<PAGE>
 
                                UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C. 20549

                                  FORM 10-Q
                                        
[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934.
     For the quarterly period ended March 31, 1999

                                       or

[_]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934.
     For the transition period from _________________  to _____________________.

                       Commission File Number: 0-22419
                                               -------

                                CARDIMA, INC.

           (Exact name of registrant as specified in its charter)


             Delaware                                        94-3177883
---------------------------------                  ----------------------------
  (State or Other Jurisdiction                           (I.R.S. Employer
of Incorporation or Organization)                       Identification No.)


    47266 Benicia Street, Fremont, CA                        94538-7330
(Address of  Principal Executive Offices)                    (Zip Code)

Registrant's telephone number, including area code:  (510) 354-0300

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) had been subject to such filing
requirements for the past 90 days.    X   Yes        No
                                    -----      -----

As of April 30, 1999, there were 16,249,310 shares of Registrant's Common Stock
outstanding.

                                       1
<PAGE>
 
                                CARDIMA, INC.

                                    INDEX

<TABLE> 
<CAPTION> 
<S>                                                                                     <C>
PART I. FINANCIAL INFORMATION........................................................... 3

 ITEM 1.  FINANCIAL STATEMENTS.......................................................... 3
  Balance Sheets as of March 31, 1999 and December 31, 1998............................. 3
  Statements of Operations for the three months ended March 31, 1999 and 1998........... 4
  Statements of Cash Flows for the three months ended March 31, 1999 and 1998........... 5
  NOTES TO FINANCIAL STATEMENTS......................................................... 6
 ITEM  2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS.................................................................. 8
 ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................16 

PART II. OTHER INFORMATION..............................................................17

 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

INDEX TO EXHIBITS FOR FORM 10-Q.........................................................20

 EXHIBIT 27.1...........................................................................21
</TABLE> 

                                       2
<PAGE>
 
                                 CARDIMA, INC.
                                BALANCE SHEETS
                      (In thousands except share amounts)
<TABLE> 
<CAPTION> 
                                                                                                          (1)
                                                                                   March 31,          December 31,
                                                                                     1999                1998
                                                                              ------------------  ------------------  
ASSETS                                                                            (unaudited)
<S>                                                                           <C>                  <C>       
Current Assets:                                                              
        Cash and cash equivalents                                                       $  7,315            $    645
        Short-term investments                                                             3,480                   -
        Restricted cash                                                                       81                 105
        Accounts receivable, net of allowances for doubtful accounts        
              of $ 45 at March 31, 1999 and $ 41 at December 31, 1998                        589                 512
        Inventories                                                                        1,975               1,977
        Other current assets                                                                 288                 366
                                                                              ------------------  ------------------  
              Total current assets                                                        13,728               3,605
                                                                             
Property and equipment, net                                                                3,078               2,998
Other assets                                                                                 424                 680
                                                                              ------------------  ------------------
                                                                             
Total assets                                                                            $ 17,230            $  7,283
                                                                              ==================  ==================
                                                                             
Liabilities and stockholders' equity (net capital deficiency)
Current liabilities:                                                                 
        Accounts payable                                                                $  1,444            $  2,286
        Accrued compensation                                                                 933               1,032
        Other current liabilities                                                            105                  76
        Notes payable                                                                          -                   -
        Capital lease obligation - current portion                                           878                 903
        Line of credit obligation - current portion                                          999                 817
                                                                              ------------------  ------------------
                                                                                           4,359               5,114
                                                                             
Deferred rent                                                                                 29                  42
Capital lease obligation - noncurrent portion                                              1,059               1,120
Line of Credit obligation - noncurrent portion                                             1,923               2,183
Stockholders' equity
  Common stock, $0.001 par value; 25,000,000 shares authorized, 
        16,238,021 shares issued and outstanding at Mar. 31, 1999, 
        8,352,296 at December 31, 1998; at amount paid in                                 60,312              45,910
        Deferred compensation                                                               (415)               (478)
        Accumulated deficit                                                              (50,037)            (46,608)          
                                                                              ------------------  ------------------          
              Total stockholders' equity (net capital deficiency)                          9,860              (1,176)          
                                                                              ------------------  ------------------          
                                                                                        $ 17,230             $ 7,283           
                                                                              ==================  ==================
</TABLE> 
(1) The information in this column was derived from the Company's audited
    financial statements as of December 31, 1998. See accompanying notes to
    financial statements.

