<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, 2000

                                       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 28, 2000, there were 21,471,420 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
  Condensed Balance Sheets as of March 31, 2000 and December 31, 1999............................  3
  Condensed Statements of Operations for the three months ended March 31, 2000 and 1999..........  4
  Condensed Statements of Cash Flows for the three months ended March 31, 2000 and 1999..........  5
  NOTES TO CONDENSED 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.............................. 15

PART II. OTHER INFORMATION....................................................................... 16

 ITEM 1. LEGAL PROCEEDINGS....................................................................... 16
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS............................................... 16
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES......................................................... 16
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................... 16
 ITEM 5. OTHER INFORMATION....................................................................... 16
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................................ 16

SIGNATURES....................................................................................... 17

INDEX TO EXHIBITS FOR FORM 10-Q.................................................................. 18

 Exhibit 10.28...................................................................................
 Exhibit 10.29...................................................................................
 Exhibit 27.1....................................................................................

</TABLE>

                                       2
<PAGE>

PART I.

ITEM 1.  FINANCIAL STATEMENTS

                                 CARDIMA, INC.
                            CONDENSED BALANCE SHEETS
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>

                                                                                  March 31,                December 31,
                                                                                    2000                       1999
                                                                             -----------------           ------------------
ASSETS                                                                          (unaudited)
Current assets:
<S>                                                                            <C>                         <C>
   Cash and cash equivalents.................................................         $  8,416                     $    423
   Short-term investments....................................................              ---                          497
   Accounts receivable, net of allowances for doubtful accounts
       of $98 at March 31, 2000 and $92 at December 31, 1999.................              551                          669
   Inventories...............................................................            1,238                        1,268
   Other current assets......................................................              259                          251
                                                                             -----------------           ------------------
       Total current assets..................................................           10,464                        3,108
Property and equipment, net..................................................            2,282                        2,512
Notes receivable.............................................................              370                          365
Other assets.................................................................              120                          104
                                                                             -----------------           ------------------
                                                                                      $ 13,236                     $  6,089
                                                                             =================           ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
   Accounts payable..........................................................         $  1,183                     $  1,436
   Accrued compensation......................................................              817                        1,041
   Other current liabilities.................................................               69                           60
   Capital lease obligation - current portion................................              743                          776
   Line of credit obligation - current portion...............................            1,120                        1,088
                                                                             -----------------           ------------------
             Total current liabilities.......................................            3,932                        4,401

Deferred rent................................................................                7                            1
Capital lease obligation - noncurrent portion................................              926                        1,012
Line of credit obligation - noncurrent portion...............................              803                        1,095

Stockholders' equity (net capital deficiency):
     Common stock, $0.001 par value; 25,000,000 shares authorized,
      21,471,420 shares issued and outstanding at March 31, 2000: 16,356,355
      as of December 31, 1999; at amount paid in.............................           71,349                       60,441
Deferred compensation........................................................             (175)                        (225)
Accumulated deficit..........................................................          (63,606)                     (60,636)
                                                                             -----------------           ------------------
     Total stockholders' equity (net capital deficiency).....................            7,568                         (420)
                                                                             -----------------           ------------------
                                                                                      $ 13,236                     $  6,089
                                                                             =================           ==================
</TABLE>

                                       3
<PAGE>

                                 CARDIMA, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>

                                                                        Three months ended March 31,
                                                                                (unaudited)
                                                                  -------------------------------------
<S>                                                               <C>                  <C>
                                                                              2000                 1999
                                                                  ----------------     ----------------
Net sales.......................................................           $   669              $   775
Cost of goods sold..............................................               846                  677
                                                                  ----------------     ----------------
      Gross profit (loss).......................................              (177)                  98
Operating expenses:
      Research and development..................................             1,166                1,637
      Selling, general and administrative.......................             1,569                1,849
                                                                  ----------------     ----------------
            Total operating expenses............................             2,735                3,486
                                                                  ----------------     ----------------
Operating loss..................................................            (2,912)              (3,388)
Interest and other income.......................................                53                   99
Interest expense................................................              (111)                (140)
                                                                  ----------------     ----------------
Net loss........................................................           $(2,970)             $(3,429)
                                                                  ================     ================
Net loss per share..............................................            $(0.16)              $(0.24)
                                                                  ================     ================
Shares used in computing basic and diluted net loss per
 share..........................................................            18,674               14,178
                                                                  ================     ================
</TABLE>


