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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    June 30,
    2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number:
    000-51772
  CARDICA, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of
    Incorporation or Organization)

94-3287832(I.R.S. Employer
    Identification No.)  900 Saginaw Drive
    Redwood City, California 94063(650) 364-9975
    (Address, including zip code, and telephone number, including
    area code, of principal executive offices)
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value per share

The NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
   o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company þ(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





Cardica,
    inc.ANNUAL
    REPORT ON
    FORM 10-K
    For the Year Ended June 30, 2009
    TABLE OF CONTENTS
   
 PagePART IItem 1.


Business


1Item 1A.


Risk Factors


26Item 2


Properties


43Item 3


Legal Proceedings


43Item 4


Submission of Matters to a Vote of Security
    Holders


44PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholders Matters and Issuer Purchases of Equity
    Securities


45Item 6.


Selected Financial Data


45Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


47Item 8.


Financial Statements and Supplementary Data


57Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


57Item 9A(T).


Controls and Procedures


57Item 9B.


Other Information


58PART IIIItem 10.


Directors, Executive Officers, and Corporate
    Governance


59Item 11.


Executive Compensation


59Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


59Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


60Item 14.


Principal Accountant Fees and Services


60PART IVItem 15.


Exhibits and Financial Statement Schedules


61Signatures


87EX-10.23EX-23.1EX-31.1EX-31.2EX-32.1




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Item 1.
    Business  Overview
    ® C-Port ® staple-on-a-strip
    Our
    Strategy
      
    Driving market adoption of the C-Port and PAS-Port
    systems.  We intend to drive commercial adoption
    of our C-Port systems, our PAS-Port system and any future
    anastomosis products by marketing them as integrated anastomotic
    tools for use in both on- and off-pump CABG procedures.
    Modifying our sales and marketing
    activities.  To reduce our expenses, we are
    modifying our sales structure to rely primarily on an
    independent network of manufacturers representatives and
    distributors to market and sell our C-Port systems and the
    PAS-Port system in the United States. Our U.S. distributors
    and representatives are initially targeting selected influential
    surgeons in high volume cardiac surgery centers. Through this
    effort, we seek to increase both confidence in and demand for
    our anastomosis products, while minimizing direct expense to us.
    We also intend to increase the number of distributors carrying
    our products in Europe and Asia. 1




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
    Developing our endoscopic microcutter.  We have
    begun development of a multi-fire endolinear microcutter device
    based on our proprietary
    staple-on-a-strip
    technology, which would expand our commercial opportunity into
    additional surgical markets. Our microcutter technology is
    designed to allow the connecting, stapling and cutting of tissue
    similar to currently marketed competitive endolinear stapling
    products. The innovative features we plan to incorporate into
    this new product line are its ability to deploy multiple
    successive rows of staples without replacing cartridges, a
    significant reduction in tool shaft diameter and the ability to
    increase the amount of articulation of the end-effector. Our
    planned introduction of the microcutter will enable more
    minimally invasive procedures in general, bariatric, thoracic,
    gynecologic and urologic surgeries, such as single incision
    laparoscopic surgery (SILS). We are evaluating whether to pursue
    further development of this product independently or with a
    development and commercialization partner.
    Leveraging our core competency to develop innovative products
    for other surgical applications.  We believe that
    our core technology, which comprises extensive technological
    innovations, can be adapted for a variety of surgical
    applications and disease indications. For example, we are
    currently developing products for use in other applications,
    such as PFO closure.
    Establishing a strong proprietary position.  As
    of June 30, 2009, we had 74 issued U.S. patents, 84
    additional patent applications in the United States, five issued
    foreign patents and another 11 patent applications filed in
    selected international markets. We plan to continue to invest in
    building our intellectual property portfolio.  Cardiac
    Industry Background
  Coronary
    Artery Disease
  build-up
  Current
    Treatment Alternatives for Coronary Artery Disease
    Medical
    Treatment with Pharmaceuticals
   2




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Interventional
    Cardiology Techniques
  Coronary Angioplasty.
  Stents.
  70-80%.
   3




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Bypass Surgery.
  
       4




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Types of
    CABG Procedures
    Conventional On-Pump CABG
    Procedures.
  Off-Pump CABG Procedures.
    Minimally Invasive Endoscopic
    Procedures.
  Surgical
    Techniques for Anastomoses
   5




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Microcutter
    Industry Background
  Market
    and/or 55-70%
   6




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Current
    Devices for Surgical Stapling
    
    Deploying multiple U-shaped wire against a deforming surface,
    called an anvil, to reshape the wires into a
    B-shaped
    wires and thereby connecting or sealing tissue;
    Deploying multiple rows of staples, usually two to three rows
    per side, with a tissue dividing cut between the rows;
    Individually placing sets of staples in reloadable cartridges,
    designed for single use;
    A deployment tool, consisting of a handle and shaft (with a
    minimum diameter of 12 millimeters), that is reusable within a
    single surgical procedure; and
    Cartridges that can be loaded, following each deployment, into a
    receptacle at the end of the deployment tool.    Our
    Cardiac Solutions
    
    Physiological features.  Our clips use medical
    grade stainless steel that is identical to that used in
    conventional coronary stents, which is known to be compatible
    with the human body (in the absence of allergies to certain
    components of medical grade stainless steel). Our products
    minimize trauma to both the graft and target vessel during
    loading and deployment, thereby reducing the risk of scar
    formation and associated narrowings or occlusions. Additionally,
    our PAS-Port system can be used without clamping the aorta,
    which has been shown to be a cause of adverse events, including
    neurological complications. In addition, our C-Port system
    creates compliant anastomoses, which potentially allow the shape
    and size of the anastomosis to adapt to changes in flow and
    blood pressure.
    Handling features.  Our anastomotic systems can
    create anastomoses more rapidly than hand suturing, resulting in
    a surgical procedure that can be performed more quickly. For
    example the PAS-Port system can be
    set-up and
    deployed in approximately three minutes compared with
    approximately ten to 25 minutes for a hand-sewn anastomosis. In
    addition, the system is easy to use, typically requiring only a
    few hours of training to become technically proficient in the
    technique. The C-Port system is compatible with coronary
    arteries as small as 1.3 millimeters in internal diameter, which
    is typically the lower limit of target vessels considered to be
    candidates for revascularization. The C-Port system can also be
    deployed at various angles, allowing access to all coronary
    targets during both on- and off-pump procedures. Both the C-Port
    system and the PAS-Port system are designed as integrated
    products, where all steps necessary to create an anastomosis are
    performed by a single tool, with one user interface. The need
    for target vessel preparation is minimal for the PAS-Port
    system, a feature that is especially important in patients
    undergoing a second or third coronary bypass procedure with the
    presence of significant scarring in and around the heart and
    aorta.
    Standardized results.  Our products enable
    consistent, reproducible anastomoses, largely independent of
    surgical technique and skill set, using a wide range in quality
    of graft tissues. In comparison with hand-sewn sutures, our
    systems offer mechanically-governed repeatability and reduced
    procedural complexity.
    Reduced costs.  Because our products can help
    to expedite the CABG procedure, we believe that they may
    contribute to reduced operating room time and a reduction in
    associated expenses, partially offset by the increased direct
    cost of our products compared to current alternatives, such as
    sutures. Additionally, our C-Port system creates anastomoses
    rapidly and does not require the interruption of blood flow. It
    may reduce 7




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some of the technical challenges inherent in performing
    anastomosis in off-pump procedures, which may advance adoption
    of the off-pump approach. By helping more surgeons perform
    off-pump CABG, the need for a costly pump may also be reduced or
    eliminated, thereby potentially reducing the total costs of the
    procedure. The C-Port Flex A allows the surgeon to perform
    coronary revascularization through small openings in the chest
    wall, thereby reducing the trauma and morbidity associated with
    the CABG procedure, which therefore may help reduce costs by
    reducing the time to patient discharge. Finally, to the extent
    complications such as strokes or injury to the heart muscle
    decrease, post-operative costs of a CABG procedure may be
    significantly reduced.  Our
    Planned Microcutter Solutions
    