                                       3
<PAGE>
 
                                 CARDIMA, INC.

                           STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)
                                  (Unaudited)
<TABLE> 
<CAPTION> 
                                                                             Three months ended March 31,
                                                                    ----------------------------------------------
                                                                             1999                     1998
                                                                    ---------------------    ---------------------
<S>                                                                  <C>                      <C>   
Net sales                                                                        $    775                 $    501
Cost of goods sold                                                                    677                      748
                                                                    ---------------------    ---------------------

        Gross profit                                                                   98                     (247)

Operating expenses:
        Research and development                                                    1,637                    1,663
        Selling, general and administrative                                         1,849                    2,047
                                                                    ---------------------    ---------------------

              Total operating expenses                                              3,486                    3,710
                                                                    ---------------------    ---------------------

Operating loss                                                                     (3,388)                  (3,957)

Interest  and other income                                                             99                      144
Interest expense                                                                     (140)                     (36)
                                                                    ---------------------    ---------------------

Net loss                                                                         $ (3,429)                $ (3,849)
                                                                    =====================    =====================

Net loss per share                                                               $  (0.24)                 $ (0.47)
                                                                    =====================    =====================

Shares used in computing net loss per share                                        14,178                    8,137
                                                                    =====================    =====================

</TABLE> 


                See accompanying notes to financial statements

                                       4
<PAGE>
 
                                 CARDIMA, INC.
                           STATEMENTS OF CASH FLOWS
                                (In thousands)
<TABLE> 
<CAPTION> 
                                                                                                  Three months ended March 31,
                                                                                              ------------------------------------
                                                                                                   1999                 1998
                                                                                              ---------------      ---------------
<S>                                                                                            <C>                 <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                                                        ($3,429)             ($3,849)

      Adjustments to reconcile net loss to net cash provided by operations:
          Depreciation and amortization                                                                   307                  192
          Amortization of deferred compensation                                                            63                   64
          Loss on disposal of assets                                                                        5                    5
      Changes in operating assets and liabilities:
          Accounts receivable                                                                             (77)                 (83)
          Inventories                                                                                       2                  (67)
          Other current assets                                                                             78                   39
          Restricted cash                                                                                  24                   22
          Notes Receivable                                                                                 (5)                  (5)
          Other assets                                                                                     94                  (44)
          Accounts payable                                                                               (842)                 (13)
          Accrued employee compensation                                                                   (99)                 191
          Other current liabilities                                                                        29                  (45)
          Deferred rent                                                                                   (13)                 (12)
                                                                                              ---------------      ---------------
              Net cash used in operating activities                                                    (3,863)              (3,605)

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of short-term investments                                                              (6,993)                (507)
      Maturities and sales of short-term investments                                                    3,513                3,541
      Capital expenditures                                                                               (227)                (192)
      Proceeds from disposal of assets                                                                      2                    -
                                                                                              ---------------      ---------------
          Net cash used in investing activities                                                        (3,705)               2,842

CASH FLOWS FROM FINANCING ACTIVITIES:
      Principal payments under capital leases                                                            (236)                (160)
      Payments under notes payments                                                                         -                   (7)
      Payments under credit line                                                                          (78)                   -
      Net proceeds from sale of common stock                                                           14,402                  147
      Proceeds from sale/leaseback of capital equipment                                                   150                  323
                                                                                              ---------------      ---------------
          Net cash provided by financing activities                                                    14,238                  303
                                                                                              ---------------      ---------------

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS                                                     6,670                 (460)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                              645                8,578
                                                                                              ---------------      ---------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                                 $7,315               $8,118
                                                                                              ===============      ===============

</TABLE> 

                                       5
<PAGE>
 
                                 CARDIMA, INC.

                         NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                                  (Unaudited)

1.   BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared by the
Company according to the rules and regulations of the Securities and Exchange
Commission for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the financial information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included.

The operating results for the three-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1999 or for future operating results. The accompanying
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report on Form 
10-K for the fiscal year ended December 31, 1998.

