##### Table of Contents



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 1934
 For the fiscal year ended June 30, 2010
 OR
 o
    
    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
    
    94-3287832(State or other jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    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 Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
 Yes o No þ
 Yes o No þ
 þ o
 o o
 þ
 Rule 12b-2
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o (Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



Cardica, inc.
ANNUAL REPORT ON FORM 10-K
For the Year Ended June 30, 2010
 TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    24Item 1B. Unresolved Staff Comments
    
    
    42Item 2. Properties
    
    
    42Item 3. Legal Proceedings
    
    
    42Item 4. (Removed and Reserved)
    
    
    42PART IIItem 5. Market for Registrants Common Equity, Related Stockholders Matters and
Issuer Purchases of Equity Securities
    
    
    43Item 6. Selected Financial Data
    
    
    44Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    46Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    56Item 8. Financial Statements and Supplementary Data
    
    
    57Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    58Item 9A. Controls and Procedures
    
    
    58Item 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
Stock Matters
    
    
    60Item 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
    
    
    87Exhibit 10.7Exhibit 10.8Exhibit 10.16Exhibit 10.28Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1




---



##### Table of Contents



This Annual Report on Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which are subject to the safe harbor created by those sections.
Forward-looking statements are based on our managements beliefs and assumptions and on information
currently available to our management. In some cases, you can identify forward-looking statements
by terms such as may, will, should, could, would, expect, plan, anticipate,
believe, estimate, project, predict, potential and similar expressions intended to
identify forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance, time frames or
achievements to be materially different from any future results, performance, time frames or
achievements expressed or implied by the forward-looking statements. We discuss many of these
risks, uncertainties and other factors in this Annual Report on Form 10-K in greater detail under
the heading Risk Factors. Given these risks, uncertainties and other factors, you should not
place undue reliance on these forward-looking statements. Also, these forward-looking statements
represent our estimates and assumptions only as of the date of this filing. You should read this
Annual Report on Form 10-K completely and with the understanding that our actual future results may
be materially different from what we expect. We hereby qualify our forward-looking statements by
our cautionary statements. Except as required by law, we assume no obligation to update these
forward-looking statements publicly, or to update the reasons actual results could differ
materially from those anticipated in these forward-looking statements, even if new information
becomes available in the future.
 
 Item 1. Business
 Overview
  ® ®
   1




---



##### Table of Contents



Our Strategy
   
    
    Developing our endoscopic microcutter.We have begun development of
the Cardica Microcutter ES8, 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 an
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 would
enable more minimally invasive procedures in general, bariatric,
thoracic, gynecologic and urologic surgeries, such as single port
surgery.
 
    
    Leveraging the Cardica Microcutter ES8 technology to develop a broad
range of surgical stapling devices.We believe that our technology for
the Cardica Microcutter ES8, which comprises extensive technological
innovations, can be adapted for a variety of surgical stapling
devices. The product applications of our technology that we plan to
develop include stapling devices that have incremental benefits, such
as smaller size, a flexible instrument shaft, greater degrees of
articulation and potentially larger staples.
 
    
    Obtaining regulatory clearance and commencing marketing of the Cardica
Microcutter ES8.We anticipate that we will complete product
development for the Cardica Microcutter ES8 in early calendar year
2011 and apply for regulatory clearance through the 510(k) process
with the FDA based on the results of our animal trials.
 
    
    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.
 
    
    Establishing a strong proprietary position.As of June 30, 2010, we
had 82 issued U.S. patents, 68 additional patent applications in the
United States, six 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
   2




---



##### Table of Contents



Current Treatment Alternatives for Coronary Artery Disease
  Medical Treatment with Pharmaceuticals
  Interventional Cardiology Techniques
 Coronary Angioplasty.
 Stents.
    3




---



##### Table of Contents



Bypass Surgery.
 
    4




---



##### Table of Contents



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




---



##### Table of Contents



Microcutter Industry Background
 Market
    Current Devices for Surgical Stapling
  
    
    deploying multiple U-shaped wires against a deforming surface, called an anvil, to
reshape the wires into 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;
 
    
    using 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
 
    
    using cartridges that can be loaded, following each deployment, into a receptacle at the
end of the deployment tool.
  6




---



##### Table of Contents



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. This may reduce 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 direct 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.
  7




---



##### Table of Contents



Microcutter Product Development
  
    
    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 allows 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 staple 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s 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 an innovative design in which 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 single procedure, without the
need to remove the stapler from the tissue site or having to replace the staple cartridge.
Conventional stapling technology requires a tedious, repetitive 13-step process after each
deployment in which the stapler is first clamped and then removed from the body cavity.
Our true multi-fire capability would reduce this multi-step process to one simple step:
following a deployment the device is reset by activating a simple slider.
 
    
    Low Deployment Forces.We are designing our microcutter products to deploy staples with
significantly lower deployment forces. Reduced 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 favorable tissue
compression. These features combine to result in excellent staple formation.
 
    
    Articulation, Rotation and Handling.End-effector articulation and rotation clearly
improve tissue access and ease of use, and both are expected by surgeons in stapling
devices. Our microcutters design incorporates an end-effector that in one product format
we are planning would be angled up to 80 degrees, as compared to the 45 degrees of maximum
articulation achieved with the vast majority of currently marketed linear stapling
technologies. In addition, our microcutter is being designed to enable 360-degree rotation
of the end-effector. Our microcutter also would be a truly single-hand operated handle for
articulating staplers: 360 degree rotation and 80 degree articulation would be accomplished
by rotating a single knob at the end of the handle.
  8




---



##### Table of Contents



Our Cardiac Products
  C-Port ® Distal Anastomosis Systems
 C-Port ® xA Anastomosis System
  
    
    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




---



##### Table of Contents



C-Port ® X-CHANGE System
  PAS-Port ® Proximal Anastomosis System
   Product Development Programs
 Microcutter
     10




---



##### Table of Contents



Cardica Hybrid Technology
  License Agreement and Collaborations
  Agreement with Intuitive Surgical
  Regulatory Status
  Cardiac Product Sales and Marketing
 United States
   11




---



##### Table of Contents



International
    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.
  12




---



##### Table of Contents



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.
   13




---



##### Table of Contents



Manufacturing
     Third-Party Reimbursement
      14




---



##### Table of Contents



Research and Development
  Patents and Intellectual Property
   15




---



##### Table of Contents



Government Regulation
   
    
    product design, development and manufacture;
 
    
    product safety, testing, labeling and storage;
 
    
    pre-clinical testing in animals and in the laboratory;
  16




---



##### Table of Contents




    
    clinical investigations in humans;
 
    
    marketing applications, such as 510(k) notifications and Premarket Approval, or 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 Requirements.
 5 10(k) Clearance Pathway.
  17




