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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

|                          |   |                                                                                                                                        |
|-------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
| **(Mark                One)** |   |                                                                                                                                   |
| **x**                         |   | **QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d)****OF                THE SECURITIES EXCHANGE ACT OF                1934** |

**For      the Quarterly Period Ended June 30, 2008**

**OR**

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

**Commission      File No. 0-51172**

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

|                                                                                        |   |                                                              |
|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
| **Delaware**                                                                                |   | **33-0795984**                                                    |
| (State                or Other Jurisdiction ofIncorporation                or Organization) |   | (I.R.S.                EmployerIdentification                No.) |

**1635      Village Center Circle, Suite 250**

**Las      Vegas, Nevada**

**89134**

**702-839-7200**

| Large                accelerated filer o | Accelerated                filer o | Non-accelerated                filer x | Smaller                Reporting Entity o |
|------------------------------------------|------------------------------------|----------------------------------------|-------------------------------------------|

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**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**FORM      10-Q**

**For      the Quarter Ended June 30, 2008**

**INDEX**

|                                                                                                                                                                                                                                      |   |   | **Page**  |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------|--------|
| **Part                  I. Financial Information**                                                                                                                                                                                        |   |   | 1              |   |
| Item                  1. Consolidated Financial Statements                                                                                                                                                                                |   |   | 1              |   |
| Consolidated Balance                  Sheets as of December 31, 2007 and June 30, 2007 and 2008                  (Unaudited)                                                                                                         |   |   | 1              |   |
| Consolidated Statements                  of Operations for the Six Month Periods Ended June 30, 2007 and 2008                  and for the Period From                  March 11, 1998 (inception) to June 30, 2008 (Unaudited) |   |   | 2              |   |
| Consolidated Statements                  of Stockholders’ Deficit for the Period From March 11, 1998 (inception) to                  June 30, 2008 (Unaudited)                                                                 |   |   | 3              |   |
| Consolidated Statements                  of Cash Flows for the Six Month Periods Ended June 30, 2007 and 2008                  and for the Period From                  March 11, 1998 (inception) to June 30, 2008 (Unaudited) |   |   | 6              |   |
| Notes                  to Consolidated Financial Statements (Unaudited)                                                                                                                                                              |   |   | 10             |   |
| Item                  2. Management’s Discussion and Analysis of Consolidated Financial                  Condition and Results of Operations                                                                                        |   |   | 59             |   |
| Item                  3. Quantitative and Qualitative Disclosures About Market                  Risk                                                                                                                                      |   |   | 74             |   |
| Item                4. Controls and Procedures                                                                                                                                                                                            |   |   | 75             |   |
|                                                                                                                                                                                                                                      |   |   |           |   |
| **Part                  II. Other Information**                                                                                                                                                                                           |   |   | 76             |   |
| Item                  1. Legal Proceedings                                                                                                                                                                                                |   |   | 76             |   |
| Item                  1A. Risk Factors                                                                                                                                                                                                    |   |   | 76             |   |
| Item                  2. Unregistered Sales of Equity Securities and Use of                  Proceeds                                                                                                                                     |   |   | 78             |   |
| Item                  3. Defaults Upon Senior Securities                                                                                                                                                                                  |   |   | 79             |   |
| Item                  4. Submission of Matters to a Vote of Security Holders                                                                                                                                                              |   |   | 79             |   |
| Item                  5. Other Information                                                                                                                                                                                                |   |   | 79             |   |
| Item                  6. Exhibits                                                                                                                                                                                                         |   |   | 80             |   |
| Signatures                                                                                                                                                                                                                                |   |   | 84             |   |
| 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. Consolidated Financial Statements**

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

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

**(A      Development Stage Company)**

**CONSOLIDATED **
**BALANCE      SHEETS**

**December      31, 2007 and June 30, 2008 (Unaudited)**

|                                                                                                                                                                                                                                                                    |   | **December                  31,****2007**                |       | **June                  30,****2008**  |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|------------|---------------------------------------------|--------|
|                                                                                                                                                                                                                                                                    |   | *(In                  thousands except for share data)*  |       |
| **ASSETS**                                                                                                                                                                                                                                                              |   |                                                     |       |                              |   |
| **Current                  Assets:**                                                                                                                                                                                                                                    |   |                                                     |       |                              |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                              |   | $                                                             | 310        |                                        | $      | 391 |   |
| Restricted                  cash                                                                                                                                                                                                                                        |   |                                                          | 60         |                                        |   | 60 |   |
| Due                  from an affiliate                                                                                                                                                                                                                                  |   |                                                          | 139        |                                        |   | 126 |   |
| Prepaid                  and other current assets                                                                                                                                                                                                                       |   |                                                          | 543        |                                        |   | 43 |   |
| **Total                  current assets**                                                                                                                                                                                                                               |   |                                                          | **1,052**  |                                        |   | **620** |   |
| Property                  and equipment, net of accumulated depreciation ($448 and $578,                  as of                  December 31, 2007 and June 30, 2008)                                                                                                   |   |                                                          | 662        |                                        |   | 484 |   |
| Deferred                  financing costs, net of amortization ($1,503 and $1,524 as of December                  31,                  2007 and June 30, 2008)                                                                                                          |   |                                                          | 50         |                                        |   | 29 |   |
| Other                  assets                                                                                                                                                                                                                                           |   |                                                          | 81         |                                        |   | 24 |   |
| **Total                  Assets**                                                                                                                                                                                                                                       |   | $                                                             | 1,845      |                                        | $      | **1,157** |   |
| **LIABILITIES                  AND STOCKHOLDERS’ DEFICIT**                                                                                                                                                                                                        |   |                                                          |       |                                        |   |   |   |
| **Current                  Liabilities:**                                                                                                                                                                                                                               |   |                                                          |            |                                        |   |   |   |
| Accrued                  interest payable                                                                                                                                                                                                                               |   | $                                                             | 129        |                                        | $      | 161 |   |
| Due                  to affiliates                                                                                                                                                                                                                                      |   |                                                          | 24         |                                        |   | — |   |
| Accounts                  payable (including $120 and $295 due to officers, directors and                  related                  parties as of December 31, 2007 and June 30, 2008)                                                                                  |   |                                                          | 3,625      |                                        |   | 4,435 |   |
| Demand                  notes, net of current portion and net of debt discount of $432                  and $0 as                  of December 31, 2007 and June 30, 2008                                                                                               |   |                                                          | 1,068      |                                        |   | 1,600 |   |
| Demand                  notes from officers                                                                                                                                                                                                                             |   |                                                          | 160        |                                        |   | 160 |   |
| Accrued                  payroll and payroll taxes (including $238 and $474 due to related                  parties                  at December 31, 2007 and June 30, 2008)                                                                                            |   |                                                          | 519        |                                        |   | 883 |   |
| Deferred                  rent                                                                                                                                                                                                                                          |   |                                                          | 215        |                                        |   | 69 |   |
| **Total                  current liabilities**                                                                                                                                                                                                                          |   |                                                          | **5,740**  |                                        |   | **7,308** |   |
| Long                  term notes, net of debt discount of $0 and $671 as of December                  31, 2007                  and June 30, 2008                                                                                                                       |   |                                                          | —    |                                        |   | 379 |   |
| Convertible                  notes payable and embedded derivatives                                                                                                                                                                                                     |   |                                                          | 4,205      |                                        |   | 3,336 |   |
| Warrants                  derivatives - other                                                                                                                                                                                                                 |   |                                                          | 4,118      |                                        |   | 4,459 |   |
| Option                  derivatives - other                                                                                                                                                                                                                   |   |                                                          | 867        |                                        |   | 629 |   |
| **Total                  Liabilities**                                                                                                                                                                                                                                  |   |                                                          | **14,930** |                                        |   | **16,111** |   |
| Non-controlling                interest in variable interest entities                                                                                                                                                                                                   |   |                                                          | —    |                                        |   | 1,650 |   |
| Commitments                  and contingencies                                                                                                                                                                                                                          |   |                                                          |       |                                        |   |   |   |
| **Stockholders’                  Deficit:**                                                                                                                                                                                                                       |   |                                                          |            |                                        |   |   |   |
| Convertible                  preferred stock, $0.001 par value; 10,000,000 shares authorized;                  52,850                  shares issued; and no shares outstanding at December 31, 2007 and                  June 30,                  2008, respectively. |   |                                                          | —    |                                        |   | — |   |
| Common                  stock, $0.001 par value, 400,000,000 shares authorized; 149,920,335                  and                  152,675,793 shares issued and outstanding at December 31, 2007                  and June                  30, 2008, respectively      |   |                                                          | 150        |                                        |   | 153 |   |
| Committed                  common stock                                                                                                                                                                                                                                 |   |                                                          | —    |                                        |   | — |   |
| Additional                  paid in capital                                                                                                                                                                                                                             |   |                                                          | 57,499     |                                        |   | 60,922 |   |
| Deficit                  accumulated during the development stage                                                                                                                                                                                                       |   |                                                          | (70,734    | )                                           |   | (77,679 | ) |
| **Total                  stockholders’ deficit**                                                                                                                                                                                                                  |   |                                                          | (13,085    | )                                           |   | (16,604 | ) |
| **Total                  Liabilities and Stockholders' Deficit**                                                                                                                                                                                                        |   | $                                                             | 1,845      |                                        | **$**  | **1,157** |   |

*The      accompanying notes are an integral part of these consolidated financial      statements*

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**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

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

**(A      Development Stage Company)**

**CONSOLIDATED      STATEMENTS OF OPERATIONS (Unaudited) **

**For      the Six Month and Three Month Periods Ended June 30, 2007 and 2008      and**

**March      11, 1998 (Inception) to June 30, 2008**

|                                                                                                                     |                            | **For                the Six Month****Period                Ended****June                30,** |         |     | **For                the Three Month****Period                Ended****June                30,** |       | **For                the Period from****March                11, 1998****(Inception)                to****June                30,** |
|--------------------------------------------------------------------------------------------------------------------------|---------------------------------|------------------------------------------------------------------------------------------------|--------------|----------|--------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------|
| **  **                                                                                                         |                            | **2007**                                                                                       |         | **2008** |                                                                                             |       | **2007**                                                                                                                            |   | **2008** |   | **2008** |
|                                                                                                                     | *(In                thousands)* |
| **Operating                expenses**                                                                                    |                            |                                                                                           |    |     |                                                                                             |       |                                                                                                                                |   |    |   |   |   |    |   |   |   |
| Research                and development (a)                                                                              |                            | $                                                                                              | 3,333        |     | $                                                                                                | 2,254      |                                                                                                                                | $ | 1,718 |   |   | $ | 1,212 |   | $ | 25,058 |
| Selling,                general and administrative (b)                                                                   |                            |                                                                                           | 8,167        |     |                                                                                             | 3,406      |                                                                                                                                |   | 4,638 |   |   |   | 1,696 |   |   | 44,213 |
| Total                operating expenses                                                                                  |                            |                                                                                           | 11,500       |     |                                                                                             | 5,660      |                                                                                                                                |   | 6,356 |   |   |   | 2,908 |   |   | 69,271 |
| **Operating                loss**                                                                                        |                            |                                                                                           | (11,500      |  )  |                                                                                             | (5,660     | )                                                                                                                                   |   | (6,356 |  ) |   |   | (2,908 | ) |   | (69,271) |
| **Other                income (expenses)**                                                                               |                            |                                                                                           |         |     |                                                                                             |       |                                                                                                                                |   |   |   |   |   |   |   |   |   |
| Interest                income                                                                                           |                            |                                                                                           | 127          |     |                                                                                             | —    |                                                                                                                                |   | 26 |   |   |   | — |   |   | 1,196 |
| Interest                expense                                                                                          |                            |                                                                                           | (6,191       | )        |                                                                                             | (1,638     | )                                                                                                                                   |   | (2,971 |  ) |   |   | (477 | ) |   | (21,290) |
| Other                expenses                                                                                            |                            |                                                                                           | —      |     |                                                                                             | —    |                                                                                                                                |   | — |   |   |   | — |   |   | (5) |
| Adjustments                to fair value of derivatives                                                                  |                            |                                                                                           | (10,084      | )        |                                                                                             | (844       | )                                                                                                                                   |   | (7,958 | )  |   |   | 2,285 |   |   | (679) |
| Adjustments                to fair value of derivatives - other option & warrant                derivative |                            |                                                                                           | 1,400        |     |                                                                                             | 1,085      |                                                                                                                                |   | 847 |   |   |   | 2,805 |   |   | 12,273 |
| Gain                on lease termination                                                                                 |                            |                                                                                           | —      |     |                                                                                             | 112        |                                                                                                                                |   | — |   |   |   | — |   |   | 112 |
| Equity                in loss of unconsolidated investee                                                                 |                            |                                                                                           | —      |     |                                                                                             | —    |                                                                                                                                |   | — |   |   |   | — |   |   | (15) |
| Net                other expenses                                                                                        |                            |                                                                                           | (14,748      |  )  |                                                                                             | (1,285     | )                                                                                                                                   |   | (10,056 |  ) |   |   | 4,613 |   |   | (8,408) |
| **Net                income (loss) before Provision for Income Taxes**                                                   |                            |                                                                                           | **(26,248**  | **)**    |                                                                                             | **(6,945** | **)**                                                                                                                               |   | **(16,412** | ** )** |   |   | **1,705** |   |   | **(77,679)** |
| Provision                for income taxes                                                                                |                            |                                                                                           | —      |     |                                                                                             | —    |                                                                                                                                |   | — |   |   |   | — |   |   | — |
| **Net                income (loss)**                                                                                     |                            | $                                                                                              | **(26,248**  | **)**    | $                                                                                                | **(6,945** | **)**                                                                                                                               | $ | **(16,412** | ** )** |   | $ | **1,705** |   | $ | **(77,679)** |
| **Income                (loss) per share**                                                                               |                            |                                                                                           |         |     |                                                                                             |       |                                                                                                                                |   |   |   |   |   |   |   |   |   |
| **Basic                income (loss) per share**                                                                         |                            | $                                                                                              | (0.20        | )        | $                                                                                           | (0.05      | )                                                                                                                                   | $ | (0.12 |  ) |   | $ | 0.01 |   |   |   |
| **Diluted                income (loss) per share**                                                                       |                            | $                                                                                         | (0.20        | )        | $                                                                                           | (0.05      | )                                                                                                                                   | $  | (0.12 |  ) |   | $ | 0.01 |   |   |   |
| **Shares                used to calculate earnings (loss) per share**                                                    |                            |                                                                                           |         |     |                                                                                             |       |                                                                                                                                |   |   |   |   |   |   |   |   |   |
| **Basic**                                                                                                                |                            |                                                                                           | 129,170      |     |                                                                                             | 135,892    |                                                                                                                                |   | 134,382 |   |   |   | 152,279 |   |   |   |
| **Diluted**                                                                                                              |                            |                                                                                           | 129,170      |     |                                                                                             | 135,892    |                                                                                                                                |   | 134,382 |   |   |   | 154,161 |   |   |   |
| (a)                Research and development with related parties (Notes 3 and                13)                         |                            | $                                                                                              | 927          |     | $                                                                                                | 677        |                                                                                                                                | $ | 384 |   |   | $ | 353 |   | $ | 6,184 |
| (b)                General and administrative with related parties (Notes 3 and                13)                       |                            | $                                                                                              | 26           |     | $                                                                                                | 7          |                                                                                                                                | $ | 5 |   |   | $ | 3 |   | $ | 1,204 |

*The      accompanying notes are an integral part of these consolidated financial      statements*

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**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

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

**(A      Development Stage Company)**

**  **

**CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ DEFICIT (Unaudited)**

**For      the Period from March 11, 1998 (Inception) to June 30,      2008**

|                                                                                                 |   |                                                              |       |                                            |   |                                                                                    |   |                            |    |               |   |                                |   |            |        |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|------------|--------------------------------------------|--------|------------------------------------------------------------------------------------|--------|---------------------------------|---------|---------------|--------|-------------------------------------|--------|-----------------|-------------|
|                                                                                                 |   |                                                              |       | **Price                    Per****Equity** |   | **Preferred                    Stock****Series                    A, Convertible** |   | **Common                Stock** |    | **Committed** |   |  ****Additional******Paid-In** |   | **Accumulated** |        |   |   |
|                                                                                                 |   | **Date**                                                          |       | **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         | )                                          | $      | .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                                                                              |   |                                                              |       |                                       |   |                                                                               |   |                            | — |          |   | —                             |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | (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         | )                                          | $      | .                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** |   |   | **—** |   | **$** | **4,351** |   | **$** | **(3,455** | **)** | **$** | **1,005** |   |
| Issuance                of common stock for cash                                                     |   |                                                              | 8/10/2001  |                                       |   | 0.80                                                                               |   |                            | — |          |   | —                             |   |            | 150         |   |   | — |   |   | — |   |   | 120 |   |   | — |   |   | 120 |   |
| Net                loss                                                                              |   |                                                              |       |                                       |   |                                                                               |   |                            | — |          |   | —                             |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | (1,665 | ) |   | (1,665 | ) |
| **Balance,                December 31, 2001**                                                        |   |                                                              |       |                                       |   |                                                                               |   |                            | **51**  |          | **$**  | **—**                         |   |            | **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** | **)** |
| 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 | ) |   | — |   |   | — |   |

*The        accompanying notes are an integral part of these consolidated financial        statements*