2.   PRIVATE PLACEMENT

In January and February 1999, the Company sold a total of 7,500,000 shares of
common stock at $2.00 per share in a private placement transaction to accredited
investors yielding net proceeds of $14,300,000 after commissions and other
expenses of the offering.  As compensation to the placement agent for this
transaction, the Company paid $490,388 in commissions, issued 354,806 shares of
its common stock and issued 750,000 warrants to purchase 750,000 shares of
common stock at an exercise price of $2.20 per share.

3.   COMPANY RESTRUCTURING

On January 14, 1999, the Company reduced its workforce by approximately 30% in
order to align available cash resources with projected expenses.  The reductions
affected all functional areas of the Company.  As a result of the reduced
workforce and normal attrition, the Company had 82 full-time employees at March
31, 1999, 13 of whom were engaged directly in research and new product
development, 10 in regulatory affairs, quality assurance and clinical
activities, 31 in manufacturing, 14 in sales and marketing and 14 in finance and
administration.

                                       6
<PAGE>
 
                   NOTES TO FINANCIAL STATEMENTS (continued)
                                  (Unaudited)

4.  BALANCE SHEET COMPONENTS

Certain balance sheet components are as follows (in thousands):

 
<TABLE>
<CAPTION>
                                                       March 31,                   December 31,
                                                         1999                         1998/1/
                                                 -------------------          -------------------
<S>                                                <C>                          <C>
Inventories:
      Raw materials                                          $   548                      $   502
       Work-in-process                                           131                          217
       Finished goods                                          1,296                        1,258
                                                 -------------------          -------------------
                                                             $ 1,975                      $ 1,977
                                                 ===================          ===================
 
Property and equipment:
       Equipment                                               5,368                        5,054
       Leasehold improvements                                    115                          107
                                                 -------------------          -------------------
                                                             $ 5,483                      $ 5,161
       Less accumulated depreciation                          (2,405)                      (2,163)
                                                 -------------------          -------------------
                                                             $ 3,078                      $ 2,998
                                                 ===================          ===================
</TABLE>
                                        

5.   NET LOSS PER SHARE

Basic net loss per share has been computed using the weighted average number of
shares of common stock outstanding during the period.  The Company has excluded
all convertible debt, convertible preferred stock, warrants, and stock options
from the computation of basic and diluted earnings per share because all such
securities are anti dilutive for all periods presented.

--------
1  The information in this column was derived from the Company's audited 
   financial statements as of December 31, 1998.

                                       7
<PAGE>
 
ITEM  2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

This Form 10-Q, including management's discussion and analysis of financial
condition and results of operations, 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, including,
without limitation, statements regarding regulatory approvals, operating results
and capital requirements.  Except for historical information, the matters
discussed in this Form 10-Q, are forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected.  Such factors include the Company's ability to
conduct successful clinical trials, obtain timely regulatory approvals and gain
acceptance from the marketplace for its products, as well as the risk factors
discussed below in "Factors Affecting Future Results" and those listed from time
to time in the Company's SEC reports.  The Company assumes no obligation to
update the forward-looking statements included in this Form 10-Q.


OVERVIEW

Since its incorporation, Cardima has been engaged in the design, research,
development, manufacturing and testing of microcatheter systems for the mapping
(diagnosis) and ablation (treatment) of cardiac arrhythmias.  Cardima has
generated revenues of approximately $5.6 million from inception to March 31,
1999.   Until January 1997, these revenues were primarily in Europe and Japan
from sales of the Cardima Pathfinder(TM) and Tracer(TM) microcatheter systems
for diagnosing VT and the Revelation(TM) microcatheter system for diagnosing AF,
as well as ancillary products such as the Venaport guiding catheters.  In
January 1997, the Company received 510(k) clearance in the United States and
began to market and sell the Cardima Pathfinder system for diagnosing VT.  In
November 1997, the Company received a 510(k) clearance in the United States and
began to market and sell the Revelation microcatheter for diagnosing AF.  The
Company derived a majority of its revenues in 1997 and 1998 in the United States
from sales of the Cardima Pathfinder for diagnosis of VT.  To date, the
Company's international sales have been made primarily through distributors and
United States sales have been made through a direct sales force, who sell the
Company's products to physicians and hospitals.