    Staple Design and Formation.  Our microcutter
    would utilize our innovative three dimensional, or 3D, staple
    design, which we engineered in connection with our vascular
    anastomotic products, that in vascular applications allow single
    rows of staples to effectively prevent blood leakage at
    physiological blood pressures. These 3D staples allow for a
    large contact surface between staple and tissue, which
    dramatically improves sealing while significantly reducing the
    likelihood of the staple cutting through tissue. These 3D
    staples are guided into their final shape by the anvil rather
    than forced to buckle, which reduces the forming forces and
    helps to eliminate malformed staples. The 3D design with a
    rectangular cross-section significantly increases the stiffness
    compared to round wire, resulting in a much stronger final form
    that is significantly more resistant to unbending or yielding.
    Device Size.  By changing the technology used
    to form the staple, our microcutter is being designed to have a
    smaller-sized end-effector and tool shaft. Depending upon the
    chosen staple line length and staple height, the microcutter
    outer diameter could be as small as five millimeters. Due to its
    smaller size, our microcutter should enable procedures requiring
    minimal access, such as robot-assisted surgery and the rapidly
    emerging area of single incision laparoscopic surgery, or SILS.
    Staple-On-A-Strip
    Technology.  We have further advanced our 3D
    staple technology in connection with the microcutter by
    introducing a novel design where 3D staples are stamped from
    sheet metal and left connected to a metal band that is then
    loaded into the device. This differs from conventional
    technology where individual staples are typically loaded into
    cartridge bays. We believe that our
    staple-on-a-strip
    technology will enable tighter spacing between individual
    staples, which improves sealing performance.
    True Multi-Fire Capability.  Our
    staple-on-a-strip
    technology is being designed to allow the surgeon to conduct
    multiple deployments within a procedure, without the need to
    remove the stapler from the tissue site or having to replace a
    cartridge. Conventional stapling technology requires a tedious,
    repetitive thirteen step process after each deployment in which
    the stapler is first clamped and then removed from the body
    cavity. True multi-fire capability reduces this multi-step
    process to 4 simple steps: unclamping of the device, advance,
    clamp and deploy. After each deployment a new set of staples is
    automatically advanced into the end-effector and the knife
    system is reset, making the device immediately ready for the
    next deployment.
    Low Deployment Forces.  In our
    microcutters design, the need to clamp the tissue would be
    completely decoupled from staple deployment, which significantly
    reduces the deployment forces. This reduction in deployment
    forces potentially gives the user more control during
    deployment. Additionally, our compact staple mechanism would
    allow more design space to be dedicated to the anvil, which
    helps to ensure excellent tissue compression. These features
    combine to result in excellent staple formation.
    Articulation, Rotation and
    Handling.  Articulation and rotation clearly
    improve tissue access and ease of use, and both are expected by
    surgeons in stapling devices. Our microcutter design
    incorporates an end-effector that can be angled up to 60
    degrees, as compared to the 45 degrees of maximum articulation 8




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achieved with the vast majority of currently marketed linear
    stapling technologies. In addition, our microcutter enables 360
    degree rotation of the end-effector. Our microcutter also would
    be the first truly single-hand operated handle for articulating
    staplers: 360 degree rotation and 60 degree articulation would
    be accomplished by rotating a single knob at the end of the
    handle.  Our
    Cardiac Products
    C-Port®

    Distal Anastomosis Systems
  C-Port®

    xA Anastomosis System
  end-to-side
  
    perform an
    end-to-side
    anastomosis without interruption of native coronary blood flow,
    which is not possible in a conventional hand-sewn anastomosis
    during off-pump surgery without the use of a temporarily placed
    vascular shunt;
    achieve nearly complete alignment of the natural blood lining
    surfaces of the coronary artery and the bypass graft to minimize
    scarring and potential occlusion of the anastomosis;
    minimize the amount of foreign material in the blood stream that
    may cause clotting and subsequent graft failure; and
    suitable for all grafts typically used in CABG procedures with
    wall thicknesses of less than or equal to 1.4 millimeters.  C-Port®

    Flex A Anastomosis System
   9




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C-Port®

    X-CHANGE System
    PAS-Port®

    Proximal Anastomosis System
  end-to-side
      Future
    Product Programs
  Microcutter
  staple-on-a-strip
 10




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Cardica
    Hybrid Technology
    Collaborations
    Cook
    Vascular Closure Device
       11




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Patent
    Foramen Ovale Closure Device
  20-25%
         12




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and/or
  Regulatory
    Status and Clinical Trial Summary
  Regulatory
    Status
    International
    United
    States
  PAS-Port.
  C-Port.
    Cardiac
    Product Sales and Marketing
  United
    States
    International
   13




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Competition
  Cardiac
    Products
    
    improved patient outcomes;
    access to and acceptance by leading physicians;
    product quality and reliability;
    ease of use;
    device cost-effectiveness;
    training and support;
    novelty;
    physician relationships; and
    sales and marketing capabilities.   14




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Microcutter
    
    reduced product size;
    ease of use;
    product quality and reliability;
    multi-fire capability;
    device cost-effectiveness;
    degree of articulation;
    physician relationships; and
    sales and marketing capabilities.   15




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Manufacturing
      sub-assemblies
    Third-Party
    Reimbursement
         16




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Research
    and Development
   17




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Patents
    and Intellectual Property
          Government
    Regulation
   18




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
    product design, development and manufacture;
    product safety, testing, labeling and storage;
    pre-clinical testing in animals and in the laboratory;
    clinical investigations in humans;
    marketing applications, such as 510(k) notifications and PMA
    applications;
    record keeping and document retention procedures;
    advertising and promotion;
    product marketing, distribution and recalls; and
    post-marketing surveillance and medical device reporting,
    including reporting of deaths, serious injuries, device
    malfunctions or other adverse events.  FDAs Premarket Clearance and Approval (PMA)
    Requirements.
  510(k) Clearance Pathway. and/or and/or
  Premarket Approval Pathway.
 19




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Clinical Trials.
      Pervasive and Continuing Regulation.
  
    product listing and establishment registration, which helps
    facilitate FDA inspections and other regulatory action; 20




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
    QSR, which requires manufacturers, including third-party
    manufacturers, to follow stringent design, testing, control,
    documentation and other quality assurance procedures during all
    aspects of the manufacturing process;
    labeling regulations and FDA prohibitions against the promotion
    of products for uncleared, unapproved or off-label use or
    indication;
    clearance or approval of product modifications that could
    significantly affect safety or efficacy or that would constitute
    a major change in intended use;
    medical device reporting regulations, which require that
    manufacturers comply with FDA requirements to report if their
    device may have caused or contributed to an adverse event, a
    death or serious injury or malfunctioned in a way that would
    likely cause or contribute to a death or serious injury if the
    malfunction were to recur;
    post-approval restrictions or conditions, including
    post-approval study commitments;
    post-market surveillance regulations, which apply when necessary
    to protect the public health or to provide additional safety and
    effectiveness data for the device; and
    notices of correction or removal and recall regulations.        
    warning letters, fines, injunctions, consent decrees and civil
    penalties;
    customer notifications, repair, replacement, refunds, recall or
    seizure of our products;
    operating restrictions, partial suspension or total shutdown of
    production;
    delay in processing marketing applications for new products or
    modifications to existing products;
    mandatory product recalls;
    withdrawing approvals that have already been granted; and
    criminal prosecution.  Fraud and Abuse and False Claims.
 21




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International Regulation.
     22




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Employees
    Corporate
    Information
  (650) 364-9975. www.cardica.com
 23




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MANAGEMENT
  Executive
    Officers and Directors
    Name

Age

PositionBernard A. Hausen, M.D., Ph.D.


49


President, Chief Executive Officer, Chief Medical Officer and
    DirectorRobert Y. Newell


61


Vice President, Finance and Chief Financial OfficerFrederick M. Bauer


55


Vice President, OperationsBryan D. Knodel, Ph.D.


49


Vice President, Research and DevelopmentKevin T. Larkin(2)(3)


60


Chairman of the BoardRichard P. Powers(1)


65


DirectorJeffrey Purvin(1)(2)(3)


57


DirectorJohn Simon, Ph.D.