                 See accompanying notes to financial statements

                                       4
<PAGE>

                                 CARDIMA, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                Three months ended March 31,
                                                                                        (unaudited)
                                                                           ---------------------------------------
<S>                                                                          <C>                    <C>
                                                                                  2000                  1999
                                                                           -----------------      ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................................................           ($2,970)              ($3,429)
Adjustments to reconcile net loss to net cash provided by operations:
  Depreciation and amortization...........................................               252                   307
  Amortization of deferred compensation...................................                50                    63
  Loss on disposal of assets..............................................                --                     5
  Changes in operating assets and liabilities:
    Accounts receivable...................................................               118                   (77)
    Inventories...........................................................                30                     2
    Other current assets..................................................                (8)                   78
    Restricted cash.......................................................                --                    24
    Notes receivable......................................................                (5)                   (5)
    Other assets..........................................................               (16)                   94
    Accounts payable......................................................              (253)                 (842)
    Accrued compensation..................................................              (224)                  (99)
    Other current liabilities.............................................                 9                    29
    Deferred rent.........................................................                 6                   (13)
                                                                           -----------------      ----------------
            Net cash used in operating activities.........................            (3,011)               (3,863)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments.......................................                --                (6,993)
Maturities and sales of short-term investments............................               497                 3,513
Capital expenditures......................................................               (22)                 (227)
Proceeds from disposal of assets..........................................                --                     2
                                                                           -----------------      ----------------
    Net cash (used) provided in investing activities......................               475                (3,705)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital leases...................................              (213)                 (236)
Principal payments under credit line......................................              (260)                  (78)
Net proceeds from sale of common stock and warrant exercises..............            10,908                14,402
Proceeds from sale/leaseback of capital equipment.........................                94                   150
                                                                           -----------------      ----------------
    Net cash provided by financing activities.............................            10,529                14,238
                                                                           -----------------      ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................             7,993                 6,670
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................               423                   645
                                                                           -----------------      ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD..................................          $  8,416              $  7,315
                                                                           =================      ================
</TABLE>

                                       5
<PAGE>

                                 CARDIMA, INC.

                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                  (Unaudited)

1.  BASIS OF PRESENTATION

The accompanying unaudited condensed 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, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000 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, 1999.  The accompanying balance sheet
at December 31, 1999 has been derived from these audited financial statements.

2.  MANAGEMENT'S PLANS

On January 26, 2000, the Company signed an exclusive three year distribution
agreement with St. Jude Medical Corporation ("St. Jude") whereby St. Jude's Daig
Division will distribute Cardima's diagnostic products in the U.S.  The
distribution agreement included an equity investment by St. Jude.  The Company
retains the rights for all other geographic areas and maintains worldwide
control of its therapeutic products.  The Company continues to enroll patients
in its AF study and intends to further expand the study into a pivotal study and
use the data as the basis for the Premarket Approval application ("PMA")
submission with the FDA.

As of March 31, 2000 the Company has approximately $8,416,000 in cash, cash
equivalents and marketable securities, working capital of $6,531,000 and an
accumulated deficit of $63,606,000.  In the course of its development
activities, the Company expects such losses to continue over the next several
quarters.  Management plans to continue to finance operations with a combination
of revenue from product sales, funds from equity or debt offerings, funds from
potential corporate alliances and technology licenses.  The Company expects its
existing capital resources will permit it to meet its capital and operational
requirements through December 2000.

3.  PRIVATE PLACEMENTS

In February 2000, the Company sold a total of 4,666,611 shares of common stock
at $2.25 per share in a private placement transaction to accredited investors.
The transaction included warrants to investors exercisable for 933,322 shares of
common stock at an exercise price of $2.48 per share.  As commission

                                       6
<PAGE>

for the transaction, the Company paid approximately $525,000 in cash. In
addition, the Company issued warrants, exercisable for 233,329 shares of common
stock at an exercise price of $2.48 per share as commission for the transaction.
The Company's net proceeds, after expenses of the placement, were approximately
$9,900,000.

4.  BALANCE SHEET COMPONENTS

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

<TABLE>
<CAPTION>
                                                       March 31,                   December 31,
<S>                                                <C>                          <C>
                                                          2000                        1999/1/
                                                 -------------------          -------------------
Inventories:
      Raw materials.........................                 $   599                      $   616
       Work-in-process......................                     176                          107
       Finished goods.......................                     463                          545
                                                 -------------------          -------------------
                                                             $ 1,238                      $ 1,268
                                                 ===================          ===================
Property and equipment:
       Equipment............................                   5,514                        5,492
       Leasehold improvements...............                     109                          109
                                                  -------------------          -------------------
                                                             $ 5,623                      $ 5,601
       Less accumulated depreciation........                  (3,341)                      (3,089)
                                                 -------------------          -------------------
                                                             $ 2,282                      $ 2,512
                                                 ===================          ===================
</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, 1999.

