U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended September 30, 1999.

[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
    of 1934 (No Fee Required)
For the transition period from _______________ to _______________.

                          COMMISSION FILE NO. 333-68167

                                  CARDIA, INC.
                 (Name of small business issuer in its charter)

            MINNESOTA                                     41-1923885
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                13770 FRONTIER COURT, BURNSVILLE, MINNESOTA 55337
               (Address of principal executive offices) (Zip Code)

                                 (612) 997-2100
                            Issuer's telephone number


         Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

         Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practical date: 1,000,081 shares of
Common Stock (par value $0.01 per share) outstanding on October 1, 1999.

<PAGE>


                                TABLE OF CONTENTS


                                                                          Page
                                                                          Number
                                                                          ------

                         PART I - FINANCIAL INFORMATION


Item 1. Financial Statements

           Balance Sheets as of September 30, 1999 (Unaudited) and
              December 31, 1998................................................1
           Statements of Operations (Unaudited) for the three months and nine
              months ended September 30, 1999 and 1998.........................3
           Statements of Cash Flows (Unaudited) for the nine months ended
              September 30, 1999 and 1998......................................4
           Notes to financial statements (Unaudited)...........................5

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operation...................................................7



                           PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K......................................10

<PAGE>


                                     PART I

                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                                  CARDIA, INC.

                                 BALANCE SHEETS
                           SEPTEMBER 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                     September 30,     December 31,
                                                         1999              1998
                                                     -------------     ------------
                                                      (Unaudited)
<S>                                                    <C>              <C>
ASSETS

CURRENT ASSETS
     Cash and Cash equivalents                         $ 400,014        $      --
     Accounts Receivable                                 192,159               --
     Inventories                                          39,186           53,639
     Prepaid Expenses                                      1,274           13,009
                                                       ---------        ---------

     TOTAL CURRENT ASSETS                                632,633           66,648
                                                       ---------        ---------

PROPERTY AND EQUIPMENT - NET                             101,166           20,481

INTANGIBLE ASSETS - NET                                   70,831           87,500
                                                       ---------        ---------

TOTAL ASSETS                                           $ 804,630        $ 174,629
                                                       =========        =========
</TABLE>



                       See notes to financial statements.


                                        1
<PAGE>


                                  CARDIA, INC.

                                 BALANCE SHEETS
                           SEPTEMBER 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                             September 30,      December 31,
                                                                  1999              1998
                                                             -------------      ------------
                                                              (Unaudited)
<S>                                                          <C>                <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Trade accounts Payable                                  $     39,186       $     29,226
     Accrued Expenses                                                (532)                --
                                                             ------------       ------------
     TOTAL CURRENT LIABILITIES                                     38,654             29,226
                                                             ------------       ------------

STOCKHOLDERS' EQUITY
     Common Stock (10,000,000 Shares                               10,000                 --
         authorized [1,000,081] outstanding)
     Preferred Stock (1,000,000 Shares
         authorized none outstanding)
     Advances by Applied Biometrics, Inc.                              --          1,217,636
     Additional paid in capital                                 2,334,667                 --
     Accumulated deficit                                       (1,578,691)        (1,072,233)

     TOTAL STOCKHOLDERS' EQUITY                                   765,976            145,403
                                                             ------------       ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $    804,630       $    174,629
                                                             ============       ============
</TABLE>



                       See notes to financial statements.


                                        2
<PAGE>


                                  CARDIA, INC.

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                              Three months ended           Nine months ended
                                                 September 30,               September 30,
                                            -----------------------     -----------------------
                                              1999          1998          1999          1998
                                            ---------     ---------     ---------     ---------
<S>                                         <C>           <C>           <C>           <C>
     Net Sales                              $ 305,271     $  40,200     $ 749,276     $  77,640
                                            ---------     ---------     ---------     ---------
     Cost of Sales                             21,332         8,244       149,343        15,732
                                            ---------     ---------     ---------     ---------

Gross Profit                                  283,939        31,956       599,933        61,908
                                            ---------     ---------     ---------     ---------

Operating Expenses
     Selling, general and administrative      341,623       128,709       866,308       370,492
     Research and development                      --        98,356        18,062       305,783
                                            ---------     ---------     ---------     ---------

Total Operating Expenses                      (57,684)     (227,065)      884,370       676,275
                                            ---------     ---------     ---------     ---------

NET LOSS                                      (57,684)     (195,109)    $(284,437)    $(614,367)
                                            =========     =========     =========     =========

Net loss per share

     Basic                                       (.06)         (.52)         (.36)        (1.64)
                                            =========     =========     =========     =========
     Fully diluted                               (.06)         (.52)         (.36)        (1.64)
                                            =========     =========     =========     =========

Weighted average shares outstanding         1,000,081       375,000       793,769       375,000
                                            =========     =========     =========     =========
</TABLE>



                       See notes to financial statements.