----

| 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          |   |   | — |   |   | — |   |   | —    |   |   | —     |   |   | —     |   |
| Option                and Warrant Derivative                                                                       |   |   | (14    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | (12,278    | )      |   | —     |   |   | (12,278     | )      |
| Reclassification                of option derivative for option 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         |   |   | 1       |   |   | — |   |   | 131        |   |   | —     |   |   | 132         |   |
| Issuance                of stock for services as independent directors                                             |   |   | (19    | )      |   |   |   |   | —     |   |   | —     |   |   | 48          |   |   | — |   |   | — |   |   | 48         |   |   | —     |   |   | 48          |   |
| Options                and Warrants Derivative                                                                     |   |   | (14    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | (279       | )      |   | —     |   |   | (279        | )      |
| Conversion                of convertible notes                                                                     |   |   | (15    | )      |   |   |   |   | —     |   |   | —     |   |   | 19,151      |   |   | 19      |   |   | — |   |   | 14,203     |   |   | —     |   |   | 14,222      |   |
| Reclassification                of conversion and interest conversion derivative on note                conversion |   |   | (18    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | 6,455      |   |   | —     |   |   | 6,455       |   |
| Reclassification                of interest conversion derivative on actual interest paid                          |   |   | (17    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | 585        |   |   | —     |   |   | 585         |   |
| Sale                of common shares                                                                               |   |   | (20    | )      |   |   |   |   | —     |   |   | —     |   |   | 3,650       |   |   | 4       |   |   | — |   |   | 3,256      |   |   | —     |   |   | 3,260       |   |
| Stock                based compensation                                                                            |   |   | (11    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | 574        |   |   | —     |   |   | 574         |   |
| Issuance                of common stock for interest payments                                                      |   |   | (21    | )      |   |   |   |   | —     |   |   | —     |   |   | 973         |   |   | 1       |   |   | — |   |   | 607        |   |   | —     |   |   | 608         |   |
| Issuance                of warrant for cash                                                                        |   |   | (22    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | 6          |   |   | —     |   |   | 6           |   |
| Issuance                of common shares for services                                                              |   |   | (23    | )      |   |   |   |   | —     |   |   | —     |   |   | 200         |   |   | — |   |   | — |   |   | 200        |   |   | —     |   |   | 200         |   |
| Net                loss (unaudited)                                                                                |   |   |   |   |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | —    |   |   | (36,006     | )      |   | (36,006     | )      |
| **Balance,                December 31, 2007**                                                                      |   |   |   |   |   |   |   |   | **—** |   | $      | —     |   |   | **149,920** |   | **$**  | **150** |   | $      | — |   | **$**  | **57,499** |   | **$**  | **(70,734** | **)**  | **$**  | **(13,085** | **)**  |
| Exercise                of options                                                                                 |   |   | (10    | )      |   |   |   |   | —     |   |   | —     |   |   | 60          |   |   | — |   |   | — |   |   | 39         |   |   | —     |   |   | 39          |   |
| Stock                based compensation                                                                            |   |   | (11    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | 145        |   |   | —     |   |   | 145         |   |
| Option                and Warrant Derivative                                                                       |   |   | (14    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | 59         |   |   | —     |   |   | 59          |   |
| Conversion                of convertible notes                                                                     |   |   | (15    | )      |   |   |   |   | —     |   |   | —     |   |   | 1,601       |   |   | 2       |   |   | — |   |   | 1,398      |   |   | —     |   |   | 1,400       |   |
| Reclassification                of conversion and interest conversion derivative on note                conversion |   |   | (18    | )      |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | 809        |   |   | —     |   |   | 809         |   |
| Sale                of common shares                                                                               |   |   | (20    | )      |   |   |   |   | —     |   |   | —     |   |   | 825         |   |   | 1       |   |   | — |   |   | 752        |   |   | —     |   |   | 753         |   |
| Issuance                of common stock for interest payments                                                      |   |   | (21    | )      |   |   |   |   | —     |   |   | —     |   |   | 269         |   |   | — |   |   | — |   |   | 221        |   |   | —     |   |   | 221         |   |
| Net                loss (unaudited)                                                                                |   |   |   |   |   |   |   |   | —     |   |   | —     |   |   | —     |   |   | — |   |   | — |   |   | —    |   |   | (6,945      | )      |   | (6,945      | )      |
| **Balance,                June 30, 2008**                                                                          |   |   |   |   |   |   |   |   | **—** |   | $      | —     |   |   | **152,675** |   |   | **153** |   | $      | — |   | **$**  | **60,922** |   | **$**  | **(77,679** | **)**  | **$**  | **(16,604** | **)**  |

*The        accompanying notes are an integral part of these consolidated financial        statements*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

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

**(A      Development Stage Company)**
**  **

**CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ DEFICIT      (Unaudited) - continued**

**For      the Period from March 11, 1998 (Inception) to June 30,      2008**

|   | (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. |
|--------|-----|--------------------------------|

|   | (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)    | Underwriter’s                warrants sold with the public                offering.     |

|   | (10) | Multiple                employee option exercises (exercise price range                $0.30-$2.00). |
|--------|------|------------------------------------------------------------------------------------------------------|

|   | (11) | Stock                options and warrants issued for                services. |
|--------|------|-------------------------------------------------------------------------------|

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

|   | (13) | Issuance                of 20 commemorative shares to directors and                executives. |
|--------|------|------------------------------------------------------------------------------------------------|

|   | (14) | Reclassification                of option and warrant derivatives from equity to liability in accordance                with EITF 00-19. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | (15)   | Conversion                of senior secured convertible notes and interest related to those                notes at                various prices. During the year ended December 31, 2007 and the six                month                period ended June 30, 2008, in addition to the period from March                11, 1998                (inception) to June 30, 2008, $14,222,486, $1,400,000, and $17,520,000                of                senior secured convertible notes payable were converted into 19,150,903,                1,601,354 and 21,739,476 shares of uncommitted common stock, respectively.                During the year ended December 31, 2007 and the six month period                ended                June 30, 2008, $607,811 and $221,060 of interest on senior secured                convertible notes were paid with common stock. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | (16)   | Reclassification                of option derivative from liability to equity for options                exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

|   | (17) | Reclassification                of interest conversion derivative from liability to equity on 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 as independent                directors. |
|--------|------|----------------------------------------------------------------------------------------|

|   | (20) | Sale                of common stock at $1.00 each. |
|--------|------|----------------------------------------------------|

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

|   | (22) | Issuance                of warrants for cash. |
|--------|------|-----------------------------------------------|

|   | (23) | Issuance                of shares to a vendor as per contract                terms. |
|--------|------|-------------------------------------------------------------------------------------|

*The      accompanying notes are an integral part of these consolidated financial      statements*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

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

**(A      Development Stage Company)**

**CONSOLIDATED STATEMENTS      OF CASH FLOWS**

**For      the Six Month Period Ended June 30, 2007 and 2008, and For**

**The      Period from March 11, 1998 (Inception) to June 30,      2008 — (Unaudited)**

|                                                                                                               |   |    **Six                Month Period Ended****June                30,** |    | **For                the****Period                from****March                11,****1998****(Inception)                to****June                30,** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **  **                                                                                                   |   | **2007**                                                                               |    | **2008**                                                                                                                                                 |   | **2008** |   |
| **  **                                                                                                   |   | *(Dollars                in thousands)*                                                |    |
| **Cash                flows from operating activities:**                                                           |   |                                                                         |    |                                                                                                                                           |   |     |   |
| Net                loss                                                                                            |   | $                                                                                      | (26,248 | )                                                                                                                                                        | $      | (6,945 | ) | $ | (77,679 | ) |
| Adjustments                to reconcile net loss to net cash used in operating                activities:          |
| Depreciation                                                                                                       |   |                                                                                   | 141     |                                                                                                                                                     |   | 140 |   |   | 594 |   |
| Gain                on lease termination                                                                           |   |                                                                                   | — |                                                                                                                                                     |   | 40 |   |   | 40 |   |
| Termination                of financing cost                                                                       |   |                                                                                   | 351     |                                                                                                                                                     |   | — |   |   | 466 |   |
| Amortization                of beneficial conversion feature                                                       |   |                                                                                   | — |                                                                                                                                                     |   | — |   |   | 2,050 |   |
| Amortization                of deferred financing costs                                                            |   |                                                                                   | 765     |                                                                                                                                                     |   | 20 |   |   | 3,488 |   |
| Interest                paid in common stock                                                                       |   |                                                                                   | 105     |                                                                                                                                                     |   | 221 |   |   | 862 |   |
| Issue                of stock options in kind                                                                      |   |                                                                                   | — |                                                                                                                                                     |   | — |   |   | 200 |   |
| Stock                based compensation and other stock based payments                                             |   |                                                                                   | 111     |                                                                                                                                                     |   | 145 |   |   | 3,292 |   |
| Stock                issued for services rendered                                                                  |   |                                                                                   | 48      |                                                                                                                                                     |   | — |   |   | 48 |   |
| Warrants                issued for services rendered                                                               |   |                                                                                   | 401     |                                                                                                                                                     |   | 159 |   |   | 4,706 |   |
| Amortization                of discount related to warrants derivatives                                            |   |                                                                                   | 397     |                                                                                                                                                     |   | 398 |   |   | 1,810 |   |
| Amortization                of discount related to conversion feature                                              |   |                                                                                   | 2,300   |                                                                                                                                                     |   | 59 |   |   | 4,481 |   |
| Amortization                of discount related to interest on conversion feature                                  |   |                                                                                   | 1,827   |                                                                                                                                                     |   | 47 |   |   | 3,558 |   |
| Amortization                of discount debts in connection with demand notes                                      |   |                                                                                   | — |                                                                                                                                                     |   | 841 |   |   | 916 |   |
| Adjustments                to fair value of derivatives                                                            |   |                                                                                   | 10,084  |                                                                                                                                                     |   | 844 |   |   | 679 |   |
| Adjustments                to fair value of derivatives - options and warrant                derivatives |   |                                                                                   | (1,400  | )                                                                                                                                                        |   | (1,085 | ) |   | (12,273 | ) |
| Equity                in loss of unconsolidated investee                                                           |   |                                                                                   | — |                                                                                                                                                     |   | — |   |   | 15 |   |
| (Increase)                decrease in:                                                                             |   |                                                                                   |    |                                                                                                                                                     |   |   |   |   |   |   |
| Due                from affiliate                                                                                  |   |                                                                                   | 24      |                                                                                                                                                     |   | 13 |   |   | (126 | ) |
| Prepaid                and other current assets                                                                    |   |                                                                                   | 512     |                                                                                                                                                     |   | 500 |   |   | (43 | ) |
| Other                assets (8)                                                                                    |   |                                                                                   | — |                                                                                                                                                     |   | 57 |   |   | (39 | ) |
| Increase                (decrease) in:                                                                             |   |                                                                                   |         |                                                                                                                                                     |   |   |   |   |   |   |
| Due                to affiliate                                                                                    |   |                                                                                   | (111    | )                                                                                                                                                        |   | (24 | ) |   | — |   |
| Accounts                payable (8)                                                                                |   |                                                                                   | 1,734   |                                                                                                                                                     |   | 810 |   |   | 4,435 |   |
| Accrued                payroll and payroll taxes                                                                   |   |                                                                                   | (6      | )                                                                                                                                                        |   | 364 |   |   | 883 |   |
| Accrued                interest                                                                                    |   |                                                                                   | (200    | )                                                                                                                                                        |   | 32 |   |   | 161 |   |
| Deferred                rent (8)                                                                                   |   |                                                                                   | 7       |                                                                                                                                                     |   | (146 | ) |   | 69 |   |
| Net                cash used in operating activities (a)                                                           |   | $                                                                                      | (9,158  | )                                                                                                                                                        | $      | (3,510 | ) | $ | (57,407 | ) |

*The      accompanying notes are an integral part of these consolidated financial      statements*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

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

**(A      Development Stage Company)**

**CONSOLIDATED STATEMENTS      OF CASH FLOWS - continued**

**For      the Six Month Period Ended June 30, 2007 and 2008, and      For**

**The      Period from March 11, 1998 (Inception) to June 30,      2008 — (Unaudited)**

|                                                                                                       |   | **Six                Month Period Ended****June                30,**               |        | **For                the****Period                from****March                11,****1998****(Inception)                to****June                30,**  |   |
|------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                       |   | **2007**                                                                           |        | **2008**                                                                                                                                                  |   | **2008**  |   |
| **Cash                flows from investing activities:**                                                   |   |    *(Dollars                in thousands)*      |        |
| Purchase                of restricted cash                                                                 |   | $                                                                                       | (3          | )                                                                                                                                                              | $      | — |   | $ | (60 | ) |
| Purchase                of property and equipment                                                          |   |                                                                                    | (56         | )                                                                                                                                                              |   | (2 | ) |   | (1,118 | ) |
| Net                cash used in investing activities (b)                                                   |   |                                                                                    | (59         | )                                                                                                                                                              |   | (2 | ) |   | (1,178 | ) |
| **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 |   |
| Payment                of financing cost - private placements - Pre                IPO |   |                                                                                    | (31         | )                                                                                                                                                              |   | — |   |   | (4,199 | ) |
| Proceeds                from sale of common stock - IPO                                          |   |                                                                                    | —     |                                                                                                                                                           |   | — |   |   | 15,548 |   |
| Proceeds                from notes payable issued under Reg D - Post IPO                         |   |                                                                                    | —     |                                                                                                                                                           |   | — |   |   | 20,000 |   |
| Net                proceeds from sale of common shares under Reg S                                         |   |                                                                                    | 1,500       |                                                                                                                                                           |   | 753 |   |   | 4,403 |   |
| Financing                cost for Reg S paid in cash                                                       |   |                                                                                    | —     |                                                                                                                                                           |   | — |   |   | (176 | ) |
| Proceeds                from the issuance of warrants                                                      |   |                                                                                    | —     |                                                                                                                                                           |   | — |   |   | 6 |   |
| Proceeds                from exercise of options and warrants                                              |   |                                                                                    | 108         |                                                                                                                                                           |   | 39 |   |   | 483 |   |
| Proceeds                from issuance of demand notes                                                      |   |                                                                                    | —     |                                                                                                                                                           |   | 270 |   |   | 2,155 |   |
| Payment                of demand notes                                                                     |   |                                                                                    | —     |                                                                                                                                                           |   | (170 | ) |   | (395 | ) |
| Proceeds                from issuance of long term notes payable                                           |   |                                                                                    | —     |                                                                                                                                                           |   | 1,051 |   |   | 1,051 |   |
| Cash                paid for deferred offering costs                                                       |   |                                                                                    | —     |                                                                                                                                                           |   | — |   |   | (866 | ) |
| Non-controlling              interest in variable interest entities                                        |   |                                                                                    | —     |                                                                                                                                                           |   | 1,650 |   |   | 1,650 |   |
| Net                cash provided by financing activities (c)                                               |   |                                                                                    | 1,577       |                                                                                                                                                           |   | 3,593 |   |   | 58,976 |   |
| Increase                (decrease) in cash and cash equivalents                                            |   |                                                                                    | (7,640      | )                                                                                                                                                              |   | 81 |   |   | 391 |   |
| **Cash                and cash equivalents at beginning of period**                                        |   |                                                                                    | 8,503       |                                                                                                                                                           |   | 310 |   |   | — |   |
| **Cash                and cash equivalents at end of period**                                              |   | **$**                                                                                   | **863**     |                                                                                                                                                           | **$**  | **391** |   | $ | 391 |   |
| **Supplemental                disclosure of cash flow information**                                        |   |                                                                                    |        |                                                                                                                                                           |   |   |   |   |   |   |
| Interest                paid                                                                               |   | **$**                                                                                   | **992**     |                                                                                                                                                           | **$**  | **20** |   | $ | 3,873 |   |
| California                Franchise Tax paid                                                               |   | **$**                                                                                   | **—** |                                                                                                                                                           | $      | **1** |   | $ | **7** |   |
|                                                                                                       |   |                                                                                    |        |                                                                                                                                                           |   |   |   |   |   |   |

| (a)    |   | Including                amount with related parties of $1,542,934, $1,344,611 and $17,560,880,                respectively |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                        |
| (b)    |   | Including                amount with related parties of $0, $0 and $0,                respectively                          |
|   |   |                                                                                                                        |
| (c)    |   | Including                amount with related parties of $117,396, $112,134, and $3,874,018,                respectively     |

*The      accompanying notes are an integral part of these consolidated financial      statements*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

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

**(A      Development Stage Company)**

**CONSOLIDATED STATEMENTS      OF CASH FLOWS - continued**

**For      the Six Month Period Ended June 30, 2007 and 2008, and For**

**The      Period from March 11, 1998 (Inception) to June 30,      2008 — (Unaudited)**

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

|   | (1) | In                February 2007, 48,000 shares were issued to the independent directors                for                their services. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | In                2007, the Company paid the interest on the convertible note in cash.                The                cash payment was valued using the Black-Scholes Model, resulting                in a                reclassification of $585,509 from liability to                paid-in-capital. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In                March 2006, 100,000 warrants, with an exercise price of $0.80, were                exercised on a cashless basis in exchange for 89,116 shares of common                stock. The remaining balance of $3.00 was paid in cash upon exercise                of                the warrants on a cashless basis. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | In                May 2006, 20 commemorative shares that had a total fair value of                $122 were                issued to the founders and the                executives. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | In                December 2002, the Company disposed of fully depreciated assets with                value                of $6,026. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | As                of March 2008, 4,475,000 shares of common stock were sold at $1.00                per                share. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | In                December 2007, 200,000 shares of common stock at $1.00 per share                were                issued to a vendor as per the consulting agreement for his consulting                fees. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | On                March 11, 2008, the company terminated the lease in San Diego resulting                in                non cash “Gain on Lease Termination” of $112,046, in our Statement of                Operations; which consists of a charge off for “Abandonment of Leasehold                Improvements” of $39,919 in the “Statement of Cash Flows.” The other                non-cash components of the “Gain on Lease Termination” include $141,137 of                deferred rent, and forgiveness of $68,633 in accounts payable in                exchange                for the deposit amount of $57,805. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | In                2008, the amount of converted notes was valued using the Black-Scholes                Model resulting in $808,693 of the embedded derivatives being reclassified                from liability to paid in capital. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (10) | During                the period ended December 31, 2005, 2,000,000 shares of committed                common                stock relating to the conversion of preferred shares in fiscal 2004                were                issued. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (11) | As                of June 30, 2008, the company received gross proceeds of $825,000                in                exchange for 825,000 shares of common stock towards the completion                of the                private placement. The stock issuance cost of $82,500 related to                the                private placement has been accrued and not paid as of June 30,                2008. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*The      accompanying notes are an integral part of these consolidated financial      statements*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