The Company has obtained the right to affix the CE Mark to its Cardima
Pathfinder, Pathfinder mini and Tracer microcatheter systems for mapping VT and
its Revelation and Revelation Tx microcatheter systems for both mapping and
ablation of AF, permitting the Company to market these products in the member
countries of the EU.  In July 1998, the Company received 510(k) clearance for
the Vueport balloon guiding catheter.  The Company currently is seeking 510(k)
clearance for its Tracer mapping catheter and its Naviport deflectable tip
guiding catheter.  There can be no assurance that such clearance will be
received for either product.  The Company will be required to conduct clinical
trials, demonstrate safety and effectiveness and obtain PMA approval from the
FDA in order to sell any of the Company's products designed for the treatment of
AF or VT in the United States.  Specifically, PMA approval will be required
prior to the introduction in the United States of the Revelation Tx
microcatheter system for treatment of AF and Therastream microcatheter system
for treatment of VT.

The Company has a limited history of operations and has experienced significant
operating losses since inception.  The Company expects that its operating losses
will continue for the foreseeable future as the 

                                       8
<PAGE>
 
Company continues to invest substantial resources in product development,
preclinical and clinical trials, obtaining regulatory approval, sales and
marketing and manufacturing.

RESULTS OF OPERATIONS - MARCH 31, 1999 AS COMPARED TO MARCH 31, 1998

Net Sales

Net sales for the quarter ended March 31, 1999 increased 55% to $775,000 from
$501,000 for the same period in 1998.  The increase in net sales was primarily
due to international sales of the Revelation and Revelation Tx products, which
received CE Mark approval in August and December of 1998, respectively.
International sales for the quarter ended March 31, 1999 increased 238% to
$440,000 from $130,000 in the same period in 1998. United States sales for the
quarter ended March 31, 1999 decreased 10% to $335,000 from $371,000 in the same
period in 1998.  The decrease in the U. S. is primarily due to the shift in
sales support to help launch the Revelation Tx in Europe.

Cost of Goods Sold

Cost of goods sold primarily includes raw materials costs, catheter fabrication
costs, system assembly, test costs and manufacturing overhead.  Cost of goods
sold for the quarter ended March 31, 1999 decreased 9% to $677,000 from $748,000
for the same period in 1998.  The decrease was due primarily to the reduced
expenses as a result of the reduction in workforce in January 1999.

Research and Development Expenses

Research and development expenses include product development, clinical testing
and regulatory expenses.  Research and development expenses for the quarter
ended March 31, 1999 decreased 2% to $1,637,000 from $1,663,000 for the same
period in 1998. The decrease was due primarily to the reduction in workforce in
January 1999 and the Company's efforts to focus on key  research and development
projects.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the quarter ended March 31,
1999 decreased 10% to $1,849,000 from $2,047,000 for the same period in 1998.
Selling expenses for the quarter ended March 31, 1999 decreased 4% to $907,000
from $940,000 for the same period in 1998. The decrease was due primarily to the
reduction in workforce in January 1999.  General and administrative expenses for
the quarter ended March 31, 1999 increased 2% to $682,000 from $666,000 for the
same period in 1998.  Marketing expenses for the quarter ended March 31, 1999
decreased 41% to $260,000 from $441,000 for the same period in 1998.  The
decrease was due primarily to the reduction in workforce in January 1999 and
decreased expenses for trade shows.

                                       9
<PAGE>
 
Interest and Other Income

Interest and other income for the quarter ended March 31, 1999 decreased to
$99,000 from $144,000 in the same period in 1998.  The decrease was due
primarily to lower balances in short term investments.

Interest Expense

Interest expense for the quarter ended March 31, 1999 increased to $140,000 from
$36,000 in the same period in 1998.  The increase is due primarily to higher
borrowing levels for purchases of capital equipment and payments on the $3.0
million line of credit obtained in September 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date principally through private
placements of equity securities, which had yielded net proceeds of $46,700,000
as of March 31, 1999, an initial public offering of Common Stock in June 1997,
which resulted in net proceeds of approximately $13,600,000, together with
interest income on such proceeds, a private placement of common stock in January
and February 1999, which resulted in net proceeds of approximately $14,300,000
and equipment leases, to finance certain capital equipment which have provided
proceeds in the amount of $3,700,000.  As of March 31, 1999, the Company had
approximately $10,800,000 in cash, cash equivalents and short-term investments.