---



##### Table of Contents



Premarket Approval Pathway.
  Clinical Trials.
    18




---



##### Table of Contents



Pervasive and Continuing Regulation.
 
    
    product listing and establishment registration, which helps facilitate FDA
inspections and other regulatory action;
 
    
    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;
  19




---



##### Table of Contents




    
    mandatory product recalls;
 
    
    withdrawing approvals that have already been granted; and
 
    
    criminal prosecution.
 Fraud and Abuse and False Claims.
    International Regulation.
  20




---



##### Table of Contents



21




---



##### Table of Contents



Employees
  Corporate Information
 www.cardica.com
  22




---



##### Table of Contents



Executive Officers of the Registrant
  Name
    
    Age
    
    PositionBernard A. Hausen, M.D., Ph.D.
    
    
    50
    
    
    President, Chief Executive Officer,
Chief Medical Officer and DirectorRobert Y. Newell
    
    
    62
    
    
    Vice President, Finance and Chief Financial OfficerFrederick M. Bauer
    
    
    57
    
    
    Vice President, OperationsBryan D. Knodel, Ph.D.
    
    
    50
    
    
    Vice President, Research and Development
 Bernard A. Hausen, M.D., Ph.D.
 Robert Y. Newell
 Frederick M. Bauer
 Bryan D. Knodel, Ph.D.
  23




---



##### Table of Contents



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 current products or future products that we may commercialize;
 
    
    achievement of U.S. regulatory clearance or approval for additional 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.
   
    
    the extent of our ongoing research and development programs and related costs, including costs
related to the development of the Cardica Microcutter ES8 and additional potential products in our
anticipated microcutter product line;
 
    
    our ability to enter into additional license, development and/or collaboration agreements with
respect to our technology, and the terms thereof;
 
    
    market acceptance and adoption of our current products or future products that we may commercialize;
 
    
    our level of revenue;
  24




---



##### Table of Contents




    
    costs associated with our sales and marketing initiatives and manufacturing activities;
 
    
    costs and timing of obtaining and maintaining FDA and other regulatory clearances and approvals for
our products and potential additional products;
 
    
    securing, maintaining and enforcing intellectual property rights and the costs thereof; and
 
    
    the effects of competing technological and market developments.
  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.
   Creditors may have rights to our assets that are senior to our stockholders.
   25




---



##### Table of Contents



Our quarterly operating results and stock price may fluctuate significantly.
  
    
    the extent of our ongoing research and development programs and related costs, including
costs related to the development of the Cardica Microcutter ES8 and additional potential
products;
 
    
    our ability to enter into additional license, development and/or collaboration agreements
with respect to our technology, and the terms thereof;
 
    
    market acceptance and adoption of our products;
 
    
    our level of revenue;
 
    
    costs associated with our sales and marketing initiatives and manufacturing activities;
 
    
    costs and timing of obtaining and maintaining FDA and other regulatory clearances and
approvals for our products and potential additional products;
 
    
    securing, maintaining and enforcing intellectual property rights and the costs thereof; and
 
    
    the effects of competing technological and market developments.
  Risks Related to Our Business
 We are dependent upon the success of our current products to generate revenue in the near term, 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 can 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.
  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.
   26




---



##### Table of Contents



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 future products, may still face future
development and regulatory difficulties.
   27




---



##### Table of Contents




    
    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;
 
    
    withdrawing approvals that have already been granted; and
 
    
    criminal prosecution.
  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.
   28




---



##### Table of Contents



Our manufacturing facilities, and those of our suppliers, must comply with applicable regulatory
requirements. Failure of our manufacturing facilities to comply with quality requirements would
harm our business and our results of operations.
    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.
   29




---



##### Table of Contents



We have limited data regarding the safety and efficacy of the PAS-Port and C-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.
   30




---



##### Table of Contents



Any clinical trials that we may conduct 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;
  31




---



##### Table of Contents




    
    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.
    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.
   32




---



##### Table of Contents



If our competitors have products that are approved in advance of ours, marketed more effectively or
demonstrated to be safer or 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.
     33




---



##### Table of Contents




    
    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.
  We are dependent upon a number of key suppliers, including single source suppliers, the loss of
which would materially harm our business.
    34




---



##### 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.
    35




---



##### 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.
    36




---



##### 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 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.
  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.
     37




---



##### Table of Contents



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.
  Our operations are currently conducted at a single location that may be at risk from earthquakes,
terror attacks or other disasters.
   38




---



##### Table of Contents



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.
  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.
   The price of our common stock may continue to be volatile, and the value of an investment in our
common stock may decline.
  
    
    completion of development of our microcutter products, and the timing thereof;
 
    
    market acceptance and adoption of our products;
  39




---



##### Table of Contents




    
    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.
  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.
   40




---



##### Table of Contents



Our future operating results may be below securities analysts or investors expectations, which
could cause our stock price to decline.
  
    
    completion of development of our microcutter products, and the timing thereof;
 
    
    FDA or other regulatory clearance or approval of our 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.
  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.
   41




---



##### Table of Contents



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 1B. Unresolved Staff Comments.
  
 Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. (Removed and Reserved)
  42




---



##### 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 2010First Quarter ended September 30, 2009
    
    $
    3.19
    
    
    $
    1.15Second Quarter ended December 31, 2009
    
    $
    1.63
    
    
    $
    1.00Third Quarter ended March 31, 2010
    
    $
    2.44
    
    
    $
    1.16Fourth Quarter ended June 30, 2010
    
    $
    2.85
    
    
    $
    1.41Fiscal 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
    
    
    $
    1.03
  Dividend Policy
  Recent Sales of Unregistered Securities
    43




---



##### Table of Contents



Issuer Purchases of Equity Securities
  
 Item 6. Selected Financial Data
   Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(in thousands, except per share data)Statements of Operations Data:Net revenue:Product sales, net
    
    $
    3,764
    
    
    $
    6,798
    
    
    $
    4,934
    
    
    $
    2,103
    
    
    $
    1,028Development revenue
    
    
    124
    
    
    
    2,995
    
    
    
    2,564
    
    
    
    1,370
    
    
    
