NewCardio (NWCI) 10-Q/A 2008 Q1 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________

AMENDMENT NO. 1 ON FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2008

[_]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
		For the transition period from ______________ to ______________

Commission File Number: 333-132621

NEWCARDIO, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-1826789
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

2350 Mission College Blvd., Suite 1175, Santa Clara CA 95054

(Address of principal executive offices)

Registrant’s telephone number, including area code: (408) 516-5000

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 requirement for the past 90 days.      Yes [X]    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.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes [_]    No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Class Common Stock, $0.001 Par Value Shares Outstanding at August 6, 2008 20,655,914

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A ("Amendment No. 1") to our Quarterly Report on Form 10-Q for the quarter ended  March 31, 2008, initially filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2008 (the "Original Filing"), reflects a restatement of the Consolidated Financial Statements of NewCardio, Inc. as discussed in Note 9 to the Consolidated Financial Statements to correct errors relating to the treatment of our redeemable Series A Convertible Preferred Stock (the “Preferred Stock”) and related warrants issued in our December 27, 2007 private placement and fees and warrants issued in connection with the private placement.

This Amendment No. 1 only amends and restates Items 2 and 4 of Part I of the Original Filing and we have revised language in these Items from the Original Filing to reflect the restatement of our Consolidated Financial Statements.  No other information in the Original Filing is amended hereby.  The foregoing items have not been updated to reflect other events occurring after the initial Original Filing or to modify or update those disclosures affected by subsequent events.  In addition, the exhibit list in Item 6 of Part II has not been updated except to reflect currently dated certifications from our Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, are filed with this Amendment No. 1 as Exhibits 31.1, 31.2, 32.1 and 32.2.

While the remainder of the Original Filing is uncharnged, this Amendment No. 1 is an amendment and restatement of the Original Filing in its entirety in order to provide a complete presentation.

Except as stated herein, this Amendment No. 1 does not reflect events occurring after the date of the filing of the Original Filing.

NEWCARDIO, INC.

INDEX

			Page Number
PART I		Financial Information
	Item 1.	Financial Statements (unaudited)	4
		Condensed Consolidated Balance Sheets -- March 31, 2008 (unaudited)  and December 31, 2007	4
		Condensed Unaudited Consolidated Statements of Operations -- Quarters Ended March 31, 2008 , March 31, 2007 and from the period September 7, 2004 (date of inception) to March 31,2008	5
		Condensed Unaudited Consolidated Statements of Stockholders Deficit  for the period from September 7, 2004 (date of inception) to March 31, 2008	6
		Condensed Unaudited Consolidated Statements of Cash Flows – Quarters Ended March 31, 2008, March 31, 2007 and from the period September 7, 2004 (date of inception) to March 31,2008	10
		Notes to Unaudited Condensed Consolidated Financial Statements	11
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
	Item 4.	Controls and Procedures	39
PART II		Other Information
	Item 6.	Exhibits	41
SIGNATURES			42
EX-31.1
EX-31.2
EX-32.1
EX-32.2

-3-

PART I.

FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

NEWCARDIO, INC

(a development stage company)

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2008 Restated			2007 Restated
	(unaudited)
ASSETS
Current assets:
Cash	$	150,773		$	1,476,625
Short term investment		5,049,125			5,000,000
Prepaid expenses		41,250			-
Total current assets		5,241,148			6,476,625
Property, plant and equipment, net of accumulated depreciation of $1,694 and $594 as of March 31, 2008 and December 31, 2007, respectively		78,164			7,687
Other assets:
Deposits		12,600			-
	$	5,331,912		$	6,484,312
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	651,145		$	871,246
Note payable, related party, current portion		10,316			10,316
Total current liabilities		661,461			881,562
Long term debt:
Warrant liability		16,995,278			4,802,973
Total liabilities		17,656,740			5,684,535
Shares subject to  redemption, liquidation value of $10,054,111 and $9,849,111 as of March 31, 2008 and December 31, 2007, respectively		2,084,493			2,084,493
Stockholders' Deficit
Common stock, $0.001 par value, 99,000,000 shares authorized; 20,237,522 shares issued and outstanding as of March 31, 2008 and December 31, 2007		20,238			20,238
Additional paid in capital		6,104,846			5,853,154
Deficit accumulated during development stage		(20,534,404	)		(7,158,108
Total deficiency in stockholders' equity		(14,409,320	)		(1,284,716
	$	5,331,912		$	6,484,312

See the accompanying notes to the unaudited condensed consolidated financial statements

-4-

NEWCARDIO, INC

(a development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended March 31,						From September 7, 2004 (date of inception) through
	2008 Restated			2007			March 31, 2008 Restated
Operating expenses:
Selling, general and administrative	$	736,967		$	45,638		$	2,823,121
Depreciation		1,100			-			1,694
Research and development		285,106			3,363			1,444,132
Total operating expenses		1,023,173			49,001			4,268,947
Net loss from operations		(1,023,173	)		(49,001	)		(4,268,947	)
Other income (expense)
Loss on change in fair value of warrant liability		(12,192,305	)		-			(12,192,305	)
Interest, net		53,294			(1,344	)		(1,041,330	)
Net loss before income taxes		(13,162,184	)		(50,345	)		(17,502,582	)
Provision for income taxes		-			-			-
Net loss		(13,162,184	)		(50,345	)		(17,502,582	)
Preferred stock dividend		(214,112	)		-			(3,031,822	)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(13,376,296	)	$	(50,345	)	$	(20,534,404	)
Net loss per share, basic and  diluted	$	(0.66	)	$	(0.01	)
Weighted average number of shares (basic and fully diluted)		20,237,522			4,090,169

See the accompanying notes to the unaudited condensed consolidated financial statements

-5-

NEWCARDIO, INC

(a development stage company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

From September 7, 2004 (date of inception) through March 31, 2008

(unaudited)

Restated

	Preferred Series A				Common				Additional Paid in		Common stock		Deficit accumulated during development
	Stock		Amount		Stock		Amount		Capital		Subscriptions		stage			Total
Balance, September 7, 2004		-	$	-		-	$	-	$	-	$	-	$	-		$	-
Adjustment of recapitalization
Common stock issued to founders at $0.001 per share in September 2004		-		-		3,176,642		3,177		-		-		-			3,177
Common stock issued for intellectual property at $0.001 per share in September 2004		-		-		260,152		260		-		-		-			260
Common stock issued in connection with options exercised at $0.001 per share in November 2004		-		-		300,000		300		-		-		-			300
Series A preferred stock issued to founders at $0.01 per share in September 2004		4,563,206		456		-		-		45,176		-		-			45,632
												-
Fair value of options issued in September 2004		-		-		-		-		263		-		-			263
Net loss		-		-		-		-		-		-		(172,343	)		(172,343	)
Balance, December 31, 2004		4,563,206	$	456		3,736,794	$	3,737	$	45,439	$	-	$	(172,343	)	$	(122,711	)

See the accompanying notes to the unaudited condensed consolidated financial statements

-6-

NEWCARDIO, INC

(a development stage company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

From September 7, 2004 (date of inception) through March 31, 2008

(unaudited)

Restated

	Preferred Series A				Common				Additional Paid in		Common stock		Deficit accumulated  during  development
	Stock		Amount		Stock		Amount		Capital		Subscriptions		stage			Total
Balance forward		4,563,206	$	456		3,736,794	$	3,737	$	45,439	$	-	$	(172,343	)	$	(122,711	)
Fair value of options issued in August 2005		-		-		-		-		44,558		-		-			44,558
Fair value of warrants issued in conjunction with issuance of Series A-2 preferred stock		-		-		-		-		232,502		-		-			232,502
Net loss		-		-		-		-		-		-		(604,739	)		(604,739	)
Balance, December 31, 2005		4,563,206		456		3,736,794		3,737		322,499		-		(777,082	)		(450,390	)
Common stock issued at $0.10 per share for services rendered in March 2006		-		-		278,375		278		27,560		-		-			27,838
Fair value of options issued in July 2006		-		-		-		-		60,082		-		-			60,082
Fair value of warrants issued in conjunction with convertible debenture		-		-		-		-		1,572		-		-			1,572
Fair value of options issued in September 2006		-		-		-		-		9,729		-		-			9,729
Common stock issued at $0.10 per share for services rendered in October 2006		-		-		75,000		75		7,425		-					7,500
Fair value of options issued in October 2006		-		-		-		-		7,006		-		-			7,006
Net loss		-		-		-		-		-		-		(378,175	)		(378,175	)
Balance, December 31, 2006		4,563,206	$	456		4,090,169	$	4,090	$	435,873	$	-	$	(1,155,257	)	$	(714,838	)

See the accompanying notes to the unaudited condensed consolidated financial statements

-7-

NEWCARDIO, INC

(a development stage company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

From September 7, 2004 (date of inception) through March 31, 2008

(unaudited)

Restated

	Preferred Series A				Common				Additional  Paid in		Common stock			Deficit accumulated  during development
	Stock		Amount		Stock		Amount		Capital		Subscriptions			stage			Total
Balance forward		4,563,206	$	456		4,090,169	$	4,090	$	435,873	$	-		$	(1,155,257	)	$	(714,838	)
Fair value of warrants issued in conjunction with convertible debenture		-		-		-		-		4,141		-			-			4,141
Fair value of options for services rendered		-		-		-		-		201,424		-			-			201,424
Common stock subscription received in June 2007		-		-		-		-		-		84,000			-			84,000
Common stock issued in June 2007 at $0.02 per share for services rendered issued at fair value of $0.10 per share		-		-		4,200,000		4,200		415,800		(84,000	)		-			336,000
Common stock issued in connection with options exercised at $0.01 per share in June 2007		-		-		137,500		138		1,237		-			-			1,375
Common stock issued in connection with options exercised at $0.001 per share in July 2007		-		-		100,000		100		-		-			-			100
Common stock issued in connection with options exercised at $0.01 per share in July 2007		-		-		204,000		204		1,836		-			-			2,040
Common stock subscription received in September 2007		-		-		-		-		-		29,513			-			29,513
Common stock issued in September 2007 at $0.02 per share for services rendered issued at fair value of $0.10 per share		-		-		1,475,631		1,476		146,087		(29,513	)		-			118,050
Common stock issued in connection with options exercised at $0.001 per share in October 2007		-		-		300,000		300		-		-			-			300
Common stock issued in connection with options exercised at $0.01 per share in December 2007		-		-		110,000		110		990		-			-			1,100
Subtotal		4,563,206	$	456		10,617,300	$	10,618	$	1,207,388	$	-		$	(1,155,257	)	$	63,205

See the accompanying notes to the unaudited condensed consolidated financial statements

-8-

NEWCARDIO, INC

(a development stage company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

From September 7, 2004 (date of inception) through March 31, 2008

(unaudited)