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

**(A      Development Stage Company)**

**CONSOLIDATED STATEMENTS      OF CASH FLOWS - continued**

**For      the Six Month Period Ended June 30, 2007 and 2008, and      For**

**The      Period from March 11, 1998 (Inception) to June 30,      2008 — (Unaudited)**

|                **Supplemental                Disclosure of Non-Cash Financing Activities**                                                          |   |   | **Six                Month Period Ended**  |   |   | **For                the Period from March 11, 1998 to**  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------|--------|--------|----------------------------------------------------------------|--------|
|                                                                                                                                                     |   |   | **June                30,****2007**        |   |   | **June                30,****2008**                       |   |   | **June                30,****2008**  |   |
|                                                                                                                                                     |   |   |                                            |   |   | *(In                thousands)*                           |   |   |   |   |
| 1)  Number                of shares of post-split adjusted common stock to founders                                                            |   |   | —                                         |   |   | —                                                        |   |   | 99,750 |   |
| 2)  Number                of shares of post-split adjusted common stock for services                                                           |   |   | —                                         |   |   | —                                                        |   |   | 583 |   |
| 3)  Beneficial                conversion feature in connection with issuance of convertible notes                payable Series I, II, and IIa |   |   | —                                         |   |   | —                                                        |   | $ | 2,050 |   |
| 4)  Number                of convertible preferred stock converted to common stock                                                             |   |   | —                                         |   |   | —                                                        |   |   | 53 |   |
| 5)  Convertible                preferred stock converted to common stock -  See line 4                above                          |   |   | —                                         |   |   | —                                                        |   |   | 5,285 |   |
| 6)  Convertible                notes payable converted to common stock                                                                         |   |   | —                                         |   |   | —                                                        |   | $ | 14,862 |   |
| 7)  Convertible                notes payable converted to common stock -  See line 6                above                            |   |   | —                                         |   |   | —                                                        |   | $ | 5,878 |   |
| 8)  Amount                of senior secured convertible notes payable converted                to uncommitted common stock                     |   | $      | 6,744                                           |   | $      | 1,400                                                          |   | $ | 17,552 |   |
| 9)  Senior                secured convertible notes payable converted to uncommitted                common stock - See line 8        |   | $      | 7,111                                           |   | $      | 1,601                                                          |   | $ | 22,037 |   |
| 10)  Amount                of senior secured convertible notes payable converted                to committed common stock                      |   |   | —                                         |   |   | —                                                        |   |   | — |   |
| 11)  Senior                secured convertible notes payable converted to committed                common stock- See line 10         |   |   | —                                         |   |   | —                                                        |   |   | — |   |
| 12)  Interest                on Senior Secured notes paid in common stock                                                                      |   |   | —                                         |   | $      | 221                                                            |   |   | 862 |   |
| 13)  Fair                Market Value of warrants issued in connection with demand                notes.                                       |   |   | —                                         |   | $      | 1,255                                                          |   | $ | 1,255 |   |

*The      accompanying notes are an integral part of these consolidated financial      statements*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      1. Description of Business**

CardioVascular      BioTherapeutics, Inc. (formerly CardioVascular Genetic Engineering, Inc.)      (“Cardio”, the “Company”, “we”, “our” or “us”) is a development stage      biopharmaceutical company focused on developing and marketing protein drug      candidates that are designed to be used in the treatment of cardiovascular      disease. The Company was incorporated in Delaware on March 11, 1998      (“Inception”) as CardioVascular BioTherapeutics, Inc. Since inception, the      Company has been engaged in research and development activities associated      with      bringing its products to market.

**Note      2. Management’s Plan**

|                                       |   | **As                of**             |    |
|--------------------------------------------|--------|--------------------------------------|---------|
| **  **                           |   | **December                31, 2007** |    | **June                30, 2008** |   |
| **  **                           |   | *(In                thousands)*      |    |
| Cash                and cash equivalent    |   |                                 | 310     |   |   | 391 |   |
| Restricted                cash             |   |                                 | 60      |   |   | 60 |   |
| Current                liabilities         |   |                                 | 5,740   |   |   | 8,958 |   |
| Stockholders’                deficit |   |                                 | (13,085 | ) |   | (16,604 | ) |
| Net                Loss                    |   |                                 | (36,006 | ) |   | (6,945 | ) |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

The        Company is also taking actions to address both demand notes and long-term        liquidity in the following ways:

|   | **·** | On                June 10, 2008 the Company entered into a clinical development agreement                with Karen Wenk-Jordan as sponsor and general partner to form Derma                Life                Clinical Partners LP (“Derma Life”) to fund a minimum of $1 million and up                to $3 million of the clinical development for the Company’s wound healing                candidate. (See footnote #9 for more detail.)                                                                                                                                                                                                                            |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | **·** | On                April 22, 2008 the Company entered into a clinical development agreement                with Dr. H. Christopher Moore as the sponsor and general partner                of                ProDerm Limited Partnership (“PDLP”) which will fund a minimum of $1                million and up to $10 million of the clinical development for the                Company’s wound healing candidate. (See footnote #9 for more                detail.)                                                                                                                                                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | **·** | On                April 24, 2008 the Company entered into an agreement with Mr. Phillip                Frey                Jr. to form Cardio Derma Clinical Partners (CDCP), an R&D Partnership.                Mr. Frey, as sponsor and general partner, will fund a minimum of                $1,000,000 and up to $5,000,000 of the clinical development of the                Company’s wound healing drug candidate. The Company is exploring other                similar opportunities for partnerships and joint ventures for                co-development, clinical trials, marketing and distribution. (See                footnote                #9 for more detail.) |

|   | **·** | In                the period ended June 30, 2008 the Company sold $1,050,800 of long                term                notes that have an 18 month term (one note for $80,000 has a 5 year                term).                These notes were issued with 1,178,300 warrants which have a five                year                term and an exercise price of $1.00. These notes have an interest                rate of                10%. Commissions earned by GHL, a related party, for the sale of                these notes was $105,000. |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **·** | On                March 18, 2008, the Company began a Private Placement of debt and                warrants                in an effort to raise up to $15,000,000 in promissory notes that                mature                within 18 months from the date of issuance. The notes are unsecured                and                serve as consideration for the issuance of warrants issued in conjunction                with the notes. As of May 31, 2008, the Company has received gross                proceeds of $1,025,800. |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **·** | 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 December                31, 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 extended this agreement                to                January 31, 2008. The Company has received an additional $825,000                in the                period ended June 30, 2008. This agreement expired and the offering                is                terminated. |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **·** | In                late 2007 and the first quarter of 2008, the Company sold $2,370,000                in                demand notes of which $1,670,000 was outstanding at June 30, 2008.                Starting in the second quarter and for the period ended June 30,                2008 the                Company sold $1,050,800 of long term notes that have an 18-month                term.                These notes were issued with 1,178,300 detachable warrants, which                have a                five-year term and an exercise price of $1.00. These notes have an                interest rate of 10%. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **·** | 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. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      3. Transactions and Contractual Relationships with Affiliated      Entities**

**The      following are or were the business activities performed by each      affiliate:**

***Active      Affiliated Companies:***

|   | **·** | 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**           |   | **The                Company's****Directors                and****Officers                %** |   | **Cardio                %** |   |
|-------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
| Percentage                of ownership in Phage |   |                                                                                          | 31.7   | %                           |   | 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. |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Inactive      Affiliated Companies:***

|   | **·** | 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. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      3. Transactions and Contractual Relationships with Affiliated Entities - (continued)**

***Joint      Patent Agreement***

|                                                    |   |   | **Six                Month Period****Ended                June 30,**  |   |   | **For                the****Period                from****March                11, 1998****(Inception)                to****June                30,**  |   |
|---------------------------------------------------------|--------|--------|----------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                    |   |   | **2007**                                                              |   |   | **2008**                                                                                                                                               |   |   | **2008**  |   |
|                                                    |   |   |                                                                       |   |   | *(In                thousands)*                                                                                                                        |   |   |   |   |
| Technical                development services           |   | $      | 927                                                                        |   |   | 677                                                                                                                                                         |   |   | 6,184 |   |
| Administrative                support provided by Phage |   | $      | 26                                                                         |   |   | 7                                                                                                                                                           |   |   | 1,204 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      3. Transactions and Contractual Relationships with Affiliated Entities      - (continued)**

***Distribution      Agreement***

***Royalty      Agreement***

***Asia      Exclusive Patent License and Distribution Agreement***

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      3. Transactions and Contractual Relationships with Affiliated      Entities - (continued)**

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

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      3. Transactions and Contractual Relationships with Affiliated      Entities - (continued)**

***Guaranty      from Daniel C. Montano***

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      3. Transactions and Contractual Relationships with Affiliated      Entities - (continued)**

***Related      Party Transactions***

|                                                                                                                |   |  **  ****  ****Six                Month Period****Ended                June 30,** |    | **For                the****Period                from****March                11, 1998****(Inception)                to****June                30,** |   |
|---------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Fees                Paid to:**                                                                                    |   | **2007**                                                                                                   |    | **2008**                                                                                                                                              |   | **2008** |   |
| **  **                                                                                                    |   | *(In                thousands)*                                                                            |    | **  **                                                                                                                                      |   |
| Daniel                C. Montano (Chairman of the Board,President                and Chief Executive Office) (a)    |   | $                                                                                                          | — |                                                                                                                                                  | $      | — |   | $ | 200 |   |
| Daniel                C. Montano (Chairman of the Board,President                and Chief Executive Office) (b)    |   |                                                                                                       | 240     |                                                                                                                                                  |   | 238 |   |   | 2,537 |   |
| Vizier                Management Company (c)                                                                        |   |                                                                                                       | — |                                                                                                                                                  |   | — |   |   | 116 |   |
| GHL                Financial Services Ltd. (“GHL”) (d)                                                  |   |                                                                                                       | 70      |                                                                                                                                                  |   | 148 |   |   | 2,538 |   |
| Dr.                Thomas Stegmann M.D. (the Company’sCo-founder                and Chief Medical Officer (a) |   |                                                                                                       | 240     |                                                                                                                                                  |   | 245 |   |   | 2,235 |   |
| C.K.                Capital International and C&K CapitalCorporation                (f)                         |   |                                                                                                       | — |                                                                                                                                                  |   | — |   |   | 1,763 |   |
| Dr.                Wolfgang Priemer (the Company’s founder) (e)                                               |   |                                                                                                       | 40      |                                                                                                                                                  |   | 30 |   |   | 392 |   |
| Total                                                                                                               |   | $                                                                                                          | 590     |                                                                                                                                                  | $      | 661 |   | $ | 9,781 |   |

|   | a) | Consulting                fees prior to becoming an employee of the                Company. |
|--------|----|---------------------------------------------------------------------------------------------|

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

|   | c) | Vizier                Management Company is controlled by Daniel C. Montano. The Company                paid                Vizier for consulting prior to his becoming an employee of the                Company. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d) | A                director 4.12% of the Company and is a principal of an investment                firm                that has sold various Company securities to international                investors. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | e) | Fees                were paid for assisting the Company as chairman, of the European                Compliance Committee which monitored the Company’s activities in Europe                from the legal, regulatory and tax compliance perspectives. This                committee                was disbanded in May 2008. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      4. Summary of Significant Accounting Policies**

***Development      Stage Enterprise***

***Stock      Split***

***Use      of Estimates***

***Cash      and Cash Equivalents***

***Restricted      Cash***

***Property      and Equipment***

***Deferred      Rent***

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      4. Summary of Significant Accounting Policies - (continued)**

***Consolidation        of Variable Interest Entities***

***Income      Taxes***

***Fair      Value of Financial Instruments***

***Valuation      of Derivative Instruments***

***Research      and Development Costs***

***Research      and Development Costs Funded by Other Entities***

The        transactions are accounted for as a contract to perform research and development        for others.  The funded amount of the development contracts will be        allocated between the fair value of the warrants issued in conjunction with        the        development agreement and the remaining amount which will be accounted for        as a        deferred charge, deferred revenue. Deferred revenue will be recognized as        revenue as research and development costs are incurred.  Research and        development costs incurred for this project will be accounted for as cost        of        sales, as incurred.

***Non-Monetary      Transactions***

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      4. Summary of Significant Accounting Policies - (continued)**

***Deferred      Financing Costs***

|                                                        |   | **As                of**                |   |
|-------------------------------------------------------------|--------|-----------------------------------------|--------|
| **  **                                            |   | **December                31,****2007** |   | **June                30,****2008** |   |
| **  **                                            |   | *(In                thousands)*         |   |
| Deferred                financing costs                     |   | $                                       | 1,553  |   | $ | 1,553 |   |
| Amortization                of the deferred costs           |   |                                    | (1,503 | ) |   | (1,524 | ) |
| Deferred                financing cost, net of amortization |   | $                                       | 50     |   | $ | 29 |   |

  

***Concentrations      of Credit Risk***

|                          |   | **As                of**                |   |
|-------------------------------|--------|-----------------------------------------|--------|
| **  **              |   | **December                31,****2007** |   | **June                30,****2008** |   |
| **  **              |   | *(In                thousands)*         |   |
| Uninsured                Cash |   | $                                       | 207    |   | $ | 288 |   |

***Loss      per Share***

|                                     |   | **As                of**                |    |
|------------------------------------------|--------|-----------------------------------------|---------|
| **  **                         |   | **December                31,****2007** |    | **June                30,****2008** |   |
| **  **                         |   | *(Shares                in thousands)*  |    |
| Stock                options             |   |                                    | 858     |   |   | 767 |   |
| Warrants                                 |   |                                    | — |   |   | — |   |
| Convertible                notes payable |   |                                    | 1,327   |   |   | 1,114 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      4. Summary of Significant Accounting Policies - (continued)**

***Stock-Based      Compensation***

*“*

***Stock-Based      Compensation — Options and Warrants:***

|                                                            |   | **Six                Month Period****Ended                June 30,** |   |
|-----------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
| **  **                                                |   | **2007**                                                             |   | **2008** |   |
| **  **                                                |   | *(In                thousands)*                                      |   |
| Research                and development                         |   | $                                                                    | 68     |   | $ | 77 |   |
| General                and administration                       |   |                                                                 | 43     |   |   | 68 |   |
| Total                Stock-based compensation expense (options) |   |                                                                 | 111    |   |   | 145 |   |
| Stock-based                compensation (warrants)              |   |                                                                 | 401    |   |   | — |   |
| Stock-based                compensation expense                 |   | $                                                                    | 512    |   | $ | 145 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      4. Summary of Significant Accounting Policies - (continued)**

***Recently      Issued Accounting Pronouncements***

*Accounting        for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement        No. 60 *

*The        Hierarchy of Generally Accepted Accounting Principles *
*The        Meaning of Present Fairly in Conformity With Generally Accepted Accounting        Principles*

*Disclosures        about Derivative Instruments and Hedging Activities, an amendment of FASB        Statement No. 133 *
*Accounting        forDerivative Instruments and Hedging Activities*

*purchase      method*

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      4. Summary of Significant Accounting Policies - (continued)**

**Note      5. Cash, Cash Equivalent and Restricted Cash**

***Cash,      cash equivalents and restricted cash consisted of the following at December      31,      2007 and June 30, 2008 (Unaudited):***

|                           |   | **As                of**                |   |
|--------------------------------|--------|-----------------------------------------|--------|
| **  **               |   | **December                31,****2007** |   | **June                30,****2008** |   |
| **  **               |   | *(In                thousands)*         |   |
| Cash                in bank    |   | $                                       | 310    |   | $ | 391 |   |
| Restricted                cash |   |                                    | 60     |   |   | 60 |   |
| Total                          |   | $                                       | 370    |   | $ | 451 |   |

**Note      6. Prepaid and Other Current Assets**

***Prepaid      assets consisted of the following at December 31, 2007 and June 30, 2008      (Unaudited):***

|                                               |   | **As                of**                |   |
|----------------------------------------------------|--------|-----------------------------------------|--------|
| **  **                                   |   | **December                31,****2007** |   | **June                30,****2008** |   |
| **  **                                   |   | *(In                thousands)*         |   |
| Prepaid                clinical trial costs        |   | $                                       | 184    |   | $ | — |   |
| Prepaid                insurance                   |   |                                    | 75     |   |   | 14 |   |
| Prepaid                professional and legal fees |   |                                    | 10     |   |   | 10 |   |
| Prepaid                and current assets (other)  |   |                                    | 274    |   |   | 19 |   |
| Total                                              |   | $                                       | 543    |   | $ | 43 |   |

**Note      7. Property and Equipment**

***Property      and equipment consisted of the following at December 31, 2007 and June 30,      2008      (Unaudited):***

|                                                                  |   | **As                of**                |   |
|-----------------------------------------------------------------------|--------|-----------------------------------------|--------|
| **  **                                                      |   | **December                31,****2007** |   | **June                30,****2008** |   |
| **  **                                                      |   | *(In                thousands)*         |   |
| Furniture,                fixtures, computer software, and equipment  |   | $                                       | 737    |   | $ | 738 |   |
| Scientific                equipment                                   |   |                                    | 85     |   |   | 86 |   |
| Leasehold                improvements                                 |   |                                    | 288    |   |   | 238 |   |
| Less                accumulated depreciation                          |   |                                    | (448   | ) |   | (578 | ) |
| Property                and equipment net of accumulated depreciation |   | $                                       | 662    |   | $ | 484 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      7. Property and Equipment  - (continued)**

**Note      8. Due to and from Affiliates**

***Due      to/from Affiliates at December 31, 2007 and June 30, 2008 consisted of the      following:***

|                          |   | **As                of**                |   |
|-------------------------------|--------|-----------------------------------------|--------|
| **  **              |   | **December                31,****2007** |   | **June                30,****2008** |   |
| **  **              |   | *(In                thousands)*         |   |
| Due                to Phage   |   | $                                       | (24    | ) | $ | — |   |
| Due                from Phage |   |                                    | 139    |   |   | 126 |   |
| Total                         |   | $                                       | 115    |   | $ | 126 |   |

