CARDIUM THERAPEUTICS, INC. – 10-Q – 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, 2013. 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 Part II, Item 1A, in our annual report on Form 10-K for our year ended December 31, 2012 (our "2012 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.

Executive Overview

We are a medical technology company primarily focused on the development and commercialization of novel products and devices. We are currently operating in four primary business lines through our four operating subsidiaries: Activation Therapeutics, Inc., Angionetics Biologics, Inc., To Go Brands, Inc. and LifeAgain Insurance Solutions, Inc. We report in two business segments. Our Pharmaceutical Products segment includes the operations of our Activation Therapeutics, Inc. and Angionetics Biologics, Inc. subsidiaries. Activation Therapeutics, Inc. is developing and commercializing late-stage line of regenerative medicine product candidates including Excellagen®. Angionetics Biologics, Inc. is developing innovative cardiovascular products including Generx® Our Nutraceutical Products segment includes the operations of our To Go Brands, Inc. subsidiary and is developing and marketing a line of nutraceuticals and other healthy lifestyle products. Our LifeAgain Insurance Solutions, Inc. subsidiary is a life insurance business focused on advanced medical data analytics and is advancing toward commercialization.

Our business is focused on the acquisition, strategic development, and partnering or other monetization 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. 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.

We currently report our operations as two operating segments: Pharmaceutical Products, which includes our Activation Therapeutics and Angionetics Biologics businesses, and Nutraceuticals, which includes our To Go Brands nutraceuticals business.

Recent Developments

During the six months ended June 30, 2013 we continued our efforts to advance the clinical development of our biologic product Generx, commercialize our wound healing product Excellagen, integrate and expand the business from our recent acquisition of To Go Brands, Inc., and develop our LifeAgain insurance product in conjunction with strategic partners. Highlights for the first half of 2013 include the following:

Angionetics Biologics, Inc.-Generx Development

Generx (Ad5FGF-4) is a disease-modifying regenerative medicine biologic that is being developed to offer a one-time, non-surgical option for the treatment of myocardial ischemia in patients with stable angina due to coronary artery disease, who might otherwise require surgical and mechanical interventions, such as coronary artery by-pass surgery or balloon angioplasty and stents. Similar to surgical/mechanical revascularization approaches, the goal of our Generx product candidate is to improve blood flow to the heart muscle - but to do so non-surgically, following a single administration from a standard balloon angioplasty catheter. The ASPIRE Phase 3 registration is currently being conducted at up to leading cardiology centers in the Russian Federation to evaluate the therapeutic effects of Generx in patients with myocardial ischemia due to coronary artery disease. The ASPIRE study, a. For additional information about Generx and the ASPIRE clinical study, please visit www.cardiumthx.com/generx.html. Recent developments with respect to Generx include:

        •   Advanced forward our Generx ASPIRE Phase 3/ registration study, a          100-patient, randomized and controlled multi-center study currently          enrolling patients at up to nine leading cardiology centers in the Russian          Federation for patients with myocardial ischemia due to coronary artery          disease. The ASPIRE study is designed to further evaluate the safety and          effectiveness of our Generx DNA-based angiogenic product candidate, which          has already been tested in clinical studies involving 650 patients at more          than one hundred medical centers in the U.S., Europe and elsewhere. The          efficacy of Generx is being quantitatively assessed using rest and stress          SPECT (Single-Photon Emission Computed Tomography) myocardial imaging to          measure improvements in microvascular cardiac perfusion following a          one-time, non-surgical, catheter-based administration of Generx. The          Cedars-Sinai Medical Center Nuclear Cardiology Core                                           -13- 