Restated

	Preferred Series A						Common				Additional Paid in			Common stock		Deficit  accumulated during development
	Stock			Amount			Stock		Amount		Capital			Subscriptions		stage			Total
Balance forward		4,563,206		$	456			10,617,300	$	10,618	$	1,207,388		$	-	$	(1,155,257	)	$	63,205
Common stock issued in connection with options exercised at $0.02 per share in December 2007		-			-			50,000		50		950			-		-			1,000
Effect of merger with New Cardio, Inc. (Formerly Marine Park Holdings, Inc.) on December 27, 2007		-			-			1,554,985		1,555		(1,555	)		-		-			-
Effective with the merger, the conversion of the preferred stock to common shares at December 27, 2007		(4,563,206	)		(456	)		4,563,206		4,563		(4,107	)		-		-			-
Effective with the merger, the conversion of the Series A-2 preferred stock to common shares at December 27, 2007		-			-			2,592,000		2,592		256,608			-		-			259,200
Effective with the merger, the conversion of convertible debentures inclusive of interest to common shares at December 27, 2007		-			-			267,900		268		196,691			-		-			196,959
Common stock issued as beneficial conversion feature in conjunction with settlement of convertible debentures		-			-			592,131		592		425,742			-		-			426,334
Fair value of warrants issued as compensation for financing		-			-			-		-		355,034			-		-			355,034
Fair value of warrants issued in conjunction with convertible debentures		-			-			-		-		598,693			-		-			598,693
B B Beneficial conversion feature of preferred stock		-			-			-		-		2,817,710			-		-			2,817,710
Dividend on preferred stock		-			-			-		-		-			-		(2,817,710	)		(2,817,710	)
Net loss		-			-			-		-		-			-		(3,185,141	)		(3,185,141	)
Balance, December 31, 2007		-			-			20,237,522		20,238		5,853,154			-		(7,158, 108	)		(1,284,716	)
Fair value of options for services rendered		-			-			-		-		251,692			-		-			251,692
Dividend on preferred stock		-			-			-		-		-			-		(214,112	)		(214,112	)
Net loss		-			-			-		-		-			-		(13,162,184	)		(13,162,184	)
Balance, March 31, 2008		-		$	-			20,237,522	$	20,238	$	6,104,846		$	-	$	(20,534,404	)	$	(14,409,320	)

See the accompanying notes to the unaudited condensed consolidated financial statements

-9-

NEWCARDIO, INC.

(a development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the three months ended March 31,						From September 7, 2004 (date of inception) through
	2008 Restated			2007			March 31, 2008 Restated
Cash flows from operating activities:
Net loss for the period	$	(13,162,184	)	$	(50,345	)	$	(17,502,582	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,100			-			1,694
Common stock issued to founders for services rendered		-			-			3,177
Common stock issued for intellectual property		-			-			260
Common stock issued for services rendered		-			-			489,388
Common stock issued as beneficial conversion feature in conjunction with settlement of convertible debentures		-			-			426,334
Series A-Preferred stock issued to founders for services rendered		-			-			45,632
Series A-2-Preferred stock issued for services rendered		-			-			180,121
Notes payable issued in conjunction with services rendered		-			-			10,316
Fair value of options issued for services rendered		251,692			25,742			574,754
Fair value of warrants issued in conjunction with issuance of Series A-2 preferred stock		-			-			232,502
Change in fair value of warrants issued in conjunction with issuance of Series A redeemable preferred stock		12,192,305			-			12,192,305
Fair value of warrants issued in settlement of convertible debentures		-			-			598,692
Amortization of debt discount attributable to subordinated convertible debt		-			407			5,713
(Increase) decrease in:
Prepaid expenses		(41,250	)		-			(41,250	)
Deposits		(12,600	)		-			(12,600	)
Increase (decrease) in:
Accounts payable and accrued liabilities		(434,213	)		24,146			356,493
Net cash used in operating activities		(1,205,150	)		(50	)		(2,439,052	)
Cash flows from investing activities:
Purchase of property plant and equipment		(71,577	)		-			(79,858	)
Purchase of short term investment		(49,125	)		-			(5,049,125	)
Net cash used in investing activities		(120,702	)		-			(5,128,983	)
Cash flows from financing activities:
Proceeds from exercise of common stock options		-			-			6,216
Proceeds from the sale of Series A-2 preferred stock		-			-			79,079
Proceeds from sale of Series A preferred stock		-						7,342,500
Proceeds from sale of common stock		-						113,513
Proceeds from convertible debt, net		-			2,500			177,500
Net cash provided by financing activities		-			2,500			7,718,808
Net (decrease) increase in cash		(1,325,852	)		2,450			150,773
Cash  at beginning of period		1,476,625			12			-
Cash  at end of period	$	150,773		$	2,462		$	150,773
Supplemental disclosures of cash flow information:
Taxes paid	$	-		$	-		$	-
Interest paid		-			-			-
Non cash transactions:
Fair value of warrants issued as compensation for financing		-			-			355,034
Beneficial conversion feature of redeemable preferred stock		-			-			2,817,710
Preferred stock dividend	$	214,112		$	-		$	3,031,822

See the accompanying notes to the unaudited condensed consolidated financial statements

-10-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying unaudited condensed consolidated financial statements follows:

General

The accompanying unaudited condensed consolidated financial statements of NewCardio, Inc., (“NewCardio” or the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  The results from operations for the three month period ended March 31, 2008, are not necessarily indicative of the results that may be expected for the year ended December 31, 2008.  

Basis and business presentation

The consolidated financial statements include the accounts of the Company, including NewCardio Technologies, Inc., its wholly-owned subsidiary (“NewCardio Technologies”). All significant intercompany balances and transactions have been eliminated in consolidation.

The Company was incorporated under the laws of the State of Delaware in September 2004 and is in the development stage, as defined by Statement of Financial Accounting Standards No. 7 ("SFAS No. 7") with its efforts principally devoted to developing cardiac diagnostics equipment in the United States. To date, the Company, has not generated sales revenues, has incurred expenses and has sustained losses.  Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise.  For the period from inception through March 31, 2008, the Company has accumulated losses of $17,502,582.

Merger and Corporate Restructure

On December 27, 2007, the Company (consummated a reverse merger by entering into a share exchange agreement (the “Share Exchange”) with the stockholders of NewCardio, Inc., pursuant to which the stockholders of NewCardio, Inc.  exchanged all of the issued and outstanding capital stock of NewCardio, Inc. for 18,682,537 shares of common stock of Marine Park Holdings, Inc. (“Marine Park Holdings”) representing 92% of Marine Park Holdings’ outstanding capital stock, after the return to treasury and retirement of 9,445,015 shares of common stock of Marine Park Holdings held by certain stockholders of Marine Park Holdings made concurrently with the Share Exchange.

As a result of the Share Exchange, there was a change in control of the Company. In accordance with SFAS No. 141, NewCardio, Inc.  was the acquiring entity. In substance the Agreement is a recapitalization of NewCardio, Inc.’s capital structure rather than a business combination.

For accounting purposes, the Company accounted for the transaction as a reverse acquisition with New Cardio, Inc.  as the surviving entity. The total purchase price and carrying value of net assets acquired was $-0-. New Cardio, Inc.  did not recognize goodwill or any intangible assets in connection with the transaction. Prior to the Share Exchange, Marine Park Holdings was an inactive corporation with no significant assets and liabilities.

The accompanying financial statements present the historical financial condition, results of operations and cash flows of New Cardio, Inc. prior to the Merger.

-11-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued)

All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse acquisition as if the transaction had taken place as of the beginning of the earliest period presented.

The total consideration paid was $-0- and the significant components of the transaction are as follows:

Assets:	$	-0-
Liabilities:
Net liabilities assumed	$	-0-
Total consideration:	$	-0-

Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” ("SAB 101"). SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

On December 17, 2003, the SEC staff released Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. The staff updated and revised the existing revenue recognition in Topic 13, Revenue Recognition, to make its interpretive guidance consistent with current accounting guidance, principally EITF Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." Also, SAB 104 incorporates portions of the Revenue Recognition in Financial Statements - Frequently Asked Questions and Answers document that the SEC staff considered relevant and rescinds the remainder. The company's revenue recognition policies are consistent with this guidance; therefore, this guidance will not have an immediate impact on the company's consolidated financial statements.

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

Fair Values

In the first quarter of fiscal year 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS No. 157) as amended by FASB Statement of Position (FSP) FAS 157-1 and FSP FAS 157-2. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. FSP FAS 157-2 delays, until the first quarter of fiscal year 2009, the effective date for SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of SFAS No. 157 did not have a material impact on the Company’s financial position or operations. Refer to Note 7 for further discussion regarding fair value.

Debt and Equity Securities

The Company follows the provisions of Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115) . The Company classifies debt and equity securities into one of three

-12-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued)

categories: held-to-maturity, available-for-sale or trading. These security classifications may be modified after acquisition only under certain specified conditions. Securities may be classified as held-to-maturity only if the Company has the positive intent and ability to hold them to maturity. Trading securities are defined as those bought and held principally for the purpose of selling them in the near term. All other securities must be classified as available-for-sale.

Short-term investments consist of a bank certificate of deposit that matures within the next 12 months.

Held-to-maturity securities are measured at amortized cost in the consolidated balance sheets. Unrealized holding gains and losses are not included in earnings or in a separate component of capital. They are merely disclosed in the notes to the consolidated financial statements.

Available-for-sale securities are carried at fair value on the consolidated balance sheets. Unrealized holding gains and losses are not included in earnings but are reported as a net amount (less expected tax) in a separate component of capital until realized.

Trading securities are carried at fair value on the consolidated balance sheets. Unrealized holding gains and losses for trading securities are included in earnings.

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.

Property and Equipment

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3-5 years.

Long-Lived Assets

The Company has adopted Statement of Financial Accounting Standards No. 144 (“SFAS 144”). The Statement requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. SFAS No. 144 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

Income Taxes

The Company has adopted Financial Accounting Standard No. 109 (SFAS 109) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.

Comprehensive Income

The Company does not have any items of comprehensive income in any of the periods presented.

-13-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Net Loss per Share

The Company has adopted Statement of Financial Accounting Standard No. 128, "Earnings Per Share," specifying the computation, presentation and disclosure requirements of earnings per share information. Basic earnings per share has been calculated based upon the weighted average number of common shares outstanding. Stock options and warrants have been excluded as common stock equivalents in the diluted earnings per share because they are either antidilutive, or their effect is not material. Fully diluted shares outstanding were 39,463,033 and 9,107,441 for three month period ended March 31, 2008 and 2007, respectively.