Net cash used in operating activities was approximately $3,900,000 and
$3,600,000 for the three months  ended March 31, 1999 and 1998, respectively,
the increase was primarily due to increased disbursement of Accounts Payable
subsequent to the private placement funds being received.  Net cash used in
investing activities of $3,700,000, for the three months ended March 31, 1999,
was used primarily for purchases of short-term investments and capital
expenditures.  Net cash provided by investing activities was $2,800,000 for the
three months ended March 31, 1998, which was attributable primarily to the
maturity of short-term investments. Net cash provided by financing activities
was approximately $14,200,000 and $300,000 for the three months ended March 31,
1999 and 1998, respectively, resulting primarily from the sale of equity
securities in private placement transactions and proceeds from bridge loans and
the line of credit during such periods.

In February 1998, the Company entered into an equipment lease that permits the
Company up to $1,500,000 of financing for the purchase of office and
manufacturing equipment, software and custom-built equipment.  In June 1998, the
Company secured a $3,000,000 line of credit which may be used for general
working capital purposes.  In January and February 1999, the Company sold a
total of 7,500,000 shares of common stock at $2.00 per share in a private
placement transaction to accredited investors yielding net proceeds of
approximately $14,300,000 after commissions and other expenses of the offering.
As compensation to the placement agent for this transaction, the Company paid
$490,388 in commissions, issued 354,806 shares of its common stock and issued
750,000 warrants to purchase 750,000 shares of common stock at an exercise price
of $2.20 per share. The Company's future liquidity and capital requirements will
depend upon numerous factors, including sales and marketing activities, the
progress of the Company's product development efforts, the progress of the
Company's clinical trials, actions relating to regulatory matters, the costs and
timing of expansion of product development, manufacturing, the extent to which
the Company's products gain market acceptance, and competitive developments. The
Company believes that available cash along with proceeds from the private
placement will be sufficient to meet the

                                       10
<PAGE>
 
Company's cash requirements through 1999. There can be no assurance, however,
that the Company will not require additional financing during that period, or
that if required, such additional financing will be available on terms
acceptable to the Company, if at all. The Company may seek to raise additional
funds through public or private financing, collaborative relationships or other
arrangements. There can be no assurance that such additional capital will be
available on terms acceptable to the Company, or at all. Furthermore, any
additional equity financing is expected to be dilutive to stockholders, and debt
financing, if available, may involve restrictive covenants. Collaborative
arrangements, if necessary to raise additional funds, may require the Company to
relinquish its rights to certain of its technologies, products or marketing
territories. The failure of the Company to raise capital when needed will have a
material adverse effect on the Company's business, financial condition and
results of operations.

Impact of the Year 2000 Issue on the Company's Operations

Many existing computer programs and devices with imbedded date/time chips use
only two digits to identify a year in the date field.  These programs and
devices were designed and developed without considering the impact of the
upcoming change in the century.  If not corrected, many computer applications
could fail or create erroneous results by or at the Year 2000 (the "Year 2000
Issue").  The Company has completed an assessment of the potential impact of the
Year 2000 Issue on its operations and concluded they are not materially affected
by the Year 2000 Issue. The Company has evaluated its financial and accounting
and inventory tracking systems and concluded that they are not materially
affected by the Year 2000 Issue. A corporate-wide inventory of computer
applications has been performed by the Company and the Company has remedied any
issues.  The Company's facilities manager has determined that there is no impact
on building security and related equipment.  There can be no assurance that all
third parties will address the Year 2000 Issue in a timely fashion, if at all.
The Company has sent out surveys to all third parties and has received responses
from 60% of them.  Not all third parties are compliant as of yet and the Company
will be sending out follow-up letters sometime in August 1999.  Any Year 2000
Issue compliance problems of either the Company, its business partners or its
customers could have a material adverse effect on the Company's business,
operating results and financial condition.

The Company has utilized only internal resources to test and replace software
for Year 2000 modifications.  All of the replacement software were upgrades
already purchased for other reasons.  Therefore, the Company has not incurred
any additional costs in researching and resolving any Year 2000 issues.

