTherapeutics, Inc. and Phage Biotechnology, Inc., dated August                16, 2004                (incorporated by reference to Exhibit 10.2 to the 2004                S-1)                                                                                                                                                                            |
|            |         |
| 10.3            |    | 2004                Stock Plan and associated form of Stock Option Award Agreement                (incorporated by reference to Exhibit 10.3 to the 2004                S-1)                                                                                                                                                                                                                                                                                     |
|            |         |
| 10.4            |    | Agreement                on Technology & Business Right Transfer between Cardio Vascular                Genetic Engineering, Inc. and Korea Biotechnology Development Co.,                Ltd.,                dated December 15, 2000* (incorporated by reference to Exhibit 10.4                of the                2004 S-1 first amendment)                                                                                                            |
|            |         |
| 10.5            |    | Agreement                between CardioVascular BioTherapeutics, Inc. and Dr. Thomas Joseph                Stegmann, dated August 30, 2004 (incorporated by reference to Exhibit                10.5                to the 2004 S-1)                                                                                                                                                                                                                             |
|            |         |
| 10.6            |    | Tenant's                Assignment of Lease with Consent by Landlord and Assumption by Assignee,                dated April 30, 2004 and underlying sublease for premises at 1700 W.                Horizon Ridge Parkway, Suite 100, Henderson, Nevada 89012 (incorporated                by                reference to Exhibit 10.6 to the 2004 S-1)                                                                                                     |
|            |         |
| 10.7            |    | Guarantee                of Sublease between Phage Biotechnology Corporation and The Regents                of the                University of California, dated August 24, 2004 (incorporated by                reference                to Exhibit 10.7 to the 2004 S-1)                                                                                                                                                                                      |
|            |         |
| 10.8            |    | Distributorship                Agreement among CardioVascular BioTherapeutics, Inc., Phage Biotechnology                Corporation and Cardio Phage International Inc., dated as of August                16,                2004 (incorporated by reference to Exhibit 10.8 to the 2004                S-1)                                                                                                                                                    |
|            |         |
| 10.9            |    | Clinical                Research Services Agreement between Clinical Cardiovascular Research,                LLC                (acquired by Touchstone Research, Inc. nka Hesperion, Inc.) and                CardioVascular Genetic Engineering (nka CardioVascular BioTherapeutics,                Inc.), dated October 24, 2001, and amendments 1, 2 and 3 thereto                (incorporated by reference to Exhibit 10.9 to the 2004                S-1) |
|            |         |
| 10.10           |    | Engagement                Agreement, dated March 2, 2006, between CardioVascular BioTherapeutics,                Inc. and C.K. Cooper & Company, Inc. (incorporated by reference to                Exhibit 10.10 of the Registrant's Annual Report on Form 10-K, File                No.                000-51172, filed with the Securities and Exchange Commission on March                31,                2006 (“2005 10-K”)               |
|            |         |
| 10.11           |    | Agreement,                dated June 23, 2004, between Catheter and Disposable Technology Inc.                and                CardioVascular BioTherapeutics, Inc. (incorporated by reference to                Exhibit                10.11 to the 2004 S-1)                                                                                                                                                                                                 |
|            |         |
| 10.12           |    | Agreement,                dated February 15, 2004, between DaVinci Biomedical Research Products,                Inc. and CardioVascular Genetic Engineering (nka CardioVascular                BioTherapeutics, Inc.) (incorporated by reference to Exhibit 10.12                to the                2004 S-1)                                                                                                                                                 |