Stock based compensation

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123R (revised 2004), “Share-Based Payment” which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” Statement 123R supersedes APB opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, "Statement of Cash Flows.” Generally, the approach in Statement 123R is similar to the approach described in Statement 123.  However, Statement 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  Pro-forma disclosure is no longer an alternative. This statement does not change the accounting guidance for share based payment transactions with parties other than employees provided in Statement of Financial Accounting Standards No. 123(R). This statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans.” On April 14, 2005, the SEC amended the effective date of the provisions of this statement.  The effect of this amendment by the SEC is that the Company had to comply with Statement 123R and use the Fair Value based method of accounting no later than the first quarter of 2006. The Company implemented SFAS No. 123(R) on January 1, 2006 using the modified prospective method.

As more fully described in Note 6 below, the Company granted stock options over the years to employees of the Company under its 2004 Equity Incentive Plan.  The Company granted non-qualified stock options to purchase 1,130,000 shares of common stock during the three month period ended March 31, 2008 to employees and directors of the Company under the 2004 Equity Incentive Plan.

As of March 31, 2008, there were outstanding employee stock options to purchase 4,130,000 shares of common stock, 1,387,640 shares of which were vested.

Concentrations of Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables.   The Company places its cash and temporary cash investments with high credit quality institutions.  At times, such investments may be in excess of the FDIC insurance limit.

Research and Development

The Company  accounts for research and development  costs in accordance with the Financial   Accounting  Standards Board's  Statement  of  Financial  Accounting Standards  No. 2 (“SFAS 2”),  “Accounting  for Research and Development  Costs.” Under SFAS 2, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred.  Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.  The Company incurred research and development expenses of $285,106, $3,363 and $1,444,132 for the three month period ended March 31, 2008 and 2007 and from September 7, 2004 (date of inception) through March 31, 2008, respectively.

-14-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, “Disclosures About Fair Value of Financial Instruments,” requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. The carrying amount for the Series A convertible preferred stock approximate fair value.

Liquidity

As shown in the accompanying financial statements, the Company incurred net loss from operations of $ 17,502,582 from its inception on September 7, 2004 through March 31, 2008.

Recent accounting pronouncements

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose to measure many financial instruments, and certain other items, at fair value. SFAS 159 applies to reporting periods beginning after November 15, 2007. The adoption of SFAS 159 is not expected to have a material impact on the Company’s financial condition or results of operations.

In December 2007, the FASB issued SFAS No. 141(R),”Business Combinations” (“SFAS No. 141(R)”), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. SFAS No. 141R is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008.  Earlier adoption is prohibited and the Company is currently evaluating the effect, if any, that the adoption will have on its financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51”  (“SFAS No. 160”), which will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity within the consolidated balance sheets.  SFAS No. 160 is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008.  Earlier adoption is prohibited and the Company is currently evaluating the effect, if any, that the adoption will have on its financial position, results of operations or cash flows.

In March 2008, FASB No. 161, ‘‘Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133’’ (‘‘SFAS 161’’) was issued. SFAS 161 requires companies to provide enhanced disclosures regarding derivative instruments and hedging activities. It requires companies to better convey the purpose of derivative use in terms of the risks that such company is intending to manage. Disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items affect a company’s financial position, financial performance, and cash flows are required. This Statement retains the same scope as SFAS 133 and is effective for fiscal years and interim periods beginning November 15, 2008. The Company is currently evaluating the potential impact of adopting SFAS 161.

NOTE 2 – NOTES PAYABLE-RELATED PARTY

Notes payable related party is comprised of a promissory note totaling $10,316, due November 15, 2008 with interest at 4.9% per annum  due upon maturity to a former director of the Company.

-15-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 3 -- REDEEMABLE SECURITIES

Series A – 10% Convertible Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.001 per share.  The Company's preferred stock may be divided into such series as may be established by the Board of Directors. The Board of Directors may fix and determine the relative rights and preferences of the shares of any series established.

In December, 2007, the Board of Directors authorized the issuance of up to 12,000 shares of Series A 10% convertible non-voting preferred stock (“Series A”) having a stated value of $1,000 per share . The Series A shares are convertible at any time, at the option of the holder, into the Company’s common stock at an initial conversion rate determined by dividing the stated value of $1,000 by the initial conversion price of $0.95 per share. The conversion price is subject to certain anti-dilution provisions in the event the Company issues shares of its common stock or common stock equivalents below the stated conversion price or pays a stock dividend or otherwise makes a distribution payable in shares of common stock, with the exception of any shares issued upon conversion or payment of dividend on this issuance, or other similar events such as stock splits or common stock reclassifications.

The holders are entitled to receive a cumulative 10% dividend based on the stated value of $1,000 per share, payable on the calendar quarter in cash or in shares of its common stock with certain discounts, at the Company’s option.

Upon any liquidation, dissolution or winding-up of the Company, the Series A shareholders shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to 120% of the stated value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each Series A share before any distribution or payment shall be made to the holders of any other securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Series A shareholders shall be ratably distributed among the Series A shareholders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. The liquidation value inclusive of accrued dividends was $10,054,111 and $9,849,111 (inclusive of dividend of $9,111) as of March 31, 2008 and December 31, 2007, respectively.

In December 2007, the Company issued 8,200 Series A shares at $1,000 per share to accredited investors in a private placement. The Company received $8,200,000 less issuance costs totaling $1,312,534. Net cash proceeds at December 31, 2007 were $ 7,342,500. The balance of the costs includes an accrual paid in January and the value of a fee warrant issued in conjunction with the financing. The issuance costs have been recorded as a reduction in the 'Shares subject to redemption'.

Under the terms of the Series A share Certificate of Designation, the Company may be required to redeem the Series A shares for cash in an amount equal to the Series A stated value, plus accrued and unpaid dividends , upon the occurrence of  certain events , including the change in control of the Company

As a result of this obligation, the Company has determined the Series A shares includes redemption features that have the potential to be outside the control of the Company, and accordingly, the Company has classified the Series A shares outside of shareholders’ equity in accordance with Emerging Issues Task Force (“EITF”) Topic D-98, Classification and Measurement of Redeemable Securities (“EITF Topic D-98”). In accordance with EITF Topic D-98, the fair value allocated to the Preferred Stock at the date of issuance was recorded outside of common shareholders’ equity in the accompanying consolidated balance sheet.  

In accordance with Emerging Issues Task Force (“EITF”) No.00-27, “ Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rates’, to Certain Convertible Instruments ”, a portion of the proceeds were allocated to the warrants based on their fair value, which totaled $4,802,973 using the Black Scholes option pricing model. Further, we attributed a beneficial conversion feature of $2,817,710 to the Series A preferred shares based upon the difference between the effective conversion price of those shares and the fair value of our common shares on the date of issuance. The assumptions used in the Black Scholes model are as follows:  (1) dividend yield of 0%; (2) expected volatility of 121.06%, (3) risk-free interest rate of 3.37% to 3.64%, and (4) expected life of 1 to 5 years. The amount attributable to the beneficial conversion feature has been recoded as a dividend to the preferred shareholders. Since the redemption feature of the preferred stock is contingent on the occurrence of future

-16-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 3 – REDEEMABLE SECURITIES (continued)

 events, we will not accrete the carrying value of the preferred stock to redemption value until the occurrence of those future events becomes probable.

The Company’s Series A Shares are redeemable under certain conditions, including:

● The Company effecting a merger or consolidation with another entity

● The Company sells all or substantially all of the Company’s assets

● The Company’s shareholders approve a render or exchange offer, or

● The Company’s holders of the common stock exchange their shares for securities or cash

The redemption feature of the Series A Shares is contingent on the occurrence of any of the above   events and the Company believes the occurrence of any  these  events not to be probable. Accordingly, upon the occurrence of one of the events, the Series A shares will become redeemable and the Company  will accrete the carrying value of the Series A Shares  to redemption value .

Registration Rights Agreement

In connection with the December 27, 2007 private placement, the Company entered into a registration rights agreement with the purchasers of the Series A shares, which, as amended, requires the Company to obtain an effective registration statement with the SEC covering the sale of the common stock issuable upon conversion of the Series A shares on or before August 31, 2008. If the Company is unable to obtain an effective registration statement by that date, the Company will have to pay liquidated damages cash to the holders of the Series A shares beginning on September 1, 2008.  The amount of liquidated damages that may be due is calculated by the following formula: up to a maximum of 20% of the aggregate subscription amount paid by each purchaser of the Series A shares on the percentage of the total Series A shares purchased by each purchaser that the SEC will allow us to register under Rule 415.  The Company estimates that percentage to be 33% of the total outstanding shares held by non-affiliates of the Company, or 4,112,753 shares of common stock.  Based on this formula the Company may be obligated to pay up to $781,423 in liquidated damages. The Company has filed a registration statement with the SEC for the sale of the common stock underlying the Series A shares. However, the registration statement is currently the subject of an SEC review and, to date, has not been declared effective.

The Company has not recorded a liability in connection with the registration rights agreement because, in accordance with SFAS No. 5, Accounting for Contingencies, management has concluded that it is not probable that the Company will make any payments under the liquidated damages provisions of the registration rights agreement.

The Company, after the effective date of the registration, and with certain market conditions, can force redemption of the Series A 10% Convertible Preferred Stock.

As additional consideration for the purchase of the Series A shares, the Company granted to the holders of the Series A shares warrants entitling it to purchase 5,178,947 common shares of the Company’s common stock at the price of $1.14 per share expiring five years from issuance, and exercisable after one year on a net cashless basis. 5,157,895 J Warrants were also issued at $1.235 per share expiring one year from issuance. In addition, J-A Warrants totaling 3,094,737 are issuable at $1.425 share, contingent on the exercise of the J Warrants. For accounting purposes they have the one-year life as they are linked to the J Warrants. If the J Warrants are exercised, these warrants become 5-year warrants with a net cashless provision. None of the warrants have registration rights. The Company estimated the fair value at date of issue of the stock purchase warrants issued in connection with the private placement to be $4,802,973 using the Black-Scholes formula assuming no dividends, a risk-free interest rate of 3.37% to 3.64 %, expected volatility of 121.06%, and expected warrant life of one to five years. Since the Company may be obligated to settle the warrants in cash, pursuant to EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” the Company has recorded the fair value of the warrants as a derivative liability. The net value of the warrants at the date of issuance was recorded as a warrant liability on the balance sheet in the amount of $ 4,802,973 and a reduction in value of shares subject to redemption. Any change in fair value was recorded as non-operating, non-cash income or expense at each reporting date.

-17-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 4- WARRANT LIABILITY

As described in Note 3, the Company issued warrants in conjunction with the sale of Series A Preferred stock.  These warrants contain a “fundamental transaction” clause that if while the warrant(s) are outstanding, the Company effects any merger or consolidation of the Company with or into another Person, or other similar transactions as defined in the warrant agreement, the warrant holders can demand net cash settlement.

As the contracts contain a provision that could require cash settlement , pursuant to  EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”, the warrants were recorded as a derivative liability and valued at fair market value until the Company meets the criteria under EITF 00-19 for permanent equity. The net value of the warrants at the date of issuance was recorded as a warrant liability on the balance sheet in the amount of $ 4,802,973 and charged as a reduction of the preferred stock carrying value. Subsequent to the initial issuance date, the Company will be required to adjust to fair value the warrant as an adjustment to current period operations.

