Financial Report

For the Q1 2009, the company reported a loss from operations of $3.5 million, representing a 47% reduction from year ago levels, as a result of various strategic actions initiated in the fourth quarter 2008. The first quarter 2009 financial results also include substantial non-cash charges to adjust for the fair market value of certain common stock warrants required beginning this quarter as a result of the adoption of Emerging Issues Task Force EITF 07-05, as noted above. Since the price of Cardium’s common stock increased by about 125% during the first quarter, this resulted in a $9.7 million Change in Fair Value of Derivative Liabilities, and resulted in a reported net loss for the current period of $14.7 million, or $0.31 per share, against a net loss of $6.7 million, or $0.16 per share for first quarter 2008. Product revenue for the first quarter 2009 was $350,000, against $534,000 in the same period in 2008 as InnerCool’s direct sales force was reduced consistent with the company’s new business strategy which is focused on the marketing and sale of InnerCool products through corporate accounts and web-based initiatives, and ultimately vertical partnering with larger organizations having already established marketing and sales organizations. Grant revenue for the first quarter 2009 was $18,000 against $112,000 for the same quarter last year. Research and development costs for the three months ended March 31, 2009 totaled $1.4 million and selling, general and administrative expenses were $2.0 million, against $3.4 million and $3.4 million respectively for the same period last year. Cash and cash equivalents as of March 31, 2009 were $1.4 million, against cash and cash equivalents of $6.3 million as of March 31, 2008. Interest expense for the three months ended March 31, 2009 was $1.6 million and includes $1.3 million representing the amortization of debt costs and warrant value issued with the debt. During the first quarter 2009, the company completed a secured debt financing resulting in gross proceeds of about $3.5 million, before placement agent fees and offering expenses and excluding any future proceeds from the exercise of the warrants issued in the financing.

The company continues to provide information in accordance with GAAP. However, with the adoption of EITF 07-05 and its very substantial impact on our overall reported net losses, varying substantially based on changes in the underlying market value of Cardium’s common stock, the company believes it is also helpful for investors to receive additional information relating more specifically to the company’s operating results. Accordingly, the company additionally provides a pro forma income statement and pro forma balance sheet which excludes the non-cash effects of EITF 07-05 on its financial results. The company presents this information to investors as an additional tool for evaluating the company’s financial results in a manner that reflects ongoing operations and facilitates comparisons with operating results from prior periods. The presentation of this additional non-GAAP information is intended to provide investors with additional incremental tools for their review of the company’s results and is not meant to be considered in isolation or as a substitute for net income information prepared and provided in accordance with GAAP.

In late December 2008, Cardium received notification from the staff of its current listing exchange indicating that the company was considered to be noncompliant with certain listing requirements of the NYSE Amex. On January 23, 2009, the company submitted a proposed plan outlining how it could establish compliance with the requirements of section 1003(a)(iv) by March 23, 2009, and establish compliance with all sections, including section 1003(a)(i), by June 23, 2010. Cardium received notification in late February that its plan had been accepted by the exchange, but remains subject to continuing review by the exchange with respect to the carrying out of its plan and the achievement and maintenance of overall compliance. On April 9, 2009, the exchange notified Cardium that it had extended the time for compliance with the requirements of section 1003(a)(iv) from March 23, 2009 to June 27, 2009; and that the company would also need to regain compliance with section 1003(a)(ii) of the exchange’s company guide regarding maintenance of stockholder’s equity of at least $4 million, which it would need to do by June 23, 2010.