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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q

QUARTERLY REPORT

pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010

001-33635

(Commission file number)

CARDIUM THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)



|                                                            |  |                                  
|----------------------------------------------------------- |  | ---------------------------------
|Delaware                                                    |  | 27-0075787                       
|(State of incorporation)                                    |  | (IRS Employer Identification No.)
|                                                            | 
|12255 El Camino Real, Suite 250
San Diego, California 92130 |  | (858) 436-1000                   
|(Address of principal executive offices)                    |  | (Registrants telephone number)  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company (as defined in Rule 12b-2 of the Exchange Act).



|                           |  |                      |  |                          |  |                             
|-------------------------- |  | -------------------- |  | ------------------------ |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer  x |  | Non-accelerated filer   ̈ |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):

 ̈  Yes    x  No

As of August 6, 2010 77,852,154 shares of the registrants common stock were outstanding.









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Unless the context requires otherwise, all references in this report to the
Company, Cardium, we, our, and us refer to Cardium Therapeutics, Inc. and, as applicable, Post-Hypothermia Corporation (formerly, InnerCool Therapies, Inc.) and Tissue Repair Company, each
a wholly-owned subsidiary of Cardium.

Special Note about Forward-Looking Statements

Certain statements in this report, including information incorporated by reference, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect current views about future events and
financial performance based on certain assumptions. They include opinions, forecasts, intentions, plans, goals, projections, guidance, expectations, beliefs or other statements that are not statements of historical fact. Words such as
may, will, should, could, would, expects, hope, plans, believes, anticipates, intends, estimates,
approximates, predicts, or projects, or the negative or other variation of such words, and similar expressions may identify a statement as a forward-looking statement. Any statements that refer to projections of
our future financial performance, our anticipated growth and trends in our business, our goals, strategies, focus and plans, and other characterizations of future events or circumstances, including statements expressing general optimism about future
operating results and the development of our products, are forward-looking statements. Forward-looking statements in this report are based upon, among other things, the Company’s assumptions with respect to:



| |  |  | future financial and operating results;
| | - |  | ---------------------------------------



| |  |  | our ability to fund operations and business plans, and the timing of any funding or corporate development transactions we may pursue;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing, conduct and outcome of discussions with regulatory agencies, regulatory submissions and clinical trials, including the timing for
completion of enrollment in clinical studies;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our beliefs and opinions about the safety and efficacy of our products and product candidates and the results of our clinical studies and trials;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to enter into acceptable relationships with one or more contract manufacturers or other service providers on which we may depend and the
ability of such contract manufacturers or other service providers to manufacture biologics, devices or key product components, or to provide other services, of an acceptable quality on a cost-effective basis;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to enter into acceptable relationships with one or more development or commercialization partners to advance the commercialization of new
products and product candidates and the timing of any product launches;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our growth, expansion and acquisition strategies, the success of such strategies, and the benefits we believe can be derived from such strategies;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our intellectual property rights and those of others, including actual or potential competitors;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | the outcome of litigation matters;
| | - |  | ----------------------------------



| |  |  | our personnel, consultants and collaborators;
| | - |  | ---------------------------------------------



| |  |  | operations outside the United States;
| | - |  | -------------------------------------



| |  |  | current and future economic and political conditions;
| | - |  | -----------------------------------------------------



| |  |  | overall industry and market performance;
| | - |  | ----------------------------------------



| |  |  | the impact of accounting pronouncements;
| | - |  | ----------------------------------------



| |  |  | management’s goals and plans for future operations; and
| | - |  | -------------------------------------------------------



| |  |  | other assumptions described in this report underlying or relating to any forward-looking statements
| | - |  | ---------------------------------------------------------------------------------------------------

The forward-looking statements in this report speak only as of the date of this report and caution should be taken not to place undue
reliance on any such forward-looking statements. Forward-looking statements are subject to certain events, risks, and uncertainties that may be outside of our control. When considering forward-looking statements, you should carefully review the
risks, uncertainties and other cautionary statements in this report as they identify certain important factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These factors
include, among others, the risks described under Item 1A of Part II and elsewhere in this report, as well as in other reports and documents we file with the United States Securities and Exchange Commission (SEC).



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TABLE OF CONTENTS



|           |  |                                                                                       |  |     
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                       |  | Page
|PART I     |  | FINANCIAL INFORMATION                                                                 |  | 1   
|           |  |                                                                                      
|Item 1.    |  | Financial Statements (Unaudited)                                                      |  | 1   
|           |  |                                                                                      
|           |  | Condensed Consolidated Balance Sheets                                                 |  | 1   
|           |  |                                                                                      
|           |  | Condensed Consolidated Statements of Operations                                       |  | 2   
|           |  |                                                                                      
|           |  | Condensed Consolidated Statements of Stockholders Equity (Deficiency)                |  | 3   
|           |  |                                                                                      
|           |  | Condensed Consolidated Statements of Cash Flows                                       |  | 4   
|           |  |                                                                                      
|           |  | Notes to Condensed Consolidated Financial Statements                                  |  | 5   
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 12  
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 14  
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 15  
|           |  |                                                                                      
|PART II    |  | OTHER INFORMATION                                                                     |  | 16  
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 16  
|           |  |                                                                                      
|Item 1A.   |  | Risk Factors                                                                          |  | 16  
|           |  |                                                                                      
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 16  
|           |  |                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 16  
|           |  |                                                                                      
|Item 5.    |  | Other Information                                                                     |  | 16  
|           |  |                                                                                      
|Item 6.    |  | Exhibits                                                                              |  | 16  
|           | 
|SIGNATURES |  | 17                                                                                   



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PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

CARDIUM THERAPEUTICS, INC. AND SUBSIDIARIES

(a development stage company)

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                       |  | June 30,2010 |             |   | December 31,2009 |  
|                                                                                                                                                       |  | (Unaudited)  |             |   | (Audited)        |  
|Assets                                                                                                                                                 |  |              |             |   |                  |   |             |  
|Current assets:                                                                                                                                        |  |              |             |   |                  |   |             |  
|Cash and cash equivalents                                                                                                                              |  | $            | 9,925,704   |   |                  | $ | 3,363,665   |  
|Restricted cash                                                                                                                                        |  |              | 1,225,000   |   |                  |   | 562,500     |  
|Accounts receivable                                                                                                                                    |  |              |            |   |                  |   | 115,138     |  
|Prepaid expenses and other current assets                                                                                                              |  |              | 104,438     |   |                  |   | 40,384      |  
|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|Total current assets                                                                                                                                   |  |              | 11,255,142  |   |                  |   | 4,081,687   |  
|Restricted cash                                                                                                                                        |  |              | 200,000     |   |                  |   | 862,500     |  
|Property and equipment, net                                                                                                                            |  |              | 299,747     |   |                  |   | 351,539     |  
|Deposits and other long term assets                                                                                                                    |  |              | 179,938     |   |                  |   | 179,938     |  
|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|Total assets                                                                                                                                           |  | $            | 11,934,827  |   |                  | $ | 5,475,664   |  
|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|Liabilities and Stockholders’Equity (deficiency)                                                                                                       |  |              |             |   |                  |   |             |  
|Current liabilities:                                                                                                                                   |  |              |             |   |                  |   |             |  
|Accounts payable                                                                                                                                       |  | $            | 1,006,508   |   |                  | $ | 2,300,786   |  
|Accrued liabilities                                                                                                                                    |  |              | 909,115     |   |                  |   | 336,457     |  
|Derivative liabilitiesfair value of warrants                                                                                                          |  |              | 2,258,987   |   |                  |   | 4,802,882   |  
|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|Current liabilities                                                                                                                                    |  |              | 4,174,610   |   |                  |   | 7,440,125   |  
|Deferred rent                                                                                                                                          |  |              | 179,965     |   |                  |   | 190,114     |  
|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|Total liabilities                                                                                                                                      |  |              | 4,354,575   |   |                  |   | 7,630,239   |  
|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|Commitments and contingencies                                                                                                                          |  |              |             |   |                  |   |             |  
|Stockholders’ equity (deficiency):                                                                                                                     |  |              |             |   |                  |   |             |  
|Common stock, $0.0001 par value; 200,000,000 shares authorized; issued and outstanding 77,852,154 at June 30, 2010 and
55,182,174 at December 31, 2009 |  |              | 7,785       |   |                  |   | 5,518       |  
|Additional paid-in capital                                                                                                                             |  |              | 85,528,239  |   |                  |   | 74,065,539  |  
|Deficit accumulated during development stage                                                                                                           |  |              | (77,955,772 | ) |                  |   | (76,225,632 | )
|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|Total stockholders’ equity (deficiency)                                                                                                                |  |              | 7,580,252   |   |                  |   | (2,154,575  | )
|                                                                                                                                                       |  |              |             |   |                  |   |             |  
|Total liabilities and stockholders’ equity (deficiency)                                                                                                |  | $            | 11,934,827  |   |                  | $ | 5,475,664   |  
|                                                                                                                                                       |  |              |             |   |                  |   |             |  

See accompanying notes, which are an integral part of these condensed consolidated financial statements.