In accordance with SFAS 133 “Accounting for Derivative Instruments and Hedging Activities,” for the three month period ended March 31, 2008, the Company recorded a loss on change in fair value of warrant liability of $12,192,305.  The fair value the warrants at March 31, 2008 were determined using the Black Scholes Option Pricing Model with the following assumptions:  Dividend yield: -0-%, volatility: 93.24%; risk free rate: 1.55% to 1.79%.

As of the date of the financial statements, the Company believes an event under the contract that would create an obligation to settle the stock purchase warrants in cash or other current assets is  remote and has  classified the obligation as a long term liability.

NOTE 5 – STOCKHOLDERS EQUITY

Series A – Convertible Preferred Stock

At the time of its founding in September 2004, NewCardio Technologies issued 4,563,206 shares of Series A Convertible Preferred Stock, par value $0.0001 per share, to certain persons for costs incurred and services rendered.  The shares of Series A Preferred Stock were valued at $0.01 per share at the time of issuance.  In December 2007, in conjunction with the Share Exchange, the Series A Preferred Stock was converted on a one share-to-one share basis into 4,563,206 shares of common stock.

Common Stock

The Company is authorized to issue 99,000,000 shares of common stock, par value $0.001 per share.

In September 2004, the Company issued 3,436,794 shares of common stock to founders and consultants in exchange for services and intellectual property.  The shares of common stock were valued at $0.001 per share at the time of issuance.

In November 2004, the Company issued 300,000 shares of common stock upon the exercise of stock options at the exercise price of $0.001 per share.

In March 2006, the Company issued 278,375 shares of common stock for services rendered and, in October 2006, the Company issued 75,000 shares of common stock for services rendered.  The shares were valued at $0.10 per share. The valuations of common stock issued for services were based on the value of the services rendered, which did not differ materially from the fair value of the common stock during the period the services were rendered.

In June 2007, the Company sold 4,200,000 shares of common stock, valued at $0.10 per share, for $0.02 per share, or $84,000.  The remaining $0.08 per share value was issued as compensation for services valued at $336,000.  The valuation of common stock issued for services was based on the value of the services rendered, which did not differ materially from the fair value of the common stock during the period the services were rendered. The difference between cash received for the sale of the common stock and the estimated fair value of $0.08 per share was recorded as stock-based compensation.  

-18-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 5 – STOCKHOLDERS EQUITY (continued)

In September 2007, the Company sold 1,475,631 shares of common stock, valued at $0.10 per share, for $0.02 per share for cash, or $29,513. The remaining $0.08 per share value was issued as compensation for services rendered.  The difference between cash received for the sale of the common stock and the estimated fair value of $0.08 per share was recorded as stock-based compensation.  25% of the shares were fully vested at the time of sale.  The remaining shares are subject to a repurchase right that diminishes over a 36 month period. 

NOTE 6 -STOCK OPTIONS AND WARRANTS

Warrants

The following table summarizes the changes in warrants outstanding and related prices for the shares of the Company’s common stock issued to shareholders at March 31, 2008:

		Warrants Outstanding			Warrants Exercisable
		Weighted Average	Weighted		Weighted
	Number	Remaining Contractual	Average	Number	Average
Exercise Price	Outstanding	Life (years)	Exercise price	Exercisable	Exercise Price
$0.10	2,592,000	2.22	$0.10	2,592,000	$0.10
0.50	25,000	3.40	0.50	22,500	0.50
0.95	604,211	4.74	0.95	604,211	0.95
0.96	592,131	4.25	0.96	592,131	0.96
1.14	5,178,947	4.74	1.14	5,178,947	1.14
1.15	473,705	4.25	1.15	473,705	1.15
1.235	5,157,895	.74	1.235	5,157,895	1.235
1.425	3,094,737	.74	1.425	-	1.425

Transactions involving the Company’s warrant issuance are summarized as follows:

	Number of Shares		Weighted  Average Price  Per Share
Outstanding at December 31, 2006		2,612,000	$	0.11
Granted		15,106,626		1.22
Exercised		-		-
Canceled or expired		-		-
Outstanding at December 31, 2007		17,718,626		1.06
Granted		-		-
Exercised		-		-
Canceled or expired		-		-
Outstanding at March 31, 2008		17,718,626	$	1.06

For the year ended December 31, 2007, warrants totaling 5,000 were issued in connection with debt financing. The warrants are exercisable for five years after date of issuance at an exercise price of $0.50 per share.  The warrants were valued using the Black Scholes option pricing method with the following assumptions:  dividend yield $-0-, volatility of 77.81% and risk free rate of 4.81%.  The Company recorded a debt discount related to the debt financing of $86 in the year ended December 31, 2007.

For the year ended December 31, 2007, warrants totaling 1,065,836 were issued in connection with convertible debentures. The warrants are exercisable until June 27, 2012, 592,131 warrants at an exercise price of $0.96 per share and 473,705 warrants at an exercise price of $1.15 per share.  The warrants were valued using the Black Scholes option pricing method with the following assumptions:  dividend yield $-0-, volatility of 121.06% and risk free rate of 3.64%.  The Company recorded a debt discount related to the debt financing of $598,692 in the year ended December 31, 2007.

-19-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 6 -STOCK OPTIONS AND WARRANTS (continued)

For the year ended December 31, 2007, warrants totaling 604,211 were issued in connection with services rendered. The warrants are exercisable for five years from the date of issuance at an exercise price of $0.95 per share.  The warrants were valued using the Black Scholes option pricing method with the following assumptions:  dividend yield $-0-, volatility of 121.06% and risk free rate of 3.64%.  The Company recorded a charge to operations of $355,034 in the year ended December 31, 2007.

For the year ended December 31, 2007, warrants totaling 13,431,579 were issued in connection with the issuance of the Series A 10% convertible preferred stock. The general descriptions and the methods and assumptions of fair value are described below:

	Series A Warrants	Series J Warrants	Series J-A Warrants
Number of warrants	5,178,947	5,157,895	3,094,737
Exercise price	$1.14	$1.235	$1.425
Term	5 years	1 year	1 year (a)
Black Scholes Assumptions:
Dividend yield:	-0-%	-0-%	-0-%
Volatility	121.06%	121.06%	121.06%
Risk free rate:	3.64%	3.37%	3.37%

(a)     In the event that Series J warrants are exercised, the Series J-A warrants will not expire until December 27, 2012.

The Company reduced shares subject to redemption by $4,802,973 (and recorded a warrant liability) in conjunction in the year ended December 31, 2007.  See also Footnote 4 for an update in the Warrant Liability and related assumptions at March 31, 2008.

Non-Employee Stock Options

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company's common stock issued to non employees of the March 31, 2008:

		Options Outstanding						Options Exercisable
				Weighted Average		Weighted				Weighted
				Remaining		Average				Average
Exercise		Number		Contractual Life		Exercise		Number		Exercise
Prices		Outstanding		(Years)		Price		Exercisable		Price
$	0.001		10,000		6.49	$	0.001		10,000	$	0.001
	0.01		571,959		8.01		0.01		327,274		0.01
	0.22		215,000		9.61		0.22		115,833		0.22
	2.25		320,000		9.93		2.25		6,667		2.25

-20-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 6 - STOCK OPTIONS AND WARRANTS (continued)

Transactions involving stock options issued to non employees are summarized as follows:

	Number of Shares			Weighted Average Price Per Share
Outstanding at December 31, 2006:		1,352,606		$	0.007
Granted		480,000			0.16
Exercised		(821,500	)		(0.05	)
Canceled or expired		(214,147	)		(0.06	)
Outstanding at December 31, 2007:		796,959			0.07
Granted		320,000			2.25
Exercised		-			-
Canceled or expired		-			-
Outstanding at March 31, 2008:		1,116,959		$	0.69

During the three month period ended March 31, 2007, the Company granted 25,000 non employee stock options in connection with the services rendered with an exercise price of $0.01 per share expiring on March 31, 2017 and vesting over four years.

The fair value of all non-employee options vesting during the three month period ended March 31, 2007 of $3,593 was charged to current period operations. The fair values of the vested options were determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-%
Volatility	125.34%
Risk free rate:	4.59%

During the three month period ended March 31, 2008, the Company granted an aggregate of 320,000 non employee stock options in connection services rendered at the exercise price of $2.25 per share.  The fair values of the vested options were determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-%
Volatility	93.24%
Risk free rate:	3.45%

The fair value of all non-employee options vesting during the three month period ended March 31, 2008 of $52,350 was charged to current period operations.

-21-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 6 - STOCK OPTIONS AND WARRANTS (continued)

Employee Stock Options

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company's common stock issued to employees of the Company under a non-qualified employee stock option plan at March 31, 2008:

		Options Outstanding						Options Exercisable
				Weighted Average		Weighted				Weighted
				Remaining		Average				Average
Exercise		Number		Contractual Life		Exercise		Number		Exercise
Prices		Outstanding		(Years)		Price		Exercisable		Price
$	0.001		100,000		6.48	$	0.001		87,500	$	0.001
	0.01		270,000		8.28		0.01		124,167		0.01
	0.02		880,000		8.94		0.02		880,000		0.02
	0.22		1,750,000		9.65		0.22		243,056		0.22
	2.05		1,130,000		9.96		2.05		52,917		2.05

Transactions involving stock options issued to employees are summarized as follows:

	Number of Shares			Weighted Average Price  Per Share
Outstanding at December 31, 2006:		450,000		$	0.004
Granted		2,630,000			0.22
Exercised		(80,000	)		(0.01	)
Canceled or expired		-			-
Outstanding at December 31, 2007:		3,000,000			0.14
Granted		1,130,000			2.05
Exercised		-			-
Canceled or expired		-			-
Outstanding at March 31, 2008:		4,130,000		$	0.69

During the three month period ended March 31, 2007, the Company granted 880,000 non employee stock options in connection with the services rendered with an exercise price of $0.02 per share expiring on March 31, 2017 and vesting immediately or over six month period.  The fair values of the options were determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-%
Volatility	125.34%
Risk free rate:	4.59%

The fair value of all employee options vesting in the three month period ended March 31, 2007 of $22,149 was charged to current period operations

During the three month period ended March 31, 2008, the Company granted 1,130,000 stock options with an exercise price of $2.05 per share expiring ten years from issuance.  The fair value was determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-%
Volatility	93.24%
Risk free rate:	3.48% - 3.56%

-22-

NEWCARDIO, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 6 - STOCK OPTIONS AND WARRANTS (continued)

The fair value of all employee options vesting in the three month period ended March 31, 2008 of $199,342 was charged to current period operations

NOTE 7 - FAIR VALUE

SFAS No. 157 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. SFAS No. 157 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Items recorded or measured at fair value on a recurring basis in the accompanying condensed financial statements consisted of the following items as of March 31, 2008:

	Total			Quoted Prices in Active Markets for Identical Instruments Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3 (A)
Assets:
Short term Investment	$	5,049,125		$	5,049,125
Total	$	5,049,125		$	5,049,125
Liabilities:
Warrant Liability	$	(16,995,278	)	$	-	$	-	$	(16,995,278	)
Total	$	(16,995,278	)		-	$	-	$	(16,995,278	)

(A) Fair value is estimated based on internally-developed models or methodologies utilizing significant inputs that are unobservable from objective sources.