**Note      9.**
** **
**Research      and Development Costs Funded by Other Entities/Variable Interest      Entities**

| Deferred                    Expense for Development Agreements |   | $ | 1,650,000 |   |
|----------------------------------------------------------------|--------|---|-----------|--------|
| Net                    Assets                                  |   | $ | 1,650,000 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      9.**
** **
**Research      and Development Costs Funded by Other Entities - continued**

**Note      10. Notes Payable**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      10. Notes Payable - continued**

|                **Demand                Notes**        |   |  **Demand                Notes****Issued**  |      |  **Warrants****Issued**  |   |  **Fees                Paid**  |   |  **Interest****%**  |    |  **Repayment                of****the                Demand****Notes**  |   |  **Demand                Notes****Outstanding****as                of****December                31,****2007**  |   |  **Demand                Notes****Outstanding****as                of****June                30,****2008**  |    |
|------------------------------------------------------------|--------|-------------------------------------------------------|-----------|------------------------------------|--------|------------------------------------------|--------|-------------------------------|---------|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------|---------|
| Note                issued without warrants in 2007        |   |                                                  | 175,000   |                               |   | —                                  |   |                          | 42,000  |                                                                              |   | 10                - 81                                                                                                    | %      |                                                                                                                  | 75,000  |   | $ | 100,000 |   | $ | 100,000 |   |
| Note                issued without warrants in 2008        |   |                                                  | 70,000    |                               |   | —                                  |   |                          | — |                                                                              |   | 29                                                                                                                        | %      |                                                                                                                  | 70,000  |   |   | — |   |   | — |   |
| Notes                issued with warrants in 2007          |   |                                                  | 1,400,000 |                               |   | 1,400,000                                |   |                          | — |                                                                              |   | 10                - 16                                                                                                    | %      |                                                                                                                  | — |   |   | 1,400,000 |   |   | 1,400,000 |   |
| Notes                issued with detached warrants in 2008 |   |                                                  | 800,000   |                               |   | 500,000                                  |   |                          | — |                                                                              |   | 10                - 16                                                                                                    | %      |                                                                                                                  | 700,000 |   |   | — |   |   | 100,000 |   |
| Total                                                      |   |                                                  | 2,445,000 |                               |   | 1,900,000                                |   |                          | 42,000  |                                                                              |   |                                                                                                                           |   |                                                                                                                  | 845,000 |   | $ | 1,500,000 |   | $ | 1,600,000 |   |
| Accrued                interest                            |   |                                                  |           |                               |   |                                          |   |                          |         |                                                                              |   |                                                                                                                           |   |                                                                                                                  |         |   | $ | 57,315 |   | $ | 81,173 |   |

|                **Officer                Notes** |   | **Demand                Notes****Issued**   |    | **Warrants****Issued**   |   | **Fees                Paid**   |   | **Interest****%**   |    | **Repayment                of****the                Demand****Notes**   |   | **Demand                Notes****Outstanding****as                of****December                31,****2007**   |   | **Demand                Notes****Outstanding****as                of****June                30,****2008**   |    |
|------------------------------------------------------|--------|-------------------------------------------------------|---------|------------------------------------|--------|------------------------------------------|--------|-------------------------------|---------|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------|---------|
| Notes                due to Officers                 |   | $                                                     | 310,000 |                               |   | —                                  |   |                          | — |                                                                              |   | 6                                                                                                                         | %      | $                                                                                                                     | 150,000 |   | $ | 160,000 |   | $ | 160,000 |   |
| Accrued                Interest                      |   |                                                  |    |                               |   |                                     |   |                          |    |                                                                              |   |                                                                                                                      |   |                                                                                                                  |    |   |   | 2,980 |   |   | 7,766 |   |

|                **Long                Term Notes** |   | **Notes****Issued**   |      | **Warrants****Issued**   |   | **Fees                  Paid** |   | **Interest****%**   |    | **Repayment                of****the                Notes**   |   | **Long                Term Notes****Outstanding****as                of****December                31,****2007**   |   | **Long                Term Notes****Outstanding****as                of****June                30,****2008**   |    |
|--------------------------------------------------------|--------|---------------------------------|-----------|------------------------------------|--------|--------------------------------|--------|-------------------------------|---------|-------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------|---------|
| Long                Term Notes                         |   | $                               | 1,050,800 |                               |   | 1,178,300                      |   |                          | 105,000 |                                                                    |   | 20                                                                                                                           | %      |                                                                                                                     | — |   | $ | — |   | $ | 1,050,800 |   |
| Accrued                Interest                        |   |                            |      |                               |   |                           |   |                          |    |                                                                    |   |                                                                                                                         |   |                                                                                                                     |    |   |   | — |   | $ | 13,056 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      10. Notes Payable - continued**

*Debt      Discount on Notes Payable*

*Derivative      information for the Demand Notes:*

|                **Year** |   | **Warrants****Issued                for****Purchase                of****Common                Stock**   |   | **Estimated                Fair****Market****Value                at June 30** |   | **Exercise                Price****per                Share****($)**  |   | **Expected****Life****(Years)** |   |                 **Risk                Free****Interest****%** |   | **Approximate****Volatility****%**   |   | **Initial****Term****Days**   |                       |
|------------------------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|---------------------------------|--------|-------------------------------------------------------------------------|--------|------------------------------------------------|--------|-----------------------------------------|----------------------------|
|                         |   |  *(In                thousands)*                                                                         |   |
| 2007                         |   | $                                                                                                                  | 1,400  |                                                                           | $      | 507                                                                        |   |                            | 1      |                                                                    |   | 5                                              |   |                                    | 3.28                - 3.99 | % |   | 63.34                - 64.12 | % |   | 42                - 91 |   |
| 2008                         |   |                                                                                                               | 500    |                                                                           |   | 420                                                                        |   |                            | 1      |                                                                    |   | 5                                              |   |                                    | 2.80                - 3.18 | % |   | 96.16 | % |   | 42                - 91 |   |
| Total                        |   | $                                                                                                                  | 1,900  |                                                                           | $      | 927                                                                        |   |                            |        |                                                                    |   |                                                |   |                                    |                            |   |   |  |   |   |  |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      10. Notes Payable - continued**

|                                                         |   | **December                31,****2007** |   | **June                30,****2008** |   | **For                the****Period                from****March                11, 1998****(Inception)                to****June                30,****2008** |   |
|--------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **  **                                             |   | *(In                thousands)*         |   |
| Amortization                of debt discount on demand notes |   | $                                       | 75     |                                | $      | 841                                                                                                                                                           |   | $ | 916 |   |

|                **Change                Period**                 |   | **Fair                Valued****at                Issuance to****December                31, 2007**  |   | **Fair                Valued****from                Issuance to****June                30, 2008**  |   | **Net                Change in****Fair                Value for the Six Month Period****June                30, 2008**  |   |
|----------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                 |   |  *(In                thousands)*                                                                |   |
| Total                fair value of derivatives at respective periods |   | $                                                                                                         | 658    |                                                                                                    | $      | 1,330                                                                                                                        |   | $ | (672 | ) |

**The      following table summarizes the assumptions used to measure the fair value of      derivatives:**

|                **Derivatives**    |   | **Dividend****Yield****%**   |    | **Expected****Volatility****%**   |   | **Risk-Free****Interest****%**   |   | **Expected                Life****(Years)**   |                       | **CVBT                Stock****Price**   |   |
|----------------------------------------|--------|----------------------------------------|---------|---------------------------------------------|--------|--------------------------------------------|--------|---------------------------------------------------------|----------------------------|----------------------------------------------------|--------|
| Warrant                derivative:     |   |                                   |         |                                        |   |                                            |   |                                                    |                            |                                               |   |  |   |   |  |   |
| At                Issuance             |   |                                   | — |                                        |   | 63.34                - 64.12               |   |                                                    | 3.28                - 3.99 |                                               |   | 4.85                - 5.00 |   | $ | 0.53                - 0.88 |   |
| As                of December 31, 2007 |   |                                   | — |                                        |   | 64.12                                      |   |                                                    | 3.45                       |                                               |   | 4.95 |   | $ | 0.88 |   |
| As                of March 31, 2008    |   |                                   | — |                                        |   | 96.16                                      |   |                                                    | 2.46                - 3.18 |                                               |   | 4.60                - 4.75 |   | $ | 0.92 |   |
| As                of June 30, 2008     |   |                                   | — |                                        |   | 95.94                                      |   |                                                    | 2.57                - 3.73 |                                               |   | 4.50                - 5.00 |   | $ | 0.63 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      10. Notes Payable - continued**

| **Year** |   |   | **Warrants****Issued                    for****Purchase                    of****Common                    Stock** |   |    | **Estimated                    Fair  Value   at issuance** |   |   | **Exercise                    Price****per                    Share****($)** |   |   | **Expected****Life****(Years)** |   |   | **Risk                    Free****Interest****%** |   |   | **Approximate****Volatility****%** |   |   | **Initial****Term****Months** |   |   | **Amortization                    for the****Six                    Months Ended June 30, 2007** |   |
|----------|--------|--------|--------------------------------------------------------------------------------------------------------------------|--------|---------|---------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------|--------|--------|---------------------------------|--------|--------|---------------------------------------------------|--------|--------|------------------------------------|--------|--------|-------------------------------|--------|--------|--------------------------------------------------------------------------------------------------|--------|
| 2008     |   |   | 1,178,000                                                                                                          |   | $  | 755,870                                                                   |   |   | 1                                                                            |   |   | 5                               |   |   | 2.65                    - 3.57                    | %      |   | 95.65                    - 96.51   | %      |   | 18                            |   | $      | 83,451                                                                                           |   |
| Total    |   |   | 1,178,000                                                                                                          |   |    |                                                                           |   |   |                                                                              |   |   |                                 |   |   |                                                   |   |   |                                    |   |   |                               |   | $      | 83,451                                                                                           |   |

|                                                                     |   |                                | **December                    31,****2007** |   |   | **June                    30,****2008** |   |   | **For                    the****Period                    from****March                    11, 1998****(Inception)                    to****June                    30,****2008** |   |
|--------------------------------------------------------------------------|--------|-------------------------------------|---------------------------------------------|--------|--------|-----------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                     |   | *(In                    thousands)* |                                        |
| Amortization                    of Debt discount on long term notes |   | $                                   | —                                     |   | $      | 83                                      |   | $      | 83                                                                                                                                                                                |   |
| Total                                                                    |   | $                                   | —                                     |   | $      | 83                                      |   | $      | 83                                                                                                                                                                                |   |

| **Change                    Period**                                     |   | **Fair                          Valued at****Issuance                        to****December                      31,****2007** |    |   | **Fair                      Valued**** from                      Issuance****to                    March 31,****2008** |    |   | **Fair                            Valued****from                            Issuance****to                            June 30,****2008** | ** ** | ** ** | **Net                            Change in****Fair                            Value****from                            issuance to****June                            30, 2008** |   |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                     |   | *(In                    thousands)*                                                                                            |    |   |                                                                                                                             |    |   |                                                                                                                                          |       |       |                                                                                                                                                                                  |   |
| Total                    fair value of derivatives at respective periods |   | $                                                                                                                              | — |   | $                                                                                                                           | — |   | $                                                                                                                                        | 491        |       | $                                                                                                                                                                                | (686   | ) |

----

**CARDIOVASCULAR          BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

**June          30, 2008**

**The          following table summarizes the assumptions used to measure the fair value          of          derivatives:**

| **Derivatives**                              |   |   | **Dividend****Yield****%** |   |   | **Expected****Volatility****%**  |   |   | **Risk-Free****Interest****%** |   |   | **Expected                    Life****(Years)** |   |   | **CVBT                    Stock****Price** |   |
|----------------------------------------------|--------|--------|----------------------------|--------|--------|----------------------------------|--------|--------|--------------------------------|--------|--------|-------------------------------------------------|--------|--------|--------------------------------------------|--------|
| Warrant                    derivative:       |   |   |                            |   |   |                                  |   |   |                                |   |   |                                                 |   |   |                                            |   |
| At                    Issuance               |   |   | —                    |   |   | 95.65                    - 96.51 |   |   | 2.65                    - 3.57 |   |   | 5.00                                            |   | $      | 0.60                    - 1.01             |   |
| As                    of June  30, 2008 |   |   | —                    |   |   | 95.94                            |   |   | 3.34                           |   |   | 4.87                                            |   | $      | 0.63                                       |   |

** **

**Note      11. Convertible Notes Payable**

***Convertible      Senior Secured Notes***

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**
**  **

**The      following table summarizes convertible notes discounts and derivative values      outstanding at June 30, 2008:**

|                                                                                                                              |   | ***(In                thousands)*** |    |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|
| Convertible                notes at face value at March 20, 2006                                                                  |   | $                                   | 20,000  |   |
| Notes                converted into common stock                                                                                  |   |                                | (17,520 | ) |
| Convertible                notes at face value at June 30, 2008                                                                   |   |                                | 2,480   |   |
| Discount                on notes:                                                                                                 |   |                                |         |   |
| Embedded                derivatives                                                                                               |   |                                | (8,196  | ) |
| Warrant                derivatives                                                                                                |   |                                | (2,383  | ) |
| Net                convertible notes on June 30, 2008                                                                             |   |                                | (8,099  | ) |
| Amortization                of discount from derivatives                                                                          |   |                                | 9,848   |   |
| Convertible                notes at June 30, 2008                                                                                 |   |                                | 1,749   |   |
| Embedded                derivatives at fair value at June 30, 2008                                                                |   |                                | 556     |   |
| Warrant                derivatives at fair value at June 30, 2008                                                                 |   |                                | 1,031   |   |
| Net                convertible notes, embedded derivatives and warrant derivatives at                June                30, 2008 |   | $                                   | 3,336   |   |

| **Period**                                                           |   | **Fair                Valued****at                June 30,****2007** |   | **Fair                Valued****from****June                30,****2007                to****December                31,****2007** |   | **Fair                Valued****from****Dec.                31,****2007                to****June                30,****2008** |   |
|----------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|--------|
| **  **                                                     |   | *(In                thousands)*                                      |   |
| Warrants                                                             |   | $                                                                    | 2,058  |                                                                                                                               | $      | 881                                                                                                                            |   | $ | 1,031 |   |
| Convertibility                Feature                                |   |                                                                 | 3,998  |                                                                                                                               |   | 631                                                                                                                            |   |   | 531 |   |
| Interest                Convertibility Feature                       |   |                                                                 | 414    |                                                                                                                               |   | 47                                                                                                                             |   |   | 25 |   |
| Total                fair value of derivatives at respective periods |   | $                                                                    | 6,470  |                                                                                                                               | $      | 1,559                                                                                                                          |   | $ | 1,587 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**

| **Net                Decrease (Increase) Recorded as Adjustment to Fair                Value**            |   | **For                the Year****Ended****December                31,****2007** |   | **For                the Period****Ended****June                30,****2008** |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
| **  **                                                                                          |   | *(In                thousands)*                                                 |   |
| Change                between reporting periods                                                           |   | $                                                                               | (968   | )                                                                             | $      | (27 | ) |
| Reclass                of derivatives from liability to equity due to actual interest                paid |   |                                                                            | (586   | )                                                                             |   | — |   |
| Reclass                of derivatives from liability to equity due to conversion                          |   |                                                                            | (6,455 | )                                                                             |   | (817 | ) |
| Total                                                                                                     |   | $                                                                               | (8,009 | )                                                                             | $      | (844 | ) |

***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** |   |
|------------|--------|--------|-------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------|--------|

| Total - 2006                      |   | $      | 1,897,514  |   |   | 987,219    |   | $      | 2.28   |   | $      | 33,028  |   |
|---------------------------------------------|--------|--------|------------|--------|--------|------------|--------|--------|--------|--------|--------|---------|--------|
| Total - 2007                      |   |   | 14,222,486 |   |   | 19,150,903 |   |   | 0.80   |   |   | 607,811 |   |
| 1st                quarter - 2008 |   |   | 800,000    |   |   | 800,000    |   |   | 1.00   |   |   | 124,890 |   |
| 2nd                quarter - 2008 |   |   | 600,000    |   |   | 801,354    |   |   | 0.75   |   |   | 96,170  |   |
| Total                                       |   | $      | 17,520,000 |   |   | 21,739,476 |   |   |   |   | $      | 861,899 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**

**The      following table defines the derivatives related to the convertible      notes:**

| **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                has been and is 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 has                been                and is revalued at the end of each                quarter. |

**The      following table summarizes the assumptions used to measure the fair value of      our      derivatives related to the convertible note:**

| **Derivative                Assumptions** |   | **Dividend****Yield****%** |    | **Expected****Volatility****%** |   | **Risk-Free****Interest****%** |   | **Expected****Life****(years)** |   | **CVBT                Stock****Price** |   |
|-------------------------------------------|--------|----------------------------|---------|---------------------------------|--------|--------------------------------|--------|---------------------------------|--------|----------------------------------------|--------|
|                                      |   |             |    |                  |   |                 |   |                  |   |                         |   |
| As                of December 31, 2007    |   |                       | — |                            |   | 45.35                          |   |                            | 3.34   |                                   |   | 1.25 |   | $ | 1.00 |   |
| As                of June 30, 2008        |   |                       | — |                            |   | 121.12                         |   |                            | 2.36   |                                   |   | 0.75 |   | $ | 0.63 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**

