Organization And Liquidity

6 Months Ended

Jun. 30, 2011

Organization And Liquidity

Organization And Liquidity

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 having definable pathways to commercialization, and on 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, Excellagen^TM is initially being developed as a single administration therapeutic 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 sold 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 being 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"). We have agreed to indemnify Philips for any damages arising from the breach of representations, warranties and covenants we made to Philips in the asset purchase agreement pursuant to which we sold such assets and liabilities. Under the terms of the asset purchase agreement, generally, our liability for breach of representations and warranties is capped at $3.5 million; however, our liability for breach of covenants and certain specified representations and warranties is not subject to the cap. As of June 30, 2011, we are not aware of a breach of any representation, warranty or covenant under the asset purchase agreement.

Liquidity and Going Concern

As of June 30, 2011, we had $3,182,919 in cash and cash equivalents and $1,325,000 in restricted cash. Of the restricted cash, $1,125,000 related to an escrow account in connection with the sale of our Innercool Therapies business to Phillips Electronics, and should be released to us from escrow within the next month. Our working capital at June 30, 2011 was $3,162,257 (excluding $272,502 for the fair value of derivative liabilities).

Net cash used in operating activities was $3,559,777 for the six months ended June 30, 2011 compared to $3,800,758 for the same period last year. The decrease in net cash used in operating activities was due primarily to the reductions in accounts payable payments which related to clinical trial costs. 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, 2011, net cash used in operating activities has been $80,968,042.

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. From inception (December 22, 2003) to June 30, 2011, net cash provided by financing activities was $88,529,462.

Net cash used in investing activities since inception has been $4,378,501. At June 30, 2011 we did not have any significant capital expenditure requirements.

We anticipate that negative cash flow from operations will continue for 2011. Although we believe that we have sufficient capital to support our operations through January 1, 2012, we are still a development stage company subject to all the risks and uncertainties that are typical in the lifecycle stage of our business. Our principal objective is to complete a strategic licensing agreement or secure the approval and future sales of the Excellagen product family and/or another corporate transaction. If we fail to enter into a strategic licensing arrangement or to generate sufficient product sales, we will not generate sufficient cash flows to cover our operating expenses.

We do not have any unused credit facilities or other sources of capital available to us at this time. We intend to secure additional working capital through sales of additional debt or equity securities. We do not have any arrangement for financing in place at this time, nor can we provide any assurance about the availability or terms of any future financing.

Our history of recurring losses and uncertainties as to whether our operations will become profitable raise substantial doubt about our ability to continue as a going concern. Our 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.