With the exception of assets and liabilities included within the scope of FSP FAS No. 157-2, we adopted the provisions of SFAS No. 157 prospectively effective as of the beginning of Fiscal 2008.  For financial assets and liabilities included within

-23-

NEWCARDIO, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 7- FAIR VALUE (continued)

 the scope of FSP FAS No. 157-2, we will be required to adopt the provisions of SFAS No. 157 prospectively as of the beginning of Fiscal 2009.  The adoption of SFAS No. 157 did not have a material impact on our financial position or results of operations, and we do not believe that the adoption of FSP FAS No. 157-2 will have a material impact on our financial position or results of operations.

The fair value of the assets, short term investments , at March 31, 2008 was grouped as Level 1 valuation as the market price was readily available, and there has been no change to the fair value of the securities at March 31, 2008.

The table below presents a reconciliation of the beginning and ending balances of our warrant liability during the three months ended March 31, 2008:

Warrant Liability:
Balance, January 1, 2008	$	4,802,973
Additions to warrant liability	$	12,192,305
Balance, March 31, 2008	$	16,995,278

During the three months ended March 31, 2008, the Company recognized an unrealized loss of $12,192,305 in connection with the increase in the warrant liability. The unrealized loss was charged to operations under loss on change in fair value of warrant liability included in other income (expense). The Company did not recognize any realized losses or gains in connection with financial assets or liabilities measured at fair values.

NOTE 8 – SUBSEQUENT EVENTS

In April 2008, the Company issued 110,301 shares of common stock as a dividend due to holders of the Series A Preferred Stock in the amount of $214,112 under the terms of the December 27, 2007 financing discussed in Note 3 above.

NOTE 9 – RESTATEMENT

The accompanying unaudited condensed consolidated financial statements as of March 31, 2008; for the three months ended March 31, 2008 and for the period from September 7, 2004 (date of inception) through March 31, 2008 have been restated to correct the accounting treatment of the issuance of Series A Redeemable Preferred Stock, warrants issued in connection with the Series A Redeemable Preferred Stock and related fees and warrants issued in connection with the issuance.

The effect of these adjustments is a decrease in net loss of $3,297,797 for the period from September 7, 2004 (date of inception) through March 31, 2008 with no effect for the three months ended March 31, 2008.  There was no effect on cash flows from operating, investing or financing for either period.

The following tables summarize the effects of these adjustments on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2008, unaudited condensed consolidated statements of operations for the three months ended March 31, 2008 and from September 7, 2004 (date of inception) through March 31, 2008 and the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2008 and from September 7, 2004 (date of inception) through March 31, 2008.

-24-

NEWCARDIO, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 9 – RESTATEMENT (continued)

Condensed Consolidated Balance Sheet

March 31, 2008

	As Previously
	Reported			Adjustment			Reference		As Restated
Cash	$	150,773		$					$	150,773
Short term investment		5,049,125								5,049,125
Prepaid expenses		41,250								41,250
Property, plant and equipment		78,164								78,164
Deposits		12,600								12,600
	$	5,331,912		$	-				$	5,331,912
Accounts payable and accrued liabilities		651,145								651,145
Note payable, related party, current portion		10,316								10,316
Shares subject to redemption		8,200,000			(8,200,000	)		a		-
Warrant liability		16,995,278								16,995,278
Total liabilities:	$	25,856,739		$	(8,200,000	)			$	17,656,739
Shares subject to redemption		-			2,084,493			b		2,084,493
Common stock		20,238								20,238
Additional paid in Capital		3,287,136			2,817,710			c		6,104,846
Deficit accumulated during development stage		(23,832,201	)		3,297,797			d		(20,534,404	)
Total  deficiency in stockholders' equity		(20,524,827	)		6,115,507					(14,409,320	)
	$	5,331,912		$	-				$	5,331,912

-25-

NEWCARDIO, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 9 – RESTATEMENT (continued)

Condensed Consolidated Statement of Operations

For the Three Months March 31, 2008

	As Previously
	Reported			Adjustment			Reference		As Restated
Operating expenses:
Selling, general and administrative	$	736,967		$					$	736,967
Depreciation		1,100								1,100
Research and development		285,106								285,106
Total operating expenses		1,023,173			-					1,023,173
Net loss from operations		(1,023,173	)		-					(1,023,173	)
Other income (expense)
Loss on change in fair value of warrant liability		(12,192,305	)							(12,192,305	)
Interest		(160,818	)		214,112			e		53,294
Net loss before income taxes		(13,376,296	)		214,112					(13,162,184	)
Provision for income taxes		-			-					-
Net loss		(13,376,296	)		214,112					(13,162,184	)
Preferred Stock dividend		-			(214,112	)		e		(214,112	)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(13,376,296	)	$	-				$	(13,376,296	)
Net loss per share, basic and diluted	$	(0.66	)	$	-				$	(0.66	)

-26-

NEWCARDIO, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

Condensed Consolidated Statement of Operations

From September 7, 2004 (date of inception) through March 31, 2008

	As Previously
	Reported			Adjustment			Reference		As Restated
Operating expenses:
Selling, general and administrative	$	2,823,121		$					$	2,823,121
Depreciation		1,694								1,694
Research and development		1,444,132								1,444,132
Total operating expenses		4,268,947			-					4,268,947
Net loss from operations		(4,268,947	)		-					(4,268,947	)
Other income (expense)
Loss on change in fair value of warrant liability		(12,192,305	)							(2,192,305	)
Interest		(7,370,949	)		6,329,619			f		(1,041,330	)
Net loss before income taxes		(23,832,201	)		6,329,619					(17,502,582	)
Provision for income taxes		-			-					-
Net loss		(23,832,201	)		6,329,619					(17,502,582	)
Preferred Stock dividend		-			(3,031,822	)		g		(3,031,822	)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(23,832,201	)	$	3,297,797				$	(20,534,404	)

-27-

NEWCARDIO, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 9 – RESTATEMENT (continued)

Condensed Consolidated Statement of Cash Flows

For the Quarter Ended March 31, 2008

	As Previously
	Reported			Adjustment			Reference		As Restated
Cash flows from operating activities:
Net loss for the period	$	(13,376,296	)	$	214,112			h	$	(13,162,184	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,100								1,100
Fair value of options issued for services rendered		251,692								251,692
Change in fair value of warrants issued in conjunction with issuance of Series A redeemable preferred stock		12,192,305								12,192,305
(Increase) decrease in:
Prepaid expenses		(41,250	)							(41,250	)
Deposits		(12,600	)							(12,600	)
Increase (decrease) in:
Accounts payable and accrued liabilities		(220,101	)		(214,112	)		h		(434,213	)
Net cash used in operating activities		(1,205,150	)		-					(1,205,150	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(71,577	)							(71,577	)
Purchase of short term investment		(49,125	)							(49,125	)
Net cash used in investing activities		(120,702	)		-					(120,702	)
Cash flows from financing activities:
Net cash provided by financing activities		-			-					-
Net (decrease) in cash		(1,325,852	)		-					(1,325,852	)
Cash at beginning of period		1,476,625								1,476,625
Cash at end of period	$	150,773		$	-				$	150,773

-28-

NEWCARDIO, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 9 – RESTATEMENT (continued)

Condensed Consolidated Statement of Cash Flows

From September 7, 2004 (date of inception) through March 31, 2008

	As Previously
	Reported			Adjustment			Reference		As Restated
Cash flows from operating activities:
Net loss for the period	$	(23,832,201	)	$	6,329,619				$	(17,502,582	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,694								1,694
Financing costs paid in conjunction with issuance of preferred stock		857,500			(857,500	)		i		-
Common stock issued to founders for services rendered		3,177								3,177
Common stock issued for intellectual property		260								260
Common stock issued for services rendered		489,388								489,388
Common stock issued as beneficial conversion feature in conjunction with settlement of convertible debentures		426,334								426,334
Series A Preferred stock issued to founders for services rendered		45,632								45,632
Series A-2 Preferred stock issued for services rendered		180,121								180,121
Notes payable issued for services rendered		10,316								10,316
Fair value of options issued for services rendered		574,754								574,754
Fair value of warrants issued as compensation for financing		355,034			(355,034	)		i		-
Fair value of warrants issued in conjunction with issuance of Series A-2  preferred stock		232,502								232,502
Fair value of warrants issued in conjunction with issuance of Series A redeemable preferred stock		16,995,278			(4,802,973	)		j		12,192,305
Fair value of warrants issued in settlement of convertible debentures		598,692								598,692
Amortization of debt discount attributable to subordinated convertible debt		5,713								5,713
(Increase) decrease in:
Prepaid expenses		(41,250	)							(41,250	)
Deposits		(12,600	)							(12,600	)
Increase (decrease) in:
Accounts payable and accrued liabilities		670,604			(314,112	)		k		356,492
Net cash used in operating activities		(2,439,052	)		-					(2,439,052	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(79,858	)							(79,858	)
Purchase of short term investment		(5,049,125	)							(5,049,125	)
Net cash used in investing activities		(5,128,983	)		-					(5,128,983	)
Cash flows from financing activities:
Proceeds from exercise of common stock options		6,216								6,216
Proceeds from sale of Series A-2 preferred stock		79,079								79,079
Proceeds from sale of Series A preferred stock		7,342,500								7,342,500
Proceeds from sale of common stock		113,513								113,513
Proceeds from convertible debt, net		177,500								177,500
Net cash provided by financing activities		7,718,808			-					7,718,808
Net increase in cash		150,773			-					150,773
Cash at beginning of period		-								-
Cash at end of period	$	150,773		$	-				$	150,773

-29-

NEWCARDIO, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 9 – RESTATEMENT (continued)

(a)  In December 2007, the Company issued 8,200 Series A shares at $1,000 per share to accredited investors in a private placement. The Company initially recorded the issuance as a current liability at the full face amount of $8,200,000 and recorded the issuance costs totally $1,312,534 interest expense in the current period.

Under the terms of the Series A Stock Certificate of Designation, the Company may be required to redeem the Series A shares for cash in an amount equal to the Series A stated value, plus accrued and unpaid dividends , upon the occurrence of  certain events , including a change in control. The Company has determined the Series A shares includes redemption features that have the potential to be outside the control of the Company, and accordingly, the Company has classified the Series A shares outside of shareholders’ equity in accordance with Emerging Issues Task Force (“EITF”) Topic D-98, Classification and Measurement of Redeemable Securities (“EITF Topic D-98”). In accordance with EITF Topic D-98, the fair value allocated to the Preferred Stock at the date of issuance was recorded outside of common shareholders’ equity in the accompanying consolidated balance sheet.