    1,000Royalty revenue
(includes amounts from
related party
of $67, $56 and$31 in
fiscal years 2008, 2007
and 2006, respectively)
    
    
    93
    
    
    
    85
    
    
    
    67
    
    
    
    56
    
    
    
    31Total net revenue
    
    
    3,981
    
    
    
    9,878
    
    
    
    7,565
    
    
    
    3,529
    
    
    
    2,059Operating costs and expenses:Cost of product sales
    
    
    3,687
    
    
    
    5,341
    
    
    
    4,808
    
    
    
    2,880
    
    
    
    2,102Research and development
    
    
    5,437
    
    
    
    8,217
    
    
    
    8,609
    
    
    
    7,014
    
    
    
    6,459Selling, general and
administrative
    
    
    5,734
    
    
    
    13,632
    
    
    
    13,175
    
    
    
    9,057
    
    
    
    5,645Total operating costs and
expenses
    
    
    14,858
    
    
    
    27,190
    
    
    
    26,592
    
    
    
    18,951
    
    
    
    14,206Loss from operations
    
    
    (10,877
    )
    
    
    (17,312
    )
    
    
    (19,027
    )
    
    
    (15,422
    )
    
    
    (12,147
    )Interest income
    
    
    35
    
    
    
    177
    
    
    
    926
    
    
    
    1,113
    
    
    
    782
  44




---



##### Table of Contents



Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(in thousands, except per share data)Interest expense (includes
related-party interest expense
of $320 and $897 in fiscal
years 2007 and 2006,
respectively)
    
    
    (112
    )
    
    
    (120
    )
    
    
    (101
    )
    
    
    (458
    )
    
    
    (1,047
    )Other income (expense), net
    
    
    (1
    )
    
    
    (22
    )
    
    
    6
    
    
    
    2
    
    
    
    (4
    )Gain on early retirement of
notes payable to related-party
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183
    
    
    
    Net loss before income tax
benefit
    
    
    (10,955
    )
    
    
    (17,277
    )
    
    
    (18,196
    )
    
    
    (13,582
    )
    
    
    (12,416
    )Income tax benefit
    
    
    31
    
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (10,924
    )
    
    $
    (17,205
    )
    
    $
    (18,196
    )
    
    $
    (13,582
    )
    
    $
    (12,416
    )Basic and diluted net loss per
common share
    
    $
    (0.50
    )
    
    $
    (1.09
    )
    
    $
    (1.23
    )
    
    $
    (1.25
    )
    
    $
    (2.58
    )Shares used in computing basic
and diluted net loss per
common share
    
    
    21,927
    
    
    
    15,776
    
    
    
    14,844
    
    
    
    10,878
    
    
    
    4,817
 As of June 30,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance Sheet Data:Cash, cash equivalents and
short-term investments
    
    $
    6,561
    
    
    $
    5,328
    
    
    $
    23,265
    
    
    $
    23,434
    
    
    $
    32,080Working capital
    
    
    5,016
    
    
    
    4,134
    
    
    
    20,959
    
    
    
    22,049
    
    
    
    31,602Total assets
    
    
    9,791
    
    
    
    10,340
    
    
    
    28,250
    
    
    
    27,324
    
    
    
    35,158Short-term note payable
    
    
    1,400
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    Long-term liabilities
    
    
    31
    
    
    
    44
    
    
    
    2,000
    
    
    
    2,020
    
    
    
    15,836Total stockholders equity
    
    
    6,477
    
    
    
    6,262
    
    
    
    21,417
    
    
    
    21,989
    
    
    
    17,677
  45




---



##### 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
  ® ®
      46




---



##### Table of Contents



Agreements with Cook Incorporated
   47




---



##### Table of Contents



Deficiency letter from The NASDAQ Global Market
   Critical Accounting Policies and Significant Judgments and Estimates
    48




---



##### Table of Contents



Revenue Recognition.
   Inventory.
 Clinical Trial Accounting.
 Stock-Based Compensation.
   49




---



##### Table of Contents



Results of Operations
 Comparison of Fiscal Years ended June 30, 2010 and 2009
 Net Revenue.
    Cost of Product Sales.
   Research and Development Expenses.
   50




---



##### Table of Contents



Selling, General and Administrative Expenses.
   Interest Income.
 Interest Expense.
 Income Tax Benefit.
 Comparison of Fiscal Years ended June 30, 2009 and 2008
 Net Revenue.
   51




---



##### Table of Contents



Cost of Product Sales.
   Research and Development Expenses.
  Selling, General and Administrative Expenses.
  Interest Income.
 Interest Expense.
  52




---



##### Table of Contents



Income Tax Benefit.
 Income Taxes
   Liquidity and Capital Resources
      53




---



##### Table of Contents



Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008(In thousands)Net cash used in operating activities
    
    $
    (7,731
    )
    
    $
    (16,703
    )
    
    $
    (14,222
    )Net cash (used in) provided by investing activities
    
    
    (365
    )
    
    
    12,664
    
    
    
    (6,613
    )Net cash provided by financing activities
    
    
    9,329
    
    
    
    146
    
    
    
    15,517
       54




---



##### Table of Contents



.
   
    
    the extent of our ongoing research and development programs and related costs,
including costs related to the development of the Cardica Microcutter ES8 and additional
potential products in our anticipated microcutter product line;
 
    
    our ability to enter into additional license, development and/or collaboration
agreements with respect to our technology, and the terms thereof;
 
    
    market acceptance and adoption of our current products or future products that we may
commercialize;
 
    
    our level of revenue;
 
    
    costs associated with our sales and marketing initiatives and manufacturing activities;
 
    
    costs and timing of obtaining and maintaining FDA and other regulatory clearances and
approvals for our products and potential additional products;
 
    
    securing, maintaining and enforcing intellectual property rights and the costs thereof;
and
 
    
    the effects of competing technological and market developments
   55




---



##### Table of Contents



Recent Accounting Pronouncements
  .
  Off-Balance Sheet Arrangements
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
   56




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  Quarterly Financial Data
 Fiscal year 2010:
 1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th Quarter(Unaudited, in thousands, except per share data)Total net revenue
    
    $
    947
    
    
    $
    1,064
    
    
    $
    979
    
    
    $
    991Gross profit (loss) on product sales
    
    
    (23
    )
    
    
    324
    
    
    
    (109
    )
    
    
    (115
    )Net loss
    
    
    (2,664
    )
    
    
    (2,226
    )
    
    
    (2,983
    )
    
    
    (3,051
    )Basic and diluted net loss per common share
    
    
    (0.17
    )
    
    
    (0.09
    )
    
    
    (0.12
    )
    
    
    (0.13
    )Shares used in computing basic and diluted
net loss per common share
    
    
    15,796
    
    
    
    23,930
    
    
    
    23,966
    
    
    
    24,000
 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
   57




---



##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
 Internal
Control  Integrated Framework 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
  Identification of Audit Committee and Audit Committee Financial Expert
  Material Changes to Procedures for Recommending Directors
  Compliance with Section 16(a) of the Exchange Act
  Code of Conduct
  
 Item 11. Executive Compensation
   59




---



##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 Security Ownership
  Equity Compensation Plan Information
  
 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
    
    
    67Notes to Financial Statements
    
    
    68
  61




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
  62




---



##### Table of Contents



Cardica, Inc.
 