66


DirectorWilliam H. Younger, Jr.(1)(2)(3)


59


Director     (1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee(3)
    
    Member of the Nominating Committee  Executive
    Officers and Directors
  Bernard A. Hausen, M.D., Ph.D.
  Robert Y. Newell
  Frederick M. Bauer
  Bryan D. Knodel, Ph.D.
 24




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Kevin T. Larkin
  Richard P. Powers
  Jeffrey Purvin
  John Simon, Ph.D.
  William H. Younger, Jr.
 25




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Item 1A.
    Risk
    Factors  We have
    identified the following risks and uncertainties that may have a
    material adverse effect on our business, financial condition or
    results of operations. The risks described below are not the
    only ones we face. Additional risks not presently known to us or
    that we currently believe are immaterial may also significantly
    impair our business operations.
  Risks
    Related to Our Finances and Capital Requirements
  We need to generate higher product sales to become and remain
    profitable.
    
    achievement of broad acceptance for our products;
    achievement of U.S. regulatory clearance or approval for
    additional products;
    successful completion of ongoing clinical trials for our
    products; and
    successful sales, manufacturing, marketing and distribution of
    our products.    We need
    substantial additional funding and may be unable to raise
    capital, which would force us to delay, reduce or eliminate our
    research and development programs or commercialization efforts
    and could cause us to cease operations.
  Form 10-K
  
    market acceptance and adoption of our products;
    maintaining our revenue growth;
    costs of maintaining sales, marketing and distribution
    capabilities;
    costs associated with our sales and marketing initiatives and
    manufacturing activities;
    the extent of our ongoing research and development programs;
    costs of obtaining and maintaining FDA and other regulatory
    clearances and approvals for our products;
    securing, maintaining and enforcing intellectual property rights
    and the costs thereof;
    effects of competing technological and market developments.   26




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We have a
    history of net losses, which we expect to continue for the
    foreseeable future, and we are unable to predict the extent of
    future losses or when we will become profitable, if at
    all.
      If we do
    not generate sufficient cash flow through increased revenue or
    raising additional capital, then we may not be able to meet our
    debt obligation that becomes due in 2010.
    
    making it more difficult to obtain additional financing; and
    constraining our ability to react quickly in an unfavorable
    economic climate.   27




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Existing
    creditors have rights to our assets that are senior to our
    stockholders.
    Our
    quarterly operating results and stock price may fluctuate
    significantly.
    
    market acceptance and adoption of our products;
    our revenue growth;
    costs of maintaining sales, marketing and distribution
    capabilities;
    costs associated with our sales and marketing initiatives and
    manufacturing activities;
    the extent of our ongoing research and development programs;
    costs of obtaining and maintaining FDA and other regulatory
    clearances and approvals of our products;
    securing, maintaining and enforcing intellectual property rights
    and costs thereof; and
    effects of competing technology and market developments.    Risks
    Related to Our Business
  We are
    dependent upon the success of our current products, and we have
    U.S. regulatory clearance for our C-Port and PAS-Port
    systems only. We cannot be certain that the C-Port and PAS-Port
    systems will be successfully commercialized in the United
    States. If we are unable to successfully commercialize our
    products in the United States, our ability to generate higher
    revenue will be significantly delayed or halted, and our
    business will be harmed.
     28




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Our
    products may never gain any significant degree of market
    acceptance, and a lack of market acceptance would have a
    material adverse effect on our business.
          Our
    PAS-Port and C-Port systems, as well as our other and future
    products, may still face future development and regulatory
    difficulties.
    
    warning letters, fines, injunctions, consent decrees and civil
    penalties;
    customer notifications, repair, replacement, refunds, recall or
    seizure of our products;
    operating restrictions, partial suspension or total shutdown of
    production; 29




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
    delay in processing marketing applications for new products or
    modifications to existing products;
    withdrawing approvals that have already been granted; and
    criminal prosecution.  follow-up
  If we do
    not achieve our projected development goals in the time frames
    we announce and expect, the commercialization of our product
    candidates may be delayed and, as a result, our stock price may
    decline.
    Our
    manufacturing facilities, and those of our suppliers, must
    comply with applicable regulatory requirements. Failure to
    obtain or maintain regulatory approval of our manufacturing
    facilities would harm our business and our results of
    operations.
     30




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If we are
    unable to establish sales and marketing capabilities or enter
    into and maintain arrangements with third parties to market and
    sell our products, our business may be harmed.
    Lack of
    third-party coverage and reimbursement for our products could
    delay or limit their adoption.
       31




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We have
    limited data regarding the safety and efficacy of the PAS-Port
    and C-Port systems, and have only recently commenced U.S.
    commercialization of our C-Port and PAS-Port systems. Any data
    that is generated in the future may not be positive or
    consistent with our existing data, which would affect market
    acceptance and the rate at which our devices are
    adopted.
       32




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Our
    current and planned clinical trials may not begin on time, or at
    all, and may not be completed on schedule, or at all.
    
    the FDA or other regulatory authorities suspend or place on hold
    a clinical trial, or do not approve a clinical trial protocol or
    a clinical trial;
    the data and safety monitoring committee of a clinical trial
    recommends that a trial be placed on hold or suspended;
    patients do not enroll in clinical trials at the rate we expect;
    patients are not
    followed-up
    at the rate we expect;
    clinical trial sites decide not to participate or cease
    participation in a clinical trial;
    patients experience adverse side effects or events related to
    our products;
    patients die or suffer adverse medical effects during a clinical
    trial for a variety of reasons, which may not be related to our
    product candidates, including the advanced stage of their
    disease and other medical problems;
    third-party clinical investigators do not perform our clinical
    trials on our anticipated schedule or consistent with the
    clinical trial protocol and good clinical practices, or other
    third-party organizations do not perform data collection and
    analysis in a timely or accurate manner;
    regulatory inspections of our clinical trials or manufacturing
    facilities may, among other things, require us to undertake
    corrective action or suspend or terminate our clinical trials if
    investigators find us not to be in compliance with regulatory
    requirements;
    third-party suppliers fail to provide us with critical
    components that conform to design and performance specifications;
    the failure of our manufacturing processes to produce finished
    products that conform to design and performance specifications;
    changes in governmental regulations or administrative actions;
    the interim results of the clinical trial are inconclusive or
    negative;
    pre-clinical or clinical data is interpreted by third parties in
    different ways; or
    our trial design, although approved, is inadequate to
    demonstrate safety
    and/or
    efficacy.    follow-up
 33




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If the
    third parties on whom we rely to conduct our clinical trials do
    not perform as contractually required or expected, we may not be
    able to obtain regulatory approval for or commercialize our
    product candidates.
    Because
    one customer accounts for a substantial portion of our product
    sales, the loss of this significant customer would cause a
    substantial decline in our revenue.
    If our
    competitors have products that are approved in advance of ours,
    marketed more effectively or demonstrated to be more effective
    than ours, our commercial opportunity will be reduced or
    eliminated and our business will be harmed.
      
    improved patient outcomes;
    access to and acceptance by leading physicians;
    product quality and reliability;
    ease of use;
    device cost-effectiveness;
    training and support;
    novelty;
    physician relationships; and
    sales and marketing capabilities. 34




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We are
    dependent upon a number of key suppliers, including single
    source suppliers, the loss of which would materially harm our
    business.
     35




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##### Table of Contents



We have
    limited manufacturing experience and may encounter difficulties
    in increasing production to provide an adequate supply to
    customers.
    
    maintaining product yields;
    maintaining quality control and assurance;
    providing component and service availability;
    maintaining adequate control policies and procedures; and
    hiring and retaining qualified personnel.          If we
    fail to retain key personnel, or to retain our executive
    management team, we may be unable to successfully develop or
    commercialize our products.
   36




---



##### Table of Contents



We may in
    the future be a party to patent litigation and administrative
    proceedings that could be costly and could interfere with our
    ability to sell our products.
      Intellectual
    property rights may not provide adequate protection, which may
    permit third parties to compete against us more
    effectively.
    assignment-of-inventions
 37




---



##### Table of Contents



Our
    products face the risk of technological obsolescence, which, if
    realized, could have a material adverse effect on our
    business.
    We may
    not be successful in our efforts to expand our product
    portfolio, and our failure to do so could cause our business and
    prospects to suffer.
    We may be
    subject, directly or indirectly, to federal and state healthcare
    fraud and abuse laws and regulations and, if we are unable to
    fully comply with such laws, could face substantial
    penalties.
   38




---



##### Table of Contents



We could
    be exposed to significant product liability claims, which could
    be time consuming and costly to defend, divert management
    attention, and adversely impact our ability to obtain and
    maintain insurance coverage. The expense and potential
    unavailability of insurance coverage for our company or our
    customers could adversely affect our ability to sell our
    products, which would adversely affect our business.
        We sell
    our systems internationally and are subject to various risks
    relating to these international activities, which could
    adversely affect our revenue.
    
    export restrictions and controls relating to technology;
    the availability and level of reimbursement within prevailing
    foreign healthcare payment systems;
    pricing pressure that we may experience internationally;
    required compliance with existing and changing foreign
    regulatory requirements and laws;
    laws and business practices favoring local companies;
    longer payment cycles;
    difficulties in enforcing agreements and collecting receivables
    through certain foreign legal systems;
    political and economic instability;
    potentially adverse tax consequences, tariffs and other trade
    barriers;
    international terrorism and
    anti-American
    sentiment;
    difficulties and costs of staffing and managing foreign
    operations; and
    difficulties in enforcing intellectual property rights. 39