(b)   As described above, the Company initially recorded the issuance of the Series A Preferred Stock at face amount of $8,200,000. By considering a beneficial conversion feature present as defined under Emerging Issues Task Force (“EITF”) No.00-27, “Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rates’, to Certain Convertible Instruments”, $4,802,973 has now been allocated to the warrants based on their fair value, which totaled using the Black Scholes option pricing model. Further, the Company attributed a beneficial conversion feature of $2,817,710 to the Series A preferred shares based upon the difference between the effective conversion price of those shares and the fair value of the common shares on the date of issuance. The assumptions used in the Black Scholes model are as follows:  (1) dividend yield of 0%; (2) expected volatility of 121.06%, (3) risk-free interest rate of 3.37% to 3.64%, and (4) expected life of 1 to 5 years. The amount attributable to the beneficial conversion feature has been recoded as a dividend to the preferred shareholders. Since the redemption feature of the preferred stock is contingent on the occurrence of future events, the Company will not accrete the carrying value of the preferred stock to redemption value until the occurrence of those future events becomes probable.

Shares subject to redemption is summarized as follows:

Face amount of Preferred Stock:	$	8,200,000
Less: fair value of warrants		(4,802,973	)
Less: issuance costs		(1,312,534	)
Net carrying value:	$	2,084,493

(c )  To record a $2,817,710 dividend to the Series A preferred shareholders (see (b) above).

(d)  The effect in deficit accumulated during development stage is as follows:

Reclassification of initial fair value of warrants from current period interest expense to a reduction in carrying value of Series A Preferred Stock	$	4,802,973
Reclassification of the issuance costs from current period interest expense to a reduction in the carrying value of Series A Preferred Stock		1,312,534
Less: The value of the beneficial conversion feature		(2,817,710	)
Net change	$	3,297,797

-30-

NEWCARDIO, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 9 – RESTATEMENT (continued)

(e)  The Company recorded the accrual for the Series A Preferred Stock dividend as a charge to current period interest expense.  With the restatement, the Company reclassified the dividend to below Net Loss as an increase in the Net Loss Attributable to Common Shareholders.

(f)  As described in (b), (d) and (e) above, the initial fair value of the warrants, issuance costs and Series A Preferred Stock dividend were reclassified from interest expense to a reduction in the carrying value of the Series A Preferred (relating to the warrants and issuance costs) or an increase in the Net Loss Attributable to Common Shareholders (dividend).

(g)  As described in (d) and (e) above, the beneficial conversion feature and the Series A Preferred Stock dividend is shown on the Condensed Consolidated Statements of Operations in the date of inception column as an increase in the Net Loss Attributable to Common Shareholders.

(h) As described in (e) above, the dividend for the Series A Preferred Stock is shown below Net Loss as an increase in the Net Loss Attributable to Common Shareholders.

(i)  As described in (b) above, the issuance costs related to the issuance of the Series A Preferred Stock was reclassified from current period expense to a reduction in the carrying value of the Preferred Stock (Shares subject to redemption).

(j) As described in (b) above, the initial fair value of the warrants issued in connection with the issuance of the Series A Preferred Stock was reclassified from current period expense to a reduction in the carrying value of the Preferred Stock (Shares subject to redemption).

(k)  In the inception to date column,  $100,000 of the issuance costs were accrued and not paid until January 2008, along with the effect of the reclassification of the current period Series A Preferred Stock dividend from interest expense to below Net Loss on the Condensed Consolidated Statements of Operations.

-31-

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Significant highlights for the first quarter of 2008 were as follows:

● We began to increase our investments in both infrastructure and our development efforts. We hired a Chief Financial Officer, installed a basic accounting system, rented a corporate space that we began to occupy in the second quarter, and put in an employee benefits plan including medical benefits. While the CFO is the only new hire in 2008 to date, we expect to add additional development personnel and begin adding a sales infrastructure for QTinno™.  We have committed approximately $120,000 per quarter in infrastructure costs which we plan to finance at this time by the proceeds from our December 27, 2007 financing.

● R&D highlights for the quarter included:

1.   Technical Development – QTinno™:

a)      During the quarter ended March 31, 2008, we made what we believe are important technical improvements to the product.  These technical improvements are intended to enhance program performance in a number of specific areas, for example, the ability to perform automated ECG analysis of "difficult" ECGs.  A "difficult" ECG is for example, an ECG contaminated with high frequency noise resulting from muscle tremors or electrical interference.  Such contamination is not uncommon in clinical studies and may result in loss of data.  We believe these improvements will enhance market acceptance of QTinno™.

2.   Clinical Development – QTinno™:

a)      Our first quarter study involved QTinno™ performance in drug-induced QT prolongation. During the quarter ended March 31, 2008, we also completed the design of a second and third external study of ECGs previously obtained in drug development clinical trials.  These studies are intended to complement and extend our previous external study completed in late 2007.  Both of these new studies will be led by independent experts, and will be re-analyses with QTinno™ of ECGs from patients treated with a drug under development.  These studies will involve approximately 7,000 and 15,000 ECGs, respectively.  The latter study is with a large clinical research organization that is involved in many drug development trials as an independent group in support of the large pharmaceutical companies. This research organization would be a potential customer for us, and as a result, we consider its involvement in the development process as an important milestone towards our ultimate goal of market acceptance. While we will use this study in our regulatory plans, at this time, we have no permission to publicly disclose the results that will be obtained in this study.

We also plan to evaluate the performance of QTinno™'s new technical features in both studies.  We expect to obtain formal written reports on this top-line data from both studies by the end of the summer of 2008.

3.   Clinical development – VisualECG™:

a)      VisualECG™ performance in ECGs from patients undergoing evaluation for acute chest pain is being studied.  During the quarter ended March 31, 2008, we completed design of a retrospective clinical study to evaluate and refine VisualECG™ performance in patients presenting to an urban emergency department with possible acute coronary syndrome (i.e. a heart attack).  This study will include about 600 consecutive patients who were evaluated for chest discomfort and who had at least one digital ECG obtained during the evaluation.  We will use ECGs and clinical information to correlate VisualECG™ findings with the clinical diagnoses – comparing the initial and VisualECG™ against the ultimate diagnosis up to several months later. The objective is to define an optimal set of VisualECG markers™ for diagnosis of a heart attack.  We expect to complete the data collection and conclude the study by the end of the summer of 2008. This study is intended to be an internal development study to be followed by an independent study of similar design that we expect to complete by the end of 2008.

-32-

Comparison of Results of Operations for the Three Months Ended March 31 2008 to March 31, 2007

Selected results of operations for the quarter ended March 31, 2008 and March 31, 2007 were as follows:

Financial Condition and Results of Operations

NEWCARDIO, INC

(a development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Quarter ended March 31,
	2008			2007			Change			%
	Restated
Operating expenses:
Selling, general and administrative	$	736,967		$	45,638		$	691,329			1515%
Depreciation		1,100			-			1,100			0%
Research and development		285,106			3,363			281,743			8378%
Total operating expenses		1,023,173			49,001			974,171			1988%
Net loss from operations		(1,023,173	)		(49,001	)		(974,171	)		1988%
Other income (expense)
Loss on change in fair value of warrant liability		(12,192,305	)		-			(12,192,305	)		0%
Interest, net		53,294			(1,344	)		54,638			4,065%
Net loss before income taxes		(13,162,184	)		(50,345	)		(13,111,839	)		26,044%
Provision for income taxes		-			-			-			0%
NET LOSS	$	(13,162,184	)		(50,345	)		(13,111,839	)		26,044%
Preferred Stock Dividend		(214,112	)		-			(214,112)			0%
Net Loss Attributable to Common Shareholders	$	(13,376,296	)		(50,345	)		(13,325,951	)		26,469%

We continue to operate in 2008 as a development stage company, and as such, we have limited capital and limited capital resources and no revenues. We do not expect to see any revenues before 2009, although based on the current stage of our QTinno™ clinical trials, we will look for opportunities to shorten the cycle we believe is necessary to convince the market to adopt QTinno™ as their cardiac safety tool in drug trials that are largely conducted by the clinical research organizations, who are also our initial target customers.  For this reason we put in place the plans for a clinical trial during the first quarter with a large clinical research organization with the objective of starting the trial in the second quarter and subsequently using the results later in the year when we plan to meet with both FDA and the Cardiac Safety Research Consortium that FDA has indicated in a press release it will look to for guidance in this area. Our plans are based on our own experience as well as that of our scientific advisory board. Unlike medical devices that have clinical application and fall under a 510(k) clearance process, the acceptance process for a research tool is not well defined, and as a result we are focusing not only on expected FDA requirements but what we believe will be necessary to gain market acceptance. We do not believe that a 510(k) clearance for QTinno™ is mandatory or necessary at this time. However, if there are material changes in any of the factors or assumptions upon which we based this current plan, actual results may differ.  Such factors and assumptions, include, without limitation, the timing and results of clinical trials, the level and timing of FDA regulatory clearance or review, our success in implementing our strategic plans and our ability to commercialize our products, any of which could impact sales, costs and expenses and our planned strategies and timing, which could have a material adverse affect on our business, results of operations, liquidity and financial condition.

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As of March 31, 2008, we have $5.2 million in cash, including a $5 million certificate of deposit, which is the balance remaining from the financing we completed in December 2007.

We spent limited resources in the early part of 2007. In the first quarter of 2008, net cash used in operating activities totaled $1.2 million.

Selling, general and administrative expenses grew 1515% to $737,000 for the quarter ended March 31, 2008, an increase of $691,000 from $46,000 in 2007.  The increase is made up of both cash and stock-based compensation to key executives. There was minimal activity in the first quarter of 2007.

Research and development expenses grew over 8000% to $285,000 for the quarter ended March 31, 2008, an increase of $282,000 from $3,000 in 2007.    A year ago very limited funds were available to spend on clinical trial efforts, whereas we are now well along on validating our first product to market, QTinno™, and we have also begun internal development trials on our second product, VisualECG™. We are concluding a study of approximately 7,000 ECGs and preparing to begin a much larger study with a Clinical Research Organization. Such an organization typically manages phase 1 clinical trials for the large pharmaceutical companies and therefore is a target customer for QTinno™. Validating this product with them is, in our opinion, a key milestone towards acceptance of this product in the marketplace, and a precursor to our planned meetings with the FDA and the Cardiac Safety Research Consortium.  The product has performed well in trials to date and although this is a research tool, we believe that the degree of success of this product will be tied to these key constituencies understanding and accepting the value of QTinno™ and that we expect this research focus to continue, and expand as necessary, until we release this product to market, which we project will be in 2009.  The release of this product is contingent on the results of these internal and clinical trials, validation of the product and market acceptance.  If actual results differ from our current expectations, this could have a material adverse affect on our business, results of operations, liquidity and financial condition.