**The      following table summarizes the “Adjustments to Fair Value of Derivatives” for      all derivatives:**

| **Adjustments                to Fair Value of Derivatives**         |   |   |                     | **Balance                as of****December                31,****2007** |   | **YTD                Adjustment****to                Fair Value****of                Derivative** |   | **Net****Additions/****Deletions                for****New                Issuance****Exercise** |   | **Adjustment****to                Paid in****Capital                for****Conversion** |   | **Balance                as of****June                30,****2008** |   |
|---------------------------------------------------------------------|--------|--------|--------------------------|-------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
| **  **                                                    |   |   |                     | *(In                thousands)*                                         |   |
| Embedded                derivatives                                 |   |   | (A)                      |                                                                    | $      | 677                                                                                               |   | $                                                                                                | 695    |                                                                                    | $      | —                                                             |   | $ | (816 | ) | $ | 556 |   |
| Warrant                derivative - convertible note      |   |   | (B)                      |                                                                    |   | 882                                                                                               |   |                                                                                             | 149    |                                                                                    |   | —                                                             |   |   | — |   |   | 1,031 |   |
| Change                in fair value                                 |   |   | (C)                = A+B |                                                                    |   | 1,559                                                                                             |   |                                                                                             | 844    |                                                                                    |   | —                                                             |   |   | (816 | ) |   | 1,587 |   |
| Option                derivative - non-employees*         |   |   |                     |                                                                    |   | 867                                                                                               |   |                                                                                             | (188   | )                                                                                       |   | —                                                             |   |   | (66 | ) |   | 629 |   |
| Warrant                derivative - non-employees*        |   |   |                     |                                                                    |   | 4,118                                                                                             |   |                                                                                             | (897   | )                                                                                       |   | 1,238                                                               |   |   | — |   |   | 4,459 |   |
| Change                in fair value *                               |   |   | (D)                      |                                                                    |   | 4,985                                                                                             |   |                                                                                             | (1,085 | )                                                                                       |   | 1,238                                                               |   |   | (66 | ) |   | 5,088 |   |
| Total                warrant and options derivative non-employees * |   |   | E                = (C+D) |                                                                    |   | 6,544                                                                                             |   |                                                                                             | (241   | )                                                                                       |   | 1,238                                                               |   |   | (883 | ) |   | 6,675 |   |

|   | * | See                footnote 12 for details |
|--------|---|--------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**

| **Years** |   | **Interest                Paid****in                Cash** |    | **Interest                Paid****with                Stock** |   | **Total                Interest** |   | **Shares                Issued****in                Lieu of****Cash                Payment** |   |
|-----------|--------|------------------------------------------------------------|---------|---------------------------------------------------------------|--------|-----------------------------------|--------|----------------------------------------------------------------------------------------------|--------|
| 2006      |   | $                                                          | 1,863   |                                                          | $      | —                           |   | $                                                                                            | 1,863  |   |   | — |   |
| 2007      |   |                                                       | 628     |                                                          |   | 404                               |   |                                                                                         | 1,032  |   |   | 693 |   |
| 2008      |   |                                                       | — |                                                          |   | 242                               |   |                                                                                         | 242    |   |   | 252 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**

***Daniel      C. Montano Guaranty***

***Pre      IPO Debt***

***Convertible      Promissory Notes Series I, II, IIa***

|                                                                   |   | **December                31,****2007** |    | **June                30,****2008** |   | **For                the****Period                from****March                11, 1998****(Inception)                to****June                30,****2008****(Inception)** |   |
|------------------------------------------------------------------------|--------|-----------------------------------------|---------|-------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **  **                                                       |   | (In                thousands)           |    |
| Interest                expense from the beneficial conversion feature |   | $                                       | — |                                | $      | —                                                                                                                                                                      |   | $ | 2,050 |   |
| Total                financing cost                                    |   |                                    | — |                                |   | —                                                                                                                                                                      |   |   | 2,136 |   |
| Interest                expense - Series I, II and IIa       |   |                                    | — |                                |   | —                                                                                                                                                                      |   |   | 1,303 |   |
| Total                                                                  |   | $                                       | — |                                | $      | —                                                                                                                                                                      |   | $ | 5,489 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**

***Series      I Convertible Promissory Notes***

***Series      II Convertible Promissory Notes***

***Series      IIa Convertible Promissory Notes***

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      11. Convertible Notes Payable - continued**

***Interest      Expense:***

|                                                         |   | **June                30, 2007** |    | **June                30, 2008** |   | **For                the****Period                from****March                11, 1998****(Inception)                to****June                30,****2008** |   |
|--------------------------------------------------------------|--------|----------------------------------|---------|----------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **  **                                             |   | *(In                thousands)*  |    |
| Interest                expense                              |   | $                                | 899     |                             | $      | 274                                                                                                                                                           |   | $ | 4,461 |   |
| Amortization                of derivatives                   |   |                             | 4,527   |                             |   | 504                                                                                                                                                           |   |   | 9,071 |   |
| Amortization                of deferred financing cost       |   |                             | 765     |                             |   | 20                                                                                                                                                            |   |   | 1,353 |   |
| Amortization                of debt discount on demand notes |   |                             | — |                             |   | 840                                                                                                                                                           |   |   | 915 |   |
| Total                                                        |   | $                                | 6,191   |                             | $      | 1,638                                                                                                                                                         |   | $ | 15,800 |   |

**Note      12. Other Derivatives Related to Options and Warrants Issued to      Non-Employees**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      12. Other Derivatives Related to Options and Warrants Issued to Non-Employees      -      continued**

| 1 |   | Options                issued toNon-employees  |   | 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.   |
|---|--------|------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 |   | Warrants                issued toNon-employees |   | 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. |

**The      following table summarizes the assumptions used to measure the fair value of      derivatives:**

| **Derivative                Information**                  |   | **Dividend****Yield                  %**    |    | **Expected****Volatility                  %**    |   | **Risk-Free****Interest                  %**    |   | **Expected****Life                  (Years)**    |                       | **CVBT****Stock****Price**   |   |
|------------------------------------------------------------|--------|------------------------------------------------------------|---------|-----------------------------------------------------------------|--------|----------------------------------------------------------------|--------|-----------------------------------------------------------------|----------------------------|----------------------------------------|--------|
| Options                issued to non-employees derivative  |   |                                                       |    |                                                            |   |                                                           |   |                                                            |                       |                                   |   |
| As                of December 31, 2007                     |   |                                                       | — |                                                            |   | 47.61                - 67.22                                   |   |                                                            | 3.05                - 4.04 |                                   |   | 1.58                - 9.90 |   | $ | 0.88 |   |
| As                of June 30, 2008                         |   |                                                       | — |                                                            |   | 95.4                - 135.39                                   |   |                                                            | 1.55                - 3.99 |                                   |   | 1.08                - 9.41 |   |   | 0.63 |   |
| Warrants                issued to non-employees derivative |   |                                                       |         |                                                            |   |                                                                |   |                                                            |                            |                                   |   |  |   |   |  |   |
| As                of December 31, 2007                     |   |                                                       | — |                                                            |   | 64.12                                                          |   |                                                            | 3.45                       |                                   |   | 5 |   | $ | 0.88 |   |
| As                of June 30, 2008                         |   |                                                       | — |                                                            |   | 95.4                - 135.39                                   |   |                                                            | 1.55                - 3.99 |                                   |   | 0.63                - 9.47 |   |   | 0.63 |   |

| (a) |   | The                range of the expected life and exercise prices are consistent with                each                individual instrument. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

**The      following table summarizes the “Adjustments to Fair Value of Derivatives” for      all derivatives:**

| **Adjustments                to Fair Value of Derivatives** |   | **Balance                as of****December                31,****2007**   |   | **Adjustment****to                Fair Value****of                Derivative**   |   | **Net****Additions/****Deletions                for****New                Issuance****Exercise**  |   | **Adjustment****to                Paid in****Capital                for****Conversion**  |    | **Balance                as of****June                30,****2008**   |   |
|-------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------|--------|
|                                                        |   |  (In                thousands)                                            |   |
| Option                derivative - non-employees  |   | $                                                                                   | 867    |                                                                                       | $      | (188                                                                                                   | )      |                                                                                          | — |                                                                            | $      | (66 | ) | $ | 629 |   |
| Warrant                derivative - non-employees |   |                                                                                | 4,118  |                                                                                       |   | (897                                                                                                   | )      | $                                                                                             | 1,238   |                                                                            |   | — |   |   | 4,459 |   |
| Change                in fair value                         |   | $                                                                                   | 4,985  |                                                                                       | $      | (1,085                                                                                                 | )      | $                                                                                             | 1,238   |                                                                            | $      | (66 | ) | $ | 5,088 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      12. Other Derivatives Related to Options and Warrants Issued to Non-Employees       - (continued)**

**Options      derivative transactions — Non-employees for options granted and      transferred:**

| **Period**                                                     |   | **Options****Granted**   |    | **Exercise****Price - Non-****Employees**   |   | **Estimated****Fair                Value on****the                Date****Options****Granted                or****Transferred**   |   | **Option****Derivatives****as                of****June                30,****2007**   |    | **Transfer                of****Fully                Vested****Employee****Stocks                to****Non-Employee**   |   |
|----------------------------------------------------------------|--------|------------------------------------|---------|-----------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|---------|-----------------------------------------------------------------------------------------------------------------------------------|--------|
| For                the year ended December 31, 2006 (a)        |   |                               | 150,000 |                                                            | $      | 1.00                                                                                                                                        |   | $                                                                                                | 228,000 |                                                                                                                              | $      | 14,243 |   |   | — |   |
| For                the year ended December 31, 2007 (b)(c)     |   |                               | 310,000 |                                                            | $      | 0.30                - 1.00                                                                                                                  |   | $                                                                                                | 560,840 |                                                                                                                              | $      | 3,702 |   |   | — |   |
| For                the six month period ended June 30, 2008(c) |   |                               | — |                                                            |   | —                                                                                                                                     |   |                                                                                             | — |                                                                                                                              |   | — |   |   | — |   |

|   | (a) | Expected                life of years, volatility of 77%, risk free rate of interest of 4.58%                to                4.67% and an expected dividend yield of                zero. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Expected                life of 10 years, volatility ranging from 67.22% to 71.22%, and risk                free                rate of interest ranging from 4.04% of 4.85% and an expected dividend                yield of zero. Transaction is done as a function of                law. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | No                new stock options were granted to non-employees during the six month                period ended June 30, 2008. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------|

**Change      in the fair value of options and warrant derivatives:**

|                **Adjustments                to Fair Value of Derivatives - Options and                Warrants** |   |   | **Total                at****December                31,****2007**  |   |   | **At                June 30,****2008**  |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------|--------|--------|----------------------------------------------|--------|
|                                                                                                                            |   |   | *(In                thousands)*                                     |   |
| Adjustment                to the fair value of option derivatives (a)                                                           |   | $      | (818                                                                     | )      | $      | (188                                         | )      |
| Adjustment                to the fair value of warrant derivatives                                                              |   |   | 20                                                                       |   |   | (897                                         | )      |
| Total                adjustments to fair value                                                                                  |   | $      | (798                                                                     | )      | $      | (1,085                                       | )      |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      12. Other Derivatives Related to Options and Warrants Issued to Non-Employees       - (continued)**

| **Stock                Option****Transactions - ****Non-Employees** |   | **Number                of****Option****Exercised**   |    | **Dividend****Yield                %**   |   | **Expected****Volatility                %**   |   | **Risk                Free****Interest                Rate****%**   |                         | **Expected****Remaining****Life                (Years)**   |   | **Decrease                In****the                Fair****Value****of                Option****Derivatives**   |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|---------|----------------------------------------------------|--------|---------------------------------------------------------|--------|-------------------------------------------------------------------------------|------------------------------|----------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|
| Total - 2007                                                        |   |                                                            | 380,000 |                                               |   | —                                                 |   |                                                                          | 69.58                - 73.36 |                                                                 |   | 4.45                - 4.98                                                                                                |   |   | 2.25                - 2.75 |   | $ | 310,738 |   |
| 1st                Quarter - 2008                                   |   |                                                            | 60,000  |                                               |   | —                                                 |   |                                                                          | 104.48                       |                                                                 |   | 1.47                - 1.61                                                                                                |   |   | 1.75 |   |   | 56,400 |   |
| 2nd                Quarter - 2008                                             |   |                                                            | 70,000  |                                               |   | —                                                 |   |                                                                          | 107.35                       |                                                                 |   | 2.58                                                                                                                      |   |   | 1.08 |   |   | 30,021 |   |
| Total                                                                         |   |                                                            | 510,000 |                                               |   |                                                         |   |                                                                          |                              |                                                                 |   |                                                                                                                           |   |   |  |   | $ | 397,159 |   |

| **Warrant****Transactions - ****Non                Employee** |   | **Warrant****Issued**   |       | **Dividend****Yield                %**  |   | **Expected****Volatility****%**  |   | **Risk                Free****interest                %**  |                   | **Expected****Life                (Years)**  |   | **Fair                Value****on                the****Date                of****Warrants****Granted**  |   | **Exercise****Price**   |                  |
|-------------------------------------------------------------------------|--------|-----------------------------------|------------|----------------------------------------------|--------|---------------------------------------|--------|-----------------------------------------------------------------|------------------------|---------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------------------|
| a                                                                       |   |                              | 250,000    |                                         |   | 0                                     |   |                                                            | 79                     |                                              |   | 5.125                                                                                                         |   |                              | 10                    |   |   | 1,602,500 |   | $ | 10.00 |   |
| b                                                                       |   |                              | 550,000    |                                         |   | 0                                     |   |                                                            | 67                     |                                              |   | 3.83                                                                                                          |   |                              | 10                    |   |   | 223,987 |   | $ | 1.00 |   |
| c                & c(i)                                             |   |                              | 5,900,000  |                                         |   | 0                                     |   |                                                            | 63                - 67 |                                              |   | 3.52                - 4.42                                                                                    |   |                              | 5                - 10 |   |   | 2,600,259 |   | $ | 1.00 |   |
| d                                                                       |   |                              | 1,400,000  |                                         |   | 0                                     |   |                                                            | 63                - 64 |                                              |   | 3.28                - 3.99                                                                                    |   |                              | 5                     |   |   | 509,804 |   | $ | 1.00 |   |
| Total                at December 31, 2007                               |   |                              | 8,100,000  |                                         |   | 0                                     |   |                                                            | 63                - 79 |                                              |   | 3.28                - 5.125                                                                                   |   |                              | 5                - 10 |   |   | 4,936,550 |   | $ | 1.00                - 10.00 |   |
| (e)1st                Quarter 2008                                      |   |                              | 500,000    |                                         |   | 0                                     |   |                                                            | 96.16                  |                                              |   | 2.46                                                                                                          |   |                              | 5                     |   |   | 335,000 |   | $ | 1.00 |   |
| (e)                2nd                Quarter 2008                      |   |                              | 1,178,300  |                                         |   | 0                                     |   |                                                            | 96.36                  |                                              |   | 3.34                                                                                                          |   |                              | 5                     |   |   | 755,870 |   | $ | 1.00 |   |
| (f)                2nd                Quarter 2008                      |   |                              | 350,000    |                                         |   | 0                                     |   |                                                            | 96.36                  |                                              |   | 3.34                                                                                                          |   |                              | 5                     |   |   | 122,500 |   | $ | 1.00 |   |
| Total                                                                   |   |                              | 10,128,300 |                                         |   |                                       |   |                                                            |                        |                                              |   |                                                                                                               |   |                              |                       |   |   |  |   |   |  |   |

|   | (a) | These                warrants were issued for past services and were expensed over a one-year                vesting period. The fair Value of the vested portion of these warrants                for                the three months ended March 31, 2007 was $400,643 and $1,602,500                in                aggregate was reclassified as part of the warrant                derivative. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | These                warrants were issued in connection with consulting services rendered.                These warrants were fully vested on the date of the grant and have                a ten                year term. These warrants will expire in November 2012. The vested                fair                value of these warrants for the year ended December 31, 2007 was                $223,987                and was reclassified as part of the warrant                derivative. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | These                warrants were for future services. These warrants were fully vested                on the                date of grant have a five year term and expired in December 2012                and                2017. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c)(i) | These                  warrants were for future services.  These warrants were fully vested                  on the date of the grant and have a ten year term.  These warrants                  will expire in December                  2017. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      12. Other Derivatives Related to Options and Warrants Issued to Non-Employees       - (continued)**

|   | (d) | These                warrants were issued in conjunction with the issuance of demand notes.                These warrants were fully vested and $658,000 was recorded as warrant                derivative at December 31, 2007. The debt discount of $507,000 is                being                amortized to interest expense over the term of the                notes. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | These                warrants were issued in conjunction with the issuance of demand and                long                term notes. These warrants were fully vested and $694,866 was recorded                as                warrant derivatives at June 30, 2008. The debt discount of $325,000                for                the demand notes and $755,870 for the long term notes is being amortized                to interest expense over the term of the                notes. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | These                warrants were issued in conjunction with the formation of a “Clinical                Trial Partnership”. These warrants were fully vested and $122,500 was                recorded as warrant derivatives at June 30,                2008. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                **Transactions                from March 20, 2006 Through June 30, 2008**                                                          |   |   | **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                                                            |   | $      | —                                                     |   |
| Proration                of derivatives at June 30, 2008 (a)                                                                                           |   |   | (939                                            | )      |   | —                                                        |   |   | —                                                          |   |   | (939                                                        | )      |
| Amortization                for the period March 20, 2006 (close date) through June 30, 2008                charged                to interest expense |   |   | (585                                            | )      |   | (1,809                                                         | )      |   | (8,039                                                           | )      |   | (10,433                                                     | )      |
| Remaining                deferred costs and discount to be amortized                                                                                   |   | $      | 29                                              |   | $      | 574                                                            |   | $      | 157                                                              |   | $      | (11,372                                                     | )      |

|   | (a) | The                proration of derivatives is a reduction in the deferred financing                cost due                to the conversion of the convertible notes into common                stock. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note      13. Stockholders’ Deficit**

***Preferred      Stock***

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
** **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      13. Stockholders’ Deficit  - (continued)**

***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 |   |

|   | (a) | At                December 31, 2004, 2,000,000 shares of common stock were subsequently                issued in 2005. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------|

|   | (b) | In                addition, six stock option holders’ exercised options to purchase 123,466                shares of common stock during year ended                2005. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      13. Stockholders’ Deficit  - (continued)**