                                        3
<PAGE>


                                  CARDIA, INC.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             Nine months ended
                                                               September 30,
                                                            1999           1998
                                                         ----------     ----------
<S>                                                      <C>            <C>
Cash flows from operating activities:

     Net income                                          $ (284,437)    $ (614,362)
                                                         ----------     ----------
     Adjustments to reconcile net income to net cash
     provided by operating activities:

         Depreciation and amortization                       22,759         14,161
         (Increase) decrease in accounts receivable         (99,242)       (13,009)
         (Increase) decrease in prepaid expenses             10,011              0
         (Increase) decrease in inventories                  11,702        (53,639)
         Increase (decrease) in accounts payable            (24,465)        29,226
         Increase (decrease) in accrued liabilities            (532)             0
                                                         ----------     ----------
         Total adjustments                                  (79,767)       (23,261)
                                                         ----------     ----------
     Net cash provided (used) by operating activities      (364,204)      (637,628)
                                                         ----------     ----------

Cash flows from investing activities:

     Cash payments for the purchase of property             (84,053)       (22,142)
                                                         ----------     ----------
     Net cash provided (used) by investing activites        (84,053)       (22,142)
                                                         ----------     ----------

Cash flows from financing activities:

     Proceeds from issuance of common stock                 625,000              0
     Investment by Applied Biometrics, Inc.                 222,771        659,770
                                                         ----------     ----------
     Net cash provided (used) by financing activities       847,771        659,770
                                                         ----------     ----------

Net increase (decrease) in cash and equivalents             399,514              0

Cash and equivalents, beginning                                 500              0
                                                         ----------     ----------
Cash and equivalents, ending                             $  400,014              0
                                                         ==========     ==========
</TABLE>



                       See notes to financial statements.


                                        4
<PAGE>


                                  CARDIA, INC.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

1.   Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance
with the instructions for Form 10-QSB and, accordingly, do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. The statements should be read in conjunction
with the financial statements and footnotes included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998, previously filed
with the Commission. In the opinion of management, the accompanying unaudited
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the Company's financial
position and the results of its operations and cash flows for the periods
presented. Operating results for the three month and nine month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the full year.

2.   Property and Equipment

The cost of property and equipment and the estimated useful lives are as
follows:

                                                    ESTIMATED
                                                   USEFUL LIFE        1999
                                                   -----------        ----

Furniture and Fixtures                               5 years       $  22,045

Machinery and Equipment                              7 years          90,693
                                                                   =========
                                                                     112,738
Less accumulated depreciation                                        (11,572)
                                                                   ---------

                                                                   $ 101,166
                                                                   ---------

3.   Intangible Assets

Intangible assets are comprised as follows:

                                                    ESTIMATED
                                                   USEFUL LIFE        1999
                                                   -----------        ----

Intangible assets                                    6 years       $ 100,000
Less accumulated amortization                                        (29,169)
                                                                   ---------

                                                                   $  70,831
                                                                   ---------


                                        5
<PAGE>


4.   Net Loss Per Share

Loss per share is computed by dividing net loss by the weighted-average number
of shares of common stock outstanding during the applicable period. For periods
prior to the spin-off of Cardia from ABI, weighted-average shares outstanding
have been determined as if the distribution of shares in the spin-off had
occurred as of the inception of the Company. Common stock equivalents,
consisting of shares which might be issued upon exercise of stock options are
not included in weighted-average common shares for purposes of determining
diluted earnings per share in years where losses are reported since their
inclusion would be antidilutive.


5.   Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." This standard
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Company must adopt this standard no later than fiscal
year 2001. Management believes the adoption of SFAS No. 133 will not have a
material effect on the Company's financial statements.