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  Table of Contents        Laboratory in Los Angeles, California, is the central core lab for the        study and is responsible for the analysis of SPECT myocardial imaging data        electronically transmitted from the Russian medical centers participating        in the ASPIRE study. The Russian Health Authority has assigned Generx the        therapeutic drug trade name of Cardionovo® for marketing and sales in        Russia.          •   Published the article, "Mechanistic, Technical, and Clinical Perspectives          in Therapeutic Stimulation of Coronary Collateral Development by          Angiogenic Growth Factors, authored by Gabor M. Rubanyi, M.D., Ph.D.,          Cardium's Chief Scientific Officer, in the April issue of Molecular          Therapy publication. The publication outlines current scientific knowledge          about the mechanistic basis of adaptive coronary collateral growth, the          biological processes to be targeted by therapeutic angiogenesis, and the          optimization of clinical trial designs, including the Generx ASPIRE          Phase 3 / registration study.  

Activation Therapeutics, Inc.-Excellagen Commercialization

Excellagen is a syringe-based, professional-use, pharmaceutically-formulated 2.6% fibrillar Type I bovine collagen homogenate that functions as an acellular biological modulator to activate the wound healing process and significantly accelerate the growth of granulation tissue. Excellagen's FDA clearance provides for very broad labeling including partial and full-thickness wounds, pressure ulcers, venous ulcers, diabetic ulcers, chronic vascular ulcers, tunneled/undermined wounds, surgical wounds (donor sites/graft, post-Mohs surgery, post-laser surgery, podiatric, wound dehiscence), trauma wounds (abrasions, lacerations, second-degree burns and skin tears) and draining wounds. Excellagen is intended for professional use following standard debridement procedures in the presence of blood cells and platelets, which are involved with the release of endogenous growth factors. Excellagen's unique fibrillar Type I bovine collagen homogenate formulation is topically applied through easy-to-control, pre-filled, sterile, single-use syringes and is designed for application at only one-week intervals. For more information, visit www.excellagen.com.

        •   Distribution agreement with Kasiak Holdings AG for the marketing and sale          of Excellagen in Germany and Switzerland.          •   Distribution agreement with AvKARE Inc., the Company's new sales and          distribution partner for Excellagen in Veterans Hospitals and other          governmental medical facilities throughout the United States. The new          agreement and commercialization arrangement with AvKARE effectively          replaces an earlier arrangement with Academy Medical, LLC. Cardium elected          to transfer the Excellagen distribution responsibilities to AvKARE, which          provides five direct wound care experts and allows Cardium's 25          distributor representatives access to all government accounts. AvKARE          services a diverse customer base that includes government (federal, state          and municipal) and commercial sectors          •   New FDA 510(k) clearance submission for the Company's current FDA-cleared          Excellagen to reflect additional and specific structural and functional          properties based on the Company's supplemental research and development          activities.          •   Collaboration agreement with researchers at Boston Children's Hospital, to          assess the medical utility of Excellagen as a delivery scaffold to seed          autologous mesenchymal fetal stem cells for ex-vivo engineering of tissue          grafts for transplantation into infants to repair prenatally diagnosed          birth defects.          •   Agreement with Orbsen Therapeutics Ltd and the National University of          Ireland, Galway, to utilize Excellagen as a delivery agent for Orbsen's          proprietary stromal cell therapy in pre-clinical studies for the potential          treatment of diabetic foot ulcers.          •   Presentation at the Symposium on Advanced Wound Care Spring 2013 Meeting          highlighting Excellagen's capability of promoting rapid granulation and          complete wound dehiscence and healing in three difficult and complex          post-surgical wounds, including Mohs surgery.          •   ISO 13485:2003 certification (a requirement for CE marking) for Excellagen          by BSI, one of the world's leading certification bodies, was received in          first quarter 2013. With the completion of ISO certification, the Company          reported that it had completed its initial submission of required          documentation, including the technical file and design dossier for its CE          mark application. The Company recently reported that since the initial          submission, it has received requests for supplemental information from          BSI. Based on the current status, all information requested has been          provided to BSI and the Company believes this process should lead to CE          mark certification for Excellagen.                                           -14- 

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To Go Brands-Integration and Expansion