1



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CARDIUM THERAPEUTICS, INC.

(a development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                               |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|-------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------------------ | - | ----------- | ------------------------------------------------------ |  | - | ---------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                                               |  | Three Months EndedJune 30, |            |   | Six Months EndedJune
30, |   |             | Period fromDecember 22, 2003(Inception)
toJune 30,2010 | 
|                                                               |  | 2010                       |            |   | 2009                     |   |             | 2010                                                   |  |   | 2009       |   | 
|Revenues                                                       |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Grant revenues                                                 |  | $                          |           |   |                          | $ | 6,996       |                                                        |  | $ |           |   |  | $ | 25,632      |   |  | $ | 1,378,681   |  
|                                                               |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Operating expenses                                             |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Research and development                                       |  |                            | 613,199    |   |                          |   | 1,107,147   |                                                        |  |   | 1,133,161  |   |  |   | 2,351,307   |   |  |   | 37,611,471  |  
|General and administrative                                     |  |                            | 1,358,870  |   |                          |   | 1,222,417   |                                                        |  |   | 2,319,495  |   |  |   | 2,510,141   |   |  |   | 30,231,044  |  
|                                                               |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Total operating expenses                                       |  |                            | 1,972,069  |   |                          |   | 2,329,564   |                                                        |  |   | 3,452,656  |   |  |   | 4,861,448   |   |  |   | 67,842,515  |  
|                                                               |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Loss from operations                                           |  |                            | (1,972,069 | ) |                          |   | (2,322,568  | )                                                      |  |   | (3,452,656 | ) |  |   | (4,835,816  | ) |  |   | (66,463,834 | )
|                                                               |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Change in fair value of derivative liabilities                 |  |                            | 1,269,610  |   |                          |   | (4,817,552  | )                                                      |  |   | 1,706,980  |   |  |   | (14,474,181 | ) |  |   | 10,226,477  |  
|Interest income                                                |  |                            | 12,878     |   |                          |   | 1,982       |                                                        |  |   | 17,710     |   |  |   | 6,773       |   |  |   | 1,549,877   |  
|Interest (expense)                                             |  |                            | (743       | ) |                          |   | (2,972,025  | )                                                      |  |   | (2,174     | ) |  |   | (4,550,115  | ) |  |   | (7,115,675  | )
|                                                               |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Net loss from continuing operations                            |  | $                          | (690,324   | ) |                          | $ | (10,110,163 | )                                                      |  | $ | (1,730,140 | ) |  | $ | (23,853,339 | ) |  | $ | (61,803,155 | )
|Net loss from discontinued operations                          |  |                            |           |   |                          | $ | (1,032,511  | )                                                      |  |   |           |   |  | $ | (2,026,212  | ) |  | $ | (22,561,220 | )
|Gain on sale of business unit                                  |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   | 6,408,603   |  
|                                                               |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Net loss                                                       |  | $                          | (690,324   | ) |                          | $ | (11,142,674 | )                                                      |  | $ | (1,730,140 | ) |  | $ | (25,879,551 | ) |  | $ | (77,955,772 | )
|                                                               |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Basic and diluted net loss per common share                    |  |                            |            |   |                          |   |             |                                                        |  |   |            |   |  |   |             |   |  |   |             |  
|Net loss from continuing operations                            |  | $                          | (0.01      | ) |                          | $ | (0.22       | )                                                      |  | $ | (0.03      | ) |  | $ | (0.51       | ) |  |   |             |  
|Net loss from discontinued operations                          |  | $                          | (0.00      | ) |                          | $ | (0.02       | )                                                      |  | $ | (0.00      | ) |  | $ | (0.04       | ) |  |   |             |  
|Net loss                                                       |  | $                          | (0.01      | ) |                          | $ | (0.24       | )                                                      |  | $ | (0.03      | ) |  | $ | (0.55       | ) |  |   |             |  
|Weighted average common shares outstanding  basic and diluted |  |                            | 77,852,154 |   |                          |   | 46,931,134  |                                                        |  |   | 68,959,510 |   |  |   | 46,930,788  |   |  |   |             |  

See accompanying notes, which are an integral part of these condensed consolidated financial
statements.



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CARDIUM THERAPEUTICS, INC. AND SUBSIDIARIES

(a development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’EQUITY (DEFICIENCY)

(Unaudited)



|                                                                                              |        |              |        |                          |       |                                          |   |            |                                      |   |             |   |  |   |            |  
|--------------------------------------------------------------------------------------------- | ------ | ------------ | ------ | ------------------------ | ----- | ---------------------------------------- | - | ---------- | ------------------------------------ | - | ----------- | - |  | - | ---------- | -
|                                                                                              |        | Common Stock |        | AdditionalPaid-InCapital |       | DeficitAccumulatedDuringDevelopmentStage |   |            | TotalStockholders’Equity(Deficiency) |  
|                                                                                              | Shares |              | Amount |                          |       |                                         
|BalanceJanuary 1, 2010                                                                       |        | 55,182,174   |        | $                        | 5,518 |                                          | $ | 74,065,539 |                                      | $ | (76,225,632 | ) |  | $ | (2,154,575 | )
|Stock option compensation expense                                                             |        |             |        |                          |      |                                          |   | 234,792    |                                      |   |            |   |  |   | 234,792    |  
|Reclassification of derivative liabilities that no longer contain price protection provisions |        |             |        |                          |      |                                          |   | 836,915    |                                      |   |            |   |  |   | 836,915    |  
|Sale of common stock, net of issuance costs                                                   |        | 22,669,980   |        |                          | 2,267 |                                          |   | 10,390,993 |                                      |   |            |   |  |   | 10,393,260 |  
|Net Loss                                                                                      |        |             |        |                          |      |                                          |   |           |                                      |   | (1,730,140  | ) |  |   | (1,730,140 | )
|                                                                                              |        |              |        |                          |       |                                          |   |            |                                      |   |             |   |  |   |            |  
|BalanceJune 30, 2010                                                                         |        | 77,852,154   |        | $                        | 7,785 |                                          | $ | 85,528,239 |                                      | $ | (77,955,772 | ) |  | $ | 7,580,252  |  
|                                                                                              |        |              |        |                          |       |                                          |   |            |                                      |   |             |   |  |   |            |  

See accompanying notes, which are an integral part of these condensed consolidated financial statements.