**Conversion      of Senior Secured Notes:**

***Stock      Option Transactions***

|                                        |   |                                                                           |         |                                                 |   |                                                  |    |                                                                           |
|---------------------------------------------|--------|--------------------------------------------------------------------------------|--------------|------------------------------------------------------|--------|-------------------------------------------------------|---------|--------------------------------------------------------------------------------|
| **Date**                                    |   | **Number                of****Option                or****Warrant****Holders** |         | **Number                of****Options****Exercised** |   | **Number****of                Warrants****Exercised** |    | **Exchange****for                Shares****of                Common****Stock** |
| 2007                                        |   |                                                                           | 1            |                                                 |   |                                                  | 440,000 |                                                                           |   |   | — |   |   |   | 440,000 |   |
| 1st                quarter - 2008 |   |                                                                           | 1            |                                                 |   |                                                  | 60,000  |                                                                           |   |   | — |   |   |   | 60,000 |   |
| 2nd                quarter - 2008           |   |                                                                           | 1            |                                                 |   |                                                  | 70,000  |                                                                           |   |   | — |   |   |   | 70,000 |   |
| Total                                       |   |                                                                           |    |                                                 |   |                                                  | 570,000 |                                                                           |   |   |    |   |   |   | 570,000 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      13. Stockholders’ Deficit - (continued)**

**Stock      option granted for 2006, 2007 and the first six month period ending June 30,      2008:**

|                                         |   |                   |    |                              |   |                                       |                       |                                                               |   |                                             |
|----------------------------------------------|--------|------------------------|---------|-----------------------------------|--------|--------------------------------------------|----------------------------|--------------------------------------------------------------------|--------|--------------------------------------------------|
| **Stock                Option Transactions** |   | **Options****Granted** |    | **Exercise                Price** |   | **Estimated****Fair                Value** |                       | **Weighted****Average****Expected                Life****(years)** |   | **Approximate****Volatility                (%)** |
| Total - 2006                (a)(b) |   |                   | 215,050 |                              |   | $                                          | 10.00                      |                                                               |   | $                                                | 500,716 |   |   |   | 5                -                10 |   |   |   | 78.89 |   |
| Total - 2007                (b)    |   |                   | 686,050 |                              |   |                                       | 1.00                -10.00 |                                                               |   |                                             | 278,014 |   |   |   | 10 |   |   |   | 67                - 69 |   |
| 1st                quarter - 2008  |   |                   | — |                              |   |                                       | —                    |                                                               |   |                                             | — |   |   |   | — |   |   |   | — |   |
| 2nd                quarter - 2008            |   |                   | — |                              |   |                                       | —                    |                                                               |   |                                             | — |   |   |   | — |   |   |   | — |   |

|   | (a) | 50,000                of these options were issued for the past services and therefore                expensed                on the date of grant. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | These                options were issued for future services and will be expense over                the                vesting 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** |
| Total - 2007                                           |   |                                                 | 380,000 |                                   |   |                                        | —      |                                             |   |                              | 69.58 - 73.36 |                                                                                |   |   | 4.55 - 4.98 |   |   |   | 2.25 - 2.75 |   |   | $ | 310,738 |   |
| 1st                quarter - 2008                      |   |                                                 | 60,000  |                                   |   |                                        | —      |                                             |   |                              | 104.48                  |                                                                                |   |   | 1.47 - 1.61 |   |   |   | 1.75 |   |   |   | 56,400 |   |
| 2nd                quarter - 2008                                |   |                                                 | 70,000  |                                   |   |                                        | —      |                                             |   |                              | 107.35                  |                                                                                |   |   | 2.58 |   |   |   | 1.08 |   |   |   | 30,021 |   |
| Total                                                            |   |                                                 | 510,000 |                                   |   |                                        |    |                                             |   |                              |               |                                                                                |   |   |    |   |   |   |    |   |   |   |    |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
** **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      13. Stockholders’ Deficit  - (continued)**

|                                                |   | **Employees** |      | **Non-Employees**                 |   | **Total**                    |   |
|-----------------------------------------------------|--------|---------------|-----------|-----------------------------------|--------|------------------------------|--------|
|                                                |   | **Shares**    |      | **Exercise                Price** |   | **Shares**                   |   | **Exercise                Price** |   | **Shares** |   | **Exercise                Price** |   |
| **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                                             |   |          | 376,050   |                              |   | 10.00                        |   |   | 310,000 |   |   | — |   |   | 686,050 |   |   | 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                                           |   |          | (2,090    | )                                 |   | 10.00                        |   |   | (150,000 | ) |   | 10.00 |   |   | (152,090 | ) |   | 10.00 |   |
| **Outstanding                at December 31, 2007** |   |          | 1,057,510 |                              | $      | 0.30                - $10.00 |   |   | 1,945,500 |   | $ | 0.30                - $10.00 |   |   | 3,003,010 |   | $ | 0.30                - $10.00 |   |
| Granted                                             |   |          | —   |                              |   | —                      |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Terminated                                          |   |          | —   |                              |   | —                      |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Reclassified                                        |   |          | —   |                              |   | —                      |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Exercised                                           |   |          | —   |                              |   | —                      |   |   | (130,000 | ) | $ | 0.30 |   |   | (130,000 | ) | $ | 0.30 |   |
| Cancelled                                           |   |          | (21,500   | )                                 | $      | 1.00-$10.00                  |   |   | — |   |   | — |   |   | (21,500 | ) | $ | 1.00-$10.00 |   |
| **Outstanding                at June 30, 2008**     |   |          | 1,036,010 |                              | $      | 0.30-$10.00                  |   |   | 1,815,500 |   | $ | 0.30-$10.00 |   |   | 2,851,510 |   | $ | 0.30-$10.00 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      13. Stockholders’ Deficit  - (continued)**

|                                                      |   |                                   |         |                                         |   |                                                                             |         |                               |
|-----------------------------------------------------------|--------|----------------------------------------|--------------|----------------------------------------------|--------|----------------------------------------------------------------------------------|--------------|------------------------------------|
|                                                      |   | **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 |   |   |   | 1,180,000 |   |
| Employees - Expected                to Vest     |   |                                   | 229,758      |                                         |   |                                                                             | 1.80         |                               |   |   | 3.86 |   |   |   | — |   |
| Employees - Exercisable                         |   |                                   | 955,792      |                                         |   |                                                                             | 1.80         |                               |   |   | 3.86 |   |   |   | 1,180,000 |   |
| 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 December 31, 2007**                |   |                                   |    |                                         |   |                                                                             |    |                               |   |   |    |   |   |   |    |   |
| Employees - Outstanding                         |   |                                   | 1,057,510    |                                         |   |                                                                             | 2.23         |                               |   |   | 5.83 |   |   |   | 290,000 |   |
| Employees - Expected                to Vest     |   |                                   | 285,078      |                                         |   |                                                                             | 1.02         |                               |   |   | 9.57 |   |   |   | — |   |
| Employees - Exercisable                         |   |                                   | 772,432      |                                         |   |                                                                             | 2.13         |                               |   |   | 5.83 |   |   |   | 290,000 |   |
| Non-Employees - Outstanding                     |   |                                   | 1,945,500    |                                         |   |                                                                             | 2.60         |                               |   |   | 5.77 |   |   |   | 635,100 |   |
| Non-Employees - Expected                to Vest |   |                                   | 145,291      |                                         |   |                                                                             | 4.37         |                               |   |   | 9.41 |   |   |   | — |   |
| Non                Employees - Exercisable      |   |                                   | 1,800,209    |                                         |   |                                                                             | 2.53         |                               |   |   | 5.77 |   |   |   | 635,100 |   |
| **As                of June 30, 2008**                    |   |                                   |    |                                         |   |                                                                             |    |                               |   |   |    |   |   |   |    |   |
| Employees - Outstanding                         |   |                                   | 1,045,063    |                                         |   |                                                                             | 2.40         |                               |   |   | 5.11 |   |   |   | 165,000 |   |
| Employees - Expected                to Vest     |   |                                   | 205,003      |                                         |   |                                                                             | 0.80         |                               |   |   | 9.12 |   |   |   | — |   |
| Employees - Exercisable                         |   |                                   | 840,060      |                                         |   |                                                                             | 2.21         |                               |   |   | 5.11 |   |   |   | 165,000 |   |
| Non-Employees - Outstanding                     |   |                                   | 1,815,500    |                                         |   |                                                                             | 4.03         |                               |   |   | 4.39 |   |   |   | 318,450 |   |
| Non-Employees - Expected                to Vest |   |                                   | 108,223      |                                         |   |                                                                             | 2.94         |                               |   |   | 8.91 |   |   |   | — |   |
| Non                Employees - Exercisable      |   |                                   | 1,707,277    |                                         |   |                                                                             | 2.76         |                               |   |   | 4.39 |   |   |   | 318,450 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      13. Stockholders’ Deficit  - (continued)**

***Warrants***

|                                              |   |                                                                           |       |                                                        |   |                                                                 |         |                            |   |                                                      |         |                               |   |                                               |
|---------------------------------------------------|--------|--------------------------------------------------------------------------------|------------|-------------------------------------------------------------|--------|----------------------------------------------------------------------|--------------|---------------------------------|--------|-----------------------------------------------------------|--------------|------------------------------------|--------|----------------------------------------------------|
| **Warrants                Granted**               |   | **Warrants****Issued                for****Purchase****of****Common****Stock** |       | **Estimated****Fair****Market****Value                ($)** |   | **Exercise****Price                Per****Share                ($)** |         | **Expected****Life****(Years)** |   | **Risk                Free****Interest                %** |         | **Approximate****Volatility****%** |   | **Expected****Dividend****Yield                %** |
| 2000                (a)                           |   |                                                                           | 933,330    |                                                        |   |                                                                 | 115,475      |                            |   |                                                      | 0.40         |                               |   |                                               | 3.5 |   |   |   | 5.02% |   |   |   | — |   |   |   | — |   |
| 2001                (b)                           |   |                                                                           | 100,000    |                                                        |   |                                                                 | —      |                            |   |                                                      | 0.80         |                               |   |                                               | 5 |   |   |   | 4.89% |   |   |   | — |   |   |   | — |   |
| 2003                (c)                           |   |                                                                           | 200,000    |                                                        |   |                                                                 | 119,744      |                            |   |                                                      | 2.00         |                               |   |                                               | 5 |   |   |   | 0.94% |   |   |   | 76 |   |   |   | — |   |
| 2005                (d)                           |   |                                                                           | 75,000     |                                                        |   |                                                                 | —      |                            |   |                                                      | —      |                               |   |                                               | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| 2006                (e)(f)(g)(i)                  |   |                                                                           | 6,249,997  |                                                        |   |                                                                 | 3,660,455    |                            |   |                                                      | 1.00-10.00   |                               |   |                                               | 3                -                10 |   |   |   | 4.89-5.12% |   |   |   | 78                -                79 |   |   |   | — |   |
| 2007                (g) (iii), (g) (ii), (h), (i) |   |                                                                           | 8,350,000  |                                                        |   |                                                                 | 3,537,674    |                            |   |                                                      | 1.00         |                               |   |                                               | 5                -                10 |   |   |   | 3.28-4.42% |   |   |   | 63                -                66.54 |   |   |   | — |   |
| 2008                (g)(ii)                       |   |                                                                           | 2,028,300  |                                                        |   |                                                                 | 1,591,470    |                            |   |                                                      | 1.00         |                               |   |                                               | 5 |   |   |   | 2.65-4.83% |   |   |   | 95.65-96.36 |   |   |   | — |   |
| Total                                             |   |                                                                           | 17,936,627 |                                                        |   |                                                                 |    |                            |   |                                                      |    |                               |   |                                               |    |   |   |   |    |   |   |   |    |   |   |   |    |   |

|   | (a) | The                warrants fully vested in December 2001 and were to expire in December                2005. However, prior to the expiration date in December 2005 the                holder of                the warrants elected to exercise 933,330 warrants in exchange for                848,482                shares of common stock. The exercise of these warrants was                cashless. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | The                warrant was fully vested on the date of grant and was exercised in                March                2006. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------|

|   | (c)    | The                warrant issued to an individual in connection with consulting services                rendered. The warrant fully vested on the date of grant and expires                in                June 2013.                                                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                        |
|   | (d)    | The                Company sold warrants for 75,000 shares of common stock at 125% of                the IPO                price for $75.00 to the underwriter pursuant to the underwriting                agreement. The warrants have a term of six months commencing on the                effective date of the IPO, February 11,                2005. |

|   | (e) | These                warrants were issued for past services and will be expensed over                a one                year vesting period. The fair value of the portion of these warrants                that                vested during 2007 of $400,643 and in aggregate $1,602,500 has been                reclassified as part of the warrant                derivative. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Warrants                issued for past services and are expensed over a one year vesting                period.                The fair value of the portion of these warrants that vested during                2007 of                $400,643 and in aggregate $1,602,500 has been reclassified as part                of the                warrant derivative. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g)(i) | The                warrants issued for future services. These warrants are fully vested                on                the date of the grant, have a five year term and expire in December                2012. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g)(ii) | These                warrants were issued along with demand notes; they are detachable,                are                fully vested on the date of the grant and have a five year term.                The fair                value of the vested warrants during the year ended December 31, 2007                of                $507,000 was recorded as additional paid-in capital and the discount                on                debt is being amortized to interest expense over the term of the                notes. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g)(iii) | The                warrants issued for future services. These warrants are fully vested                on                the date of the grant and have a ten (10) year term. The warrants                will                expire in December 2017. |
|--------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (h) | These                warrants were issued in connection with consulting services rendered.                These warrants are fully vested on the date of the grant and have                a ten                year term. The warrants will expire in November 2017. The fair value                of                the fully vested warrants during the year ended December 31, 2007                of                $223,987 has been reclassified as part of the warrant                derivative. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      13. Stockholders’ Deficit  - (continued)**

|   | (i) | The                warrants were issued to an employee in connection with the research                and                development services rendered. The warrants are fully vested on the                date                of the grant, have a ten year term and expire in November                2017. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Warrant      activity for the years 2006, 2007 and the six month period June 30, 2008 is      as      follows:**

|                                                     |   | **Warrants****Outstanding** |       | **Weighted****Average****Exercise****Price** |
|----------------------------------------------------------|--------|-----------------------------|------------|----------------------------------------------|
| Outstanding                at December 31, 2006          |   |                        | 1,230,882  |                                         |   | $ | 7.88 |   |
| Granted                                                  |   |                        | 8,350,000  |                                         |   |   | 1.00 |   |
| Sold(a)                                                  |   |                        | 5,999,997  |                                         |   |   | 1.00 |   |
| Exercised                                                |   |                        | —    |                                         |   |   | — |   |
| Forfeited                                                |   |                        | (705,882   | )                                            |   |   | 8.50 |   |
| Outstanding                at December 31, 2007          |   |                        | 14,874,997 |                                         |   | $ | 1.22 |   |
| Granted                                                  |   |                        | 2,028,300  |                                         |   |   | 1.00 |   |
| Sold/Reissued                                            |   |                        | —    |                                         |   |   | — |   |
| Exercised                                                |   |                        | —    |                                         |   |   | — |   |
| Forfeited/Cancelled                                      |   |                        | —    |                                         |   |   | — |   |
| Outstanding                at June 30, 2008              |   |                        | 16,903,297 |                                         |   | $ | 1.20 |   |
| Warrants                exercisable at December 31, 2006 |   |                        | 1,168,382  |                                         |   |   | 7.88 |   |
| Warrants                exercisable at December 31, 2007 |   |                        | 14,874,997 |                                         |   |   | 1.22 |   |
| Warrants                exercisable at June 30, 2008     |   |                        | 16,903,297 |                                         |   | $ | 1.20 |   |

| **Exercise                Prices** |   | **Warrants****Outstanding** |       | **Weighted****Average****Remaining****Life****(Years)** |   | **Weighted****Average****Exercise****Price** |         | **Warrants****Exercisable** |   | **Weighted****Average****Exercise****Price** |
|------------------------------------|--------|-----------------------------|------------|---------------------------------------------------------|--------|----------------------------------------------|--------------|-----------------------------|--------|----------------------------------------------|
| $                1.00              |   |                        | 5,999,997  |                                                    |   |                                         | 0.72         |                        |   | $                                            | 1.00 |   |   |   | 5,999,997 |   |   | $ | 1.00 |   |
| 1.00                               |   |                        | 8,350,000  |                                                    |   |                                         | 4.44         |                        |   |                                         | 1.00 |   |   |   | 8,350,000 |   |   |   | 1.00 |   |
| 1.00                               |   |                        | 2,028,300  |                                                    |   |                                         | 4.56         |                        |   |                                         | 1.00 |   |   |   | 2,028,300 |   |   |   | 1.00 |   |
| 2.00                               |   |                        | 200,000    |                                                    |   |                                         | 4.98         |                        |   |                                         | 2.00 |   |   |   | 200,000 |   |   |   | 2.00 |   |
| 10.00                              |   |                        | 250,000    |                                                    |   |                                         | 7.79         |                        |   |                                         | 10.00 |   |   |   | 250,000 |   |   |   | 10.00 |   |
| 12.50                              |   |                        | 75,000     |                                                    |   |                                         | 0.63         |                        |   |                                         | 12.50 |   |   |   | 75,000 |   |   |   | 12.50 |   |
| Total                              |   |                        | 16,903,297 |                                                    |   |                                         |    |                        |   |                                         |    |   |   |   | 16,903,297 |   |   |   |    |   |