----

|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|----------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Exhibit**    |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.13          |   | Agreement,                dated March 11, 2004, between DaVinci Biomedical Research and                CardioVascular Genetic Engineering (nka CardioVascular BioTherapeutics,                Inc.) (incorporated by reference to Exhibit 10.13 to the 2004                S-1)                                                                                                                                                                   |
|           |   |
| 10.14          |   | Master                Agreement between MPI Research, Inc. and Phage Biotechnology Corporation                dated March 2004 (incorporated by reference to Exhibit 10.14 to the                2004                S-1)                                                                                                                                                                                                                              |
|           |   |
| 10.14 (a) |   | Services                Agreement Addendum No. 1, dated November 17, 2004, between MPI Research,                Inc. and Phage Biotechnology Corporation (incorporated by reference                to                Exhibit 10.14(a) of the 2004 S-1 second amendment)                                                                                                                                                                                |
|           |   |
| 10.14 (b) |   | Services                Agreement Addendum No. 2, dated December 31, 2004, between MPI Research,                Inc. and Phage Biotechnology Corporation (incorporated by reference                to                Exhibit 10.14(b) to the 2004 S-1 second amendment)                                                                                                                                                                                |
|           |   |
| 10.15          |   | Lease                Agreement, dated November 1, 2005, between Howard Hughes Properties,                Limited Partnership and CardioVascular BioTherapeutics, Inc. (incorporated                by reference to Exhibit 10.15 to the 2005 10-K)                                                                                                                                                                                                     |
|           |   |
| 10.16          |   | Voting                Agreement and Proxy, dated January 9, 2004, among Daniel Montano,                Cardio                Korea Ltd. and CardioVascular Genetic Engineering (incorporated by                reference to Exhibit 10.16 of the 2004 S-1 third                amendment)                                                                                                                                                              |
|           |   |
| 10.17          |   | Sublease                Agreement, dated November 2005, between CardioVascular BioTherapeutics,                Inc. and Phage Biotechnology Corporation (incorporated by reference                to                Exhibit 10.17 to the Annual Report on Form 10-K for fiscal year ended                December 31, 2005)                                                                                                                            |
|           |   |
| 10.18          |   | Securities                Purchase Agreement, dated March 20, 2006 (incorporated by reference                to                Exhibit 10.1 of the March 2006 8-K”)                                                                                                                                                                                                                                                                              |
|           |   |
| 10.19          |   | Registration                Rights Agreement dated March 20, 2006 (incorporated by reference                to                Exhibit 10.2 to the March 2006 8-K)                                                                                                                                                                                                                                                                                      |
|           |   |
| 10.20          |   | Security                Agreement dated March 20, 2006 (incorporated by reference to Exhibit                10.3                to the March 2006 8-K)                                                                                                                                                                                                                                                                                                 |
|           |   |
| 10.21          |   | Patent                Security Agreement dated March 20, 2006 (incorporated by reference                to                Exhibit 10.4 to the March 2006 8-K)                                                                                                                                                                                                                                                                                          |
|           |   |
| 10.22          |   | Guaranty                of Daniel C. Montano dated March 20, 2006 (incorporated by reference                to                Exhibit 10.5 to the March 2006 8-K)                                                                                                                                                                                                                                                                                      |
|           |   |
| 10.23          |   | Pledge                Agreement dated March 20, 2006 (incorporated by reference to Exhibit                10.6                to the March 2006 8-K)                                                                                                                                                                                                                                                                                                   |
|           |   |
| 10.24          |   | Form                of Note attached as Exhibit A to Exhibit 10.18 (incorporated by reference                to Exhibit 10.7 to the March 2006 8-K)                                                                                                                                                                                                                                                                                                    |
|           |   |
| 10.25          |   | Standard                Industrial Net Lease, dated March 15, 2006, between Canta Rana Ranch,                L.P.                and Phage Biotechnology Corporation (incorporated by reference to                Exhibit                10.1 of the Registrant's Current Report on Form 8-K, File No. 000-51172,                filed with the Securities and Exchange Commission on March 21, 2006                (“March 21, 2006 8-K”) |
|           |   |
| 10.26          |   | Indemnity                and Reimbursement Agreement for the Standard Industrial Net Lease                of March                15, 2006, dated March 15, 2006, between CardioVascular BioTherapeutics,                Inc., as guarantor, and Phage Biotechnology Corporation (incorporated                by                reference to the March 21, 2006 8-K)                                                                                   |
|           |   |
| 10.27          |   | Controlling                Stockholders Agreement, dated as of August 30, 2004, by and among                each of                the Controlling Stockholders of CardioVascular BioTherapeutics, Inc.                (incorporated by reference to Exhibit 9 to the 2004                S-1)                                                                                                                                                         |