3



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CARDIUM THERAPEUTICS, INC. AND SUBSIDIARIES

(a development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|----------------------------------------------------------------------------------- | ---- | -------------------------------- | ---------- | ---- | -------------------------------------------- | - | ----------- | - |  | - | ----------- | -
|                                                                                    |      | For The Six Months EndedJune 30, |            |      | December 22, 2003(Inception) ToJune 30, 2010 |  
|                                                                                    | 2010 |                                  |            | 2009 |                                              |  
|Cash Flows From Operating Activities                                                |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Net loss                                                                            |      | $                                | (1,730,140 | )    |                                              | $ | (25,879,551 | ) |  | $ | (77,955,772 | )
|Adjustments to reconcile net loss to net cash used in operating activities:         |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Gain on sale of discontinued operation                                              |      |                                  |           |      |                                              |   |            |   |  |   | (6,408,603  | )
|Loss on abandonment of leaseholds                                                   |      |                                  |           |      |                                              |   |            |   |  |   | 135,344     |  
|Depreciation                                                                        |      |                                  | 82,255     |      |                                              |   | 356,967     |   |  |   | 1,812,786   |  
|Amortizationintangibles                                                            |      |                                  |           |      |                                              |   | 394,828     |   |  |   | 2,696,193   |  
|Amortizationdebt discount                                                          |      |                                  |           |      |                                              |   | 3,257,859   |   |  |   | 5,291,019   |  
|Amortizationdeferred financing costs                                               |      |                                  |           |      |                                              |   | 559,541     |   |  |   | 925,859     |  
|Provision for obsolete inventory                                                    |      |                                  |           |      |                                              |   |            |   |  |   | 200,000     |  
|Change in fair value of warrants                                                    |      |                                  | (1,706,980 | )    |                                              |   | 14,474,181  |   |  |   | (10,226,477 | )
|Common stock and warrants issued for services and reimbursement of expenses         |      |                                  |           |      |                                              |   |            |   |  |   | 203,882     |  
|Stock based compensation expense                                                    |      |                                  | 234,792    |      |                                              |   | 370,621     |   |  |   | 7,091,370   |  
|In-process purchased technology                                                     |      |                                  |           |      |                                              |   |            |   |  |   | 2,027,529   |  
|Changes in operating assets and liabilities, excluding effects of acquisition:      |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Accounts receivable                                                                 |      |                                  | 115,138    |      |                                              |   | 126,120     |   |  |   | 78,988      |  
|Inventories                                                                         |      |                                  |           |      |                                              |   | 239,836     |   |  |   | (1,806,159  | )
|Prepaid expenses and other assets                                                   |      |                                  | (64,054    | )    |                                              |   | (22,806     | ) |  |   | (217,028    | )
|Deposits                                                                            |      |                                  |           |      |                                              |   | (47,500     | ) |  |   | (193,380    | )
|Accounts payable                                                                    |      |                                  | (1,294,278 | )    |                                              |   | 525,671     |   |  |   | 2,143,230   |  
|Accrued liabilities                                                                 |      |                                  | 572,658    |      |                                              |   | 1,448,317   |   |  |   | 225,997     |  
|Deferred rent                                                                       |      |                                  | (10,149    | )    |                                              |   | (84         | ) |  |   | 179,965     |  
|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Net cash used in operating activities                                               |      |                                  | (3,800,758 | )    |                                              |   | (4,196,000  | ) |  |   | (73,795,257 | )
|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Cash Flows From Investing Activities                                                |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|In-process technology purchased from Tissue Repair Company                          |      |                                  |           |      |                                              |   |            |   |  |   | (1,500,000  | )
|Purchases of property and equipment                                                 |      |                                  | (30,463    | )    |                                              |   |            |   |  |   | (2,790,198  | )
|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Net cash used in investing activities                                               |      |                                  | (30,463    | )    |                                              |   |            |   |  |   | (4,290,198  | )
|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Cash Flows From Financing Activities                                                |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Proceeds from officer loan                                                          |      |                                  |           |      |                                              |   |            |   |  |   | 62,882      |  
|Cash acquired in Aries merger and InnerCool acquisition                             |      |                                  |           |      |                                              |   |            |   |  |   | 1,551,800   |  
|Restricted cash  collateral for letter of credit                                   |      |                                  |           |      |                                              |   |            |   |  |   | (300,000    | )
|Restricted cash  proceeds placed in escrow from sale of discontinued operation     |      |                                  |           |      |                                              |   |            |   |  |   | (1,125,000  | )
|Proceeds from the exercise of warrants, net                                         |      |                                  |           |      |                                              |   | (4          | ) |  |   | 1,258,448   |  
|Proceeds from debt financing agreement, net of deferred financing costs of $871,833 |      |                                  |           |      |                                              |   | 3,966,194   |   |  |   | 14,378,167  |  
|Proceeds from the sale of business unit                                             |      |                                  |           |      |                                              |   |            |   |  |   | 11,250,000  |  
|Repayment of debt                                                                   |      |                                  |           |      |                                              |   | (100,000    | ) |  |   | (15,750,000 | )
|Proceeds from the sale of common stock, net of issuance cost                        |      |                                  | 10,393,260 |      |                                              |   |            |   |  |   | 76,684,862  |  
|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Net cash provided by financing activities                                           |      |                                  | 10,393,260 |      |                                              |   | 3,866,190   |   |  |   | 88,011,159  |  
|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Net increase in cash                                                                |      |                                  | 6,562,039  |      |                                              |   | (329,810    | ) |  |   | 9,925,704   |  
|Cash and cash equivalents at beginning of period                                    |      |                                  | 3,363,665  |      |                                              |   | 1,102,894   |   |  |   |            |  
|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Cash and cash equivalents at end of period                                          |      | $                                | 9,925,704  |      |                                              | $ | 773,084     |   |  | $ | 9,925,704   |  
|                                                                                    |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Supplemental Disclosures of Cash Flow Information:                                  |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Cash paid for interest                                                              |      | $                                | 2,170      |      |                                              | $ | 359,285     |   |  | $ | 1,382,470   |  
|Cash paid for income taxes                                                          |      | $                                | 2,400      |      |                                              | $ |            |   |  | $ | 24,562      |  
|Non-Cash Activity:                                                                  |      |                                  |            |      |                                              |   |             |   |  |   |             |  
|Subscription receivable for common shares                                           |      | $                                |           |      |                                              | $ |            |   |  | $ | 17,000      |  
|Common stock issued for repayment of loans                                          |      | $                                |           |      |                                              | $ |            |   |  | $ | 62,882      |  
|Common stock and warrants issued for services and reimbursement of expenses         |      | $                                |           |      |                                              | $ |            |   |  | $ | 203,882     |  
|Net assets acquired for the issuance of common stock (exclusive of cash acquired)   |      | $                                |           |      |                                              | $ |            |   |  | $ | 5,824,000   |  
|Warrants issued with debt                                                           |      | $                                |           |      |                                              | $ | 1,363,380   |   |  | $ | 15,861,172  |  
|Reclassification of derivative liabilities with expired price protection provisions |      | $                                | (836,915   | )    |                                              | $ | (315,680    | ) |  | $ | (3,375,708  | )
|Issuance of note for accrued milestone payment                                      |      | $                                |           |      |                                              | $ |            |   |  | $ | 500,000     |  

See accompanying
notes, which are an integral part of these condensed consolidated financial statements.



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##### Table of Contents

CARDIUM THERAPEUTICS, INC. AND SUBSIDIARIES

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.
Organization and Liquidity

Organization

Cardium Therapeutics, Inc. (the Company, Cardium, we, our and
us) was incorporated in Delaware in December 2003. Our business is focused on the acquisition and strategic development of product opportunities or businesses having the potential to address significant unmet medical needs, and definable
pathways to commercialization, partnering or other monetization following the achievement of corresponding development objectives. In October 2005, we acquired a portfolio of biologic growth factors and related delivery techniques from the Schering
AG Group (now part of Bayer AG) for potential use in treating ischemic and other cardiovascular conditions. In March 2006, we acquired the technologies and products of InnerCool Therapies, Inc., a medical technology company in the emerging field of
therapeutic hypothermia, or patient temperature modulation, whose systems and products are designed to rapidly and controllably cool the body to reduce cell death and damage following acute ischemic events such as cardiac arrest and stroke, and to
potentially lessen or prevent associated injuries such as adverse neurologic outcomes. In August 2006, we acquired rights to assets and technologies of Tissue Repair Company, a company focused on the development of growth factor therapeutics for the
potential treatment of tissue wounds such as chronic diabetic wounds, and whose product candidate, ExcellarateTMis initially being developed as a single administration for the treatment of non-healing, neuropathic diabetic foot ulcers. InnerCool Therapies and Tissue Repair Company are each operated as
a wholly-owned subsidiary of Cardium.