Since 2007, To Go Brands has been making healthy, great tasting and anti-oxidant-rich phytonutrients and nutraceutical supplements in an array of easy use formats, including drink mixes, chews, powders and capsules, to empower busy lifestyles in today's fast-paced, tech-driven world. The Go Active! product line includes High Octane®, Green Tea Energy Fusion™, Acai Natural Energy Boost™, and Neo-Energy®. The Go Healthy! product line includes Greens to Go®, Extreme Berries to Go®, Healthy Belly®, VitaRocks®, and Neo-Chill™. Go Trim! products include Smoothie Complete®, Trim Energy Green Coffee Bean™, Trim Energy®, and Neo-Carb Bloc®. To Go Brands products are sold through mass, food and drug channels at retailers including Target, Whole Foods, Sprouts, Kroger, GNC, RiteAid, Jewel-Osco, Ralph's Supermarkets, Vitamin World, Meijer, Fred Meyer, King Soopers, and the Vitamin Shoppe, as well as directly from the company's web-based store. To learn more about To Go Brands, visit www.togobrands.com.

        •   We announced that To Go Brands® expanded its VitaRocks® kids vitamins          product line and that retail distribution of the newly-designed products          is being broadened into select nationwide Target stores. We also announced          that because of the unique manufacturing process of To Go Brands'          VitaRocks platform, we now have the flexibility to expand the product line          into formulas that could include enzymes, electrolytes, amino acids,          vitamins and minerals, as well as nutrients, and into other applications          including OTC drugs.  

LifeAgain™ Insurance Solutions-Product Development

LifeAgain™ Insurance Solutions, Inc., is a newly-formed, national life insurance business and medical data analytics technology company that is focused on the development, marketing and sale of "survivable risk" term life insurance programs for cancer survivors or others with medical conditions that are currently considered uninsurable based on traditional underwriting standards. Working in cooperation with large and established life insurance companies, LifeAgain seeks to use the power of internally developed and proprietary medical data analytics technology platform to quantitatively support decision rule adaption to broaden eligibility for individuals with specific medical conditions, more deeply assess mortality on an individualized basis using the prognostic value of advanced diagnostic information that is supported by long-term clinical studies, and establish customized premium pricing in a cost effective and scalable manner operating within current life insurance standard operating procedures. LifeAgain's initial focus will be to develop, market and sell affordable survivable risk life insurance to men with active localized prostate cancer for substantial coverage levels at affordable premium rates. LifeAgain is potentially developing additional new and innovative insurance solutions for other medical conditions currently considered uninsurable by traditional underwriters. The Company has developed intellectual property as it relates to advanced medical data analytics technology that is focused on applications for the insurance underwriting and risk assessment.

In April 2013 we entered into a financing transaction involving the sale of newly authorized Series A Convertible Preferred Stock. Details of the financing transaction are discussed in "Liquidity and Capital Resources" below.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements included under Item 1 in 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.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include reserve for product returns, reserve for inventory, and valuing options and warrants using option pricing models. 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.

Our significant accounting policies are described in the notes to our financial statements.

Results of Operations

Three months ended June 30, 2013 compared to June 30, 2012.

Revenues for the three months ended June 30, 2013 were $584,571, primarily from sales of our To Go Brands product lines, along with sales of Excellagen as further described in Note 10 to our consolidated financial statements. For the three months ended June 30, 2012 sales were $13,174 and were attributable to our initial distribution of our Medpodium Nutra-Apps nutraceutical products. The increase of $571,397 was principally attributable to the purchase of To Go Brands in September 2012.

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Research and development expenses for the three months ended June 30, 2013 were $489,357 compared to $424,734 for the same three month period last year. The increase of $64,623 was the result of increased costs associated with our Generx ASPIRE study in Russia. Research and development expenses for the three months ended June 30, 2013 included $78,000 associated with milestone payments and out of pocket costs of ASPIRE.