---



##### Table of Contents



We are
    dependent upon key personnel, the loss of any of which could
    have a material adverse affect on our business.
    Our
    operations are currently conducted at a single location that may
    be at risk from earthquakes, terror attacks or other
    disasters.
    If we use
    hazardous materials in a manner that causes injury, we may be
    liable for damages.
    We may be
    subject to fines, penalties or injunctions if we are determined
    to be promoting the use of our products for unapproved or
    off-label uses.
  and/or
 40




---



##### Table of Contents



Risks
    Related to Our Common Stock
  We may not be able to maintain our listing on The NASDAQ
    Global Market, which would adversely affect the price and
    liquidity of our common stock.
  Form 10-Q
        The price
    of our common stock may continue to be volatile, and the value
    of an investment in our common stock may decline.
    
    market acceptance and adoption of our products;
    regulatory clearance or approvals of our products;
    volume and timing of orders for our products;
    changes in earnings estimates, investors perceptions,
    recommendations by securities analysts or our failure to achieve
    analysts earning estimates;
    quarterly variations in our or our competitors results of
    operations;
    general market conditions and other factors unrelated to our
    operating performance or the operating performance of our
    competitors;
    the announcement of new products or product enhancements by us
    or our competitors;
    announcements related to patents issued to us or our competitors
    and to litigation; and
    developments in our industry. 41




---



##### Table of Contents



The
    ownership of our common stock is highly concentrated, and your
    interests may conflict with the interests of our existing
    stockholders.
    Evolving
    regulation of corporate governance and public disclosure will
    result in additional expenses and continuing
    uncertainty.
    Our
    future operating results may be below securities analysts
    or investors expectations, which could cause our stock
    price to decline.
    
    FDA or other regulatory clearance or approval of future
    generations of our C-Port system or other products;
    demand for our products;
    the performance of third-party contract manufacturers and
    component suppliers;
    our ability to develop sales and marketing capabilities;
    our ability to develop, introduce and market new or enhanced
    versions of our products on a timely basis; and
    our ability to obtain and protect proprietary rights.   42




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##### Table of Contents



Anti-takeover
    defenses that we have in place could prevent or frustrate
    attempts to change our direction or management.
    
    limit who may call a special meeting of stockholders;
    establish advance notice requirements for nominations for
    election to our board of directors or for proposing matters that
    can be acted upon at stockholder meetings;
    prohibit cumulative voting in the election of our directors,
    which would otherwise permit less than a majority of
    stockholders to elect directors;
    prohibit stockholder action by written consent, thereby
    requiring all stockholder actions to be taken at a meeting of
    our stockholders; and
    provide our board of directors with the ability to designate the
    terms of and issue a new series of preferred stock without
    stockholder approval.    We may
    become involved in securities class action litigation that could
    divert managements attention and harm our
    business.
    We have
    never paid dividends on our capital stock, and we do not
    anticipate paying any cash dividends in the foreseeable
    future.
    Item 2.
    Properties    Item 3.
    Legal
    Proceedings   43




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders   44




---



##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    for Common Equity
    High

LowFiscal year 2009First Quarter ended September 30, 2008

$
11.13


$
7.14Second Quarter ended December 31, 2008

$
8.28


$
2.50Third Quarter ended March 31, 2009

$
4.27


$
2.25Fourth Quarter ended June 30, 2009

$
3.24


$
1.03Fiscal year 2008First Quarter ended September 30, 2007

$
12.04


$
5.08Second Quarter ended December 31, 2007

$
15.15


$
6.50Third Quarter ended March 31, 2008

$
11.15


$
5.60Fourth Quarter ended June 30, 2008

$
10.10


$
6.27     Dividend
    Policy
    Equity
    Compensation Plan Information
    Recent
    Sales of Unregistered Securities
    Issuer
    Purchases of Equity Securities
    Item 6.
    Selected
    Financial Data     45




---



##### Table of Contents



Fiscal Year Ended June 30,2009


2008


2007


2006


2005(In thousands, except per share data)Statements of Operation Data:Net revenue:Product sales, net

$
6,798


$
4,934


$
2,103


$
1,028


$
719Development revenue


2,995



2,564



1,370



1,000



Royalty revenue (including amounts from related party:
    2008  $67; 2007  $56; 2006 
    $31; 2005  $1,027)


85



67



56



31



1,027Development revenue from related-party


















310Total net revenue


9,878



7,565



3,529



2,059



2,056Operating costs and expenses:Cost of product sales (includes related-party costs of $1,180 in
    fiscal year 2005)


5,341



4,808



2,880



2,102



2,478Research and development


8,217



8,609



7,014



6,459



6,289Selling, general and administrative


13,632



13,175



9,057



5,645



3,753Total operating costs and expenses


27,190



26,592



18,951



14,206



12,520Loss from operations


(17,312
)


(19,027
)


(15,422
)


(12,147
)


(10,464
)Interest income


177



926



1,113



782



305Interest expense (includes related-party interest expense of
    $320, $897 and $897 in fiscal years 2007, 2006 and 2005,
    respectively)


(120
)


(101
)


(458
)


(1,047
)


(1,048
)Other income (expense), net (includes $250 income from
    related-party in fiscal year 2005)


(22
)


6



2



(4
)


257Gain on early retirement of notes payable to related-party










1,183







Net loss before income tax benefit


(17,277
)


(18,196
)


(13,582
)


(12,416
)


(10,950
)Tax benefit


72















Net loss

$
(17,205
)

$
(18,196
)

$
(13,582
)

$
(12,416
)

$
(10,950
)Basic and diluted net loss per common share

$
(1.09
)

$
(1.23
)

$
(1.25
)

$
(2.58
)

$
(7.82
)Shares used in computing basic and diluted net loss per common
    share


15,776



14,844



10,878



4,817



1,401   As of June 30,2009

2008

2007

2006

2005Balance Sheet Data:Cash, cash equivalents and short-term investments

$
5,328


$
23,265


$
23,434


$
32,080


$
8,951Working capital


4,134



20,959



22,049



31,602



9,032Total assets


10,340



28,250



27,324



35,158



12,146Short-term note payable


2,000















Long-term liabilities


44



2,000



2,020



15,836



15,156Convertible preferred stock


















39,683Total stockholders equity (deficit)


6,262



21,417



21,989



17,677



(43,685
)  46




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with our financial statements and the related notes
    to those statements included elsewhere in this report. In
    addition to historical financial information, the following
    discussion and analysis contains forward-looking statements that
    involve risks, uncertainties and assumptions. Our actual results
    and timing of selected events may differ materially from those
    anticipated in these forward-looking statements as a result of
    many factors, including those discussed under Risk
    Factors and elsewhere in this Report.
  Overview
    ® ® staple-on-a-strip
       47




---



##### Table of Contents



Form 10-K
    Agreements
    with Cook Incorporated
     48




---



##### Table of Contents



Deficiency
    letter from The NASDAQ Global Market
  Form 10-Q
      Critical
    Accounting Policies and Significant Judgments and
    Estimates
      Revenue Recognition. Revenue Recognition.
 49




---



##### Table of Contents



Inventory. first-in,
  Clinical Trial Accounting.
  Stock-Based Compensation. Share-Based Payment Accounting for Stock Issued
    to Employees
   50




---



##### Table of Contents



Results
    of Operations
  Comparison
    of Fiscal Years ended June 30, 2009 and 2008
  Net revenue.
        Cost of product sales.
   51




---



##### Table of Contents



Research and development expense.
      Selling, general and administrative
    expense.
      Interest income.
  Interest expense.
  Income Tax Benefit.
  Comparison
    of Fiscal Years ended June 30, 2008 and 2007
  Net revenue.
 52




---



##### Table of Contents



Cost of product sales.
      Research and development expense.
    Selling, general and administrative
    expense.
    Interest income.
 53




---



##### Table of Contents



Interest expense.
  Gain on early retirement of notes payable to related
    party.
  Income
    Taxes
    Accounting for Uncertainty in
    Income Taxes
    Liquidity
    and Capital Resources
     54




---



##### Table of Contents



Fiscal Year Ended June 30,2009

2008

2007(In thousands)Net cash used in operating activities

$
(16,703
)

$
(14,222
)

$
(14,952
)Net cash (used in) provided by investing activities


12,664



(6,613
)