On July 24, 2009, we closed a transaction for the sale of all of the assets and
liabilities of our InnerCool Therapies business to Philips Electronics North America Corporation (Philips) for $11.25 million, of which $1,125,000 is held in escrow as security for certain indemnification obligations, as well as the
transfer of approximately $1.5 million in trade payables (the Philips Transaction). The operations of InnerCool are presented as a discontinued operation in our condensed consolidated statements of operations. After the closing, the name
of InnerCool Therapies, Inc. was changed to Post-Hypothermia Corporation.

We are a development stage company. We have yet to
generate positive cash flows from operations, and are essentially dependent on debt and equity funding to finance our operations.

Liquidity and Going Concern

As of June 30, 2010 we had $9,925,704 in cash and cash equivalents and $1,425,000 in restricted cash. Our working capital at
June 30, 2010 was $9,339,519 (excluding $2,258,987 for the fair value of derivative liabilities).

Net cash used in
operating activities was $3,800,758 for the six months ended June 30, 2010 compared to $4,196,000 for the same period last year. The decrease in net cash used in operating activities for the six months ended June 30, 2010 when compared to
the same period last year was a result of the decrease in company wide spending, the sale of all the assets of our InnerCool business in July 2009 and the completion of the MATRIX clinical study during the fourth quarter of 2009.

Our primary source of liquidity has been cash flows from financing activities and in particular proceeds from the sales of our debt and
equity securities. On March 12, 2010, we completed a registered direct offering of 2,266,998 units, which were sold to institutional and retail investors, at a price of $5.00 per unit. Each unit consisted of 10 shares of common stock and a
warrant to purchase 5 shares of common stock. The warrants are exercisable at an exercise price of $0.64 per share, at any time after six months from the date of closing and have a term of exercise equal to five years from the date the warrants are
initially exercisable. In the aggregate 22,669,980 shares of common stock and warrants to purchase an additional 11,334,990 shares of common stock were issued in the offering. The offering resulted in gross proceeds to us of $11.3 million, and net
proceeds of approximately $10.4 million after payment of offering fees and expenses.

Since inception, our operations have
consumed substantial amounts of cash and we have had only limited revenues. From inception (December 22, 2003) to June 30, 2010, net cash used in operating activities has been $73,795,257, net cash provided by financing activities was
$88,011,159, and net cash used in investing activities has been $4,290,198.

Our primary source of capital has been the cash
that we generated from the sale of debt or equity securities. We do not currently have any line of credit or other sources of capital available to us.

We have incurred significant losses from operations to date and anticipate that the negative cash flow from operations will continue for
2010. We expect that our existing capital will support our operations for at least the next twelve months, during which time we hope to complete a strategic licensing agreement or secure the approval and future sales of the Excellagen product family
and/or another corporate transaction.



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##### Table of Contents

On August 9, 2010 we filed a Form S-3 Registration Statement putting in place a
universal shelf registration statement covering up to $50 million of any combination of common stock, preferred stock, debt securities, warrants, or units we may offer from time to time in the future. Specific terms of the offering will be provided
in one or more supplements to the prospectus. This registration statement is intended to allow us to capitalize on strategic opportunities that may arise; we do not have any current commitments for shares to be registered under the registration
statement. The registration statement has a three year life and replaces an existing universal shelf registration statement scheduled to expire later in the year.

If we fail to enter into a strategic licensing arrangement or generate sufficient product sales, we will not generate sufficient cash
flows to cover our operating expenses. If needed, we intend to secure additional working capital through the sale of additional debt or equity securities. No arrangements or commitments for any such financing are in place at this time, and we cannot
give any assurances about the availability or terms of any future financing.

Our history of recurring losses and
uncertainties as to whether our operations might become profitable raise substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments related to the recoverability
of assets or classifications of liabilities that might be necessary should we be unable to continue as a going concern.

Note 2. Basis of
Presentation and Summary of Certain Significant Accounting Policies

Basis of Presentation

Our principal activities are expected to focus on the commercialization of our licensed technologies, other technologies and the expansion
of our existing product candidates. The accompanying condensed consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (the FASB) Accounting Standards Codification
(ASC) Topic 915, Accounting and Reporting by Development Stage Enterprises.

The accompanying interim
unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to the
instructions to Form 10-Q and applicable rules and regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and
regulations. In management’s opinion, all adjustments necessary for a fair presentation of the condensed consolidated financial position, results of operations and cash flows have been included and are of a normal, recurring nature. The
condensed consolidated results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

The accompanying condensed consolidated financial statements and these notes should be read in conjunction with our audited financial
statements included in our Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Annual Report). The accounting policies used to prepare the financial statements included in this report are the same as those
described in the notes to the consolidated financial statements in our 2009 Annual Report unless otherwise noted below.

Earnings Per
Common Share

We compute earnings per share, or loss per share, in accordance with ASC Topic 260, Earnings Per
Share. ASC Topic 260 requires dual presentation of basic and diluted earnings per share.

Basic income or loss per
common share for continuing operations and discontinued operations is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted income or loss per common share is computed by
dividing net income or loss by the weighted average number of common shares outstanding, plus the issuance of common shares, if dilutive, resulting from the exercise of outstanding stock options and warrants. These potentially dilutive securities
were not included in the calculation of loss per common share for the three and six month periods ended June 30, 2010 and 2009, due to the losses we incurred during such periods as their inclusion would have been anti-dilutive.

Potentially dilutive securities not included in diluted loss per common share for continuing operations and discontinued operations
consisted of outstanding stock options and warrants to acquire 42,729,005 shares as of June 30, 2010 and 23,717,953 shares as of June 30, 2009.

Stock-Based Compensation

In accordance with ASC Topic 718 Compensation-Stock Compensation, stock-based compensation costs are recognized on a
straight-line basis over the requisite service period of the award, which is generally the vesting term of the award.



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##### Table of Contents

Total stock-based compensation expense included in the condensed consolidated statements of
operations was allocated to research and development and general and administrative expenses as follows:



|                           |  |                                    |         |      |   |        
|-------------------------- |  | ---------------------------------- | ------- | ---- | - | -------
|                           |  | For the Three MonthsEnded June 30,
|                           |  | 2010                               |         | 2009
|Research and development   |  | $                                  | 42,825  |      | $ | 55,118 
|General and administrative |  |                                    | 71,488  |      |   | 65,490 
|                           |  |                                    |         |      |   |        
|Total                      |  | $                                  | 114,313 |      | $ | 120,608
|                           |  |                                    |         |      |   |        



|                           |  |                                  |         |      |   |        
|-------------------------- |  | -------------------------------- | ------- | ---- | - | -------
|                           |  | For the Six MonthsEnded June 30,
|                           |  | 2010                             |         | 2009
|Research and development   |  | $                                | 85,473  |      | $ | 169,374
|General and administrative |  |                                  | 149,319 |      |   | 201,247
|                           |  |                                  |         |      |   |        
|Total                      |  | $                                | 234,792 |      | $ | 370,621
|                           |  |                                  |         |      |   |        

As of June 30, 2010 we had $626,794 of unvested
stock-based compensation at fair value remaining to be expensed ratably over the period July 2010 through May 2013.

Income Taxes

In accordance with ASC Topic 740 Income Taxes interest costs related to unrecognized tax benefits are required
to be calculated (if applicable) and would be reclassified as interest expense, net. Penalties if incurred would be recognized as a component of general and administrative expense.

We file income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, we are no
longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2006.

As of
December 31, 2009 and for the six months ended June 30, 2010, no liability for unrecognized tax benefits was required to be recorded. We do not expect our unrecognized tax benefit position to change during the next 12 months.