 BALANCE SHEETS
  June 30,2010
    
    
    2009AssetsCurrent assetsCash and cash equivalents
    
    $
    6,561
    
    
    $
    5,328Accounts receivable
    
    
    376
    
    
    
    624Inventories
    
    
    1,131
    
    
    
    1,895Prepaid expenses and other current assets
    
    
    231
    
    
    
    321Total current assets
    
    
    8,299
    
    
    
    8,168Property and equipment, net
    
    
    1,338
    
    
    
    1,862Restricted cash
    
    
    154
    
    
    
    310Total assets
    
    $
    9,791
    
    
    $
    10,340Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    496
    
    
    $
    551Accrued compensation
    
    
    440
    
    
    
    319Other accrued liabilities
    
    
    517
    
    
    
    637Deferred development revenue
    
    
    403
    
    
    
    527Deferred rent
    
    
    27
    
    
    
    Note payable
    
    
    1,400
    
    
    
    2,000Total current liabilities
    
    
    3,283
    
    
    
    4,034Other non-current liabilities
    
    
    31
    
    
    
    44Total liabilities
    
    
    3,314
    
    
    
    4,078Commitments and contingencies (Note 6)Stockholders equityPreferred stock, $0.001 par value: 5,000,000 shares authorized,
no shares issued and outstanding at June 30, 2010 and 2009
    
    
    
    
    
    
    Common stock, $0.001 par value: 45,000,000 shares authorized,
24,005,813
and 15,825,549 shares issued and outstanding at June 30,
2010 and 2009,
respectively
    
    
    24
    
    
    
    16Additional paid-in capital
    
    
    127,381
    
    
    
    116,272Treasury stock at cost (66,227 shares at June 30, 2010 and 2009)
    
    
    (596
    )
    
    
    (596
    )Deferred stock-based compensation
    
    
    
    
    
    
    (22
    )Accumulated deficit
    
    
    (120,332
    )
    
    
    (109,408
    )Total stockholders equity
    
    
    6,477
    
    
    
    6,262Total liabilities and stockholders equity
    
    $
    9,791
    
    
    $
    10,340
   63




---



##### Table of Contents



Cardica, Inc.
 
 STATEMENTS OF OPERATIONS
  Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008Net revenueProduct sales, net
    
    $
    3,764
    
    
    $
    6,798
    
    
    $
    4,934Development revenue
    
    
    124
    
    
    
    2,995
    
    
    
    2,564Royalty revenue (including $67 from a related party in
2008)
    
    
    93
    
    
    
    85
    
    
    
    67Total net revenue
    
    
    3,981
    
    
    
    9,878
    
    
    
    7,565Operating costs and expensesCost of product sales
    
    
    3,687
    
    
    
    5,341
    
    
    
    4,808Research and development
    
    
    5,437
    
    
    
    8,217
    
    
    
    8,609Selling, general and administrative
    
    
    5,734
    
    
    
    13,632
    
    
    
    13,175Total operating costs and expenses
    
    
    14,858
    
    
    
    27,190
    
    
    
    26,592Loss from operations
    
    
    (10,877
    )
    
    
    (17,312
    )
    
    
    (19,027
    )Interest income
    
    
    35
    
    
    
    177
    
    
    
    926Interest expense
    
    
    (112
    )
    
    
    (120
    )
    
    
    (101
    )Other income (expense), net
    
    
    (1
    )
    
    
    (22
    )
    
    
    6Net loss before income tax benefit
    
    
    (10,955
    )
    
    
    (17,277
    )
    
    
    (18,196
    )Income tax benefit
    
    
    31
    
    
    
    72
    
    
    
    Net loss
    
    $
    (10,924
    )
    
    $
    (17,205
    )
    
    $
    (18,196
    )Basic and diluted net loss per common share
    
    $
    (0.50
    )
    
    $
    (1.09
    )
    
    $
    (1.23
    )Shares used in computing basic and diluted net loss per common
share
    
    
    21,927
    
    
    
    15,776
    
    
    
    14,844
   64




---



##### Table of Contents



Cardica, Inc.
 
 STATEMENTS OF STOCKHOLDERS EQUITY
  Deferred
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    Stock-
    
    
    other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Treasury
    
    
    Based
    
    
    comprehensive
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Stock
    
    
    Compensation
    
    
    loss
    
    
    Deficit
    
    
    EquityBalance 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
    
    
    
    
    
    
    
    
    
    
    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
    )
    
    
    21,417
  65




---



##### Table of Contents



Deferred
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    Stock-
    
    
    other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Treasury
    
    
    Based
    
    
    comprehensive
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Stock
    
    
    Compensation
    
    
    loss
    
    
    Deficit
    
    
    EquityIssuance 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
    
    
    
    
    
    
    
    
    
    
    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
    )
    
    
    6,262Issuance of common stock upon
exercise of employee stock
options for cash
    
    
    8,257
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Issuance of common stock upon release of restricted
share units
    
    
    49,925
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of stock options to
non-employees for services
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Cancellation of restricted stock awards, net of
issuance of shares
    
    
    (20,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of common stock, net of financing costs of $280
    
    
    8,142,082
    
    
    
    8
    
    
    
    9,910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,918Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    1,158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,158Amortization of deferred
stock-based compensation
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    21Comprehensive loss:Net and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,924
    )
    
    
    (10,924
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,924
    )Balance at June 30, 2010
    
    
    24,005,813
    
    
    
    24
    
    
    
    127,381
    
    
    
    (596
    )
    
    
    
    
    
    
    
    
    
    
    (120,332
    )
    
    
    6,477
   66




---



##### Table of Contents



Cardica, Inc.
 