Selling, general and administrative expenses for the three months ended June 30, 2013 were $1,873,074 compared to $1,459,214 for the three months ended June 30, 2012. The $413,860 increase was primarily due to the inclusion of $450,000 of costs associated with To Go Brands, Inc. operations acquired in September 2012, offset by decreases in advertising, and professional fees.

Net loss for the three months ended June 30, 2013 was $2,117,548, compared to a net loss of $1,875,447 for the same period in the prior year. The increase in net loss was primarily attributable to the increase from To Go Brands selling, general and administrative expenses described above, partially offset by their gross margin.

Six months ended June 30, 2013 compared to June 30, 2012.

Revenues for the six months ended June 30, 2013 were $1,183,776, primarily from sales of our To Go Brands product lines, along with sales of Excellagen as further described in Note 10 to our consolidated financial statements. For the six months ended June 30, 2012 sales were $33,652 attributable to our distribution of our MedPodium Nutra-Apps nutraceutical products. The increase of $1,150,000 was principally attributable to the purchase of To Go Brands in September 2012.

Research and development expenses for the six months ended June 30, 2013 were $1,251,809 compared to $1,589,333 for the same six month period last year. The decrease of $337,500 was the result of decreases in expenses related to the development of our Excellagen product candidates, offset by increased costs associated with our Generx ASPIRE study in Russia. Research and development expenses for the six months ended June 30, 2013 included $338,000 associated with milestone payments and out of pocket costs of ASPIRE study and $100,000 of product and testing costs used to validate a production volume and cost efficiency improvement for Excellagen.

Selling, general and administrative expenses for the six months ended June 30, 2013 were $3,621,258 compared to $2,968,975 for the six months ended June 30, 2012. The $652,283 increase was primarily due to the inclusion of $929,000 of costs associated with To Go Brands, Inc. operations offset by decreases in advertising, insurance, investor relations and professional fees.

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 six months ended June 30, 2013 was $217 compared to $4,681 for the same six month period last year. Interest expense for the six months ended June 30, 2013 was $1,438 and $2,114 at June 30, 2012.

Net loss for the six months ended June 30, 2013 was $4,379,903, roughly unchanged from a net loss of $4,469,483 in the same period for the prior year.

Liquidity and Going Concern

As of June 30, 2013 we had $658,559 in cash and cash equivalents and our working capital was $922,096. As discussed below, we raised an additional $1,531,800 of net proceeds in a transaction that closed in July 2013, subsequent to the period covered by this report.

Net cash used in operating activities was $3,941,000 for the six months ended June 30, 2013 compared to $4,981,000 for the six months ended June 30, 2012. The decrease in net cash used in operating activities was due primarily to an increase in product sales, and decreases in testing and process validation costs for the initial inventory of our Excellagen topical treatment gel. 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, 2013, net cash used in operating activities amounted to $98,235,000.

Our primary source of liquidity has been cash flows from financing activities and in particular proceeds from sales of our debt and equity securities. Net cash provided by financing activities was $2,276,000 for the six months ended June 30, 2013. This included the sale of 2,356 shares of Series A Convertible Preferred Stock in April for net proceeds of $2,160,300, and 343,749 shares of common stock in at-the-market transactions in the first quarter for net proceeds of $65,743. From inception (December 22, 2003) to June 30, 2013 net cash provided by financing activities amounted to $101,456,000.

Net cash used in investing activities for the six months ended June 30, 2013 was $4,600. Net cash used in investing activities since inception amounted to $2,562,000. At June 30, 2013 we did not have any significant capital expenditure requirements.