6.   Subsequent Events

On July 1, 1999, the Company entered into an Agreement and Plan of Merger with
Video Learning Systems, Inc. ("VLS"), pursuant to which it was proposed that VLS
be merged into the Company in exchange for 200,000 shares of the Company's
common stock. The merger was approved by the shareholders of VLS on October 6,
1999, at which time VLS merged into the Company. The Company is the surviving
entity and will continue its business as it was being conducted prior to the
merger. VLS has ceased to exist and its assets, consisting principally of cash,
cash equivalents and a note receivable, have become assets of the Company. The
former shareholders of VLS were issued approximately 200,000 shares of Cardia
Common Stock in the merger.

The acquisition of VLS by Cardia will be in the form of a merger of VLS with and
into Cardia. Accounting for the merger will result in an adjustment of
historical cost basis of the assets and liabilities of VLS. Because VLS has not
conducted an active trade or business, for accounting purposes the merger
transaction will be accounted for as a purchase of the net assets of VLS, which
consist principally of cash, cash equivalents and a note receivable.

The proforma combined results of operations for prior periods are not material
to Cardia.


                                        6
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

INTRODUCTION

         Cardia, Inc. was formed in October of 1998 as a subsidiary of Applied
Biometrics, Inc. ("ABI") to develop, manufacture and market transcatheter
closure device products for the repair of certain cardiac defects. These
products are based, in part, on certain intellectual property rights ABI
acquired from Bernhard Schneidt and Dr. Rainer Schrader in November of 1997.
Prior to October 1998, a division of ABI engaged in the development of
transcatheter closure devices. As of October of 1998, Cardia has assumed all
activity relating to the development and marketing of these products.

         On February 11, 1999, ABI distributed 375,000 shares of the Company's
common stock to ABI shareholders. Concurrent with the Distribution, the Company
sold 125,000 shares of Cardia common stock at a price of $1 per share to an
officer of the Company.

         Subsequent to the Distribution, the Company completed a rights offering
of its common stock to sell an aggregate of 500,000 shares of common stock at a
subscription price of $1 per share, on the basis of one right for each share of
Cardia stock held by a shareholder immediately after the Distribution.

         On October 6, 1999, Video Learning Systems, Inc. ("VLS") was merged
into the Company. The Company is the surviving entity and will continue its
business as it was being conducted prior to the merger. VLS has ceased to exist
and its assets, consisting principally of cash, cash equivalents and a note
receivable, have become assets of the Company. The former shareholders of VLS
were issued approximately 200,000 shares of Cardia Common Stock in the merger.

         Cardia is currently developing two transcatheter closure device
products, one for the pediatric defect market and one for the adult defect
market. Cardia estimates that the market for adult closure devices is
significantly larger than the market for pediatric closure devices. Cardia,
therefore, intends to focus most of its resources during the next twelve months
on continuing to develop, test and pursue regulatory approval to market and sell
its adult line of closure devices in Europe and the United States.


RESULTS OF OPERATIONS

         REVENUES

         Revenues for the three months ended September 30, 1999 were $305,271 as
compared to revenues of $40,200 for the comparable period in 1998. Revenues for
the nine months ended September 30, 1999 were $749,276 as compared to revenues
of $77,640 in the first nine months of 1998. To date, Cardia's modest revenues
have been generated by marketing its pediatric and adult closure devices on an
experimental basis in Germany and Switzerland. Cardia is currently seeking the
necessary regulatory approvals to market these devices on a broader basis in
additional European Union countries. However, Cardia has turned its primary
focus toward the development of its adult device and expects the majority of
future revenue to be generated from the sale of this product. Cardia does not
expect to realize significant revenues until product development is complete and
Cardia has obtained necessary regulatory approvals to market its products in
Europe and the United States.


                                        7
<PAGE>


         GROSS PROFIT

         Gross profit for the three months ended September 30, 1999 was
$283,939, up from $31,956 in the same period of 1998. Gross profit for the first
nine months of 1999 was $599,933, compared to $61,908 for the first nine months
of 1998. The increase in gross profit in 1999 can be attributed to increased
revenues associated with its sales of transcatheter closure devices, which were
very limited in 1998, and to the lower cost of goods sold per dollar of sales
resulting from operating the Company's business independently, compared to the
cost of goods sold experienced while the business was being operated as a part
of Applied Biometrics in 1998.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Cardia's selling, general and administrative expenses for the first
three months of 1999 were $341,623, compared to $128,709 for the comparable
period in 1998. Cardia expended $866,308 in the first nine months of 1999 on
selling, general and administrative expenses, up from $370,492 in the first nine
months of 1998. The majority of these expenses are attributable to Cardia's
expansion of its sales and marketing activities in 1999. These expenditures are
not currently fixed costs and the amount spent during the remainder of 1999 will
depend largely on the performance and growth of Cardia's business. Accordingly,
Cardia will adjust these expenses based on revenues and cash flows. Cardia does
not expect to make material capital investments in plant or equipment during the
remainder of1999. However, Cardia expects to add between 2 and 3 additional
full-time employees during the fourth quarter of 1999. Those additional
personnel will not be added, however, unless business growth justifies
additional employees.