 STATEMENTS OF CASH FLOWS
  Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008Operating activitiesNet loss
    
    $
    (10,924
    )
    
    $
    (17,205
    )
    
    $
    (18,196
    )Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation and amortization
    
    
    836
    
    
    
    917
    
    
    
    944Loss on disposal or retirement of property and equipment
    
    
    53
    
    
    
    614
    
    
    
    12Amortization of deferred stock-based compensation expense
    
    
    21
    
    
    
    253
    
    
    
    307Issuance of common stock to settle intellectual property litigation
    
    
    
    
    
    
    
    
    
    
    425Stock-based compensation on grants of stock options to non-employees
    
    
    31
    
    
    
    10
    
    
    
    10Stock-based compensation on grants of stock options to employees
    
    
    1,158
    
    
    
    1,629
    
    
    
    1,365Changes in assets and liabilitiesAccounts receivable
    
    
    248
    
    
    
    92
    
    
    
    (433
    )Prepaid expenses and other current assets
    
    
    98
    
    
    
    115
    
    
    
    Inventories
    
    
    764
    
    
    
    (555
    )
    
    
    (164
    )Restricted Cash
    
    
    156
    
    
    
    200
    
    
    
    Accounts payable and other accrued liabilities
    
    
    (175
    )
    
    
    (1,129
    )
    
    
    643Accrued compensation
    
    
    121
    
    
    
    (692
    )
    
    
    495Deferred rent
    
    
    6
    
    
    
    17
    
    
    
    (111
    )Deferred development revenue
    
    
    (124
    )
    
    
    (958
    )
    
    
    603Leasehold improvement obligation
    
    
    
    
    
    
    (11
    )
    
    
    (122
    )Net cash used in operating activities
    
    
    (7,731
    )
    
    
    (16,703
    )
    
    
    (14,222
    )Investing activitiesPurchases of property and equipment
    
    
    (365
    )
    
    
    (1,392
    )
    
    
    (1,454
    )Purchases of short-term investments
    
    
    
    
    
    
    (4,974
    )
    
    
    (45,981
    )Proceeds from maturities of short-term investments
    
    
    
    
    
    
    19,030
    
    
    
    40,822Net cash (used in) provided by investing activities
    
    
    (365
    )
    
    
    12,664
    
    
    
    (6,613
    )Financing activitiesProceeds from sales of common stock, net of issuance costs
    
    
    9,918
    
    
    
    
    
    
    
    15,350Payment of note payable
    
    
    (600
    )
    
    
    
    
    
    
    Proceeds from issuance of common stock pursuant to the exercise of stock
options
    
    
    11
    
    
    
    146
    
    
    
    167Net cash provided by financing activities
    
    
    9,329
    
    
    
    146
    
    
    
    15,517Net increase (decrease) in cash and cash equivalents
    
    
    1,233
    
    
    
    (3,893
    )
    
    
    (5,318
    )Cash and cash equivalents at beginning of period
    
    
    5,328
    
    
    
    9,221
    
    
    
    14,539Cash and cash equivalents at end of period
    
    $
    6,561
    
    
    $
    5,328
    
    
    $
    9,221Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    118
    
    
    $
    117
    
    
    $
    101
   67




---



##### Table of Contents



Cardica, Inc.
 
 Notes to Financial Statements
 Note 1. Organization and Summary of Significant Accounting Policies
 Organization
    Use of Estimates
  Cash and Cash Equivalents
  Available-for-Sale Securities
   68




---



##### Table of Contents



Restricted Cash
   Concentrations of Credit Risk and Certain Other Risks
    Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008United States
    
    
    63
    %
    
    
    84
    %
    
    
    82
    %Japan
    
    
    23
    %
    
    
    10
    %
    
    
    13
    %Europe
    
    
    13
    %
    
    
    4
    %
    
    
    4
    %Rest of world
    
    
    1
    %
    
    
    2
    %
    
    
    1
    %
  Percent of Total Net
    
    
    Percent of TotalRevenue for
    
    
    Accounts ReceivableFiscal Year Ended June 30,
    
    
    as of June 30,2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009Century Medical
    
    
    22
    %
    
    
    10
    %
    
    
    13
    %
    
    
    
    
    
    
    10
    %Cook Incorporated
    
    
    3
    %
    
    
    30
    %
    
    
    34
    %
    
    
    
    
    
    
    
  Inventories
   69




---



##### Table of Contents



Property and Equipment
  Impairment of Long-Lived Assets
  Revenue Recognition
    Research and Development
   70




---



##### Table of Contents



Clinical Trials
  Deferred Rent
  Income Taxes
   Segments
  Comprehensive Loss
  Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008Net loss
    
    $
    (10,924
    )
    
    $
    (17,205
    )
    
    $
    (18,196
    )Change in unrealized gain (loss) on investments
    
    
    
    
    
    
    12
    
    
    
    (10
    )Comprehensive loss
    
    $
    (10,924
    )
    
    $
    (17,193
    )
    
    $
    (18,206
    )
  71




---



##### Table of Contents



Net Loss per Share
  Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008Numerator:Net loss
    
    $
    (10,924
    )
    
    $
    (17,205
    )
    
    $
    (18,196
    )Denominator:Weighted-average common shares outstanding
    
    
    21,935
    
    
    
    15,815
    
    
    
    14,893Less: Weighted-average non-vested common shares
subject to repurchase
    
    
    
    
    
    
    
    
    
    
    (1
    )Less: Weighted-average non-vested restricted stock awards
    
    
    (8
    )
    
    
    (39
    )
    
    
    (48
    )Denominator for basic and diluted net loss per common share
    
    
    21,927
    
    
    
    15,776
    
    
    
    14,844Basic and diluted net loss per common share
    
    $
    (0.50
    )
    
    $
    (1.09
    )
    
    $
    (1.23
    )
 Outstanding securities not included in diluted net loss per common share calculation:
 As of June 30,2010
    
    
    2009Options to purchase common stock
    
    
    3,062
    
    
    
    1,446Non-vested restricted stock units and awards
    
    
    46
    
    
    
    229Warrants
    
    
    4,706
    
    
    
    6487,814
    
    
    
    2,323
 Stock-Based Compensation
   Fiscal Year Ended June 30,2010
    
    2009
    
    2008Risk-free interest rate
    
    1.49%  2.35%
    
    0.10%  2.57%
    
    2.39%  3.70%Dividend yield
    
    
    
    
    
