"With a slower than expected rate of clinical adoption for our automated anastomosis products, during our fiscal fourth quarter we had to make difficult decisions to revise our direct sales model cost structure by reducing our workforce and decreasing operating expenses substantially to protect the future viability of our products and technology," said Bernard A. Hausen, M.D., Ph.D., president and chief executive officer of Cardica.

"We continue to evaluate a variety of strategic and financing alternatives and believe that our products and proprietary technology have the potential to generate substantial value in the future," continued Dr. Hausen. "To that end, we are in the process of adding independent distributors and manufacturer's representatives to support our core direct sales team in order to contain sales costs while still serving our customers and potential customers for our automated anastomosis product line. Looking beyond cardiac surgery, we are shifting our development efforts to focus on our endoscopic microcutter, which would expand our commercial opportunity into additional surgical markets."

   Recent Highlights and Accomplishments    --  Increased cumulative worldwide shipments of PAS-Port  Proximal       Anastomosis Systems to over 15,000 units, with a total of 1,051 units       sold in the fourth quarter of fiscal 2009;   --  Increased cumulative worldwide shipments of C-Port  Distal Anastomosis       Systems to over 9,300 units, with a total of 555 units sold in the       fourth quarter of fiscal 2009;   --  Continued progress on the development of Cardica's C-Port        X-CHANGEII(TM), a cartridge-based C-Port system, allowing surgeons to       complete up to four anastomoses with the same CO2 powered handle.       Cardica expects to launch this product in fiscal 2010, subject to FDA       clearance, and believes this product will not only show improved       performance but, with significantly reduced cost of goods, will allow       Cardica to offer more favorable pricing while improving gross margins;   --  Reported the publication of full results for the PAS-Port system       multi-center pivotal trial in The Journal of Thoracic and       Cardiovascular Surgery.  The data demonstrated that the PAS-Port       system met all endpoints and saved approximately five minutes of       operating room time when compared to hand-sewn anastomoses; and    --  Started development of the Cardica Microcutter, a multi-fire       endolinear microcutter device based on Cardica's proprietary       "staple-on-a-strip" technology. This truly innovative staple design is       the basis for a new generation of linear staplers under development by       Cardica that the company believes could alter the landscape of       stapling products. Cardica anticipates that it could launch the first       product of this product line in fiscal 2011, subject to completion of       trials and receipt of FDA clearance. The microcutter product line will       feature reduced shaft diameters to facilitate less invasive surgical       procedures. Importantly, Cardica believes that the microcutter product       line could be the first and only linear staplers that will allow       surgeons to deploy multiple staple lines without the need for the       exchange of individual cartridges.     Fiscal 2009 Fourth Quarter Financial Results  

Total product revenue was $1.2 million for the fiscal 2009 fourth quarter compared to $1.6 million for the fiscal 2008 fourth quarter. Product revenue decreased as a result of Cardica's smaller direct sales force during this transition period as Cardica adds independent distributors and manufacturer's representatives to more cost-effectively market its products throughout the United States. Total net revenue was $2.0 million for the fiscal 2009 fourth quarter compared to $2.8 million for the same period of 2008. Cost of product revenue was $1.2 million for the fiscal 2009 fourth quarter compared to $1.4 million in the fiscal 2008 fourth quarter. The cost of product revenue in the 2009 period included an inventory write-off of approximately $250,000 for excess raw materials.

For the fiscal 2009 fourth quarter, research and development expenses decreased to $1.9 million, which included $0.6 million in write-offs related to Cardica's C-Port xV(TM) System, which is no longer under development since Cardica's C-Port X-CHANGEII(TM) system performs a comparable function while offering additional features and has nearly caught up with the C-Port xV system in development. For the fiscal 2008 fourth quarter, research and development expenses were $2.7 million. Selling, general and administrative expenses for the fiscal 2009 fourth quarter decreased to $2.3 million compared to $3.7 million for the fiscal 2008 fourth quarter. Operating costs and expenses included $0.5 million of one-time severance costs in the fiscal 2009 fourth quarter.