***Authorized      Shares***

**Note      14. Income Taxes**

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      14. Income Taxes  - (continued)**

|                                                 |   |                                                            |   |                                                        |
|------------------------------------------------------|--------|-----------------------------------------------------------------|--------|-------------------------------------------------------------|
| **Net                Operating Loss Carry Forward:** |   | **As                of****December                31,****2007** |   | **As                of****June                30,****2008** |
| **  **                                     |   | *(In                thousands)*                                 |
| Federal                income taxes                  |   | $                                                               | 69,357 |                                                        |   | $ | 73,406 |   |
| State                income taxes (California)       |   |                                                            | 59,792 |                                                        |   |   | 63,841 |   |

|                                                                 |   | **As                of****June                30,****2008** |
|----------------------------------------------------------------------|--------|-------------------------------------------------------------|
| **  **                                                     |   | *(In                thousands)*                             |
| Federal                research and development credit carry forward |   | $                                                           | 687 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**
**  **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      15. Commitments and Contingencies**

***Leases***

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      15. Commitments and Contingencies  - (continued)**

| **Paid                Rent:**      |   | **December                31,****2007** |   | **June                30,****2008** |
|------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|
| **  **                   |   | *(In                thousands)*         |
| Total                rent paid (a) |   | $                                       | 465    |                                |   | $ | 167 |   |

|   | (a) | Rent                paid for the corporate office in Las Vegas and the San Diego lab                facility. |
|--------|-----|---------------------------------------------------------------------------------------------------------------|

**Service      Agreements**

**The      major outstanding contractual obligations are as follows:**

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

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      15. Commitments and Contingencies - (continued)**

|   | (1) | The                Company entered into a joint patent agreement with Phage as of February                28, 2007. The Company 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. The Company 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 the Company 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, the Company 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 the Company                in                locations throughout the world other than United States, Canada,                Europe,                Japan, China, and the Republic of Korea. CPI is obligated to pay                the                Company 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                the Company’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 the Company a                royalty of ten percent net revenue from sales in its Asian                territories. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Hesperian                will assist the Company with the FDA approval process for                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. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      15. Commitments and Contingencies  - (continued)**

|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
|---------------------------|--------|-------------------------------------------------------------|--------|--------------------------------------------------|--------|------------------------------|--------|----------------------------------------------------------------------------------------------------|
| **Item                #** |   | **Contract**                                                |   | **Agreement                Name**                |   | **Start**                    |   | **End                Date**                                                                        |
| 7                         |   | bioRASI,                LLC                                 |   | CRO                agreement                     |   | Aug.                8, 2005  |   | Aug.                20, 2007                                                                       |
|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
| 8                         |   | Phage                BiotechnologyCorporation               |   | Lease                Guarantee - San Diego       |   | Mar.                15, 2006 |   | March                16, 2008                                                                      |
|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
| 9                         |   | Promethean                                                  |   | Convertible                Notes                 |   | Mar.                20, 2006 |   | March                19, 2009                                                                      |
|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
| 10                        |   | Chief                Executive Officer                      |   | Guarantee                agreement               |   | Mar.                20, 2006 |   | First                date of generatingrevenue                onrepayment                of notes. |
|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
| 11                        |   | Chief                Executive Officer                      |   | Guarantee                reimbursement agreement |   | Mar.                20, 2006 |   | First                date of generating revenue on repayment of notes.                             |
|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
| 12                        |   | Kendle                (formerly Charles River Laboratories) |   | CRO                agreement                     |   | Aug.                8, 2006  |   | Completion                of Phase II Severe Coronary Heart Disease                                |
|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
| 13                        |   | The                Bruckner Group                           |   | Feasibility                Study                 |   | Aug.                4, 2006  |   | Upon                completion of study                                                            |
|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
| 14                        |   | Investment                Banking                           |   | Investment                Banker                 |   | June                6, 2006  |   | Ongoing                                                                                            |
|                      |   |                                                        |   |                                             |   |                         |   |                                                                                               |
| 15                        |   | Public                Accounting Firm                       |   | Professional                Services             |   | July                1, 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. This contract                is now                terminated. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | Lease                guarantee terminated on March 16,                2008. |
|--------|-----|-----------------------------------------------------------------------------|

|   | (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. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      15. Commitments and Contingencies  - (continued)**

|   | (10) | Daniel                C. Montano, Chairman, 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 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. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (13) | The                Bruckner Group Incorporated has been assisting the Company in exploring                the potential economic consequences of applying FGF-1 141                to                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. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 June 30,**       |   | **For                the****Period                from****March                11,****1998****(Inception)                to****June                30,** |
|-------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Service                Fees Paid for Major Contractual Obligations:** |   | **2007**                                |   | **2008**                                                                                                                                                 |   | **2008** |
| **  **                                                        |   | *(Dollars                in thousands)* |
| The                Bruckner Group                                       |   | $                                       | 617    |                                                                                                                                                     |   | $ | — |   |   | $ | 1,068 |   |
| Touchstone                Research (C2R)(Hesperion)                     |   |                                    | 293    |                                                                                                                                                     |   |   | 14 |   |   |   | 4,896 |   |
| Kendle                (Charles River)                                   |   |                                    | 328    |                                                                                                                                                     |   |   | 154 |   |   |   | 1,877 |   |
| Total                                                                   |   | $                                       | 1,238  |                                                                                                                                                     |   | $ | 168 |   |   | $ | 7,841 |   |

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Note      15. Commitments and Contingencies - (continued)**

**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. |
|--------|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CARDIOVASCULAR      BIOTHERAPEUTICS, INC.**

**(Unaudited)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2008**

**Litigation**

----

**Item      2. Management’s Discussion and Analysis of Consolidated Financial Condition and      Results of Operations**

**FORWARD      LOOKING STATEMENTS**

*This      Form 10-Q, including but not limited to this section, may contain      forward-looking statements. These statements relate to future events or the      Company’s future financial performance and involve known and unknown risks,      uncertainties and other factors that may cause the Company or it’s 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. The Company believes that the section entitled “Risk Factors”includes all material risks that could harm its 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.*

*The      Company believes it is important to communicate its future expectations to      the      Company’s investors. However, there may be events in the future that the Company      may not able to accurately predict or control and that may cause the Company’s      actual results to differ materially from the expectations it describes in the      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 the Company’s forward-looking      statements.*

*Although      the Company believes that the expectations reflected in the forward-looking      statements are reasonable, the Company cannot guarantee future results, levels      of activity, performance or achievements. You should read the following      discussion and analysis of the Company’s financial condition and results of      operations together with the 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 the plans and strategy for the Company’s 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.*

----

**BUSINESS**

**1.      Overview**

----

**2.      Results of Operations**

|                                                       |   | **For                the Six Month Period Ended June 30,** |
|------------------------------------------------------------|--------|------------------------------------------------------------|
| **  **                                           |   | **2007**                                                   |   | **2008** |   | **$****Change** |   | **%****Change** |
| **  **                                           |   | *(Dollars                in thousands)*                    |
| Research                and development                    |   | $                                                          | 3,333 |   |   | $ | 2,254 |   |   | $ | (1,079 | )                  |   |   | (32.37 | )%                  |
| Clinical                trials                             |   | $                                                          | 1,485 |   |   | $ | 497 |   |   | $ | (988 | )                  |   |   | (66.53 | )%                  |
| Phage                Biotechnology Corporation (affiliate) |   | $                                                          | 927 |   |   | $ | 677 |   |   | $ | (250 | )                  |   |   | (26.97 | )%                  |

***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                Arterial Disease (“PAD”)                                                                |
| •  CVBT-141H      |   | Severe                Coronary Heart Disease (“CHD”) — injection catheter                delivery |

***Proof      of Concept Clinical Trials:***

| **Drug                Candidate** |   | **Indication**                                                                 |
|-----------------------------------|--------|--------------------------------------------------------------------------------|
| •  CVBT-141D      |   | Disc                Ischemia — proof of                concept |

***Pre-Clinical      Research and Development:***

| **Drug                Candidate** |   | **Indication**             |
|-----------------------------------|--------|----------------------------|
| •  CVBT-141E      |   | Stroke                     |
| •  CVBT-141F      |   | Bone                Repair |

**Clinical      Development**

----

***Clinical      Development***

----

***Pre-Clinical      Development***

**General      and Administrative**

|                                                       |   | **For                the Six Month Period Ended June 30,** |
|------------------------------------------------------------|--------|------------------------------------------------------------|
| **  **                                           |   | **2007**                                                   |   | **2008** |   | **$****Change** |   | **%****Change** |
| **  **                                           |   | *(Dollars                in thousands)*                    |
| General                and administrative                  |   | $                                                          | 8,167 |   |   | $ | 3,406 |   |   | $ | (4,761 | )                  |   |   | (58.30 | )%                  |
| Phage                Biotechnology Corporation (affiliate) |   | $                                                          | 26 |   |   | $ | 7 |   |   | $ | (19 | )                  |   |   | (73.08 | )%                  |

----

|                                                                                                                                                                                                                                     |   | **$                Amount****in                thousands** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|
| **These                are our primary reductions in expenses:**                                                                                                                                                                         |   |                                                       |    |   |
| Write-off                of deferred costs related to listing on the Alternative Investment                Market                of the London Stock Exchange.                                                                           |   | $                                                          | 1,625 |   |
| Professional                expenses related to listing on the Alternative Investment Market                of the                London Stock Exchange, SOX Audit and Restatement of a full year of                financial statements |   |                                                       | 1,127 |   |
| Officer                compensation, related to the issuance of warrants in April                2005                                                                                                                                    |   |                                                       | 404 |   |
| Computer                expenses reflecting the reduction in new project                initiatives                                                                                                                                      |   |                                                       | 367 |   |
| Travel                expenses                                                                                                                                                                                                           |   |                                                       | 292 |   |
| Investor                relations                                                                                                                                                                                                        |   |                                                       | 295 |   |
| Outside                services primarily related to printing and distribution of financial                reports                                                                                                                       |   |                                                       | 187 |   |
| Marketing                                                                                                                                                                                                                                |   |                                                       | 144 |   |
| D&O                Insurance                                                                                                                                                                                                         |   |                                                       | 86 |   |
| Reduction                in payroll and other human resources costs                                                                                                                                                                      |   |                                                       | 84 |   |
| Net                decrease in all other expenses                                                                                                                                                                                        |   |                                                       | 150 |   |
| Total                decrease in expenses                                                                                                                                                                                                |   | $                                                          | 4,761 |   |

**Interest      Income**

|                           |   |                                                       |   |     |   |            |    |            |
|--------------------------------|--------|------------------------------------------------------------|--------|----------|--------|-----------------|---------|-----------------|
|                           |   | **For                the Six Month Period Ended June 30,** |
| **  **               |   | **2007**                                                   |   | **2008** |   | **$****Change** |    | **%****Change** |
| **  **               |   | *(Dollars                in thousands)*                    |
| Interest                income |   | $                                                          | 127    |     |   | $               | — |            |   | $ | (127 | )  |   |   | (100 | )%                  |

**Interest      Expense**

|                            |   | **For                the Six Month Period Ended June 30,** |
|---------------------------------|--------|------------------------------------------------------------|
| **  **                |   | **2007**                                                   |   | **2008** |   | **$****Change** |   | **%****Change** |
| **  **                |   | *(Dollars                in thousands)*                    |
| Interest                expense |   | $                                                          | 6,191 |   |   | $ | 1,638 |   |   | $ | (4,553 | )  |   |   | (74%) |   |

|                                                       |        |
|------------------------------------------------------------|--------|
|                                                       |   | **For                the Six Month Period Ended June 30,** |
| **Components                of Interest Expense:**         |   | **2007** |   | **2008** |
| Interest                from senior notes and demand notes |   | $ | 794 |   |   | $ | 260 |   |
| Cashless                interest from senior notes         |   |   | 105 |   |   |   | 14 |   |
| Amortization                of deferred financing cost     |   |   | 765 |   |   |   | 20 |   |
| Amortization                of derivatives                 |   |   | 4,527 |   |   |   | 504 |   |
| Amortization                of debt discount               |   |   | — |   |   |   | 840 |   |
| Total                interest expense                      |   | $ | 6,191 |   |   | $ | 1,638 |   |

----

|                                                                     |   |                                                                          |    |                    |
|--------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|---------|-------------------------|
|                                                                     |   | **For                the Six Months****Period                Ended June 30,** |
| **  **                                                         |   | **2007**                                                                      |    | **2008**                |
| **  **                                                         |   | *(Dollars                in thousands)*                                       |
| Adjustment                to fair value of derivatives                   |   | $                                                                             | (10,084 | )                  |   | $ | (844 | )                  |
| Adjustment                to fair value of derivatives - other |   |                                                                          | 1,400   |                    |   |   | 1,085 |   |

**Three      Months Ended June 30, 2007 and 2008**

|                                                       |   | **For                the Three Month Period Ended June 30,** |
|------------------------------------------------------------|--------|--------------------------------------------------------------|
| **  **                                           |   | **2007**                                                     |   | **2008** |   | **$****Change** |   | **%****Change** |
| **  **                                           |   | *(Dollars                in thousands)*                      |
| Research                and development                    |   | $                                                            | 1,718 |   |   | $ | 1,212 |   |   | $ | (506 | )                  |   |   | (29 | )%                  |
| Clinical                trials                             |   | $                                                            | 875 |   |   | $ | 221 |   |   | $ | (654 | )                  |   |   | (75 | )%                  |
| Phage                Biotechnology Corporation (affiliate) |   | $                                                            | 384 |   |   | $ | 353 |   |   | $ | (31 | )                  |   |   | (8 | )%                  |

**General      and Administrative**

|                                                       |   | **For                the Three Month Period Ended June 30,** |
|------------------------------------------------------------|--------|--------------------------------------------------------------|
| **  **                                           |   | **2007**                                                     |   | **2008** |   | **$****Change** |   | **%****Change** |
| **  **                                           |   | *(Dollars                in thousands)*                      |
| General                and administrative                  |   | $                                                            | 4,638 |   |   | $ | 1,696 |   |   | $ | (2,942 | )                  |   |   | (63 | )%                  |
| Phage                Biotechnology Corporation (affiliate) |   | $                                                            | 5 |   |   | $ | 3 |   |   | $ | (2 | )                  |   |   | (40 | )%                  |

----

|                                                                                                                                                                                                                                     |   | **$                Amount****in                Thousands** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|
| **These                are our primary reductions in expenses:**                                                                                                                                                                         |   |                                                       |    |   |
| Write-off                of deferred costs related to listing on the Alternative Investment                Market                of the London Stock Exchange.                                                                           |   | $                                                          | 1,625 |   |
| Professional                expenses related to listing on the Alternative Investment Market                of the                London Stock Exchange, SOX audit and restatement of a full year of                financial statements |   |                                                       | 511 |   |
| Officer                compensation, related to the issuance of warrants in April                2005                                                                                                                                    |   |                                                       | — |   |
| Computer                expenses reflecting the reduction in new project                initiatives                                                                                                                                      |   |                                                       | 153 |   |
| Travel                expenses                                                                                                                                                                                                           |   |                                                       | 88 |   |
| Investor                relations                                                                                                                                                                                                        |   |                                                       | 140 |   |
| Outside                services primarily related to printing and distribution of financial                reports                                                                                                                       |   |                                                       | 177 |   |
| Marketing                                                                                                                                                                                                                                |   |                                                       | 98 |   |
| D&O                Insurance                                                                                                                                                                                                         |   |                                                       | 58 |   |
| Reduction                in payroll and other human resources costs                                                                                                                                                                      |   |                                                       | 80 |   |
| Net                increase in all other expenses                                                                                                                                                                                        |   |                                                       | 11 |   |
| Total                decrease in expenses                                                                                                                                                                                                |   | $                                                          | 2,942 |   |

**Interest      Income**

|                           |   |                                                         |   |     |   |            |    |            |
|--------------------------------|--------|--------------------------------------------------------------|--------|----------|--------|-----------------|---------|-----------------|
|                           |   | **For                the Three Month Period Ended June 30,** |
| **  **               |   | **2007**                                                     |   | **2008** |   | **$****Change** |    | **%****Change** |
| **  **               |   | *(Dollars                in thousands)*                      |
| Interest                income |   | $                                                            | 26     |     |   | $               | — |            |   | $ | (26 | )  |   |   | (100 | )%                  |

|                            |   | **For                the Three Month Period Ended June 30,** |
|---------------------------------|--------|--------------------------------------------------------------|
| **  **                |   | **2007**                                                     |   | **2008** |   | **$****Change** |   | **%****Change** |
| **  **                |   | *(Dollars                in thousands)*                      |
| Interest                expense |   | $                                                            | (2,971 | ) |   | $ | (477 | )  |   | $ | (2,494 | ) |   |   | (84%) |   |

|                                                       |        |
|------------------------------------------------------------|--------|
|                                                       |   | **For                the Three Month Period Ended June 30,** |
| **Components                of Interest Expense:**         |   | **2007** |   | **2008** |
| Interest                from senior notes and demand notes |   | $ | 351 |   |   | $ | 121 |   |
| Cashless                interest from senior notes         |   |   | 33 |   |   |   | 7 |   |
| Amortization                of deferred financing cost     |   |   | 640 |   |   |   | 10 |   |
| Amortization                of derivatives                 |   |   | 1,947 |   |   |   | 251 |   |
| Amortization                of debt discount               |   |   | — |   |   |   | 88 |   |
| Total                interest expense                      |   | $ | 2,971 |   |   | $ | 477 |   |

----

|                                                                     |   |                                                                           |   |     |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|----------|
|                                                                     |   | **For                the Three Month****Period                Ended June 30,** |
| **  **                                                         |   | **2007**                                                                       |   | **2008** |
| **  **                                                         |   | *(Dollars                in thousands)*                                        |
| Adjustment                to fair value of derivatives                   |   | $                                                                              | (7,958 | )        |   | $ | 2,285 |   |
| Adjustment                to fair value of derivatives - other |   |                                                                           | 847    |     |   |   | 2,805 |   |