As of December 31, 2009 and June 30, 2010, we recognized deferred tax assets of $29.3 million and $30.6 million, respectively
which are primarily comprised of net operating loss carryovers. As of December 31, 2009 and for the six months ended June 30, 2010 we had net operating loss carryovers of $71.4 million and $75 million, respectively. These net operating
losses are subject to Internal Revenue Code Section 382, which could result in limitations on the amount of such losses that could be utilized during any taxable year. The net operating losses begin to expire in 2023 for federal income tax
purposes and in 2013 for state income tax purposes.

The ultimate realization of deferred tax assets depends on the generation
of future taxable income during the periods in which those net operating losses are available. We consider projected future taxable income and tax planning strategies in making this assessment. At present, we do not have a sufficient history of
income to conclude that it is more-likely-than-not that we will realize the benefits of our deferred tax assets and therefore we have recorded a valuation allowance for the full amount of our deferred tax assets.

A valuation allowance will be maintained until sufficient positive evidence exists to support the reduction of any portion or all of the
valuation allowance. Should we become profitable in future periods with supportable trends, the valuation allowance will be recalculated accordingly.

Note 3. Disposal of Long-lived Assets

In accordance with the provisions of ASC Topic 360, Accounting for the Impairment or Disposal of Long-Lived Assets, the
disposal of all of the assets and liabilities of our InnerCool Therapies business segment is presented as a discontinued operation in the accompanying condensed consolidated financial statements.



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##### Table of Contents

The following results of operations of InnerCool Therapies are presented as a loss from a
discontinued operation in the condensed consolidated statements of operations:



|                                      |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  
|------------------------------------- |  | -------------------------- | - | ---- | ------------------------ | ---------- | ---- | ----------------------------------------------------- | ---- | - |  | - | ---------- | - |  | - | ----------- | -
|                                      |  | Three Months EndedJune 30, |   |      | Six Months EndedJune 30, |            |      | Period
fromDecember 22,2003(Inception) toJune 30,2010 |     
|                                      |  | 2010                       |   | 2009 |                          |            | 2010 |                                                       | 2009 |   | 
|Revenues                              |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  
|Product sales                         |  | $                          |  |      | $                        | 370,293    |      |                                                       | $    |  |  | $ | 720,070    |   |  | $ | 4,620,076   |  
|Cost of goods sold                    |  |                            |  |      |                          | 322,085    |      |                                                       |      |  |  |   | 528,679    |   |  |   | 4,313,998   |  
|                                      |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  
|Gross profit                          |  |                            |  |      |                          | 48,208     |      |                                                       |      |  |  |   | 191,391    |   |  |   | 306,078     |  
|Operating expenses                    |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  
|Research and development              |  |                            |  |      |                          | 107,173    |      |                                                       |      |  |  |   | 289,741    |   |  |   | 5,965,833   |  
|Selling, general and administrative   |  |                            |  |      |                          | 776,132    |      |                                                       |      |  |  |   | 1,513,443  |   |  |   | 13,681,733  |  
|Amortizationintangibles              |  |                            |  |      |                          | 197,414    |      |                                                       |      |  |  |   | 394,828    |   |  |   | 2,696,193   |  
|                                      |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  
|Total operating expenses              |  |                            |  |      |                          | 1,080,719  |      |                                                       |      |  |  |   | 2,198,012  |   |  |   | 22,343,759  |  
|                                      |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  
|Loss from operations                  |  |                            |  |      |                          | (1,032,511 | )    |                                                       |      |  |  |   | (2,006,621 | ) |  |   | (22,067,681 | )
|                                      |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  
|Interest, net                         |  |                            |  |      |                          |           |      |                                                       |      |  |  |   | (19,591    | ) |  |   | (523,539    | )
|                                      |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  
|Net loss from discontinued operations |  | $                          |  |      |                          | (1,032,511 | )    |                                                       | $    |  |  | $ | (2,026,212 | ) |  | $ | (22,561,220 | )
|                                      |  |                            |   |      |                          |            |      |                                                       |      |   |  |   |            |   |  |   |             |  

Note 4. Property and Equipment

Property and equipment consisted of the following:



|                                          |  |              |            |   |                  |   |           |  
|----------------------------------------- |  | ------------ | ---------- | - | ---------------- | - | --------- | -
|                                          |  | June 30,2010 |            |   | December 31,2009 |  
|Computer and telecommunication equipment  |  | $            | 495,672    |   |                  | $ | 466,329   |  
|Machinery and equipment                   |  |              | 31,779     |   |                  |   | 31,779    |  
|Office equipment                          |  |              | 53,050     |   |                  |   | 53,050    |  
|Instrumentation                           |  |              | 115,421    |   |                  |   | 115,421   |  
|Office furniture and equipment            |  |              | 474,772    |   |                  |   | 473,652   |  
|Leasehold improvements                    |  |              | 152,774    |   |                  |   | 152,774   |  
|                                          |  |              |            |   |                  |   |           |  
|                                          |  |              | 1,323,468  |   |                  |   | 1,293,005 |  
|Accumulated depreciation and amortization |  |              | (1,023,721 | ) |                  |   | (941,466  | )
|                                          |  |              |            |   |                  |   |           |  
|Property and equipment, net               |  | $            | 299,747    |   |                  | $ | 351,539   |  
|                                          |  |              |            |   |                  |   |           |  

Depreciation and amortization of property and equipment for continuing operations totaled $42,026 for the
three months ended June 30, 2010 and $82,255 for the six months ended June 30, 2010. For the three months ended June 30, 2009, depreciation and amortization of property and equipment totaled $81,340 and for the six months ended
June 30, 2009 totaled $356,967. Depreciation and amortization of property and equipment totaled $1,812,786 for the period from December 22, 2003 (date of inception) through June 30, 2010.



8



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##### Table of Contents

Note 5. Accrued Liabilities

Accrued liabilities consisted of the following:



|                                  |  |              |         |                  |   |        
|--------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                  |  | June 30,2010 |         | December 31,2009
|Accrued expenses - other          |  |              | 34,658  |                  |   | 24,608 
|Accrued compensation and benefits |  |              | 874,457 |                  |   | 311,849
|                                  |  |              |         |                  |   |        
|Total                             |  | $            | 909,115 |                  | $ | 336,457
|                                  |  |              |         |                  |   |        

Note 6. Derivative Liabilities

The adoption of ASC Topic 815 Derivatives and Hedging affected the accounting for warrants with price-based anti dilution
provisions (or down-round provisions). Down-round provisions reduce the exercise price or increase the number of shares underlying common stock equivalents for subsequent issuances of new equity or equity linked securities at prices, or
with exercise prices, that are more favorable than the security that includes such down-round provisions. We evaluated whether our outstanding warrants to acquire our stock contain down-round provisions or otherwise could result in modification of
the exercise price under the respective warrant agreements. A summary of our warrants that contain such characteristics is as follows:



|                                     |  |                                       |   |  |            |            |  
|------------------------------------ |  | ------------------------------------- | - |  | ---------- | ---------- | -
|                                     |  | Number ofWarrants (shares subject to) |   |  | Fair Value |           
|Balance outstanding, January 1, 2010 |  | 13,993,184                            |   |  | $          | 4,802,882  |  
|Warrants issued                      |  |                                      |   |  |            |           |  
|Warrants expired or cancelled        |  | (3,935,500                            | ) |  |            | (836,915   | )
|Fair value adjustment                |  | 2,838,777                             |   |  |            | (1,706,980 | )
|                                     |  |                                       |   |  |            |            |  
|Balance outstanding, June 30, 2010   |  | 12,896,461                            |   |  | $          | 2,258,987  |  
|                                     |  |                                       |   |  |            |            |  

We had warrants to purchase 13,993,184 shares of our common stock outstanding that contain down-round
provisions as of January 1, 2010. The aggregate fair value at such date of all such warrants amounted to $4,802,882. We calculated the fair value of these warrants using the Black-Scholes Option Pricing Model with the following weighted average
assumptions: exercise price $1.30, closing price of common stock $0.68, risk free interest rate of 1.27%, dividend yield of 0%, volatility of 98% and a remaining contractual term of 3.36 years.