                                       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 in November 1992, 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 $9.0 million from
inception to March 31, 2000.  Until January 1997, these revenues were primarily
in Europe and Japan from sales of the Cardima Pathfinder and Tracer
microcatheter systems for diagnosing VT and the Revelation microcatheter system
for diagnosing AF, as well as ancillary products such as the Venaport guiding
catheters.  Subsequent to 1997, United States sales consists primarily of
Pathfinder and Revelation lines of microcatheters for diagnosis of VT and AF
following FDA 510(k) clearance.  To date, the Company's international sales have
been made primarily through distributors who sell the Company's products to
physicians and hospitals. European sales consist primarily of the Revelation and
Revelation Tx microcatheters for treatment of AF following receipt of CE Marking
in August and December 1998, respectively.

Revenues are recognized when products are shipped.  In December 1999, the
Securities and Exchange Commission issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101").  We are evaluating
the effects, if any, that the adoption of SAB 101, in the second quarter of
2000, may have on the results of our operations or our financial position.

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, Revelation Tx and Revelation T-Flex microcatheter systems for
both mapping and ablation of AF, permitting the Company to market these products
in the member countries of the EU.  The Company received 510(k) clearances for
the Revelation microcatheter for mapping of AF, the Pathfinder mini
microcatheter and the Tracer microcatheter for mapping VT, for the Vueport
balloon guiding catheter in July 1998 and the Naviport deflectable guiding
catheter in August 1999.  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 treatment of AF
or VT in the United States.  Specifically, PMA approval will be required

                                       8
<PAGE>

prior to the introduction in the United States of the Revelation Tx
microcatheter system for treatment of AF or 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 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, 2000 AS COMPARED TO MARCH 31, 1999

Net Sales

Net sales for the quarter ended March 31, 2000 decreased 14% to $669,000 from
$775,000 for the same period in 1999.  The decrease in net sales was
attributable to the Company's transitioning from a direct sales force to that of
using distributors, particularly in the United States, where a sales and
distribution agreement was recently announced with St. Jude Medical, Inc. (St.
Jude).  United States sales for the quarter ended March 31, 2000 decreased 16%
to $282,000 from $335,000 in the same period in 1999.  International sales for
the quarter ended March 31, 2000 decreased 12% to $387,000 from $440,000 in the
same period in 1999 as the Company transitioned some of its direct selling
efforts to distributors in certain European countries.

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, 2000 increased 25% to $846,000 from
$677,000 for the same period in 1999.  The increase was due primarily to the
additional hiring and training of manufacturing personnel.

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, 2000 decreased 29% to $1,166,000 from $1,637,000 for the same
period in 1999.  The decrease was due primarily to staff reductions in research
and development as a result of the Company's restructuring in January 1999, the
Company's efforts to focus on key research and development projects and the
transition of all animal studies from out of state to a local firm which reduced
costs for research and development product testing.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the quarter ended March 31,
2000 decreased 15% to $1,569,000 from $1,849,000 for the same period in 1999.
Selling expenses for the quarter ended March 31, 2000 decreased 23% to $698,000
from $907,000 for the same period in 1999.  The decrease was due primarily to
the reduction in workforce in January 1999 and the reduction in direct sales
expenses due to the U.S. distribution agreement with St. Jude in January 2000.
General and administrative expenses for the quarter ended March 31, 2000
decreased 5% to $648,000 from $682,000 for the same period in 1999.  Marketing
expenses for the quarter ended March 31, 2000 decreased 14% to $223,000 from
$260,000 for

                                       9
<PAGE>

the same period in 1999. The decrease was due primarily to the reduction in
workforce in January 1999, decreased expenses for trade shows, and the reduction
in direct marketing expenses due to the U.S. distribution agreement with St.
Jude in January 2000.

Interest and Other Income

Interest and other income for the quarter ended March 31, 2000 decreased 46% to
$53,000 from $99,000 for the same period in 1999.  The decrease was due
primarily to lower cash balances and balances in short term investments.

Interest Expense

Interest expense for the quarter ended March 31, 2000 decreased to $111,000 from
$140,000 for the same period in 1999.  The decrease was primarily due the
expiration of two capital equipment leases at the end of 1999 and the reduced
interest rate on the re-lease of this equipment.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date principally through private
placements of equity securities, an initial public offering of Common Stock in
June 1997, borrowings under a $3,000,000 line of credit and equipment leases to
finance certain capital equipment which have provided proceeds in the amount of
$4,600,000.  As of March 31, 2000, the Company had approximately $8,400,000 in
cash, cash equivalents and short-term investments.