We primarily use consultants to engineer our product development and to conduct our clinical trial studies and their costs and support expenses. Such expenses totaled the $285,000 R&D expense for the quarter and included $49,000 of compensation related to stock option grants earned by these consultants and travel expense of $34,000. We employ approximately a dozen consultants worldwide; primarily engineers (software developers) and medical experts that support our clinical trial programs.  For strategic timing reasons, no significant work is being performed on CardioBip™ at this time. 

We have historically relied on the issuance of equity securities to consultants in exchange for services and following the December 2007 financing offer both cash and stock-based compensation arrangements. Our management enters into equity compensation agreements with non-employees, if it is in our best interest, under terms and conditions consistent with the requirements of Financial Accounting Standards No. 148, "Accounting for Stock Based Compensation - Transition and Disclosure - an amendment of SFAS 123."   In order to conserve our limited operating capital resources, we anticipate continuing to compensate certain non-employees for services using equity or a combination of cash and equity during the next 12 months. Further, stock options will be a key element of employee compensation and, with the increase in our market capitalization as a result of our transition from a private company to a public company, the value of our equity is materially higher. This is expected to have a material effect on our results of operations during the next 12 months. For the quarter ended March 31, these costs totaled $252,000 in 2008 and $26,000 in 2007 respectively.

      Loss on change in fair value of warrant liability is due to the warrants issued with the December 2007 financing. We marked the value of the warrants to market at the end of March 2008 and at the current market price of our common stock, the value and thus warrant liability increased substantially. The warrant liability at March 31, 2008 is approximately $17 million and quarterly expense related to this warrant liability is approximately $12 million. Interest of $53,000 (compared to almost none in 2007) is primarily related to income on the short term investment.   The preferred dividend of $214,000 is the 10% dividend on the $8.2 million in preferred stock payable through March 31, 2008. 

Liquidity and Capital Resources

We have incurred losses attributable to common shareholders of $20,534,404from our inception in September 2004 through March 31, 2008.  These losses stem from expenses associated principally with equity-based compensation to consultants who have provided marketing, public relations and investor services, acquisition costs and professional service, including legal and accounting fees.  We believe that we will continue to incur net losses and negative cash flow from operating activities into 2009.

As of March 31, 2008, we had a working capital of approximately $4.6 million.  As a result of operating losses from our inception on September 7, 2004 through March 31, 2008, we generated a cash flow deficit of approximately $2.4 million from operating activities from our inception on September 7, 2004 through March 31, 2008.  Cash flow used in investing activities was primarily related to the purchase of a certificate of deposit for $5,000,000 at the end of December 2007.  We met our cash requirements during this period through the private placement of common stock, the exercise of common stock options, the private placement of preferred stock and the issuance of convertible notes.  We raised a net amount of approximately $7,700,000 during 2006 and 2007, most of which was raised in our December 2007 private placement.

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As a result of our December 2007 financing, we raised a net amount of approximately $7,000,000, which we believe will sufficiently fund our operations and business plan into 2009.   By adjusting our operations and development to the level of our capitalization, we believe that our existing capital resources will be sufficient to fund our current level of operating activities, capital expenditures and other obligations into the first half of 2009, but not until we are cash flow positive. However, actual results may differ from our current belief, if there are material changes in any of the factors or assumptions upon which we based our current belief.  Such factors and assumptions, include, without limitation, the development of our proprietary technology platform and our products, the timing of such development, the timing and results of clinical trials, the level and timing of FDA regulatory clearance or review, protection of our intellectual property, our success in implementing our strategic, operating and people initiatives and our ability to commercialize our products, any of which could impact sales, costs and expenses and/or planned strategies and timing.  As a result, it is possible that the money we raised in the private placement will not be sufficient to meet our projected cash flow deficits from operations or to fund the development of our technology and products and we may need additional financing to meet our capital needs.  If we are not successful in generating sufficient cash flow from operations or in raising sufficient capital on terms acceptable to us, including up to $6,370,000 we could receive if the Series J Warrants are exercised on or before December 27, 2008, we may not have sufficient cash to fund our operations, which could have a material adverse affect on our business, results of operations, liquidity and financial condition.

Our continued operations will depend on whether we are able to generate sufficient liquidity from operations and/or raise additional funds through various potential sources, such as equity and debt financing, including, without limitation, through the exercise of the one-year Series J Warrants, collaborative and licensing agreements, strategic alliances, and our ability to realize the full potential of our technology in development. Such additional funds may not become available on acceptable terms, if at all, and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term. Until we are able to generate sufficient liquidity from operations, we intend to continue to fund operations from cash on-hand and through private placements of our securities. There can be no assurance that we will be able to raise additional capital or that we are able to obtain an amount sufficient to meet our needs.  If we are not able to generate sufficient liquidity from operations or raise sufficient additional capital, this could have a material adverse affect on our business, results of operations, liquidity and financial condition.

We may experience fluctuations in operating results in future periods due to a variety of factors, including our ability to obtain additional financing in a timely manner and on terms favorable to us, our ability to successfully develop our business model, the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure and the implementation of marketing programs, key agreements, and strategic alliances, and general economic conditions specific to our industry.

We also have an outstanding promissory note to a former member of our Board of Directors in the principal amount of $10,316.  The promissory note has a two-year term and an interest rate of 4.9%.  Principal and interest accrued thereon are payable in full on the promissory note’s due date in November 2008.

We believe that we will continue to incur net losses and negative cash flows from operating activities beyond 2008.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. A summary of the significant accounting policies and the judgments that we make in the application of those policies is presented in Note 1 to our unaudited condensed consolidated financial statements.

These financial statements are based on the selection of accounting policies and the application of accounting estimates, some of which require management to make significant assumptions. Actual results could differ materially from the estimated amounts. The following accounting policies are critical to understanding and evaluating our reported financial results:

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Accounting for Stock-Based Compensation

We account for our stock options and warrants using the fair value method promulgated by Statement of Financial Accounting Standards No. 123R “Share-Based Compensation” which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Therefore, our results include non-cash compensation expense as a result of the issuance of stock options and warrants and we expect to record additional non-cash compensation expense in the future.

Accounting for and Classifying Series A Stock

We may be required to redeem the Series A shares for cash in an amount equal to the stated value of the Series A shares, plus accrued and unpaid dividends, upon the occurrence of certain events. As the Series A shares redemption requirement may be triggered by events that are outside of our control, in accordance with Emerging Issues Task Force Topic D-98, Classification and Measurement of Redeemable Securities, we recorded the fair value of the Series A shares outside of common shareholders’ equity in the consolidated balance sheet.

Accounting for and Classifying Warrants

The warrants we issued to the investors in the December 2007 private placement contain a “fundamental transaction” clause that, if while the warrants are outstanding, we effect a merger or consolidation, or similar transactions as defined in the warrants, the warrant holders can demand net cash settlement. As the warrants contain a provision that could require cash settlement, pursuant to  EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” the warrants were recorded as a derivative liability and valued at fair market value until we meet the criteria under EITF 00-19 for permanent equity. The net value of the warrants at the date of issuance was recorded as a warrant liability on the balance sheet in the amount of $4,802,973 and reduced the value of the shares of Series A Stock subject to redemption. Subsequent to the initial issuance date, we are required to adjust, and have been adjusting, the warrants to fair value through current period operations.

In preparing our financial statements, management made a number of   assumptions in connection with the accounting and reporting the issuance of the warrants as non-current liabilities:

● The Series J-A warrants are only exercisable in the event the Series J warrants are exercised. 

● If the Series J warrants are exercised, the term of the Series J-A will automatically extend until December 27, 2012, which would give them a five- year term from date of issuance.

● The holders of the warrants may exercise their options to purchase our common stock at any time during the term of the warrants.  Absent specific events, described as a “Fundamental Transactions,” we are obligated to settle the warrants with unregistered shares of common stock.

● The warrant holders can demand net cash settlement if we enter into a transaction that is either:

● an all cash sale,

● a “going private transaction,” or

● a transaction involving a person or entity not traded on a national securities exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market.

● Absent the occurrence of any of the three events described above, should the holders of the warrants exercise their warrants, we would meet the obligation by issuing shares of our unregistered common stock, not the transfer of current assets.

● Based upon the facts and circumstances available to management, management made the following estimates and assumptions in accounting and reporting of the liabilities associates with the Series J and Series J-A warrant liabilities:

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● During the foreseeable future, we have no plan to enter into a transaction that would require us to settle the Series J and Series J-A warrants with cash.

● The holders of the Series J warrants will exercise their warrants and we will receive shares of unregistered common stock. This assumption is based upon the economic value of the warrants.

● As a result of the Series J warrants being exercised, the Series J-A warrants will not expire until December 27, 2012.

● Further, if the Series J warrants are not exercised by December 27, 2008, the warrant liability for both the Series J and Series J-A warrants terminates.

● As of the date of the financial statements, we believe an event that would create an obligation to settle the warrants in cash or other current assets is remote and have classified the obligation as a long term liability.

If an event occurs that would require the net cash settlement of the warrants, we will reclassify the obligation to current liabilities.

Financial Instruments Measured at Fair Value.

We carry certain financial instruments in the form of liabilities at fair value with changes in fair value recognized in earnings each period. We make estimates regarding valuation of assets and liabilities measured at fair value in preparing the consolidated financial statements. The assets are comprised solely of short term investments consisting of certificate of deposits. The liabilities are comprised solely of derivative contracts that may have to settle in the form of cash if certain events occur. The derivative contracts comprise 100% of the liabilities measured at fair value. 

Fair Value Measurement—Definition and Hierarchy.

We adopted the provisions of SFAS No. 157, effective January 1, 2008. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, we use various valuation approaches, including market, income and/or cost approaches. SFAS No. 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

● Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

● Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, directly or indirectly.

● Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary and is affected by a wide variety of factors, including, for example, the type of security, whether the security or instrument  is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised us in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or Level 2 to Level 3. See Note 7 to the unaudited condensed consolidated financial statements at March 31, 2008 for further information about our financial assets and liabilities that is accounted for at fair value.

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Valuation Techniques.

Fair value for many derivative contracts is derived using pricing models. Pricing models take into account the contract terms (including maturity) as well as multiple inputs, including, where applicable, equity prices, interest rate yield curves, and volatility of the underlying security. Where appropriate, valuation adjustments are made to account for various factors, including bid-ask spreads and market liquidity. These adjustments are applied on a consistent basis and are based upon observable inputs where available.

Short-term Investment.  Short term investment primarily consists of certificate of deposits where the market price was readily available and there was no change in fair valuing them at March 31, 2008.   