During the six months ended June 30, 2010 we issued warrants to purchase 2,838,777 shares of our common stock when down-round
provisions were triggered on March 12, 2010 as a result of the registered direct offering. During the six months ended June 30, 2010 we cancelled warrants to purchase 3,935,500 shares of our common stock as their down-round provisions were
no longer in effect. The fair value of the warrants we cancelled amounted to $836,915 and were recorded as an increase in paid in capital and a reduction of derivative liabilities. As a result, we had warrants to purchase 12,896,461 shares of our
common stock outstanding that contain down-round provisions as of June 30, 2010. The aggregate fair value at such date of all such warrants amounted to $2,258,987. We calculated the fair value of these warrants using the Black-Scholes Option
Pricing Model with the following weighted average assumptions: exercise price $0.52, closing price of common stock $0.35, risk free interest rate of 1.05%, dividend yield of 0%, volatility of 97% and a remaining contractual term of 2.86 years. We
recorded a gain of $1,269,210 and 1,706,980 for the three and six months ended June 30, 2010, respectively which is shown as change in fair value of derivative liabilities in our condensed consolidated statement of operations for each of those
periods. Additionally we recorded a decrease of $1,706,980 in the derivative liability to fair value as of June 30, 2010.

The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entitys own assumptions
(unobservable inputs). The hierarchy consists of three levels:



| |  |  | Level oneQuoted market prices in active markets for identical assets or liabilities;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Level twoInputs other than level one inputs that are either directly or indirectly observable; and
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Level threeUnobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those
assumptions that a market participant would use.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Determining which category an asset or liability falls within the hierarchy requires
significant judgment. We evaluate our hierarchy disclosures each quarter. Assets and liabilities measured at fair value on a recurring basis are summarized as follows:



|       |  |         |   |         |   |         |  |              |   |  |   |  
|------ |  | ------- | - | ------- | - | ------- |  | ------------ | - |  | - | -
|Assets |  | Level 1 |   | Level 2 |   | Level 3 |  | June 30,2010
|None   |  | $       |  |         | $ |        |  | $            |  |  | $ | 
|       |  |         |   |         |   |         |  |              |   |  |   |  



|                                                             |  |         |   |         |   |         |  |              |           |  |   |          
|------------------------------------------------------------ |  | ------- | - | ------- | - | ------- |  | ------------ | --------- |  | - | ---------
|Liabilities                                                  |  | Level 1 |   | Level 2 |   | Level 3 |  | June 30,2010
|Fair value of common stock warrants (derivative liabilities) |  | $       |  |         | $ |        |  | $            | 2,258,987 |  | $ | 2,258,987
|                                                             |  |         |   |         |   |         |  |              |           |  |   |          
|Total                                                        |  | $       |  |         | $ |        |  | $            | 2,258,987 |  | $ | 2,258,987
|                                                             |  |         |   |         |   |         |  |              |           |  |   |          

The following table provides the assets and
liabilities carried at fair value measured on a recurring basis as of December 31, 2009:



|                       |  |                     |           |                                              |   |                                             |  |                                         |   |  |   |          
|---------------------- |  | ------------------- | --------- | -------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | - |  | - | ---------
|                       |  |                     |           | Fair Value Measurements at December 31, 2009
|                       |  | Total CarryingValue |           | Quotedprices inactive markets(Level 1)       |   | Significant otherobservable inputs(Level 2) |  | Significantunobservable inputs(Level 3)
|Derivative liabilities |  | $                   | 4,802,882 |                                              | $ |                                            |  | $                                       |  |  | $ | 4,802,882
|                       |  |                     |           |                                              |   |                                             |  |                                         |   |  |   |          

Note 7. Stockholders Equity (Deficiency)

Common Stock

On
March 12, 2010, we completed a registered direct offering of 2,266,998 units, which were sold to institutional and retail investors, at a price of $5.00 per unit. The offering resulted in gross proceeds to us of $11.3 million and net proceeds
of approximately $10.4 million after payment of offering fees and expenses. Each unit consisted of 10 shares of common stock and a warrant to purchase 5 shares of common stock. In the aggregate 22,669,980 shares of common stock and warrants to
purchase an additional 11,334,990 shares of common stock were issued in the offering. Dawson James received placement agent fees of $793,449 and a warrant to purchase an aggregate of 1,133,499 shares of common stock, exercisable at $0.64 per share.
The placement agents warrants expire on December 9, 2012.

Option Activity

We have an equity incentive plan that was established in 2005 under which 5,665,856 shares of our common stock have been reserved for
issuance to our employees, non-employee directors and consultants.

The following is a summary of stock option activity under
our equity incentive plan and warrants issued outside of the plan to employees and consultants, during the six months ended June 30, 2010:



|                                     |  |                             |   |  |                                |      |                                                   |    
|------------------------------------ |  | --------------------------- | - |  | ------------------------------ | ---- | ------------------------------------------------- | ---
|                                     |  | Number ofOptions orWarrants |   |  | Weighted AverageExercise Price |      | WeightedAverageRemainingContractualLife(in years)
|Balance outstanding, January 1, 2010 |  | 4,025,000                   |   |  | $                              | 1.67 |                                                   | 5.6
|Granted                              |  |                            |   |  |                                |     |                                                   |   
|Exercised                            |  |                            |   |  |                                |     |                                                   |   
|Expired (vested)                     |  |                            |   |  |                                |     |                                                   |   
|Cancelled (unvested)                 |  | (164,617                    | ) |  |                                | .90  |                                                   |   
|                                     |  |                             |   |  |                                |      |                                                   |    
|Balance outstanding, June 30, 2010   |  | 3,860,383                   |   |  | $                              | 1.76 |                                                   | 5.1
|                                     |  |                             |   |  |                                |      |                                                   |    
|Exercisable, June 30, 2010           |  | 2,862,373                   |   |  |                                | 1.97 |                                                   | 4.9
|                                     |  |                             |   |  |                                |      |                                                   |    
|Unvested, June 30, 2010              |  | 998,010                     |   |  |                                | 0.95 |                                                   | 5.6
|                                     |  |                             |   |  |                                |      |                                                   |    

Warrants

In connection with the March 2010 registered direct offering of 2,266,998 units, we sold warrants to purchase an aggregate of
11,334,990 shares of common stock. The common stock purchase warrants are exercisable at an exercise price of $0.64 per share, at any time after six months from the date of closing and have a term of exercise equal to five years from the date the
warrants are initially exercisable. Dawson James Securities, Inc. acted as exclusive placement agent for the offering. Dawson James received placement agent fees of $793,449 and a warrant to purchase an aggregate of 1,133,499 shares of common stock,
exercisable at $0.64 per share. The placement agent warrants expire on December 19, 2012.



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Before the closing of the March 2010 offering we had warrants to purchase 13,706,202 shares
of common stock outstanding with down-round provisions. As a result of the issuance of the securities in the March 2010 offering and the terms of the down-round provisions of our then outstanding warrants, the exercise price of all such warrants was
reduced to $0.50 per share (with the exception of 1,660,500 warrants issued to officers of the Company that were reduced to $0.90 per share) and warrants to purchase an additional 2,838,777 shares of common stock were issued.

The following table summarizes warrant activity for the six months ended June 30, 2010:



|                                      |  |                   |  |                                |      |                                                   |    
|------------------------------------- |  | ----------------- |  | ------------------------------ | ---- | ------------------------------------------------- | ---
|                                      |  | Number ofWarrants |  | Weighted AverageExercise Price |      | WeightedAverageRemainingContractualLife(in years)
|Balance outstanding, January 1, 2010  |  | 23,561,356        |  | $                              | 1.52 |                                                   | 4.0
|Warrants issued                       |  | 15,307,266        |  |                                | 0.61 |                                                   | 5.0
|Warrants exercised                    |  |                  |  |                                |     |                                                   |   
|Warrants expired                      |  |                  |  |                                |     |                                                   |   
|Warrants cancelled                    |  |                  |  |                                |     |                                                   |   
|                                      |  |                   |  |                                |      |                                                   |    
|Balance outstanding, June 30, 2010    |  | 38,868,622        |  | $                              | 0.95 |                                                   | 4.1
|                                      |  |                   |  |                                |      |                                                   |    
|Warrants exercisable at June 30, 2010 |  | 26,400,133        |  | $                              | 1.09 |                                                   | 3.4
|                                      |  |                   |  |                                |      |                                                   |    

The table above does not include warrants issued to
employees and consultants described and included under Option Activity above.