**3.      Liquidity and Capital Resources**

***Sources      of Liquidity***

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|
| **Source                of Funds**                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | **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                                                                                                                                                                                                                                                                                                              |   |                                     | 15,548 |   |
| Exercise                of 2,026,064 stock option and warrants                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                     | 483 |   |
| Proceeds                from private placement of senior secured convertible notes together                with                warrants to purchase 705,882 shares of Company’s common stock. 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)                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                     | 4,227 |   |
| Proceeds                from the issuance of demand notes                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                     | 1,760 |   |
| Proceeds                from the issuance of Long Term Notes                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                     | 1,051 |   |
| Proceeds                from issuance of warrants at $0.001 par value                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                     | 6 |   |
| Total                proceeds from financing through June 30, 2008                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                        | 62,391 |   |
| Financing                costs                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                     | (5,065 | ) |
| Net                proceeds per statement of cash flow                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                                        | 57,326 |   |

----

|   | (a) | On                May 21, 2007, we entered into an agreement to sell 15,000,000 of                common                stock at a purchase price of $1.00 per share in connection with the                Private Placement on March 31, 2008, we issued 4,475,000 shares.                We                received gross proceeds in the amount of $4,475,000 and net proceeds                in                the amount of $4,325,000 towards completion of the Private Placement.                The                agreement, as amended, provides for commissions of 10% of the amount                placed in addition to warrants to purchase 3,700,000 shares of our                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. We                decided not to sell common stock below $1.00 per share through November                9,                2007. We are 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. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | On                March 20, 2006, we completed the private placement of $20,000,000                of                senior secured notes together with warrants to purchase 705,882 shares                of                our common stock which was increased to 5,999,997 due to price re-set                from                $8.50 to $1.00. We will incur certain penalties if it fails to file,                obtain and maintain the effectiveness of a registration statement                covering                the Securities, such as cash payments to the note holders calculated                under                formulas based on the principal amount of the notes and aggregate                exercise                price of the warrants. A total of $1,553,000 in transaction fees                and                expenses have been paid by us, such that we realized net proceeds                in the                amount of $18,447,000. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**4.      Cash Flow**

***Six      Months Ended June 30, 2007 and 2008***

|                                                            |   | **Six                Month Period Ended June 30,** |
|-----------------------------------------------------------------|--------|----------------------------------------------------|
| **  **                                                |   | **2007**                                           |   | **2008** |   | **$****Change** |   | **%****Change** |
| **  **                                                |   | *(Dollars                in thousands)*            |
| Cash                flow used in operating activities           |   | $                                                  | (9,158 | ) |   | $ | (3,510 | ) |   | $ | 5,648 |   |   |   | (52 | )%  |
| Cash                flow used in investing activities           |   |                                               | (59 | ) |   |   | (2 | ) |   |   | 57 |   |   |   | (97 | )% |
| Cash                flow provided from financing activities (a) |   |                                               | 1,577 |   |   |   | 3,593 |   |   |   | 2,016 |   |   |   | 127 | %                  |

| (a)    | On                May 21, 2007 we entered into an agreement to sell 15,000,000 of common                stock at a purchase price of $1.00 per share in connection with Private                Placement to the investor and certain other subscribers pursuant                to a                subscription agreement. During the six month period ended June 30,                2008,                we issued 825,000 shares in exchange for gross proceeds of $825,000                and                net proceeds of $742,000 towards completion of the Private                Placement.                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | In                the period ended June 30, 2008 the Company sold $1,050,800 of long                term                notes that have an 18 month term (one note for $80,000 has a 5 year                term).                These notes were issued with 1,178,300 warrants which have a five                year                term and an exercise price of $1.00. These notes have an interest                rate of                10%. Commissions earned for the sale of these notes was                $105,000.                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | In                late 2007 and the first quarter of 2008, the Company sold $2,370,000                in                demand notes of which $1,670,000 was outstanding at June 30, 2008.                Starting in the second quarter and for the period ended June 30,                2008 the                Company sold $1,050,800 of long term notes that have an 18-month                term.                These notes were issued with 1,178,300 detachable warrants, which                have a                five-year term and an exercise price of $1.00. These notes have an                interest rate of 10%. |

----

**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)     |   | $                               | 3,531  |                                                  |   | $                            | 2,480  |                         |   | $                                                      | 1,051 |   |   | $ | — |   |   | $ | — |   |
| Operating                lease obligations (b)(c) |   |                            | 941    |                                                  |   |                         | 342    |                         |   |                                                   | 598 |   |   |   | — |   |   |   | — |   |
| Total                                             |   | $                               | 4,472  |                                                  |   | $                            | 2,822  |                         |   | $                                                      | 1,649 |   |   | $ | — |   |   | $ | — |   |

|   | (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. During the three months ended March 31, 2007, note                holders                converted $3,493,266 of the convertible senior secured notes to $3,653,980                shares of common stock for an average price of $0.96. During the                six                months ended June 30, 2008, convertible note holders elected to convert                $800,000 of their notes receivable to 800,000 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                $360,360. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | 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. The lease was terminated on March 14, 2008 in exchange for                the                amount of security deposit of $57,805. There is no future liability                after                this date. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**The      major outstanding contractual obligations are as follows:**

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

|   | Item   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | (1)    | The                Company entered into a joint patent agreement with Phage as of February                28, 2007. The Company 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. The Company 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 the Company 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, the Company 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 the Company                in                locations throughout the world other than United States, Canada,                Europe,                Japan, China, and the Republic of Korea. CPI is obligated to pay                the                Company 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                the Company’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 the Company a                royalty of ten percent net revenue from sales in its Asian                territories. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Hesperian                will assist the Company with the FDA approval process for                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                                        |   | Aug.                8, 2005   |   | Aug.                20, 2007                                           |
|                      |   |                                                        |   |                                                                |   |                          |   |                                                                   |
| 8                         |   | Phage                Biotechnology Corporation              |   | Lease                Guarantee - San                Diego |   | March                15, 2006 |   | Aug.                15, 2013                                           |
|                      |   |                                                        |   |                                                                |   |                          |   |                                                                   |
| 9                         |   | Promethean                                                  |   | Convertible                Notes                                    |   | March                20, 2006 |   | March                19, 2009                                          |
|                      |   |                                                        |   |                                                                |   |                          |   |                                                                   |
| 10                        |   | Chief                Executive Officer                      |   | Guarantee                agreement                                  |   | March                20, 2006 |   | First                date of generating revenue on repayment of notes. |
|                      |   |                                                        |   |                                                                |   |                          |   |                                                                   |
| 11                        |   | Chief                Executive Officer                      |   | Guarantee                reimbursement agreement                    |   | March                20, 2006 |   | First                date of generating revenue on repayment of notes. |
|                      |   |                                                        |   |                                                                |   |                          |   |                                                                   |
| 12                        |   | Kendle                (formerly Charles River Laboratories) |   | CRO                agreement                                        |   | Aug.                8, 2006   |   | Completion                of Phase II Severe Coronary Heart Disease    |
|                      |   |                                                        |   |                                                                |   |                          |   |                                                                   |
| 13                        |   | The                Bruckner Group                           |   | Feasibility                Study                                    |   | Aug.                4, 2006   |   | Upon                completion of study                                |
|                      |   |                                                        |   |                                                                |   |                          |   |                                                                   |
| 14                        |   | Investment                Banking                           |   | Investment                Banker                                    |   | June                6, 2006   |   | Ongoing                                                                |
|                      |   |                                                        |   |                                                                |   |                          |   |                                                                   |
| 15                        |   | Public                Accounting Firm                       |   | Professional                Services                                |   | July                1, 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. This contract                is now                terminated. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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) | 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, 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 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. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (13) | The                Bruckner Group Incorporated has been assisting the Company in exploring                the potential economic consequences of applying FGF-1 141                to                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. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Service      Fees Paid for Major Contractual Obligations:***

|                                                |   |                                                                                    |   |                                                                                                                                  |   |     |
|-----------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|                                                |   |  **  ****  ****  ****As                of June 30,** |   | **For                the****Period                from****March                1, 1998****(Inception)****to                June 30,** |
| **  **                                    |   | **2007**                                                                                |   | **2008**                                                                                                                              |   | **2008** |
| **  **                                    |   | *(Unaudited;                Dollars in thousands)*                                      |
| The                Bruckner Group                   |   | $                                                                                       | 617    |                                                                                                                                  |   | $        | — |   |   | $ | 1,068 |   |
| Touchstone                Research (C2R)(Hesperion) |   |                                                                                    | 293    |                                                                                                                                  |   |     | 14 |   |   |   | 4,896 |   |
| Kendle                (Charles River)               |   |                                                                                    | 328    |                                                                                                                                  |   |     | 154 |   |   |   | 1,877 |   |
| Total                                               |   | $                                                                                       | 1,238  |                                                                                                                                  |   | $        | 168 |   |   | $ | 7,841 |   |

**7.      Off-Balance Sheet Transactions**

----

**8.      Recently Issued Accounting Pronouncements**

*Accounting      for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement      No. 60 *

*The              Hierarchy of Generally Accepted Accounting Principles *
*The              Meaning of Present Fairly in Conformity With Generally Accepted Accounting              Principles*

*Disclosures              about Derivative Instruments and Hedging Activities, an amendment of              FASB              Statement No. 133 *
*Accounting              forDerivative Instruments and Hedging Activities*

*purchase            method*

----

**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**

**Plan          for Remediation of Material Weaknesses**

|  | • | Re-evaluate                      the qualifications of the third party                      expert; |
|--|---------|-----------------------------------------------------------------------------------------------------|

|  | • | Re-evaluate                      the processes surrounding the utilization of the third party                      expert,                      including; |
|--|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | • | Identification                      of how the error in identification of derivatives                      occurred; |
|--|---------|----------------------------------------------------------------------------------------------------------------------|

|  | • | Identification                      of how once the error occurred that review procedures did not                      disclose the                      error. |
|--|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | • | Re-designingthe                      process surrounding the utilization of the third party expert                      based on                      what we learn in the re-evaluation of the processes discussed                      immediately                      above in order to provide reasonable assurance that a material                      error                      cannot go undetected by the                      Company. |
|--|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Changes          in 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 Company**

***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.***

|   | · | seeks                regulatory approvals for its new drug                candidates. |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | develop,                formulate, manufacture and commercialize its new drug                candidates. |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | implement                additional internal systems and                infrastructure. |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | hire                additional clinical, scientific, administrative, sales and marketing                personnel. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

----

***Exercise      of the warrants that the company is issuing in conjunction with its private      placement of promissory notes could also cause substantial      dilution.***

***The      Company’s Chairman, President and CEO is a guarantor of its obligation under the      Company’s senior secured notes and warrants and private placement of notes and      warrants.***

----

***Conversion      into common stock of the senior secured notes and warrants that the Company      sold      in 2006 has also caused substantial dilution.***

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

|                                                                                            |   | **As                of****June                30,****2008** |   |
|-------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| **  **                                                                                |   | *(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****June                30,****2008** |   |
|--------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| **  **                                                                                             |   | (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****June                30,****2008** |   |
|-------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| **  **                                                        |   | *(In                thousands)*                             |   |
| Use                of proceeds in pre-clinical and clinical trials      |   | $                                                           | 1,138  |   |
| Use                of proceeds in general and administrative activities |   |                                                        | 3,073  |   |
| Interest                on senior secured notes                         |   |                                                        | 331    |   |
| Total                                                                   |   | $                                                           | 4,542  |   |

----

**Item      3. Defaults Upon Senior Securities**

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

| **Directors**                    |   | **For**  |        | **Against**  |   | **Abstain**  |   |
|----------------------------------|--------|---------------|-------------|-------------------|--------|-------------------|--------|
| Daniel                C. Montano |   |          | 97,574,193  |              |   | 0                 |   |   | 11,162,620 |   |
| Grant                Gordon      |   |          | 97,906,543  |              |   | 0                 |   |   | 10,830,270 |   |
| John                W. Jacobs    |   |          | 108,447,897 |              |   | 0                 |   |   | 288,916 |   |
| Mickael                A. Flaa   |   |          | 107,591,380 |              |   | 0                 |   |   | 1,145,433 |   |
| Thomas                Stegmann   |   |          | 108,604,815 |              |   | 0                 |   |   | 131,998 |   |
| Thomas                L. Ingram  |   |          | 107,611,890 |              |   | 0                 |   |   | 1,124,923 |   |
| Robert                Levin      |   |          | 107,590,027 |              |   | 0                 |   |   | 1,146,786 |   |
| Gary                Abromovitz   |   |          | 108,164,627 |              |   | 0                 |   |   | 572,186 |   |
| Joong                Ki Baik     |   |          | 107,416,880 |              |   | 0                 |   |   | 1,319,933 |   |
| Frederic                Chanson  |   |          | 103,836,224 |              |   | 0                 |   |   | 4,900,589 |   |

| **For**  |   | **Against**  |    | **Abstain**  |   |
|---------------|--------|-------------------|---------|-------------------|--------|
| 105,438,187   |   |              | 241,422 |              |   | 3,057,184 |   |

**Item      5. Other Information**

----

**Item      6. Exhibits**

| **Exhibit****No.**          |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1     |   | Restated                Certificate of Incorporation, dated July 22, 2004 (incorporated by                reference toExhibit                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 CardioVascular 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)                                                                    |

----

| **Exhibit****No.** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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                the2004                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)                                                                                                                           |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 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 (nka CardioVascular                BioTherapeutics, Inc.) (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 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)                                                        |

----

| **Exhibit****No.** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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)                                                                                                                                                                                                                               |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 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                August                16, 2006, between CardioVascular BioTherapeutics, Inc. and Phage                Biotechnology Corporation (incorporated                by reference to Exhibit 10.1 of the May 20, 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 theRegistrant’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    |   | 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    |   | FirmInvest,                AG Private Placement offer dated May 20, 2007 (incorporated by reference                to Exhibit 10.1 to the form 8-K filed on May 24, 2007).                                                                                                                                                                                                                                                                                                                                                   |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.36    |   | Engagement                Agreement, dated August 16, 2007, between CardioVascular BioTherapeutics,                Inc. and GHL Financial Services LTD., Inc. (incorporated by reference                to                Exhibit 10.36 onForm                10-Q 3 rd                Quarter 2007 filed with the Securities and Exchange Commission on                November                29, 2007).                                                                                                                   |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.37    |   | Amendment                to FirmInvest, AG Commitment Letter dated August 17, 2007 (incorporated                by                reference to Exhibit 10.2 to the Form 8-K filed on August 17,                2007).                                                                                                                                                                                                                                                                                                        |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.38    |   | Amendment                II to FirmInvest, AG Commitment Letter dated October 12, 2007                (incorporated by reference to Exhibit 10.38 on Form 10-Q 3 rd                Quarter 2007 filed with the Securities and Exchange Commission on                November                29, 2007).                                                                                                                                                                                                                       |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.39    |   | FirmInvest,                AG warrant dated October 12, 2007 to purchase 3,700,000 shares of                CardioVascular BioTherapeutics, Inc. Common Stock (incorporated by                reference to Exhibit 10.39 on Form 10-Q 3 rd                Quarter 2007 filed with the Securities and Exchange Commission on                November                29, 2007).                                                                                                                                                |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.40    |   | Form                of Subscription Agreement for Reg S Offering (incorporated by reference                to                Exhibit 10.40 on Form 10-Q 3 rd                Quarter, 2007 filed with the Securities and Exchange Commission                onNovember                29, 2007).                                                                                                                                                                                                                              |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.41    |   | Termination                of Lease Agreement, dated March 14, 2008 (incorporated by reference                to                Exhibit                10.01 to the form 8-K filed on March 24,                2008).                                                                                                                                                                                                                                                                                                        |

----

| **Exhibit****No.** |   | **Description** |
|--------------------|--------|-----------------|

| 10.42  |   | Addendum                to Letter Agreement with GHL Financial Services Ltd., Inc., dated                January                17, 2008.                                                              |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                   |
| 10.43  |   | Addendum                II to Letter Agreement with GHL Financial Services Ltd., Inc., dated                March                1, 2008.                                                              |
|   |   |                                                                                                                                                                                                   |
| 10.44  |   | Derma                Life Development Agreement, dated June 3, 2008 (incorporated by reference                to Exhibit 10.1 to the Form 8-K filed on June 16,                2008).                  |
|   |   |                                                                                                                                                                                                   |
| 10.45  |   | Derma                Life Technology Agreement, dated June 3, 2008 (incorporated by reference                to Exhibit 10.2 to the Form 8-K filed on June 16,                2008).                   |
|   |   |                                                                                                                                                                                                   |
| 10.46  |   | Derma                Life Sponsor Agreement, dated May 28, 2008 (incorporated by reference                to                Exhibit 10.3 to the Form 8-K filed on June 16, 2008).                      |
|   |   |                                                                                                                                                                                                   |
| 10.47  |   | ProDerm                Development Agreement, dated July 8, 2008 (incorporated by reference                to                Exhibit 10.1 to the Form 8-K filed on July 18, 2008).                     |
|   |   |                                                                                                                                                                                                   |
| 10.48  |   | ProDerm                Technology Agreement, dated July 8, 2008 (incorporated by reference                to                Exhibit 10.2 to the Form 8-K filed on July 18, 2008).                      |
|   |   |                                                                                                                                                                                                   |
| 10.49  |   | ProDerm                Sponsor Agreement, dated April 22, 2008 (incorporated by reference                to                Exhibit 10.3 to the Form 8-K filed on July 18, 2008).                       |
|   |   |                                                                                                                                                                                                   |
| 10.50  |   | Cardio                Derma Development Agreement, dated July 10, 2008 (incorporated by                reference to Exhibit 10.4 to the Form 8-K filed on July 18,                2008).               |
|   |   |                                                                                                                                                                                                   |
| 10.51  |   | Cardio                Derma Technology Agreement, dated July 10, 2008 (incorporated by                reference                to Exhibit 10.5 to the Form 8-K filed on July 18,                2008). |

| 24                     |   | Power                of Attorney (included on signature page of this registration                statement)                                                                                                                              |
|--------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       |   |                                                                                                                                                                                                                                     |
| 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.**                              |
|                      |                                                                          |                        |
| August                19, 2008 | By:                                                                      | /s/              Mickael A. Flaa |
|                           | Mickael                A. FlaaChief                Financial Officer and Treasurer |
|                           |                                                                                    |

----