    Weighted-average expected life
    
    3.5  4.58 years
    
    0.25  4.5 years
    
    4.56 yearsVolatility
    
    68%  81%
    
    53%  136%
    
    58%
   72




---



##### Table of Contents



Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008Cost of product sales
    
    $
    178
    
    
    $
    187
    
    
    $
    51Research and development
    
    
    329
    
    
    
    522
    
    
    
    605Selling, general and administrative
    
    
    703
    
    
    
    1,183
    
    
    
    1,026Total
    
    $
    1,210
    
    
    $
    1,892
    
    
    $
    1,682
 Recent Accounting Pronouncements
   Revenue Recognition
  73




---



##### Table of Contents



Note 2. Fair Value Measurements
 Fair Value Measurements and Disclosures,
 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.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, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalCash equivalents:Money market funds
    
    $
    511
    
    
    $
    
    
    
    $
    
    
    
    $
    511Total assets at fair value
    
    $
    511
    
    
    $
    
    
    
    $
    
    
    
    $
    511
 As of June 30, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalCash equivalents:Money market funds
    
    $
    510
    
    
    $
    
    
    
    $
    
    
    
    $
    510Total assets at fair value
    
    $
    510
    
    
    $
    
    
    
    $
    
    
    
    $
    510
    74




---



##### Table of Contents



Note 3. Inventories
   June 30,2010
    
    
    2009Raw materials
    
    $
    250
    
    
    $
    256Work in progress
    
    
    62
    
    
    
    404Finished goods
    
    
    819
    
    
    
    1,235$
    1,131
    
    
    $
    1,895
 Note 4. Property and Equipment
  June 30,2010
    
    
    2009Computer hardware and software
    
    $
    501
    
    
    $
    485Office furniture and equipment
    
    
    220
    
    
    
    220Machinery and equipment
    
    
    5,545
    
    
    
    5,122Leasehold improvements
    
    
    567
    
    
    
    567Construction in process
    
    
    
    
    
    
    1496,833
    
    
    
    6,543Less: accumulated depreciation and amortization
    
    
    (5,495
    )
    
    
    (4,681
    )$
    1,338
    
    
    $
    1,862
 Note 5. Commitments and Contingencies
   OperatingFiscal year ending June 30,
    
    Leases2011
    
    
    8582012
    
    
    144Total minimum lease payments
    
    $
    1,002
  75




---



##### Table of Contents



Note 6. License, Development and Commercialization Agreements
 .
  Note 7. Related-Party Transactions
 Financing Activities
   76




---



##### Table of Contents



Development and Supply Agreement
  Note 8. Note Payable
    Note 9. Stockholders Equity
   77




---



##### Table of Contents



Private Placement Offering
  Public Offering
   Common Stock
  Preferred Stock
   78




---



##### Table of Contents



Shares Reserved
  June 30,2010Stock options outstanding
    
    
    3,061,926Shares available for grant under stock option plan
    
    
    794,135Warrants for common stock
    
    
    4,706,4108,562,471
 Stock Options
      79




---



##### Table of Contents



Outstanding OptionsWeighted-AverageShares
    
    
    
    
    
    
    ExerciseAvailable for
    
    
    Number of
    
    
    Price PerGrant
    
    
    Shares
    
    
    ShareBalance 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
    
    
    55,250
    
    
    
    
    
    
    
    Balance at June 30, 2009
    
    
    618,594
    
    
    
    1,446,149
    
    
    
    5.65Shares reserved
    
    
    1,750,000
    
    
    
    
    
    
    
    Options granted
    
    
    (2,217,785
    )
    
    
    2,217,785
    
    
    
    1.28Restricted stock awards
    
    
    (66,425
    )
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    (8,257
    )
    
    
    1.81Options forfeited
    
    
    593,751
    
    
    
    (593,751
    )
    
    
    4.29Awards
forfeited
    
    
    116,000
    
    
    
    
    
    
    
    Balance at June 30, 2010
    
    
    794,135
    
    
    
    3,061,926
    
    
    $
    2.63
  Options Outstanding
    
    
    Options exercisableWeighted-
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageRemaining
    
    
    Exercise
    
    
    
    
    
    
    ExerciseNumber of
    
    
    Contractual
    
    
    Price per
    
    
    Number of
    
    
    Price perExercise Prices
    
    Shares
    
    
    Life (years)
    
    
    Share
    
    
    Shares
    
    
    Share$1.12
    
    
    1,257,202
    
    
    
    6.36
    
    
    $
    1.12
    
    
    
    211,725
    
    
    $
    1.12$1.21  $1.55
    
    
    761,743
    
    
    
    6.05
    
    
    
    1.46
    
    
    
    385,708
    
    
    
    1.48$1.71  $4.53
    
    
    512,674
    
    
    
    5.28
    
    
    
    2.57
    
    
    
    432,220
    
    
    
    2.69$4.60  $9.00
    
    
    291,691
    
    
    
    4.26
    
    
    
    6.91
    
    
    
    240,716
    
    
    
    7.00$9.20
    
    
    223,618
    
    
    
    5.10
    
    
    
    9.20
    
    
    
    107,520
    
    
    
    9.20$9.75
    
    
    14,998
    
    
    
    5.46
    
    
    
    9.75
    
    
    
    14,998
    
    
    
    9.75Total outstanding
    
    
    3,061,926
    
    
    
    5.81
    
    
    $
    2.63
    
    
    
    1,392,887
    
    
    $
    3.44Options vested and
expected to vest
    
    
    2,795,805
    
    
    
    5.76
    
    
    $
    2.72
    80




---



##### Table of Contents



Restricted Stock Units and Awards
  Weighted-AverageGrant-Date FairValue perShares
    
    
    ShareNon-vested restricted stock at June 30, 2007
    
    
    12,917Awarded
    
    
    52,450
    
    
    $
    11.25Vested
    
    
    (5,950
    )Forfeited
    
    
    Non-vested restricted stock at June 30, 2008
    
    
    59,417Awarded
    
    
    250,850
    
    
    $
    3.62Vested
    
    
    (26,167
    )Forfeited
    
    
    (55,250
    )Non-vested restricted stock at June 30, 2009
    
    
    228,850Awarded
    
    
    Vested
    
    
    (66,425
    )Forfeited
    
    
    (116,000
    )Non-vested restricted stock at June 30, 2010
    
    
    46,425
  Warrants
  ExercisePrice PerShares
    
    
    Share
    
    
    Expiration4,071,046
    
    
    $
    1.45
    
    
    September 2014575,347
    
    
    