Note 8. Subsequent Events

On August 9, 2010 we filed a Form S-3 Registration Statement putting in place a universal shelf registration statement covering up to
$50 million of any combination of common stock, preferred stock, debt securities, warrants, or units we may offer from time to time in the future. Specific terms of the offering will be provided in one or more supplements to the prospectus. This
registration statement is intended to allow us to capitalize on strategic opportunities that may arise; we do not have any current commitments for shares to be registered under the registration statement. The registration
statement has a three year life and replaces an existing universal shelf registration statement scheduled to expire later in the year.

The Board of Directors of the Company adopted a recommendation of the Compensation Committee of the Board of Directors (the
Committee) to authorize the Company to pay performance awards to certain officers. The awards related to such officers performance and the Companys performance during 2007, 2008, and 2009. No performance award payments were
paid to such officers during the past three years. The payments to be made to the officers are as follows: Christopher J. Reinhard, Chief Executive Officer, $62,500; Tyler M. Dylan-Hyde, Chief Business Office and General Counsel, $57,500; Dennis M.
Mulroy, Chief Financial Officer, $50,000; Gabor M. Rubanyi, Chief Scientific Officer $30,000. An equivalent amount was authorized to be paid to such officers upon the Companys receipt of clearance for the Companys Excellagen product from
the U.S. Food and Drug Administration (FDA) under Section 510(k) of the Food Drug and Cosmetic Act.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis is intended to help you understand our financial condition and results of operations for the three and six months
ended June 30, 2010. You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and the notes to the condensed consolidated financial statements included under Item 1 in
this report, as well as the risk factors and other information included in our 2009 Annual Report and other reports and documents we file with the United States Securities and Exchange Commission (SEC). Our future financial condition and results of
operations will vary from our historical financial condition and results of operations described below.

Overview

We are a medical technology company primarily focused on the development and commercialization of novel therapeutics and medical devices
for cardiovascular and ischemic disease, wound healing and tissue repair. Since we were initially funded in October 2005, we have made three strategic acquisitions and assembled a portfolio of innovative late-stage cardiovascular and regenerative
medicine product candidates. We have established a pipeline of innovative products that are divided into two operating units, Cardium Biologics and the Tissue Repair Company. We report our operations in a single operating segment.

Our business is focused on the acquisition and strategic development of product opportunities or businesses having the potential to
address significant unmet medical needs, and definable pathways to commercialization, partnering or other monetization following the achievement of corresponding development objectives. Consistent with our overall business strategy, as our product
opportunities and businesses are advanced and corresponding valuations established, we intend to consider various corporate development transactions designed to place our product candidates into larger organizations or with partners having existing
commercialization, sales and marketing resources, and a need for innovative products. Such transactions could involve the sale, partnering or other monetization of particular product opportunities or businesses.

During 2009, we (i) completed the sale of all of the assets and liabilities of our wholly-owned subsidiary
InnerCool Therapies, Inc. to Royal Philips Electronics, (ii) completed Tissue Repair Companys Matrix 2b clinical trial, (iii) submitted an FDA 510(k) application for the use of
ExcellagenTMin the potential treatment of diabetic and
other chronic wounds, and (iv) announced the Companys new Orthobiologics initiative, designed to build on and extend the underlying technology developed by the Tissue Repair Company to hard tissue application such as bone.

We do not currently have any products available for sale or use. Because of the limited nature of our revenues and the high costs we must
incur to develop our product candidates, we have yet to generate positive cash flows or income from operations and do not anticipate doing so in the foreseeable future. As a result, we are currently dependent on debt and equity funding to finance
our operations. During the second half of 2009 we raised net proceeds of $9.7 million from the sale of common stock and warrants in two registered direct offerings. In the first quarter of 2010, we raised additional net proceeds of approximately
$10.4 from an additional registered direct offering of common stock and warrants.

During the second quarter of 2010 we
entered into a Master Services Agreement with bioRASI, an international contract research organization, to assist us in conducting late-stage clinical studies and commercialization activities for Cardium's Generx (Ad5FGF-4), in Russia and affiliated
jurisdictions and other potential new markets. The Generx clinical study is expected to be initiated in the second half of this year. We have budgeted approximately $2 million for this product candidate to be paid over the lives of the clinical
studies and as certain milestones are met. The contract can be cancelled upon 90 days written notice.

We also entered into a
multi-year supply agreement with Devro Medical Limited, part of Devro plc, a public limited company registered in Scotland, for the supply of highly-refined fibrillar bovine Type I collagen, an important component of our new Excellagen formulated
collagen product candidate, which is pending FDA 510(k) clearance. Under this supply agreement, the collagen component of Excellagen will be manufactured at Devro's new cGMP manufacturing facility which is currently undergoing final process
validation activities and awaiting a formal accreditation audit for ISO certifications. Devro also plans to establish a Device Master File with the FDA following completion of ISO certifications of other component manufacturing processes. In
addition, we have also entered into a clinical manufacturing and supply agreement with Devros U.S.-based fill and finish contract manufacturer to provide final processing and assembly of the market ready Excellagen product.

More detailed information about our products, product candidates, our intended efforts to develop our products and our business strategy
is included in our 2009 Annual Report.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements included in Item 1 of this report have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). The preparation of our financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the amounts reported in our financial statements
and their accompanying notes. We have identified certain policies such as derivative liabilities and stock option compensation expenses that are calculated using the Black-Scholes Option Model that we believe are important to the portrayal of our
financial condition and results of operations. These policies require the application of significant judgment by our management. We base our estimates on our historical experience, industry standards, and various other assumptions that we believe
are reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. An adverse effect on our financial condition, changes in financial condition, and results of operations could occur
if circumstances change that alter the various assumptions or conditions used in such estimates or assumptions. If we were to undervalue our derivative liabilities or stock option compensation expense we would understate the expense recognized in
our condensed consolidated statements of operations. Conversely if we were to overvalue our derivative liabilities and stock option compensation expenses we would overstate the expense recognized in our condensed consolidated statements of
operations.



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Our significant accounting policies are described under Item 7 of our 2009 Annual
Report and in the notes to the condensed consolidated financial statements included in this report.

Results of Operations

Three months ended June 30, 2010 compared to June 30, 2009.

There were no grant revenues for the three months ended June 30, 2010, compared to $6,996 for the three months ended June 30,
2009. The grant under which we were generating revenues concluded on November 30, 2009.

Research and development
expenses for the three months ended June 30, 2010 were $613,199 compared to $1,107,147 for the same three month period last year. The decrease of $439,948 was primarily due to a reduction in expenses related to our Excellarate product candidate
following the completion of its Phase 2b clinical trial which ended in late 2009 and reductions in Generx (AWARE) Phase 3 clinical trial costs, partially offset by a performance bonus accrual of $145,000 which was accrued during the quarter and
covers 2007, 2008 and 2009. Half of the performance bonus is currently payable and the remainder will be paid upon our receipt of FDA 510(k) clearance for our Excellagen product.

General and administrative expenses for the three months ended June 30, 2010 were $1,358,870 compared to $1,222,417 for the three
months ended June 30, 2009. The increase of $136,453 was the result of a performance bonus accrual of $440,000 which was accrued during the quarter and covers 2007, 2008 and 2009, offset by decreases in professional fees and stock option
compensation expense, insurance costs and rent. Half of the performance bonus is currently payable and the remainder will be paid upon our receipt of FDA 510(k) clearance for our Excellagen product.

We derive interest income from the investment of our available cash in various short-term obligations, such as certificates of deposit,
commercial paper and money market funds. Interest income for the three months ended June 30, 2010 was $12,878 compared to $1,982 for the same three month period last year.

