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FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2002

Commission file number 0-28288

	California	77-0223740
	(State of incorporation)	(I.R.S. EmployerIdentification Number)

26632 Towne Center Drive
Suite 320
Foothill Ranch, California 92610
(Address of principal executive offices)

(714) 649-5000
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   [X]    No   [   ]

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock outstanding as of the latest practicable date.

37,058,647 shares of Common Stock, no par value
As of October 31, 2002

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CARDIOGENESIS CORPORATION
TABLE OF CONTENTS

PART 1
FINANCIAL INFORMATION
				Page
Item 1.	Financial Statements (unaudited):
	a.	Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001		1
	b.	Consolidated Statements of Operations & Comprehensive Loss for the three and nine months ended September 30, 2002 and 2001		2
	c.	Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2001		3
	d.	Notes to Consolidated Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			5
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			16
Item 4.	Controls and Procedures			17
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings			17
Item 2.	Changes in Securities and Use of Proceeds			17
Item 3.	Defaults Upon Senior Securities			17
Item 4.	Submission of Matters to a Vote of Security Holders			17
Item 5.	Other Information			17
Item 6.	Exhibits and Reports on Form 8-K			18
	Signatures			19
	Certifications			20

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CARDIOGENESIS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

ASSETS

		September 30,				December 31,
		2002					2001
Current assets:
Cash and cash equivalents		$	1,801			$	2,629
Accounts receivable, net of allowance for doubtful accounts of $1,299 and $1,114 at September 30, 2002 and December 31, 2001, respectively			1,876				2,330
Inventories, net of reserve of $273 and $1,246 at September 30, 2002 and December 31, 2001, respectively			2,083				3,215
Prepaids and other current assets			766				569
Total current assets			6,526				8,743
Property and equipment, net			655				863
Other assets			1,557				1,703
Total assets		$	8,738			$	11,309
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	1,357			$	1,548
Accrued liabilities			3,073				4,467
Customer deposits			50				54
Deferred revenue			602				931
Note payable			162				170
Current portion of capital lease obligation			30				30
Current portion of long-term liabilities			—				495
Total current liabilities			5,274				7,695
Capital lease obligation, less current portion			9				32
Total liabilities			5,283				7,727
Shareholders’ equity:
Preferred stock:
no par value; 5,000 shares authorized; none issued and outstanding			—				—
Common stock:
no par value; 50,000 shares authorized; 37,059 and 36,507 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively			168,236				167,750
Accumulated other comprehensive loss			(23	)			(88	)
Accumulated deficit			(164,758	)			(164,080	)
Total shareholders’ equity			3,455				3,582
Total liabilities and shareholders’ equity		$	8,738			$	11,309

The accompanying notes are an integral part of these consolidated financial statements.

1

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CARDIOGENESIS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE LOSS
(in thousands, except per share amounts)
(unaudited)

	Three months ended								Nine months ended
	September 30,								September 30,
	2002				2001				2002				2001
Net revenues	$	3,210			$	4,221			$	9,378			$	11,362
Cost of revenues		695				1,627				2,193				4,745
Gross profit		2,515				2,594				7,185				6,617
Operating expenses:
Research and development		(261	)			337				382				1,586
Sales, general and administrative		3,357				4,309				9,790				11,203
Restructuring costs		—				442				—				1,132
Total operating expenses		3,096				5,088				10,172				13,921
Operating loss		(581	)			(2,494	)			(2,987	)			(7,304	)
Interest, net		5				13				24				71
Gain on sale of equity investee		—				—				2,285				—
Equity in net loss of investee		—				—				—				(652	)
Net loss		(576	)			(2,481	)			(678	)			(7,885	)
Other comprehensive income (loss):
Foreign currency translation adjustment		23				(74	)			65				(41	)
Other comprehensive income (loss)		23				(74	)			65				(41	)
Comprehensive loss	$	(553	)		$	(2,555	)		$	(613	)		$	(7,926	)
Net loss per share:
Basic and diluted	$	(0.02	)		$	(0.07	)		$	(0.02	)		$	(0.24	)
Weighted average shares outstanding		37,059				34,209				36,850				32,866

The accompanying notes are an integral part of these consolidated financial statements.

2

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CARDIOGENESIS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	Nine months ended
	September 30,
	2002				2001
Cash flows from operating activities:
Net loss	$	(678	)		$	(7,885	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		239				352
Gain from sale of equity investee		(2,285	)			—
Loss from equity in investee		—				652
Provision for doubtful accounts		260				135
Inventory reserves		685				932
Amortization of deferred compensation		—				57
Accretion of long-term liability		—				26
Amortization of license fees		146				156
Loss on disposal of property and equipment		28				—
Reduction of clinical trial accrual		(684	)			—
Changes in operating assets and liabilities:
Accounts receivable – short term		194				(127	)
Inventories		447				643
Prepaids and other current assets		427				49
Accounts receivable – long term		—				(138	)
Other assets		—				(19	)
Accounts payable		(191	)			239
Accrued liabilities		(710	)			(195	)
Current portion of long term liabilities		(495	)			(10	)
Long term liabilities		—				(365	)
Customer deposits		(4	)			—
Deferred revenue		(329	)			(414	)
Net cash used in operating activities		(2,950	)			(5,912	)
Cash flows from investing activities:
Proceeds from sale of equity investee		2,285				—
Acquisition of property and equipment		(59	)			(302	)
Net cash provided by (used in) investing activities		2,226				(302	)
Cash flows from financing activities:
Net proceeds from sales of common stock and from issuance of common stock from exercise of options		486				3,697
(Payments on) proceeds from short term borrowings		(632	)			205
Repayments of capital lease obligations		(23	)			(21	)
Net cash (used in) provided by financing activities		(169	)			3,881
Effects of exchange rate changes on cash and cash equivalents		65				(41	)
Net decrease in cash and cash equivalents		(828	)			(2,374	)
Cash and cash equivalents at beginning of period		2,629				3,357
Cash and cash equivalents at end of period	$	1,801			$	983
Supplemental schedule of cash flow information:
Interest paid	$	10			$	18
Taxes paid	$	26			$	49
Supplemental schedule of noncash investing and financing activities:
Deferred compensation	$	—			$	(4	)
Issuance of warrants	$	—			$	94
Financing of insurance premiums with note payable	$	624			$	554

The accompanying notes are an integral part of these consolidated financial statements.

3

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CARDIOGENESIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies:

Interim Financial Information (unaudited):

                 The interim financial statements in this report reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the results of operations and cash flows for the interim periods covered and of the financial position of the Company at the interim balance sheet date. Results for interim periods are not necessarily indicative of results to be expected for the full fiscal year. The year-end balance she