In April 2013, we entered into a securities purchase agreement with one of our institutional investors pursuant to which we agreed to sell to the investor an aggregate of 4,012 shares of our newly authorized Series A Convertible Preferred Stock, for a total

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purchase price of $4.0 million. No warrants were issued in connection with this offering, other than placement agent warrants. The securities purchase agreement provided for the sale of Series A Convertible Preferred Stock in two closings. Upon consummation of the financing, which was subject to exchange and other approvals, the initial closing under the securities purchase agreement took place in April 2013. At that closing we sold 2,356 shares of Series A Convertible Preferred Stock for net proceeds of $2,160,300. A second closing for the remaining $1,656,000 was completed following the shareholder approval of the offering of the Series A Convertible Preferred Stock and the reverse stock split on July 18, 2013.

Our business model is designed to develop a diversified portfolio of product opportunities and businesses, leveraging our skills in late-stage product development in order to bridge the critical gap between promising new technologies and readiness for commercialization - and then to partner or monetize such product opportunities or businesses with established organizations capable of advancing their commercialization. Consistent with our business model and long-term strategy, we have already advanced and monetized a first business unit, InnerCool Therapies, Inc., which was sold to Philips Electronics North America Corporation.

We now have four additional business units in our portfolio: (1) Angionetics Biologics, which includes Cardium's late-stage DNA-based Generx® cardiovascular biologic product candidate; (2) Activation Therapeutics, which includes the Company's regenerative medicine wound healing technology platform, including its Excellagen® advanced wound care product; (3) To Go Brands®, which includes the Company's health sciences and nutraceutical business; and (4) LifeAgain Insurance Solutions, Inc. which is focused on building the Company's medical data analytics technology platform.

These portfolio companies and their business, lead product or product candidate, and current commercial status are outlined on the schedule below.

      Portfolio Company      Business Summary       Lead Product           Status    Activation             Advanced Tissue      Excellagen®          Initial Product   Therapeutics Inc.      Regeneration for                          FDA-Cleared                          Wounds &                          Biological                          Delivery Platform    Angionetics            Cardiovascular       Generx® Product      Phase 3   Biologics Inc.         Growth Factor        Candidate            Registration                          Therapeutics                              Study    To Go Brands Inc.      Nutrition & Health   Portfolio of 30      Nationwide                          Sciences             Products             Commercial Sales                                                                    at 15,000 Retail                                                                    Locations    LifeAgain Insurance    National Life        BlueMetric Select™   Advancing toward   Solutions Inc.         Insurance Business   Term Life            commercialization                          Focused on Medical   Insurance                          Data Analytics  

We intend to consider additional corporate development transactions designed to place our product candidates or businesses 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. In parallel, as our businesses are advanced and corresponding valuations established, we plan to pursue new product opportunities and acquisitions with strong value enhancement potential.

While we may partner or monetize one or more of our product opportunities or businesses consistent with our business model, they cannot be assured and negative cash flow from operations would be expected to continue for the foreseeable future. In order to maintain operations and liquidity, we expect we will need to complete a monetization of one or more product opportunities or business units, and/or complete a financing, before end of year. Our principal business objective in the near term is to complete an additional strategic licensing agreement to advance sales of the Excellagen product family, enter into a distribution arrangement to advance sales of our To Go Brands nutraceuticals business, and/or another corporate transaction. However, we are still a development stage company subject to all the risks and uncertainties that are typical in the lifecycle stage of our business. If we fail to receive sufficient proceeds from the partnering, sale or other monetization of product opportunities or businesses or generate sufficient product sales, or raise funds through additional financings, we will not generate sufficient cash flows to cover our operating expenses. Any additional financings would be expected to be in the form of sale of equity securities.

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Based on recently-issued amendments to Rule 506 and Rule 144A under the Securities Act of 1933 that were implemented under Section 201(a) of the Jumpstart Our Business Startups Act (the "JOBS Act"), and since we do not anticipate raising additional funds under our shelf registration statement or as debt within the next 12 months, such financings may be through the sale of private equity interests to Qualified Investors or strategic partners based on the JOBS Act amendments, and/or through other private placements or a public offering of securities, which could potentially be made in the parent company or independently in one or more of our subsidiary business units.

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 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.

Off-Balance Sheet Arrangements

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