         Subsequent to the end of the third quarter, Cardia received CE mark
certification for its current products. As a result, those products, which have
been sold on an experimental basis to date, can now be sold throughout the
European Union. Cardia expects to begin expanding its selling efforts in the
European Union during the fourth quarter and, as a result, expenditures for
sales and marketing activities are expected to start to increase during the
fourth quarter, with such increases continuing into calendar year 2000.

         RESEARCH AND DEVELOPMENT

         Cardia did not incur any research and development expenses during the
three months ended September 30, 1999, compared to expenses of $98,356 incurred
during the same period of 1998. Research and development costs accounted for
$18,062 during the first nine months of 1999, down from $305,783 expended in the
first nine months of 1998. Cardia is not currently accounting for research and
development separately. Research and development expenses are currently included
in cost of sales and selling, general and administrative costs. Cardia intends
to account for research and development separately in future periods.

         NET LOSS

         Cardia's net loss for the three months ended September 30, 1999 was
$57,684 , compared to a net loss of $227,065 for the same period of 1998. Cardia
recognized a net loss of $284,437 in the first nine months of 1999, as compared
to a net loss of $614,367 in the first nine months of 1998. The decrease in net
loss for each of the comparative periods was due largely to significantly
increased revenues coupled with significantly increased gross profits, and to a
substantial decrease in research and development costs.


                                        8
<PAGE>


         LIQUIDITY AND CAPITAL RESOURCES

         Cardia's liquidity as of September 30, 1999 consisted of approximately
$400,014 in cash, and $192,159 in accounts receivable. As a result of the merger
of Video Learning Systems into the Company, the Company acquired cash of
approximately $380,000 and a note receivable with a principal balance of
approximately $160,000. Cardia believes that its current liquidity will be
sufficient to fund operations for an estimated 12 months. Cardia intends to
raise additional capital in the next 12 to 18 months through the issuance of
equity or debt securities or through bank debt, or a combination of these means.

         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Cardia's management believes that the market risk association with its
market risk sensitive instruments as of September 30, 1999 is not material, and
therefore, disclosure is not required.

FORWARD LOOKING STATEMENTS

         This form 10-QSB contains forward-looking statements that involve risks
and uncertainties. When used in this 10-QSB, the words or phrases "believes,"
"anticipates," "expects," "intends,""estimates" or similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying such statements. These forward looking statements involve risks
and uncertainties that may cause our actual results to differ materially from
those expressed or implied by the forward looking statements. Important factors
that could cause our actual results to differ materially from projections
include, but are not limited to (1) Cardia's ability to comply with extensive
government regulations, (2) Cardia's ability to protect its proprietary
technology, (3) rapidly changing technologies and Cardia's ability to respond to
these changes, (4) Cardia's ability to obtain adequate insurance reimbursement
from government and private health care insurers, and (5) Cardia's ability to
retain qualified personnel. Readers are urged to carefully review and consider
the various disclosures made by Cardia in this report and in Cardia's other
reports filed with the Securities and Exchange Commission from time to time that
attempt to advise interested parties of the risks and factors that may affect
Cardia's business and results of operations. Cardia undertakes no obligation to
revise any forward-looking statements in order to reflect events or
circumstances that may arise after the date of this report.


                                        9
<PAGE>


                                     PART II

                                OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  EXHIBITS

              The following exhibit is included with this Quarterly Report on
              Form 10-QSB as required by item 601 of Regulation S-B:

              Exhibit 27.           Financial Data Schedule

         (b)  REPORTS ON FORM 8-K

              None.


                                       10
<PAGE>


                                   SIGNATURES

       Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on November 10, 1999.

                                        CARDIA, INC.

                                        By  /s/ Joseph A. Marino
                                           -------------------------------------
                                            Chief Executive Officer


                                       11