----

|        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Exhibit** |    | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.28       |    | Amendment                No. 1 to the Controlling Stockholders Agreement, dated as of April                13,                2006, by and among each of the Controlling Stockholders of CardioVascular                BioTherapeutics, Inc. (incorporated by reference to Exhibit 9.1 of                the                Registrant's Current Report on Form 8-K, File No. 000-51172, filed                with                the Securities and Exchange Commission on May 26, 2006 (“May 2006                8-K”) |
|        |         |
| 10.29       |    | Amended                and Restated Joint Patent Ownership and License Agreement, dated                May 23,                2006, between CardioVascular BioTherapeutics, Inc. and Phage Biotechnology                Corporation (incorporated by reference to Exhibit 9.1 of the May                2006                8-K)                                                                                                                                                                                                     |
|        |         |
| 10.30       |    | Lease                Agreement, dated August 7, 2006, by and between BMR-6828 Nancy Ridge                LLC                and CardioVascular BioTherapeutics, Inc. (incorporated by reference                to                Exhibit 10.1 of the Registrant's Current Report on Form 8-K, File                No.                000-51172, filed with the Securities and Exchange Commission on August                11,                2006)                                                                                  |
|        |         |
| 10.31       |    | First                Amendment, dated January 11, 2006, to the November 1, 2005 Lease                Agreement                by and between Howard Hughes Properties and CardioVascular                BioTherapeutics, Inc. (incorporated by reference to Exhibit 10.2                of the                Registrant's Current Report on Form 8-K, File No. 000-51172, filed                with                the Securities and Exchange Commission on September 6, 2006 (“September                2006 8-K”)    |
|        |         |
| 10.32       |    | Second                Amendment, dated August 29, 2006, to the November 1, 2005 Lease Agreement                by and between Howard Hughes Properties and CardioVascular                BioTherapeutics, Inc. (incorporated by reference to Exhibit 10.1                of the                September 2006 8-K)                                                                                                                                                                                                                   |
|        |         |
| 10.33       |    | First                Amendment, dated September 1, 2006, to the August 7, 2006 Lease Agreement                by and between BMR-6828 Nancy Ridge LLC and CardioVascular                BioTherapeutics, Inc. (incorporated by reference to Exhibit 10.1                of the                Registrant's Current Report on Form 8-K, File No. 000-51172, filed                with                the Securities and Exchange Commission on September 14,                2006)                                                     |
|        |         |
| 10.34       |         | New                Joint Patent Agreement, dated February 28, 2007 between Cardiovascular                BioTherapeutics, Inc. and Phage BioTechnology Corporation (incorporated                by                reference to Exhibit 10.34 on Form 8-K, filed with the Securities                and                Exchange Commission on March 27, 2007).                                                                                                                                                                        |
|        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.35       |         | CardioVascular                BioTherapeutics, Inc. engaged in a private placement with FirmInvest,                AG                for the Company's common stock for a total of $15,000,000 May 21,                2007.                (Incorporated by reference to Exhibit 10.35 on Form 8-K, filed with                the                Securities and Exchange Commission on May 24, 2007.)                                                                                                                                |
|        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.36       |         | Engagement                Agreement, dated August 16, 2007, between CardioVascular BioTherapeutics,                Inc. and GHL Financial Services, Ltd., Inc.,                                                                                                                                                                                                                                                                                                                                                                      |
|        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.37       |         | Amendment                to FirmInvest, AG Commitment Letter dated August 17, 2007 (incorporated                by                reference to Exhibit 10.2 on Form 8-K, filed with the Securities                and                Exchange Commission on August 17, 2007)                                                                                                                                                                                                                                                         |
|        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.38       |         | Amendment                II to FirmInvest, AG Commitment Letter dated October 12,                2007                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.39       |         | Warrant                dated October 12, 2007 to purchase 3,700,000 shares of Cardio Vascular                Bio                Therapeutics, Inc. Common Stock.                                                                                                                                                                                                                                                                                                                                                                     |
|        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.40       |         | Form                of Subscription Agreement for Reg S Offering                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 14          |    | Code                of Ethics (incorporated by reference to Exhibit 99.3 to the 2004                S-1)                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |         |
| 31.1        |    | Certification                of Principal Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |         |
| 31.2        |    | Certification                of Principal Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |         |
| 32          |    | Certifications                of Chief Executive Officer and Chief Financial Officer pursuant to                18                U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes Oxley Act of                2002                                                                                                                                                                                                                                                                                             |
|        |         |
| 99.1        |    | Governance                Policies (incorporated by reference from Exhibit 99.1 to 2004                S-1)                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |         |
| 99.5        |    | Compensation                Committee Charter (incorporated by reference from Exhibit 99.5 to                2004                S-1)                                                                                                                                                                                                                                                                                                                                                                                                |
|        |         |
| 99.6        |    | Nominating                and Corporate Governance Committee Charter (incorporated by reference                from                Exhibit 99.6 to 2004 S-1)                                                                                                                                                                                                                                                                                                                                                                    |

----

**SIGNATURES**

|                             |                                                                    |                               |
|----------------------------------|-------------------------------------------------------------------------|------------------------------------|
|                             | CARDIOVASCULAR                BIOTHERAPEUTICS, INC.                     |
|                        |                                                               |                          |
| November                15, 2007 | By:                                                           | /s/                Mickael A. Flaa |
|                             | **Mickael                A. Flaa**                                      |
|                             | **Chief                Financial Officer and                Treasurer** |

----