18,291Net cash provided by financing activities


146



15,517



7,098        55




---



##### Table of Contents



available-for-sale
      
    market acceptance and adoption of our products;
    our revenue growth;
    costs associated with our sales and marketing initiatives and
    manufacturing activities;
    costs of obtaining and maintaining FDA and other regulatory
    clearances and approvals for our products;
    securing, maintaining and enforcing intellectual property rights;
    costs of developing marketing and distribution capabilities;
    the extent of our ongoing research and development programs;
    the progress of clinical trials; and
    the effects of competing technological and market developments.  Recent
    Accounting Pronouncements
  Subsequent Events.
  The FASB Accounting Standards
    Codification and the Hierarchy of Generally Accepted Accounting
    Principles, a replacement of FASB Statement No. 162
  Off-Balance
    Sheet Arrangements
   56




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data    Quarterly
    Financial Data
  Fiscal
    year 2009:
  1st Quarter


2nd Quarter


3rd Quarter


4th Quarter(Unaudited, in thousands, except per share data)Total net revenue

$
2,106


$
2,944


$
2,838


$
1,989Gross profit (loss) on product sales


450



532



551



(77
)Net loss


(5,154
)


(4,697
)


(3,902
)


(3,452
)Basic and diluted net loss per common share


(0.33
)


(0.30
)


(0.25
)


(0.22
)Shares used in computing basic and diluted net loss per common
    share


15,741



15,781



15,785



15,796   Fiscal
    year 2008:
  1st Quarter


2nd Quarter


3rd Quarter


4th Quarter(Unaudited, in thousands, except per share data)Total net revenue

$
1,349


$
1,694


$
1,707


$
2,815Gross profit (loss) on product sales


13



84



(183
)


212Net loss


(3,659
)


(4,167
)


(5,543
)


(4,827
)Basic and diluted net loss per common share


(0.27
)


(0.29
)


(0.35
)


(0.31
)Shares used in computing basic and diluted net loss per common
    share


13,604



14,471



15,620



15,682     Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rule 13a-15(e) 15d-15(e)
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f) Internal Control 
    Integrated Framework
 57




---



##### Table of Contents



Internal
    Control  Integrated Framework
    Changes
    in Internal Control Over Financial Reporting
    Inherent
    Limitations on Effectiveness of Controls
    Item 9B.
    Other
    Information   58




---



##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Identification
    of Executive Officers and Directors
  Form 10-K,
  Identification
    of Audit Committee and Financial Expert
    Material
    Changes to Procedures for Recommending Directors
    Compliance
    with Section 16(a) of the Exchange Act
    Code of
    Conduct
  Form 10-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Security
    Ownership
    Equity
    Compensation Plan Information
   59




---



##### Table of Contents



Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   60




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    1. Financial Statements
  Cardica,
    Inc.
  Index to
    Financial Statements
  PageReport of Independent Registered Public
    Accounting Firm


62Balance Sheets


63Statements of Operations


64Statements of Stockholders Equity


65Statements of Cash Flows


66Notes to Financial Statements


67  61




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm                 62




---



##### Table of Contents



Cardica,
    Inc.



BALANCE
    SHEETS  June 30,2009


2008(In thousands, except share and per share data)ASSETSCurrent assets:Cash and cash equivalents

$
5,328


$
9,221Short-term investments






14,044Accounts receivable


624



716Inventories


1,895



1,393Prepaid expenses and other current assets


321



418Total current assets


8,168



25,792Property and equipment, net


1,862



1,948Restricted cash


310



510Total assets

$
10,340


$
28,250LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
551


$
1,200Accrued compensation


319



1,011Other accrued liabilities


637



1,117Current portion of leasehold improvement obligation






11Deferred development revenue


527



1,485Deferred rent






9Note payable


2,000



Total current liabilities


4,034



4,833Note payable






2,000Other non-current liabilities


44



Total liabilities


4,078



6,833Commitments and contingencies (Note 6)Stockholders equity:Preferred stock, $0.001 par value: 5,000,000 shares
    authorized, no shares issued and outstanding at June 30,
    2009 and 2008






Common stock, $0.001 par value: 45,000,000 shares
    authorized, 15,825,549 and 15,784,655 shares issued and
    outstanding at June 30, 2009 and 2008, respectively


16



16Additional paid-in capital


116,272



114,494Treasury stock at cost (66,227 shares at June 30, 2009
    and 2008)


(596
)


(596
)Deferred stock-based compensation


(22
)


(282
)Accumulated other comprehensive loss






(12
)Accumulated deficit


(109,408
)


(92,203
)Total stockholders equity


6,262



21,417Total liabilities and stockholders equity

$
10,340


$
28,250    63




---



##### Table of Contents



Cardica,
    Inc.



STATEMENTS
    OF OPERATIONS  Fiscal Year Ended June 30,2009


2008


2007(In thousands, except per share data)Net revenue:Product sales, net

$
6,798


$
4,934


$
2,103Development revenue


2,995



2,564



1,370Royalty revenue (including amounts from related party: 
    2008   $67; 2007  $56)


85



67



56Total net revenue


9,878



7,565



3,529Operating costs and expenses:Cost of product sales


5,341



4,808



2,880Research and development


8,217



8,609



7,014Selling, general and administrative


13,632



13,175



9,057Total operating costs and expenses


27,190



26,592



18,951Loss from operations


(17,312
)


(19,027
)


(15,422
)Interest income


177



926



1,113Interest expense (includes related-party interest expense of
    $320 in fiscal year 2007)


(120
)


(101
)


(458
)Other income (expense), net


(22
)


6



2Gain on early retirement of notes payable to related-party










1,183Net loss before income tax benefit


(17,277
)


(18,196
)


(13,582
)Income tax benefit


72







Net loss

$
(17,205
)

$
(18,196
)

$
(13,582
)Basic and diluted net loss per common share

$
(1.09
)

$
(1.23
)

$
(1.25
)Shares used in computing basic and diluted net loss per common
    share


15,776



14,844



10,878    64




---



##### Table of Contents



Cardica,
    Inc.



STATEMENTS
    of STOCKHOLDERS EQUITY  Deferred

Receivable

AccumulatedAdditional



Stock-

from Stock

Other



TotalCommon Stock

Paid-in

Treasury

Based

Option

Comprehensive

Accumulated

StockholdersShares

Amount

Capital

Stock

Compensation

Exercises

Loss

Deficit

Equity(In thousands, except share data)Balance at June 30, 2006


9,795,833


$
10


$
79,843


$
(596
)

$
(1,029
)

$
(79
)

$
(47
)

$
(60,425
)

$
17,677Issuance of common stock upon exercise of employee stock options
    for cash


76,613







161























161Discount received on initial public offering expenses










(38
)






















(38
)Issuance of common stock upon exercise of stock options for
    promissory note










18























18Payment of receivable from stockholder






















79











79Common stock issued to related- party for cancellation of note
    payable


1,432,550



2



5,727























5,729Sale of common stock, net of financing costs of $932


2,301,337



2



10,942























10,944Issuance of stock options to non- employees for services










3























3Issuance of stock options to employees for services










38























38Stock-based compensation expense accounted for under FAS123(R)










561























561Early exercise of stock options no longer subject to repurchase










1























1Reversal of deferred stock-based compensation for terminated
    employees










(85
)






85















Amortization of deferred stock- based compensation


















353















353Comprehensive loss:Net loss






























(13,582
)


(13,582
)Net change in unrealized loss on marketable securities


























45







45Comprehensive loss


































(13,537
)Balance at June 30, 2007


13,606,333



14



97,171



(596
)


(591
)






(2
)


(74,007
)


21,989Issuance of common stock upon exercise of employee stock options
    for cash


77,036







167























167Sale of common stock, net of financing costs of $1,481


1,981,170



2



15,348























15,350Issuance of stock options to non- employees for services










10























10Issuance of common stock for settlement of patent litigation


60,000







425























425Issuance of shares pursuant to net exercise of warrants


7,666































Issuance of restricted stock awards


52,450































Stock-based compensation expense accounted for under FAS123(R)










1,365























1,365Early exercise of stock options no longer subject to repurchase










10























10Reversal of deferred stock-based compensation for terminated
    employees










(2
)






2















Amortization of deferred stock- based compensation


















307















307Comprehensive loss:Net loss






























(18,196
)


(18,196
)Net change in unrealized loss on marketable securities


























(10
)






(10
)Comprehensive loss


































(18,206
)Balance at June 30, 2008


15,784,655



16



114,494



(596
)


(282
)






(12
)


(92,203
)


21,417Issuance of common stock upon exercise of employee stock options
    for cash


44,144







146























146Issuance of stock options to non- employees for services










10























10Cancellation of restricted stock awards, net of issuance of
    shares


(3,250
)






(2
)






2















Stock-based compensation expense accounted for under FAS123(R)










1 ,629























1,629Reversal of deferred stock-based compensation for terminated
    employees










(5
)






5











Amortization of deferred stock- based compensation


















253















253Comprehensive loss:Net loss






























(17,205
)


(17,205
)Net change in unrealized loss on marketable securities


























12







12Comprehensive loss


































(17,193
)Balance at June 30, 2009


15,825,549



16



116,272



(596
)


(22
)










(109,408
)


6,262   65




---



##### Table of Contents





Cardica,
    Inc.