The Company currently has no contingency plans in the event it does not complete
all phases of the Year 2000 program.  The Company plans to evaluate the status
of completion in August 1999 and determine whether such a plan is necessary.

                                       11
<PAGE>
 
Year 2000 Disclosure Chart
                               Resolution Phases

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                             Assessment                  Remediation                  Testing                   Implementation
<S>                          <C>                         <C>                          <C>                       <C>
------------------------------------------------------------------------------------------------------------------------------------

Information Technology       100 % Complete              100% Complete                100% Complete             100% Complete
------------------------------------------------------------------------------------------------------------------------------------

 
Operating Equipment 
 with Embedded Chips         100% Complete               100% Complete                100% Complete             100% Complete
 or Software     
------------------------------------------------------------------------------------------------------------------------------------

 
Products                     Not Applicable              Not Applicable               Not Applicable            Not Applicable

------------------------------------------------------------------------------------------------------------------------------------


3rd Party               100% Complete for system      100% Complete for system   100% Complete for system   100% Complete for system
                        interface; 60% Complete for   interface                  interface                  interface
                        all other material 
                        exposures.
 
                        Expected completion date for
                        surveying all third parties,
                        September 1999
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       12
<PAGE>
 
ADDITIONAL FACTORS AFFECTING FUTURE RESULTS

We have a history of losses.  Our ability to achieve or, if achieved, sustain
profitability, is highly uncertain.

We have experienced losses since we began our operations and we expect to
experience substantial net losses for the foreseeable future. We had net losses
of approximately $16.2 million, $12.3 million and $7.8 million for the fiscal
years ended 1998, 1997 and 1996, respectively.  As of March 31, 1999, we had an
accumulated deficit of approximately $50.0 million.  We expect to incur
substantial net operating losses for the foreseeable future as a result of
research and product development, clinical trials, manufacturing, sales,
marketing and other expenses expected to be incurred as we further develop, seek
regulatory approvals, test and distribute our products.  Our limited operating
history makes accurate prediction of future operating results difficult or
impossible.  There can be no assurance that we will ever generate substantial
revenue or achieve profitability on a sustained basis.  Our failure to generate
substantial revenues would have a material adverse effect on our business,
results of operations and financial condition.

We will need to raise capital in the future.  Future financings could have a
dilutive effect on our stockholders.


Our future capital uses and requirements will depend on numerous factors,
including:

     .  the progress of our clinical research and product development programs,
     .  the time required to obtain and the receipt of regulatory clearances and
        approvals,
     .  the costs and timing of product development, manufacturing and sales and
        marketing activities,
     .  the extent to which our products gain market acceptance,
     .  competitive developments, and
     .  the cost of filing, prosecuting, and enforcing patent claims and other
        intellectual property rights.

In order to commercialize our products, we will require additional capital that
may not be available on terms acceptable to us, or at all.  In addition, if
unforeseen difficulties arise in the course of developing our products,
performing clinical trials, obtaining necessary regulatory clearances and
approvals or other aspects of our business, we may be required to spend greater-
than-anticipated funds.  As a consequence, we will be required to raise
additional capital through public or private equity or debt financings,
collaborative relationships, bank facilities or other arrangements.  There can
be no assurance that such additional capital will be available on terms
acceptable to us, or at all. Any additional equity financing is expected to be
dilutive to stockholders, and debt financing, if available, may involve
restrictive covenants.  We have financed our operations to date primarily
through private sales of equity securities, proceeds from our initial public
offering in June 1997, private placement in January and February 1999, and loan-
facilities.  As of March 31, 1999, cash, cash equivalents and short-term
investments totaled $10.8 million.  We believe that our existing cash, cash
equivalents and short-term investments along with cash generated 

                                       13
<PAGE>
 
from the sales of our products and from financings, will be sufficient to fund
our operating expenses, debt obligations and capital requirements through 1999.

Our future capital uses and requirements depend on numerous factors, including:

     .  our ability to establish collaborative arrangements,
     .  the level of product revenues,
     .  the possible acquisition of new products and technologies, and
     .  the development of commercialization activities.