    5.65
    
    
    June 201260,017
    
    
    
    11.58
    
    
    October 20104,706,410
 Note 10. Reductions in Force
  Note 11. Income Taxes
   81




---



##### Table of Contents



June 30,2010
    
    
    2009Net operating loss carry-forwards
    
    $
    39,267
    
    
    $
    36,008Research credits
    
    
    1,747
    
    
    
    2,340Capitalized research and development expenses
    
    
    77
    
    
    
    107Fixed asset depreciation
    
    
    365
    
    
    
    291Other
    
    
    795
    
    
    
    462Total deferred tax assets
    
    
    42,251
    
    
    
    39,208Valuation allowance
    
    
    (42,251
    )
    
    
    (39,208
    )Net deferred tax assets
    
    $
    
    
    
    $
    
     82




---



##### Table of Contents



Fiscal Year Ended June 30,2010
    
    
    2009
    
    
    2008Tax benefit at U.S. statutory rate
    
    $
    (3,725
    )
    
    $
    (5,874
    )
    
    $
    (6,186
    )Loss for which no tax benefit is currently recognizable
    
    
    3,428
    
    
    
    5,201
    
    
    
    5,726Refundable research credits
    
    
    (31
    )
    
    
    (72
    )
    
    
    Stock based
compensation
    
    
    279
    
    
    
    616
    
    
    
    404Other, net
    
    
    18
    
    
    
    57
    
    
    
    56$
    (31
    )
    
    $
    (72
    )
    
    $
    
   AmountBalance at July 1, 2007
    
    $
    574Additions based on tax positions related to current year
    
    
    72Reductions for tax positions of prior year
    
    
    (7
    )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 prior year
    
    
    (18
    )Balance at June 30, 2009
    
    
    737Additions based on tax positions related to current year
    
    
    77Reductions for tax positions of current year
    
    
    (11
    )Reductions for tax positions of prior year
    
    
    (208
    )Balance at June 30, 2010
    
    $
    595
   Note 12. Employee Benefit Plan
  Note 13. Indemnification
   83




---



##### Table of Contents



Note 14. Subsequent Event
  .
 2. Financial Statement Schedules
   84




---



##### Table of Contents



3. The following exhibits are included herein or incorporated herein by reference:
  ExhibitNumber
    
    Description3.1
    (1)
    
    Amended and Restated Certificate of Incorporation of the Registrant as currently in effect.3.2
    (6)
    
    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
    (2)
    
    Form of Warrant dated June 2007.4.4
    (12)
    
    Form of Warrant dated September 2009.10.1
    (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)
    
    Office Lease Agreement dated April 25, 2003, and First Amendment to Office Lease Agreement
dated January 21, 2004.10.4
    (8)
    
    Second Amendment to Office Lease Agreement, executed and delivered on December effective
November 19, 2007.10.5
    (1)
    
    Distribution Agreement by and between Cardica, Inc. and Century Medical, Inc. dated
June 16, 2003.10.6
    (4)
    
    First Amendment to Distribution Agreement, dated March 30, 2007, by and between Cardica,
Inc. and Century Medical, Inc.10.7
    
    
    Amendment No. 2 to Distribution Agreement, dated June 13, 2007, by and between Cardica,
Inc. and Century Medical, Inc. 10.8
    
    
    Amendment No. 3 to Distribution Agreement, dated January 24, 2008, by and between Cardica,
Inc. and Century Medical, Inc.10.9
    (13)
    
    Amendment No. 4 to Distribution Agreement, dated April 1, 2010, by and between Cardica,
Inc. and Century Medical, Inc.10.10
    (1)
    
    Subordinated Convertible Note Agreement with Century Medical, Inc. dated June 16, 2003,
and Amendment No. 1 thereto, dated August 6, 2003.10.11
    (4)
    
    Amendment No. 2 to Subordinated Convertible Note Agreement, dated March 30, 2007, by and
between Cardica, Inc. and Century Medical, Inc. 10.12
    (13)
    
    Amendment No. 3 to Subordinated Convertible Note Agreement, dated April 1, 2010, by and
between Cardica, Inc. and Century Medical, Inc. 10.13
    (4)
    
    Amended and Restated Note issued pursuant to Amendment No. 2 to Subordinated Convertible
Note Agreement with Century Medical, Inc.10.14
    (2)
    
    Registration Rights Agreement, dated June 7, 2007, by and among Cardica, Inc., and the
purchasers listed on the signature pages thereto.10.15
    (16)
    
    Additional Compensation Information for named executive officers. +10.16
    
    
    Cardica, Inc. Non-Employee Director Compensation. +10.17
    (1)
    
    Benefit Agreement with Bernard Hausen, M.D., Ph.D.+10.18
    (9)
    
    Letter Agreement with Frederic M. Bauer+10.19
    (10)
    
    Cardica, Inc. Change in Control and Severance Benefit Plan. +10.20
    (11)
    
    Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Grant Agreement. +10.21
    (5)
    
    License, Development and Commercialization Agreement by and between the Company and Cook
Incorporated, dated June 12, 2007.10.22
    (7)
    
    Amendment to License, Development and Commercialization Agreement by and between Cardica,
Inc. and Cook Incorporated, dated September 19, 2007.10.23
    (15)
    
    Second Amendment to License, Development and Commercialization Agreement by and between
Cardica, Inc. and Cook Incorporated, dated June 19, 2009.10.24
    (12)
    
    Securities Purchase Agreement, dated September 29, 2009, by and among Cardica, Inc., and
purchasers listed on the signature pages thereto.10.25
    (12)
    
    Registration Rights Agreement, dated September 25, 2009, by and among Cardica, Inc., and
the purchasers listed on the signature pages thereto.
  85




---



##### Table of Contents



ExhibitNumber
    
    Description10.26
    (14)
    
    Stock Purchase Agreement, dated August 16, 2010, by and between Cardica, Inc., and
Intuitive Surgical Operations, Inc.10.27
    (14)
    
    Registration Rights Agreement, dated August 16, 2010, by and between Cardica, Inc., and
Intuitive Surgical Operations, Inc.10.28
    
    
    License Agreement, dated August 16, 2010, by and between Cardica, Inc., and Intuitive
Surgical Operations, Inc. 21.1
    (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 13, 2009 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 June 21, 2007,
excluding Items 3.01 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 August 19, 2008 and
incorporated herein by reference.(7)
    
    Filed as an exhibit to the Companys Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2007 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 December 5, 2007 and
incorporated herein by reference.(9)
    
    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.(10)
    
    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.(11)
    
    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.(12)
    
    Filed as an exhibit to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 29, 2009 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 April 7, 2010 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 August 20, 2010 and
incorporated herein by reference.(15)
    
    Filed as an exhibit to the Companys Annual Report on Form 10-K filed
with the Securities and Exchange Commission on September 18, 2009 and
incorporated herein by reference.(16)
    
    Filed as an exhibit to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on August 18, 2009 and
incorporated herein by reference.    86




---



##### Table of Contents



SIGNATURES
  Cardica, Inc.