STATEMENTS
    OF CASH FLOWS  Fiscal Year Ended June 30,2009


2008


2007(In thousands)Operating activities:Net loss

$
(17,205
)

$
(18,196
)

$
(13,582
)Adjustments to reconcile net loss to net cash used in operating
    activities:Depreciation and amortization


917



944



763Loss on disposal or retirement of property and equipment


614



12



25Amortization of deferred stock-based compensation expense


253



307



353Issuance of common stock to settle intellectual property
    litigation






425



Gain on early retirement of notes payable to related party










(1,433
)Stock-based compensation on grants of stock options to
    non-employees


10



10



2Stock-based compensation on grants of stock options to employees


1,629



1,365



599Changes in assets and liabilities:Accounts receivable


92



(433
)


(119
)Prepaid expenses and other current assets


115







153Inventories


(555
)


(164
)


(797
)Restricted cash


200







Accounts payable and other accrued liabilities


(1,129
)


643



470Accrued compensation


(692
)


495



280Deferred rent


17



(111
)


(93
)Deferred development revenue


(958
)


603



882Leasehold improvement obligation


(11
)


(122
)


(122
)Interest payable to related party










(2,333
)Net cash used in operating activities


(16,703
)


(14,222
)


(14,952
)Investing activities:Purchases of property and equipment


(1,392
)


(1,454
)


(837
)Purchases of short-term investments


(4,974
)


(45,981
)


(17,172
)Proceeds from maturities of short-term investments


19,030



40,822



36,300Net cash (used in) provided by investing activities


12,664



(6,613
)


18,291Financing activities:Proceeds from sales of common stock, net of issuance costs






15,350



10,945Payment of notes payable to related-party










(3,087
)Payment of note payable










(1,000
)Proceeds from issuance of common stock pursuant to the exercise
    of stock options


146



167



161Proceeds from payment of receivable from stock option exercises










79Net cash provided by financing activities


146



15,517



7,098Net increase (decrease) in cash and cash equivalents


(3,893
)


(5,318
)


10,437Cash and cash equivalents at beginning of period


9,221



14,539



4,102Cash and cash equivalents at end of period

$
5,328


$
9,221


$
14,539Supplemental disclosure of cash flow information:Cash paid for interest (related party of $2,652 in fiscal year
    2007)

$
117


$
101


$
2,799Supplemental disclosure of non-cash activities:Issuance of common stock to related-party for early retirement
    of notes payable

$



$



$
7,163Deferred stock-based compensation, (reversal) net of forfeitures

$
(5
)

$
(2
)

$
(85
)Vesting of shares issued upon early exercise of stock options

$



$
10


$
18    66




---



##### Table of Contents



Cardica,
    Inc.



Notes to
    Financial Statements  Note 1.
    Organization
    and Summary of Significant Accounting Policies  Organization
         67




---



##### Table of Contents



Use of
    Estimates
    Cash and
    Cash Equivalents
    Available-for-Sale
    Securities
  available-for-sale. available-for-sale
  available-for-sale
  Available-for-sale
  Restricted
    Cash
      Concentrations
    of Credit Risk and Certain Other Risks
     68




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##### Table of Contents



Fiscal Year Ended June 30,2009

2008

2007United States


84
%


82
%


71
%Japan


10
%


13
%


25
%Europe


4
%


4
%


4
%Rest of world


2
%


1
%


     Percent of Total Net

Percent of TotalRevenue for

Accounts ReceivableFiscal Year Ended June 30,

as of June 30,2009

2008

2007

2009

2008Century Medical


10
%


13
%


25
%


10
%


Cook Incorporated


30
%


34
%


39
%






     Inventories
  first-in, work-in-process
  Property
    and Equipment
    Impairment
    of Long-Lived Assets
   69




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##### Table of Contents



Revenue
    Recognition
  Revenue Recognition.
      Research
    and Development
    Clinical
    Trials
    Income
    Taxes
    Accounting for Uncertainty in Income
    Taxes
 70




---



##### Table of Contents



Segments
    Comprehensive
    Loss
  available-for-sale
  Fiscal Year Ended June 30,2009


2008


2007Net loss

$
(17,205
)

$
(18,196
)

$
(13,582
)Change in unrealized gain (loss) on investments


12



(10
)


45Comprehensive loss

$
(17,193
)

$
(18,206
)

$
(13,537
)     Net Loss
    per Share
    Fiscal Year Ended June 30,2009


2008


2007Numerator:Net loss

$
(17,205
)

$
(18,196
)

$
(13,582
)Denominator:Weighted-average common shares outstanding


15,815



14,893



10,901Less: Weighted-average non-vested common shares subject to
    repurchase






(1
)


(6
)Less: Weighted  average non-vested restricted stock
    awards


(39
)


(48
)


(17
)Denominator for basic and diluted net loss per common share


15,776



14,844



10,878Basic and diluted net loss per common share

$
(1.09
)

$
(1.23
)

$
(1.25
)  71




---



##### Table of Contents



Outstanding
    securities not included in diluted net loss per common share
    calculation: (in
    thousands)
  Fiscal Year Ended June 30,2009

2008

2007Options to purchase common stock


1,446



1,334



1,316Non-vested restricted stock units and awards


229



59



13Non-vested common shares subject to repurchase










11Warrants


648



680



7322,323



2,073



2,072   Stock-Based
    Compensation
  Share-Based Payment Accounting for Stock Issued to Employees
    Fiscal Year Ended June 30,2009

2008

2007Risk-free interest rate

0.10% - 2.57%

2.39% - 3.70%

4.51% - 5.02%Dividend yield





Weighted-average expected life

0.25 - 4.5 years

4.56 years

4.8 yearsVolatility

53% - 136%

58%

70%         72




---



##### Table of Contents



Fiscal Year Ended June 30,2009


2008


2007Cost of product sales

$
187


$
51


$
61Research and development


522



605



129Selling, general and administrative


1,183



1,026



765Total

$
1,892


$
1,682


$
955       Recent
    Accounting Pronouncements
  Subsequent Events.
  The FASB
    Accounting Standards Codification and the Hierarchy of Generally
    Accepted Accounting Principles, a replacement of FASB Statement
    No. 162.
  Note 2.
    Fair
    Value Measurements  Fair Value Measurements,
  Level 1 
    Quoted prices in active markets for identical assets or
    liabilities.Level 2 
    Observable inputs other than quoted prices included in
    Level 1, such as quoted prices for similar assets and
    liabilities in active markets; quoted prices for identical or
    similar assets and liabilities in markets that are not active;
    or other inputs that are observable or can be corroborated by
    observable market data. 73




---



##### Table of Contents



Level 3 
    Unobservable inputs that are supported by little or no market
    activity and that are significant to the fair value of the
    assets or liabilities.    As of June 30, 2009Level 1


Level 2


Level 3


Fair ValueCash equivalents:Money market funds

$
510


$



$



$
510Total assets at fair value

$
510


$



$



$
510       Note 3.
    Short-Term
    Investments    June 30, 2008Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


ValueAvailable-for-sale
    securities:Commercial paper

$
4,786


$



$
(6
)

$
4,780Federal agency bonds


9,268



2



(6
)


9,264Total

$
14,054


$
2


$
(12
)

$
14,044   available-for-sale
  Note 4.
    Inventories    June 30,2009


2008Raw materials

$
256


$
634Work in progress


404



209Finished goods


1,235



550$
1,895


$
1,393  74




---



##### Table of Contents



Note 5.
    Property
    and Equipment    June 30,2009


2008Computer hardware and software

$
485


$
463Office furniture and equipment


220



210Machinery and equipment


5,122



5,149Leasehold improvements


567



565Construction in process


149



1116,543



6,498Less: accumulated depreciation and amortization


(4,681
)


(4,550
)$
1,862


$
1,948     Note 6.
    Commitments
    and Contingencies      OperatingLeasesFiscal year ending June 30,2010