Interest expense for the three months ended June 30, 2010 was $743 and $2,972,025 at June 30, 2009. The decrease in interest
expense is a result of our paying off notes in late 2009 that we issued in November 2008, March 2009 and June 2009.

Six months ended
June 30, 2010 compared to June 30, 2009.

There were no grant revenues for the six months ended June 30,
2010, compared to $25,632 for the six months ended June 30, 2009. The grant under which we were generating revenues concluded on November 30, 2009.

Research and development expenses for the six months ended June 30, 2010 were $1,133,161 compared to $2,351,307 for the same six
month period last year. The decrease of $1,218,146 was primarily due to a reduction in expenses related to our Excellarate product candidate in its Phase 2b clinical trial. There were also reductions in Generx (AWARE) Phase 3 clinical trial costs
and related salary expense and stock option compensation partially offset by the performance bonus accrual described above.

General and administrative expenses for the six months ended June 30, 2010 were $2,319,495 compared to $2,510,141 for the six months
ended June 30, 2009. The decrease of $ 190,646 for the six month period was primarily due to decreases in, salary related costs, professional fees, stock option compensation and investor relations expenses partially offset by the performance
bonus accrual described above.

Interest income for the six months ended June 30, 2009 was $17,710 compared to $6,773 for
the same six month period last year. The $10,937 increase in interest income for the six month period when compared to the same period last year was related to the increase in cash available for investment during the respective periods.

Interest expense for the six months ended June 30, 2010 was $2,174. Interest expense was $4,550,115 for the six months ended
June 30, 2009, due to the interest associated with the notes we issued in November 2008, March 2009 and June 2009, all of which we paid off at the end of 2009.



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Liquidity and Capital Resources

Liquidity

As of
June 30, 2010 we had $9,925,704 in cash and cash equivalents and $1,425,000 in restricted cash. Our working capital at June 30, 2010 was $9,339,519 (excluding $2,258,987 for the fair value of derivative liabilities).

Net cash used in operating activities was $3,800,758 for the six months ended June 30, 2010 compared to $4,196,000 for the same
period last year. The decrease in net cash used in operating activities for the six months ended June 30, 2010 when compared to the same period last year was a result of the decrease in company wide spending, the sale of the assets of our
InnerCool business in July 2009 and the completion of the MATRIX clinical study during the fourth quarter of 2009.

Our
primary source of liquidity has been cash flows from financing activities and in particular proceeds from the sales of our equity and debt securities. On March 12, 2010, we completed a registered direct offering of 2,266,998 units, which were
sold to institutional and retail investors, at a price of $5.00 per unit. Each unit consisted of 10 shares of common stock and a warrant to purchase 5 shares of common stock. The warrants are exercisable at an exercise price of $0.64 per share, at
any time after six months from the date of closing and have a term of exercise equal to five years from the date the warrants are initially exercisable. In the aggregate 22,669,980 shares of common stock and warrants to purchase an additional
11,334,990 shares of common stock were issued in the offering. The offering resulted in gross proceeds to us of $11.3 million, and net proceeds of approximately $10.4 million after payment of offering fees and expenses.

Since inception, our operations have consumed substantial amounts of cash and we have had only limited revenues. From inception (December
22, 2003) to June 30, 2010, net cash used in operating activities has been $73,795,257, net cash provided by financing activities was $88,011,159, and net cash used in investing activities has been $4,290,198.

Capital Resources

Our
primary source of capital is the cash that we generate from the sale of debt or equity securities. We do not currently have any line of credit or other sources of capital available to us.

We have incurred significant losses from operation to date and anticipate that the negative cash flow from operations will continue for
2010. We expect that our existing capital will support our operations for at least the next twelve months, during which time we hope to complete a strategic licensing agreement or secure the approval and future sales of the Excellagen product family
and/or another corporate transaction.

On August 9, 2010 we filed a Form S-3 Registration Statement putting in place a
universal shelf registration statement covering up to $50 million of any combination of common stock, preferred stock, debt securities, warrants, or units we may offer from time to time in the future. Specific terms of the offering will be provided
in one or more supplements to the prospectus. This registration statement is intended to allow us to capitalize on strategic opportunities that may arise; we do not have any current commitments for shares to be registered under the registration
statement. The registration statement has a three year life and replaces an existing universal shelf registration statement scheduled to expire later in the year.

If we fail to enter into a significant licensing arrangement or generate sufficient product sales, we will not generate sufficient cash
flows to cover our operating expenses. If needed, we intend to secure additional working capital through the sale of additional debt or equity securities. No arrangements or commitments for any such financing are in place at this time, and we cannot
give any assurances about the availability or terms of any future financing.

Off-Balance Sheet Arrangements

As of June 30, 2010, we did not have any significant off-balance sheet arrangements.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

We are exposed to a limited level of market risk, which is the potential loss arising from adverse changes in market rates and prices,
such as interest rates, due to the investment of our available cash in various instruments.

The goal of our investment
activities is to preserve principal while seeking to increase income received on our investments without significantly increasing risk. In the normal course of business, we employ established policies and procedures to manage our exposure to changes
in the fair value of our investments. We generally do not, however, enter into derivatives or other financial instruments for trading or speculative purposes or to otherwise manage our exposure to interest rate changes. Generally, we seek to limit
our exposure to risk by investing substantially in short-term, investment grade securities, such as commercial paper, certificates of deposit and money market funds. The amount of interest income we receive on our investments will vary with changes
in the general level of interest rates in the United States, generally decreasing as interest rates decrease and increasing as interest rates increase.



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While we cannot predict with any certainty our future exposure to fluctuations in interest
rates or other market risks or the impact, if any, such fluctuations may have on our future business, consolidated financial condition, results of operations or cash flows, due to the short-term, investment grade nature of our investments, we do not
believe our exposure to market risk from our investments is material.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

We maintain certain disclosure controls and procedures. They are designed to help ensure that material information is: (i) gathered
and communicated to our management, including our principal executive and financial officers, on a timely basis; and (ii) recorded, processed, summarized, reported and filed with the SEC as required under the Securities Exchange Act of 1934, as
amended.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of June 30, 2010. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective for their
intended purpose described above.

There were no changes to our internal control over financial reporting during the quarterly
period ended June 30, 2010 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.



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PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

From
time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to intellectual property, employment, tax, regulation, contract or other
matters. The resolution of these matters as they arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources.

As of the filing date of this report, neither Cardium nor its subsidiaries were a party to any material pending legal proceeding nor was
any of their property the subject of any material pending legal proceeding.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

A number of
risk factors that could materially affect our business, product candidates, financial condition and results of operations are disclosed and described in our 2009 Annual Report. You should carefully consider the risks described under Item 1A of
our 2009 Annual Report, as well as the other information in our 2009 Annual Report, this report and other reports and documents we file with the SEC, when evaluating our business and future prospects. If any of the identified risks actually occur,
our business, financial condition and results of operations could be seriously harmed. In that event, the market price of our common stock could decline and you could lose all or a portion of the value of your investment in our common stock.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

During the quarterly period ended June 30, 2010, we did not sell any unregistered securities.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None



|ITEM 6. | EXHIBITS
|------- | --------

The following
exhibit index shows those exhibits filed with this report and those incorporated by reference:

EXHIBIT INDEX



|              |  |                                                                   |  |                             
|------------- |  | ----------------------------------------------------------------- |  | ----------------------------
|ExhibitNumber |  | Description                                                       |  | Incorporated By Reference To
|              |  |                                                                  
|31.1          |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |  | Filed herewith              
|              |  |                                                                  
|31.2          |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |  | Filed herewith              
|              |  |                                                                  
|32            |  | Section 1350 Certification                                        |  | Furnished herewith.         



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Cardium Therapeutics, Inc., the
registrant, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 9, 2010



CARDIUM THERAPEUTICS, INC.By:

/s/ DENNIS M. MULROYDennis M. Mulroy,
Chief Financial Officer




17