RegistrantSeptember 24, 2010
Date
    
    /s/ Robert Y. Newell

Robert Y. NewellChief Financial Officer
 POWER OF ATTORNEY
   Name and Signature
    
    Title
    
    Date/s/ Bernard A. Hausen

Bernard A. Hausen, M.D., Ph.D.
    
    President, Chief Executive
Officer and Director(Principal Executive Officer)
    
    September 24, 2010/s/ Robert Y. Newell

Robert Y. Newell
    
    Chief Financial Officer(Principal Financial and
Accounting Officer)
    
    September 24, 2010/s/ Kevin T. Larkin

Kevin T. Larkin
    
    Director
    
    September 24, 2010/s/ Richard P. Powers

Richard P. Powers
    
    Director
    
    September 24, 2010/s/ Jeffrey L. Purvin

Jeffrey L. Purvin
    
    Director
    
    September 24, 2010/s/ John Simon

John Simon, Ph.D.
    
    Director
    
    September 24, 2010/s/ William H. Younger, Jr.

William H. Younger, Jr.
    
    Director
    
    September 24, 2010
  87




---



##### Table of Contents



ExhibitNumber
    
    Description3.1
    (1)
    
    Amended and Restated Certificate of Incorporation of the Registrant as currently in effect.3.2
    (6)
    
    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
    (2)
    
    Form of Warrant dated June 2007.4.4
    (12)
    
    Form of Warrant dated September 2009.10.1
    (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)
    
    Office Lease Agreement dated April 25, 2003, and First Amendment to Office Lease Agreement
dated January 21, 2004.10.4
    (8)
    
    Second Amendment to Office Lease Agreement, executed and delivered on December effective
November 19, 2007.10.5
    (1)
    
    Distribution Agreement by and between Cardica, Inc. and Century Medical, Inc. dated
June 16, 2003.10.6
    (4)
    
    First Amendment to Distribution Agreement, dated March 30, 2007, by and between Cardica,
Inc. and Century Medical, Inc.10.7
    
    
    Amendment No. 2 to Distribution Agreement, dated June 13, 2007, by and between Cardica,
Inc. and Century Medical, Inc. 10.8
    
    
    Amendment No. 3 to Distribution Agreement, dated January 24, 2008, by and between Cardica,
Inc. and Century Medical, Inc.10.9
    (13)
    
    Amendment No. 4 to Distribution Agreement, dated April 1, 2010, by and between Cardica,
Inc. and Century Medical, Inc.10.10
    (1)
    
    Subordinated Convertible Note Agreement with Century Medical, Inc. dated June 16, 2003,
and Amendment No. 1 thereto, dated August 6, 2003.10.11
    (4)
    
    Amendment No. 2 to Subordinated Convertible Note Agreement, dated March 30, 2007, by and
between Cardica, Inc. and Century Medical, Inc. 10.12
    (13)
    
    Amendment No. 3 to Subordinated Convertible Note Agreement, dated April 1, 2010, by and
between Cardica, Inc. and Century Medical, Inc. 10.13
    (4)
    
    Amended and Restated Note issued pursuant to Amendment No. 2 to Subordinated Convertible
Note Agreement with Century Medical, Inc.10.14
    (2)
    
    Registration Rights Agreement, dated June 7, 2007, by and among Cardica, Inc., and the
purchasers listed on the signature pages thereto.10.15
    (16)
    
    Additional Compensation Information for named executive officers. +10.16
    
    
    Cardica, Inc. Non-Employee Director Compensation. +10.17
    (1)
    
    Benefit Agreement with Bernard Hausen, M.D., Ph.D.+10.18
    (9)
    
    Letter Agreement with Frederic M. Bauer+10.19
    (10)
    
    Cardica, Inc. Change in Control and Severance Benefit Plan. +10.20
    (11)
    
    Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Grant Agreement. +10.21
    (5)
    
    License, Development and Commercialization Agreement by and between the Company and Cook
Incorporated, dated June 12, 2007.10.22
    (7)
    
    Amendment to License, Development and Commercialization Agreement by and between Cardica,
Inc. and Cook Incorporated, dated September 19, 2007.10.23
    (15)
    
    Second Amendment to License, Development and Commercialization Agreement by and between
Cardica, Inc. and Cook Incorporated, dated June 19, 2009.10.24
    (12)
    
    Securities Purchase Agreement, dated September 29, 2009, by and among Cardica, Inc., and
purchasers listed on the signature pages thereto.10.25
    (12)
    
    Registration Rights Agreement, dated September 25, 2009, by and among Cardica, Inc., and
the purchasers listed on the signature pages thereto.
  88




---



##### Table of Contents



ExhibitNumber
    
    Description10.26
    (14)
    
    Stock Purchase Agreement, dated August 16, 2010, by and between Cardica, Inc., and
Intuitive Surgical Operations, Inc.10.27
    (14)
    
    Registration Rights Agreement, dated August 16, 2010, by and between Cardica, Inc., and
Intuitive Surgical Operations, Inc.10.28
    
    
    License Agreement, dated August 16, 2010, by and between Cardica, Inc., and Intuitive
Surgical Operations, Inc. 21.1
    (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 13, 2009 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 June 21, 2007,
excluding Items 3.01 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 August 19, 2008 and
incorporated herein by reference.(7)
    
    Filed as an exhibit to the Companys Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2007 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 December 5, 2007 and
incorporated herein by reference.(9)
    
    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.(10)
    
    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.(11)
    
    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.(12)
    
    Filed as an exhibit to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 29, 2009 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 April 7, 2010 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 August 20, 2010 and
incorporated herein by reference.(15)
    
    Filed as an exhibit to the Companys Annual Report on Form 10-K filed
with the Securities and Exchange Commission on September 18, 2009 and
incorporated herein by reference.(16)
    
    Filed as an exhibit to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on August 18, 2009 and
incorporated herein by reference.  89