8262011


8582012


144Total minimum lease payments

$
1,828     Note 7.
    License,
    Development and Commercialization Agreements   75




---



##### Table of Contents



Note 8.
    Related-Party
    Transactions  Financing
    Activities
       76




---



##### Table of Contents



Loan
    Agreements
    Development
    and Supply Agreement
    Note 9.
    Note
    Payable    Note 10.
    Stockholders
    Equity    Private
    Placement Offering
   77




---



##### Table of Contents



Public
    Offering
      Common
    Stock
    Preferred
    Stock
    Shares Reserved
    June 30,2009Stock options outstanding


1,446,149Shares available for grant under stock option plan


618,594Warrants for common stock


679,7802,744,523   Stock
    Options
   78




---



##### Table of Contents



EITF 00-23,
    Outstanding OptionsWeighted-Shares



AverageAvailable for

Number of

Exercise PriceGrant

Shares

per ShareBalance at June 30, 2006


242,847



1,017,739


$
4.32Shares reserved


250,000







Options granted


(498,783
)


498,783



5.77Options exercised






(76,613
)


2.08Options forfeited


123,903



(123,903
)


7.87Balance at June 30, 2007


117,967



1,316,006



4.67Shares reserved


500,000







Options granted


(155,450
)


155,450



7.61Restricted stock awards


(52,450
)






Options exercised






(77,036
)


2.19Options forfeited


60,288



(60,288
)


5.98Balance at June 30, 2008


470,355



1,334,132



5.10Shares reserved


500,000







Options granted


(530,050
)


530,050



8.03Restricted stock awards


(250,850
)






Options exercised






(44,144
)


3.33Options forfeited


373,889



(373,889
)


7.09Awards forfeited


55,250Balance at June 30, 2009


618,594



1,446,149


$
5.65  79




---



##### Table of Contents



Options Outstanding

Options ExercisableWeighted-

Weighted



WeightedAverage

Average



AverageRemaining

Exercise



ExerciseRange of Exercise

Number of

Contractual

Price per

Number

Price perPrices

Shares

Life (Years)

Share

Exercisable

Share$1.35  $2.25


148,162



3.11


$
2.08



148,162


$
2.08$2.85


359,506



3.84



2.85



354,987



2.85$4.38  $6.00


152,352



2.74



4.58



113,915



4.89$6.03


205,452



3.61



6.03



112,872



6.03$6.75  $8.00


240,803



3.78



7.75



181,765



7.82$8.30  9.75


339,874



5.12



9.22



104,077



9.30Total outstanding


1,446,149



3.89


$
5.65



1,015,778


$
4.87Options vested and Expected to vest


1,351,154



3.84


$
5.55      80




---



##### Table of Contents



Restricted
    Stock Units and Awards
    Weighted-AverageGrant-Date FairValue perShares

ShareNon-vested restricted stock at June 30, 2006


20,000Awarded


Vested


(7,083
)Forfeited


Non-vested restricted stock at June 30, 2007


12,917Awarded


52,450


$
11.25Vested


(5,950
)Forfeited


Non-vested restricted stock at June 30, 2008


59,417



Awarded


250,850


$
3.62Vested


(26,167
)


Forfeited


(55,250
)


Non-vested restricted stock at June 30, 2009


228,850



     Warrants
    ExercisePrice per

DateShares

Share

Exercisable

Expiration12,270


$
4.89


July 2001

March 2010575,347



5.65


Dec 2007

June 201260,017



11.58


July 2001

October 2010647,634   Note 11.
    Reductions
    in Force     81




---



##### Table of Contents



Note 12.
    Income
    Taxes      June 30,2009


2008Net operating loss carry-forwards

$
36,008


$
30,412Research credits


2,340



2,004Capitalized research and development expenses


107



136Fixed asset depreciation


291



Other


462



317Total deferred tax assets


39,208



32,869Valuation allowance


(39,208
)


(32,869
)Net deferred tax assets

$



$
        82




---



##### Table of Contents



AmountBalance at July 1, 2007

$
574Additions based on tax positions related to current year


72Additions for tax positions of prior year


Reductions for tax positions of current year


Reductions for tax positions of prior year


(7
)Settlements


Balance at June 30, 2008


639Additions based on tax positions related to current year


106Additions for tax positions of prior year


10Reductions for tax positions of current year


Reductions for tax positions of prior year


(18
)Settlements


Balance at June 30, 2009

$
737         Fiscal Year Ended June 30,2009


2008


2007Tax benefit at U.S. statutory rate

$
(5,874
)

$
(6,186
)

$
(4,624
)Loss for which no tax benefit is currently recognizable


5,201



5,726



4,298Refundable research credits


(72
)






Stock based compensation


616



404



334Other, net


57



56



(8
)$
(72
)

$



$
     Note 13.
    Employee
    Benefit Plan   83




---



##### Table of Contents



Note 14.
    Indemnification    2.
    Financial Statement Schedules    3.
    The following exhibits are included herein or incorporated
    herein by reference:  ITEM 15.
    Exhibits
    and Financial Statement Schedules.    ExhibitNumber

Description3
.1(1)

Amended and Restated Certificate of Incorporation of the
    Registrant as currently in effect.3
.2(8)

Bylaws of the Registrant as currently in effect.3
.3(1)

Specimen Common Stock certificate of the Registrant.4
.1(1)

Warrant dated March 17, 2000 exercisable for
    36,810 shares of common stock (on a pre-split basis).4
.2(1)

Warrant dated October 31, 2002 exercisable for
    180,052 shares of common stock (on a pre-split basis).4
.3(10)

Amendment of Registration Rights Agreement, dated
    October 15, 2007.4
.4(2)

Form of Warrant dated June 2007.4
.5(2)

Securities Purchase Agreement, dated June 27, 2007, by and
    among Cardica, Inc., and purchasers listed on the signature
    pages thereto.10
.1(1)

1997 Equity Incentive Plan and forms of related agreements and
    documents.10
.2(3)

2005 Equity Incentive Plan and forms of related agreements and
    documents.10
.3(1)

Amended and Restated Investor Rights Agreement, dated
    August 19, 2003, by and among the Registrant and certain
    stockholders.10
.4(1)

Benefit Agreement with Bernard Hausen, M.D., Ph.D.+10
.5(1)

Office Lease Agreement dated April 25, 2003, and First
    Amendment to Office Lease Agreement dated January 21, 2004.10
.6(11)

Second Amendment to Office Lease Agreement, executed and
    delivered on December effective November 19, 2007.10
.7(1)

Distribution Agreement by and between Cardica, Inc. and Century
    Medical, Inc. dated June 16, 2003.10
.8(4)

First Amendment to Distribution Agreement, dated March 30,
    2007, by and between Cardica, Inc. and Century Medical,
    Inc.10
.9(1)

Subordinated Convertible Note Agreement with Century Medical,
    Inc. dated June 16, 2003, and Amendment No. 1 thereto,
    dated August 6, 2003.10
.10.1(4)

Amendment No. 2 to Subordinated Convertible Note Agreement,
    dated March 30, 2007, by and between Cardica, Inc. and
    Century Medical, Inc. 84




---



##### Table of Contents



ExhibitNumber

Description10
.11(4)

Amended and Restated Note issued pursuant to Amendment
    No. 2 to Subordinated Convertible Note Agreement with
    Century Medical, Inc.10
.12(1)

Allen & Company LLC letter of intent dated
    September 12, 2005.10
.13(5)

Consent to Grant of Registration Rights and Amendment to Amended
    and Restated Investor Rights Agreement, dated November 7,
    2006, by and between Cardica, Inc. and the investors set forth
    therein.10
.14(12)

Cardica, Inc. Non-Employee Director Compensation.+10
.15(6)

Registration Rights Agreement, dated June 7, 2007, by and
    among Cardica, Inc., and the purchasers listed on the signature
    pages thereto.10
.16(8)

Bonus arrangement for Vice President of Worldwide Sales and
    Marketing, effective August 13, 2008.+10
.17(8)

Additional Compensation Information for named executive
    officers.+10
.18(12)

Letter Agreement with Frederic M. Bauer+10
.19(13)

Cardica, Inc. Change in Control and Severance Benefit Plan.+10
.20(14)

Form of Restricted Stock Unit Grant Notice and Restricted Stock
    Unit Grant Agreement.10
.21(7)

License, Development and Commercialization Agreement by and
    between the Company and Cook Incorporated, dated June 12,
    2007.10
.22(9)

Amendment to License, Development and Commercialization
    Agreement by and between Cardica, Inc. and Cook Incorporated,
    dated September 19, 2007.10
.23

Second Amendment to License, Development and Commercialization
    Agreement by and between Cardica, Inc. and Cook Incorporated,
    dated June 19, 200921
.1(1)

Subsidiaries of Registrant.23
.1

Consent of Independent Registered Public Accounting Firm.24
.1

Power of Attorney (included on signature page).31
.1

Certification of chief executive officer.31
.2

Certification of chief financial officer.32
.1

Section 1350 Certification.     
    