Derivative Contracts. Derivative contracts are comprised of warrants issued to investors in connection with the placement of equity instruments in December 2007.  As the contracts contain a provision that could require cash settlement, pursuant to  EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” the warrants were recorded as a derivative liability and valued at fair market value until we meet the criteria under EITF 00-19 for permanent equity. The net value of the warrants at the date of issuance was recorded as a warrant liability on the balance sheet in the amount of $4.8 million and a reduction to shares subject to redemption. For the three month period ended March 31, 2008, we recorded an unrealized loss on change in fair value of warrant liability of $12.1 million. While the change in the value of the derivative contract increased both our liabilities and losses, the increase did not impact our liquidity. We did not recognize any realized losses or gains in connection with financial assets or liabilities measured at fair values.

The fair value the warrants at March 31, 2008 were determined using the Black Scholes Option Pricing Model with the following assumptions:  Dividend yield: - -0-%, volatility: 93.24%; risk free rate: 1.55% to 1.79%.

Since we are newly established and have a limited operating history and external price data is extremely limited, the valuation of the derivative instruments required more judgment in the implementation of the valuation technique applied due to the reduced observability of inputs. Derivative contracts , for which observability of external price data is extremely limited, are valued based on an evaluation of the market for similar positions as indicated by industry competitors market activity (for example, assumed volatility of underlying shares of the common stock underlying the derivative) . Each position is evaluated independently taking into consideration the underlying collateral performance and pricing and liquidity. While these factors may be supported by historical and actual external observations, the determination of their value as it relates to specific positions nevertheless requires significant judgment. For example, if assumed projected volatility of our shares of common stock underlying the derivate contract were to increase from the assumed 100.08%, the value of the derivative contract would increase, resulting in an increase in liabilities and a corresponding decrease in earnings. The derivative instruments are valued based on data from comparable equity instruments tend to be of limited observability. These instruments involve significant unobservable inputs and are categorized in Level 3 of the fair value hierarchy.

In general, as the price of our common stock underlying the derivative contact increases, our reported liability increases and operating  results will be negatively impact our financial condition and results of operations; conversely, if our common stock price decreases, the changes in the derivative contract will improve our financial condition and results of operations. Given the changes in the derivative contract are non-cash and unrealized, any changes will not have an impact on our liquidity.

While these valuation factors may be supported by historical and actual external observations, the determination of their value as it relates to specific positions may require significant judgment. We are unable to predict whether or not the fair value of the derivative contract will approximate the ultimate realization on settlement. In the case of our warrant liability, we believe an event under the contract that would obligate us to settle the liability in cash is remote, and we have classified the liability as long term as a result. We do not expect it to impact our liquidity.

If the event occurred, it could have a material adverse effect on the Company’s financial condition and operating results.

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Reclassifications of Derivative Contracts.

There were no reclassifications of derivative contracts from Levels 1 or 2 to Level 3 during the period ended March 31, 2008.

Fair Value Control Processes.

We employ control processes to validate the fair value of its financial instruments, including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and that the assumptions are reasonable. These control processes include reviews of the pricing model’s theoretical soundness and appropriateness by our personnel with relevant expertise.

Where a pricing model is used to determine fair value, recently executed comparable transactions and other observable market data are considered for purposes of validating assumptions underlying the model.

Off-Balance Sheet Arrangements

The Company does not maintain off-balance sheet arrangements nor does it participate in non-exchange traded contracts requiring fair value accounting treatment.

Inflation

Our opinion is that inflation has not had a material effect on our operation.

Forward-Looking Statements

This Management’s Discussion and Analysis contains forward-looking statements regarding our future plans, strategies and expectations and describes our intent, belief or current expectations.  These forward-looking statements are based on a number of assumptions and currently available information and are subject to a number of risks and uncertainties.  Forward-looking statements are generally identifiable by the use of terms such as “anticipate,” “will,” “expect,” “believe,” “should” or similar expressions. Although we believe that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence or nonoccurrence of future events. There can be no assurance that the forward-looking statements contained in this report will prove to be accurate. The inclusion of a forward-looking statement herein should not be regarded as a representation by us that our objectives will be achieved.  The potential risks and uncertainties that could cause our actual results to differ materially from those expressed or implied herein are set forth in Item 1A of our Annual Report on Form 10-K/A (No. 2)  for the year ended December 31, 2007 and include: our business plan, our business strategy, the development of our proprietary technology platform and our products, the timing of such development, the timing and results of clinical trials; the level and timing of FDA regulatory clearance or review; protection of our intellectual property; our success in implementing our strategic, operating and people initiatives; our ability to commercialize our products; any of which could impact sales, costs and expenses and/or planned strategies and timing.   We assume no obligation to, and do not currently intend to, update these forward-looking statements.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act).  This evaluation identified a deficiency in our disclosure controls and procedures.  As a result of comments received from the Accounting Staff of the Division of Corporate Finance of the SEC in its review of our financial statements for the fiscal year ended December 31, 2007 and the quarter ended March 31, 2008, contained in our Form S-1 currently under SEC review, we determined that errors were made in the accounting of the Series A Stock and related warrants issued in the December 2007 private placement.   Due to the significance of these errors, we have restated our financial statements for the year ended December 31, 2007 and the quarter ended March 31, 2008.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

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We have taken remedial measures to establish effective disclosure controls and procedures and internal control over financial reporting, including reviewing all equity instruments to identify any securities that may have to be classified as outside of shareholders’ equity; hiring an outside accountant with expertise in derivatives accounting to assist us in this review; improving the supervision and training of our accounting staff to understand and implement accounting requirements, policies and procedures for the accounting of redeemable preferred securities.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 6. Exhibits.

3.1a	Certificate of Incorporation of EP Floors, Inc., originally filed as Exhibit 3.1a to Registrant’s Registration Statement on Form SB-2 filed on March 22, 2006 and to Registrant’s Annual Report on Amendment No. 1 on Form 10-K/A filed on April 4, 2008.
3.1b	Amended Certificate of Incorporation of EP Floors, Inc., originally filed as Exhibit 3.1b to Registrant’s Registration Statement on Form SB-2 filed March 22, 2006 and to Registrant’s Annual Report on Amendment No. 1 on Form 10-K/A filed on April 4, 2008.
3.1c	Certificate of Amendment of Certificate of Incorporation, originally filed as Exhibit 3.2 to Registrant’s Form 8-K filed on February 1, 2008 and to Registrant’s Annual Report on Form 10-K/A filed on April 4, 2008.
3.2	Amended and Restated Bylaws of NewCardio, Inc.
4.1	Certificate of Designation of Series A Preferred Stock (Incorporated herein by reference to Exhibit No. 4.1 of Registrant’s Form S-1/A (No. 1) filed on April 15, 2008.)
10.1	Securities Purchase Agreement (Incorporated herein by reference to Exhibit No. 4.1 of Registrant's Form 8-K filed on January 4, 2008).
10.2	Form of Series A Warrant (Incorporated herein by reference to Exhibit No. 4.2 of Registrant's Form 8-K filed on January 4, 2008).
10.3	Form of Series J Warrant (Incorporated herein by reference to Exhibit No. 4.3 of Registrant's Form 8-K filed on January 4, 2008).
10.4	Form of Series J-A Warrant (Incorporated herein by reference to Exhibit No. 4.4 of Registrant's Form 8-K filed on January 4, 2008).
10.5	Registration Rights Agreement (Incorporated herein by reference to Exhibit No. 4.5 of Registrant's Form 8-K filed on January 4, 2008).
10.6	Amendment No. 1 to Securities Purchase Agreement dated as of December 27, 2007, between Marine Park Holdings, Inc. and certain of the purchasers signatory thereto (Incorporated herein by reference to Exhibit No. 4.6 of Registrant's Form 8-K filed on February 6, 2008).
10.7	Amendment No. 1 to Registration Rights Agreement dated as of December 27, 2007, between Marine Park Holdings, Inc. and certain of the purchasers signatory thereto (Incorporated herein by reference to Exhibit No. 4.7 of Registrant's Form 8-K filed on February 6, 2008).
10.8	Share Exchange Agreement dated December 27, 2007 by and among Marine Park Holdings, Inc., NewCardio, Inc., and the shareholder of NewCardio, Inc. (Incorporated herein by reference to Exhibit No. 10.1 of Registrant's Form 8-K filed on January 4, 2008).
10.9	Return to Treasury Agreement dated December 27, 2007 between Marine Park Holdings, Inc. and Harborview Master Fund L.P., (Incorporated herein by reference to Exhibit No. 10.2 of Registrant's Form 8-K filed on January 4, 2008).
10.10	Return to Treasury Agreement dated as of December 27, 2007 between Marine Park Holdings, Inc. and Diverse Trading Ltd., (Incorporated herein by reference to Exhibit No. 10.3 of Registrant's Form 8-K filed on January 4, 2008).
10.11	2004 Equity Incentive Plan (Incorporated herein by reference to Exhibit No. 10.4 of Registrant's Form S-8 POS filed on March 7, 2008).
10.12	Employment Agreement dated November 1, 2007 between NewCardio, Inc. and Branislav Vajdic. (Incorporated herein by reference to Exhibit No. 10.5 of Registrant's Annual Report on Amendment No. 1 on Form 10-K/A filed on April 4, 2008).
10.13	Consulting Agreement dated March 1, 2007 between NewCardio, Inc. and Branislav Vajdic. (Incorporated herein by reference to Exhibit No. 10.6 of Registrant's Amendment  No. 1 on Form 10-K/A filed on April 4, 2008).
10.14	Employment Agreement dated October 31, 2007 between NewCardio, Inc. and Kenneth Londoner. (Incorporated herein by reference to Exhibit No. 10.7 of Registrant's Amendment No. 1 on Form 10-K/A filed on April 4, 2008).
10.15	Restricted Stock Purchase Agreement dated as of June 4, 2007 between NewCardio, Inc. and Kenneth Londoner, as amended by Amendment No. 1 to Restricted Stock Purchase Agreement dated as of September 15, 2007 between NewCardio, Inc. and Kenneth Londoner. (Incorporated herein by reference to Exhibit No. 10.8 of Registrant's Amendment No. 1 on Form 10-K/A filed on April 4, 2008).
10.16	Form of Lock Up Agreement dated as of December 27, 2007.
10.17	Escrow Deposit Agreement dated as of December 27, 2007, by and among Marine Park Holdings, Inc., Capstone Investments and Signature Bank.
10.18	Employment Agreement dated January 22, 2008 between NewCardio, Inc. and Richard Brounstein.
10.19	Employment Agreement dated as of March 1, 2008 between NewCardio, Inc. and Richard Brounstein.
10.20	Lease dated February 6, 2008 between NewCardio, Inc. and 2350 Mission Investors, LLC.
31.1	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NEWCARDIO, INC.
By:	/s/ Richard D. Brounstein
	Richard D. Brounstein
	Executive Vice President and Chief Financial Officer

Dated:  August 22, 2008

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