There can be no assurance that additional funding will be available for us to
finance our ongoing operations when needed or that adequate funds for our
operations, whether from financial markets, collaborative or other arrangements
with corporate partners or from other sources, will be available when needed, if
at all, or on terms attractive to us.  Our inability to obtain sufficient funds
may require us to delay, scale back or eliminate some or all of our research and
product development programs, to limit the marketing of our products, or to
license to third parties the rights to commercialize products or technologies
that we would otherwise seek to develop and market ourselves.  This would have a
material adverse effect on our business, financial condition and results of
operations.

Our stock price may be volatile.

Prior to June 1997, there was no public market for our common stock.  There can
be no assurance that there will be an active trading market for our common stock
or that the market price of the common stock will not decline below its present
market price.  The market prices for securities of biotechnology companies have
been, and are likely to continue to be, highly volatile.  Factors that have had,
and are expected to continue to have, a significant impact on the market price
of our common stock include:

     .  announcements regarding the results of regulatory approval filings,
     .  our clinical studies or other testing,
     .  our technological innovations or new commercial products or those of our
        competitors,
     .  government regulations, developments concerning proprietary rights,
     .  public concern as to safety of technology, and
     .  variations in operating results.

We do not intend to pay cash dividends on our stock.


We have never paid cash dividends on our capital stock and do not anticipate
paying cash dividends in the foreseeable future.  Instead, we intend to retain
future earnings for reinvestment in our business.  Our credit agreement requires
the approval of our bank to declare or pay cash dividends.

                                       14
<PAGE>
 
Our operating results may fluctuate from period to period in the future.

We believe that a quarter to quarter or annual comparison of our operating
results is not a good indication of our future performance.  It is likely that
at some future time our results will be below market expectations.  As a result,
our common stock price will likely fall.  Our results of operations have
fluctuated significantly in the past and we expect them to vary significantly
from quarter to quarter or year to year depending upon a number of factors,
including:

     .  actions relating to regulatory matters,
     .  progress of pre-clinical and clinical trials,
     .  the extent to which our products gain market acceptance,
     .  the scale-up of manufacturing capabilities,
     .  the expansion of sales and marketing activities,
     .  competition,
     .  the timing of new product introductions by us or our competitors,
     .  our ability to successfully market our products in the United States and
        internationally, and
     .  general economic conditions and economic conditions specific to the
        biotechnology field.

Although all microcatheter systems are labeled for single use only, we are aware
that some physicians are reusing these products.  Reuse of our microcatheter
systems would reduce revenues from product sales and could have a material
adverse effect on our future performance and periodic operating results.  Due to
such fluctuations in operating results, period to period comparisons of our
revenues and operating results are not necessarily meaningful and should not be
relied upon as indicators of likely future performance or annual operating
results.

There are risks associated with international sales of our products.

A number of risks are inherent in international transactions.  International
sales may be limited or disrupted by

     .  the imposition of government product or currency controls,
     .  export license requirements,
     .  economic or political instability,
     .  domestic or international trade restrictions,
     .  changes in tariffs,
     .  exchange rate fluctuation, or
     .  difficulties in staffing and management.

The financial condition, expertise and performance of our international
distributors and any future international distributors could affect sales of our
products internationally and could have a material adverse effect on our
business, financial condition and results of operations. The regulation of
medical devices in a number of such jurisdictions, particularly in the EU,
continues to develop, and there can be no 

                                       15
<PAGE>
 
assurance that new laws or regulations will not have a material adverse effect
on our business, financial condition and results of operations. Foreign
regulatory agencies often establish product standards different from those in
the United States and any inability to obtain foreign regulatory approvals on a
timely basis could have a material adverse effect on our international business
and our financial condition and results of operations. In addition, the laws of
certain foreign countries do not protect our intellectual property rights to the
same extent as do the laws of the United States. There can be no assurance that
we will be able to successfully manage a remote sales force, comply with such
foreign laws or regulations, or protect our intellectual property. There also
can be no assurance that we will be able to successfully commercialize any of
our current microcatheter products, including the Cardima Pathfinder, Pathfinder
mini, Revelation, Revelation Tx and Tracer microcatheter systems, or any future
products in any foreign market, which could have a material adverse effect on
our business, financial condition and results of operations.


The adoption of the Euro presents uncertainties for our international business.

