Cardima Announces a $1.1 Million Non-Cash Expense Adjustment for the Third Quarter of 2003.

Business Editors/Health/Medical Writers

FREMONT, Calif.--(BUSINESS WIRE)--March 25, 2004

Cardima, Inc. (Nasdaq: CRDM) today reported that it will be making a non-cash adjustment to its previously reported financial results for the third quarter of 2003, increasing expenses in that quarter by approximately $1.1 million. The adjustment results from a $904,000 non-cash charge related to the classification and valuation of certain common stock warrants issued in the third quarter, and an $180,000 accrual of compensation expense relating to a employee severance arrangement.

While the additional expense did impact the net loss during the third quarter of 2003, the Company realized no changes to revenue or net cash flow for the restated period. As a result of the adjustment, net loss for the quarter ended September 30, 2003 will increase to approximately $3.74 million, or $0.05 net loss per share, from the previously reported net loss of approximately $2.66 million, or $0.04 net loss per share.

In August 2003, we issued warrants to investors as part of private placements of our common stock, and granted contractual registration rights to the investors. We registered the shares underlying the warrants with the SEC, as required by the registration rights, in September 2003. Through the filing of our Form 10-Q for the quarter ended September 30, 2003, we believed that the warrants' value was appropriately classified as equity. As part of the review of our financial results for the 2003 fiscal year, however, we determined that Emerging Issues Task Force (EITF) Issue No. 00-19, "Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company's Own Stock," should be applied to these warrants. Under EITF 00-19, we should have initially recorded their full fair value as a liability because of certain provisions of their registration rights. This liability would have been transferred to equity upon the registration of the underlying common shares in September 2003 at its current fair value at that date. We should have expensed the change in fair value of the warrant liability between the issuance date and the effectiveness date of the registration statement. This additional expense is a non-cash item.

We also concluded that our third quarter 2003 results should have reflected a $180,000 accrual for the full amount of certain severance obligations initially approved by our Board in July 2003, which we had been expensing as the payments occurred. This accrual will increase selling, general and administrative expenses for the third quarter by $180,000.

Cardima will file an amended Form 10-Q for the third quarter of 2003 reflecting the adjustments described above.

About Cardima

Cardima, Inc. has developed the REVELATION(R) Tx, REVELATION T-Flex and REVELATION Helix linear ablation microcatheters, the NAVIPORT deflectable guiding catheters, and the INTELLITEMP energy management system for the minimally invasive treatment of atrial fibrillation (AF). The REVELATION Helix was developed for the treatment of AF originating in the pulmonary veins of the heart. The REVELATION Tx, REVELATION T-Flex and REVELATION Helix systems and the INTELLITEMP have received CE Mark approval in Europe. The Company has also developed a Surgical Ablation System, which is expected to be used by cardiac surgeons to treat AF by ablating cardiac tissue during heart surgery using radio frequency (RF) energy. In February 2003, the Company announced that it had received FDA 510(k) clearance to market the Surgical Ablation System in the U.S.

Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Potential risks and uncertainties include the Company's ability to raise additional capital, whether the Company's pre-market approval (PMA) application for the REVELATION(R) Tx or any other product will be approved by the FDA, the possibility of business disruption or unanticipated expenses due to the Company's recent staffing reduction and financing efforts, and whether the Company will be able to conduct successful clinical trials, obtain and maintain regulatory approvals, gain acceptance for its products from the marketplace, secure distribution partners or successfully market, sell and distribute its products to end users in the event regulatory approvals are obtained. Additional risks are set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission on March 31, 2003, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, the Company's Quarterly Report on Form 10-Q, as amended on Form 10-Q/A, for the quarter ended June 30, 2003, and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.