Net cash used in operating activities was approximately $3,000,000 and
$3,900,000 for the three months ended March 31, 2000 and 1999, respectively.
The decrease was primarily due from the decrease of operating losses incurred
and the decrease in the disbursement of accounts payable over the same period
last year.  Net cash provided by investing activities of $475,000, for the three
months ended March 31, 2000, was primarily provided by the maturities and sales
of short-term investments.  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 financing
activities was approximately $10,500,000 and $14,200,000 for the three months
ended March 31, 2000 and 1999, respectively, resulting primarily from the sale
of equity securities in private placement transactions during such periods.

In May 1999, the Company entered into an equipment lease that permits the
Company to borrow up to $1,000,000 for the purchase of office and manufacturing
equipment, software and custom-built equipment.  As of March 31, 2000, the
Company has drawn $635,000 against the equipment leaseline.  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.  As
commission, the Company issued 354,806 shares of its common stock to the
placement agent and paid approximately $490,000 in cash.  In addition the
Company issued 750,000 warrants, exercisable for 750,000 shares of common stock
at an exercise price of $2.20 as a commission for the transaction.  The
Company's net proceeds, after expenses of the placement, were approximately
$14,300,000.  In February 2000, the Company sold a total of 4,666,611 shares of
common stock at $2.25 per share in a private placement transaction to accredited
investors.  The transaction included warrants to investors exercisable for
933,322 shares of common stock

                                       10
<PAGE>

at an exercise price of $2.48 per share. As commission for the transaction, the
Company paid approximately $525,000 in cash. In addition, the Company issued
warrants, exercisable for 233,329 shares of common stock at an exercise price of
$2.48 per share as commission for the transaction. The Company's net proceeds,
after expenses of the placement, were approximately $9,900,000.

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 will be sufficient to meet the Company's
cash requirements at least through December 2000.  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.

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.  To date, sales of
our microcatheter systems have been limited.  We had net losses of approximately
$14.0 million, $16.2 million and $12.3 million for the fiscal years ended 1999,
1998 and 1997, respectively.  As of March 31, 2000, we had an accumulated
deficit of approximately $63.6 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,

                                       11
<PAGE>

    .  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, and loan-facilities.  As of March 31, 2000, cash, cash
equivalents and short-term investments totaled $8.4 million.  We believe that
our existing cash, cash equivalents and short-term investments along with cash
generated from the sales of our products and from financings, will be sufficient
to fund our operating expenses, debt obligations and capital requirements
through December 31, 2000.

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.

We are dependent on St. Jude to commercialize our diagnostic products in the
U.S.

On January 26, 2000, we announced that we had signed an exclusive three-year
distribution agreement for our diagnostic products in the United States with St.
Jude, which included an investment by St. Jude.  If St. Jude fails to
successfully commercialize our diagnostic products, we may have to restructure
or significantly curtail our business.

                                       12
<PAGE>

Our stock price may be volatile.

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.

Our stock may become subject to penny stock rules, which may make it more
difficult for you to sell your shares.

If we are delisted from the Nasdaq Smallcap Market, our common stock will be
considered a penny stock under regulations of the Securities and Exchange
Commission and would therefore be subject to rules that impose additional sales
practice requirements on broker-dealers who sell our securities.  The additional
burdens imposed upon broker-dealers by these requirements could discourage
broker-dealers from effecting transactions in our common stock, which could
severely limit the market liquidity of the common stock and your ability to sell
our securities in the secondary market.  We cannot assure you that we will be
able to maintain our listing on the Nasdaq Smallcap Market.

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.

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,

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<PAGE>

    .  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 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.

                                       14
<PAGE>

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

Since the Company did not have any short-term investments and a variable
interest rate line of credit obligation as of March 31, 2000, the Company does
not have any material quantitative or qualitative disclosures about market risk.

                                       15
<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.   Legal Proceedings

          None.

ITEM 2.   Changes in Securities and Use of Proceeds

          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.

ITEM 3.   Defaults Upon Senior Securities

          None.

ITEM 4.   Submission of Matters to a Vote of Security Holders

          None.

ITEM 5.   Other Information

          None.

ITEM 6.   Exhibits and Reports on Form 8-K

          (a) Exhibits - See Index to Exhibits.
          (b) No reports on Form 8-K were filed in the quarter ended March 31,
              2000.

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<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 15, 2000           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

                                       17
<PAGE>

                                 CARDIMA, INC.

                        INDEX TO EXHIBITS FOR FORM 10-Q

                        FOR QUARTER ENDED MARCH 31, 2000


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

   10.28       St. Jude Medical Investment Agreement
   10.29*      Exclusive Distribution Agreement between Daig Corporation and
               Cardima, Inc.
   27.1        Financial Data Schedule

* Confidential Treatment Requested

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