    Portions of this exhibit (indicated by asterisks) have been
    omitted pursuant to a request for confidential treatment and
    this exhibit has been filed separately with the SEC.+
    
    Indicates management contract or compensatory plan.(1)
    
    Filed as an exhibit to the Registrants Registration
    Statement on
    Form S-1,
    file
    no. 333-129497,
    declared effective on February 2, 2006, as amended, and
    incorporated herein by reference.(2)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 13, 2007, excluding Item 3.02 and incorporated
    herein by reference.(3)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    November 14, 2006 and incorporated herein by reference.(4)
    
    Filed as exhibits to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    April 5, 2007 and incorporated herein by reference.(5)
    
    Filed as exhibits to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    November 8, 2006 and incorporated herein by reference.(6)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 13, 2007 and incorporated herein by reference.(7)
    
    Filed as exhibits to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 21, 2007, excluding Items 3.01 and incorporated
    herein by reference.(8)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    August 19, 2008 and incorporated herein by reference. 85




---



##### Table of Contents



(9)
    
    Filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2007.(10)
    
    Filed as an exhibit to the Companys Registration Statement
    on
    Form S-3
    filed with the Securities and Exchange Commission on
    October 15, 2007 and incorporated herein by reference.(11)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 5, 2007 and incorporated herein by reference.(12)
    
    Filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q
    filed with the Securities and Exchange Commission on
    November 7, 2008 and incorporated herein by reference.(13)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    February 18, 2009 and incorporated herein by reference.(14)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    February 20, 2009 and incorporated herein by reference.     86




---



##### Table of Contents



SIGNATURES    
  
       POWER OF
    ATTORNEY
  Form 10-K,
    Name and Signature

Title

Date/s/  Bernard
    A. HausenBernard
    A. Hausen, M.D., Ph.D.

President, Chief Executive Officer and Director(Principal Executive Officer)

September 17, 2009/s/  Robert
    Y. NewellRobert
    Y. Newell

Chief Financial Officer(Principal Financial and Accounting Officer)

September 17, 2009/s/  Kevin
    T. LarkinKevin
    T. Larkin

Director

September 17, 2009/s/  Richard
    P. PowersRichard
    P. Powers

Director

September 17, 2009/s/  Jeffrey
    L. PurvinJeffrey
    L. Purvin

Director

September 17, 2009/s/  John
    SimonJohn
    Simon, Ph.D

Director

September 10, 2009/s/  William
    H. Younger, Jr.William
    H. Younger, Jr.

Director

September 17, 2009  87




---



##### Table of Contents



ExhibitNumber

Description3
.1(1)

Amended and Restated Certificate of Incorporation of the
    Registrant as currently in effect.3
.2(8)

Bylaws of the Registrant as currently in effect.3
.3(1)

Specimen Common Stock certificate of the Registrant.4
.1(1)

Warrant dated March 17, 2000 exercisable for
    36,810 shares of common stock (on a pre-split basis).4
.2(1)

Warrant dated October 31, 2002 exercisable for
    180,052 shares of common stock (on a pre-split basis).4
.3(10)

Amendment of Registration Rights Agreement, dated
    October 15, 2007.4
.4(2)

Form of Warrant dated June 2007.4
.5(2)

Securities Purchase Agreement, dated June 27, 2007, by and
    among Cardica, Inc., and purchasers listed on the signature
    pages thereto.10
.1(1)

1997 Equity Incentive Plan and forms of related agreements and
    documents.10
.2(3)

2005 Equity Incentive Plan and forms of related agreements and
    documents.10
.3(1)

Amended and Restated Investor Rights Agreement, dated
    August 19, 2003, by and among the Registrant and certain
    stockholders.10
.4(1)

Benefit Agreement with Bernard Hausen, M.D., Ph.D.+10
.5(1)

Office Lease Agreement dated April 25, 2003, and First
    Amendment to Office Lease Agreement dated January 21, 2004.10
.6(11)

Second Amendment to Office Lease Agreement, executed and
    delivered on December effective November 19, 2007.10
.7(1)

Distribution Agreement by and between Cardica, Inc. and Century
    Medical, Inc. dated June 16, 2003.10
.8(4)

First Amendment to Distribution Agreement, dated March 30,
    2007, by and between Cardica, Inc. and Century Medical,
    Inc.10
.9(1)

Subordinated Convertible Note Agreement with Century Medical,
    Inc. dated June 16, 2003, and Amendment No. 1 thereto,
    dated August 6, 2003.10
.10.1(4)

Amendment No. 2 to Subordinated Convertible Note Agreement,
    dated March 30, 2007, by and between Cardica, Inc. and
    Century Medical, Inc.10
.11(4)

Amended and Restated Note issued pursuant to Amendment
    No. 2 to Subordinated Convertible Note Agreement with
    Century Medical, Inc.10
.12(1)

Allen & Company LLC letter of intent dated
    September 12, 2005.10
.13(5)

Consent to Grant of Registration Rights and Amendment to Amended
    and Restated Investor Rights Agreement, dated November 7,
    2006, by and between Cardica, Inc. and the investors set forth
    therein.10
.14(12)

Cardica, Inc. Non-Employee Director Compensation.+10
.15(6)

Registration Rights Agreement, dated June 7, 2007, by and
    among Cardica, Inc., and the purchasers listed on the signature
    pages thereto.10
.16(8)

Bonus arrangement for Vice President of Worldwide Sales and
    Marketing, effective August 13, 2008.+10
.17(8)

Additional Compensation Information for named executive
    officers.+10
.18(12)

Letter Agreement with Frederic M. Bauer+10
.19(13)

Cardica, Inc. Change in Control and Severance Benefit Plan.+10
.20(14)

Form of Restricted Stock Unit Grant Notice and Restricted Stock
    Unit Grant Agreement.10
.21(7)

License, Development and Commercialization Agreement by and
    between the Company and Cook Incorporated, dated June 12,
    2007.10
.22(9)

Amendment to License, Development and Commercialization
    Agreement by and between Cardica, Inc. and Cook Incorporated,
    dated September 19, 2007.10
.23

Second Amendment to License, Development and Commercialization
    Agreement by and between Cardica, Inc. and Cook Incorporated,
    dated June 19, 200921
.1(1)

Subsidiaries of Registrant.23
.1

Consent of Independent Registered Public Accounting Firm. 88




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##### Table of Contents



ExhibitNumber

Description24
.1

Power of Attorney (included on signature page).31
.1

Certification of chief executive officer.31
.2

Certification of chief financial officer.32
.1

Section 1350 Certification.     
    
    Portions of this exhibit (indicated by asterisks) have been
    omitted pursuant to a request for confidential treatment and
    this exhibit has been filed separately with the SEC.+
    
    Indicates management contract or compensatory plan.(1)
    
    Filed as an exhibit to the Registrants Registration
    Statement on
    Form S-1,
    file
    no. 333-129497,
    declared effective on February 2, 2006, as amended, and
    incorporated herein by reference.(2)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 13, 2007, excluding Item 3.02 and incorporated
    herein by reference.(3)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    November 14, 2006 and incorporated herein by reference.(4)
    
    Filed as exhibits to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    April 5, 2007 and incorporated herein by reference.(5)
    
    Filed as exhibits to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    November 8, 2006 and incorporated herein by reference.(6)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 13, 2007 and incorporated herein by reference.(7)
    
    Filed as exhibits to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 21, 2007, excluding Items 3.01 and incorporated
    herein by reference.(8)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    August 19, 2008 and incorporated herein by reference.(9)
    
    Filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2007.(10)
    
    Filed as an exhibit to the Companys Registration Statement
    on
    Form S-3
    filed with the Securities and Exchange Commission on
    October 15, 2007 and incorporated herein by reference.(11)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 5, 2007 and incorporated herein by reference.(12)
    
    Filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q
    filed with the Securities and Exchange Commission on
    November 7, 2008 and incorporated herein by reference.(13)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    February 18, 2009 and incorporated herein by reference.(14)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    February 20, 2009 and incorporated herein by reference.     89