In January 1999, the new "Euro" currency was introduced in certain European
countries that are part of the European Monetary Union ("EMU"). Beginning in
2003, all EMU countries are expected to be operating with the Euro as their
single currency. A significant amount of uncertainty exists as to the effect the
Euro will have on the marketplace generally.  In particular, the participating
countries' adoption of a single currency may likely result in greater price
transparency, making the EMU a more competitive environment for our products.
In addition, some of the rules and regulations relating to the governance of the
currency have not yet been defined and finalized. As a result, companies
operating in or conducting business in Europe will need to ensure that their
financial and other software systems are capable of processing transactions and
properly handling the Euro.

We are currently assessing the effect the introduction of the Euro will have on
our internal accounting systems and the potential sales of our products. We will
take appropriate corrective actions based on the results of such assessment. We
have not yet determined the costs related to addressing this issue. This issue
and its related costs could have a material adverse effect on our business,
financial condition and results of operations.


We are dependent upon our key personnel and will need to hire additional key
personnel in the future.

Our ability to operate successfully depends in significant part upon the
continued service of certain key scientific, technical, clinical, regulatory and
managerial personnel, and our continuing ability to attract and retain
additional highly qualified personnel in these areas. Competition for such
personnel is intense, especially in the San Francisco Bay Area.  There can be no
assurance that we can retain such personnel or that we can attract or retain
other highly qualified scientific, technical, clinical, regulatory and
managerial personnel in the future, including key sales and marketing personnel.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Not applicable

                                       16
<PAGE>
 
PART II.  OTHER INFORMATION

ITEM 1.   Legal Proceedings

          None.

ITEM 2.   Changes in Securities and Use of Proceeds

          In January 1999 and February 1999, the Company sold an aggregate of
          7,500,000 shares of Common Stock at $2.00 per share to certain
          accredited investors in a private placement transaction.  The
          exemption from registration claimed for the private placement was
          pursuant to Section 506 of Regulation D promulgated under the
          Securities Act of 1933, as amended.  Sunrise Securities Corporation
          acted as the placement agent for the Company in the transaction.  The
          private placement resulted in gross proceeds to the Company of
          $15,000,000.  As compensation to the placement agent for this
          transaction, the Company paid $490,388 in commissions, issued 354,806
          shares of its Common Stock and issued 750,000 warrants.  The warrants
          are exercisable for 750,000 shares of Common stock at an exercise
          price of $2.20 per share.  The Company incurred $170,279 in expenses
          related to other expenses of the offering.  The net proceeds of the
          private placement, after deducting the foregoing expenses, were
          approximately $14,300,000.

          On March 19, 1999, a Registration Statement on Form S-3 (No. 333-
          74753) was filed with the Securities and Exchange Commission pursuant
          to which the Company proposes to  register 8,604,806 shares of Common
          Stock (which includes Common Stock issuable upon exercise of the
          warrants) for sale to the public by the certain accredited investors
          and the placement agent.

          As of March 31, 1999, the Company has used approximately $3,500,000 of
          the net proceeds from the private placement to fund ongoing
          operations.

ITEM 3.   Defaults Upon Senior Securities

          None.

ITEM 4.   Submission of Matters to a Vote of Security Holders
 
          None.

ITEM 5.   Other Information

          None.

                                       17
<PAGE>
 
ITEM 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits - See Index to Exhibits.
          (b)  On January 27, and February 10, 1999, the Company filed reports
               on Form 8-K.

                                       18
<PAGE>
 
                                 CARDIMA, INC.

                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


DATE:   May 12, 1999                 CARDIMA, INC.
                                                  

                                        /s/   Phillip C. Radlick, Ph.D.
                                        ---------------------------------------
                                         PHILLIP C. RADLICK, Ph.D.
                                         President, Chief Executive Officer and
                                         Director
                                                   

                                        /s/   Ronald E. Bourquin
                                        ---------------------------------------
                                         RONALD E. BOURQUIN
                                         Vice President, Chief Financial Officer
                                         and Secretary

                                       19
<PAGE>
 
                                 CARDIMA, INC.

                        INDEX TO EXHIBITS FOR FORM 10-Q

                        FOR QUARTER ENDED MARCH 31, 1999


EXHIBIT NO.    EXHIBIT DESCRIPTION
-----------    -------------------

   27.1        Financial Data Schedule