<PAGE>   1
                                  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 September 30, 1996

                                       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: 000-28372

                          CARDIAC PATHWAYS CORPORATION

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


          DELAWARE                                                77-0278792
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)




995 BENECIA AVENUE, SUNNYVALE, CA                                  94086
(Address of principal executive offices)                         (Zip Code)



Registrant's telephone number, including area code:  (408) 737-0505



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


As of October 31, 1996 there were 9,304,766 shares of the Registrant's Common
Stock outstanding.

                                        1
<PAGE>   2
                          CARDIAC PATHWAYS CORPORATION

                                      INDEX

<TABLE>
<CAPTION>

PART I.   FINANCIAL INFORMATION                                                PAGE NO.

<S>                                                                            <C>
Item 1.   Financial  Statements and Notes (Unaudited)

          Consolidated Balance Sheets as of September 30, 1996 and
          June 30, 1996 .....................................................     3

          Consolidated Statements of Operations for the three months ended
          September 30, 1996 and 1995 .......................................     4

          Consolidated Statements of Cash Flows for the three months ended
          September 30, 1996 and 1995 .......................................     5

          Notes to Consolidated Financial Statements ........................     6

Item 2.   Management's Discussion and Analysis of Financial Condition and
          and Results of Operations .........................................     8


PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K...................................    20

SIGNATURES...................................................................    21
</TABLE>






                                        2
<PAGE>   3
PART I.   FINANCIAL INFORMATION   

ITEM 1  FINANCIAL  STATEMENTS AND NOTES

                         CARDIAC PATHWAYS CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                                 (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                      September 30,         June 30,
                                                                                         1996               1996 (1)
                                                                                      -------------         --------
                                                  ASSETS
<S>                                                                                   <C>                 <C>    
Current assets:
   Cash and cash equivalents                                                           $   9,430,452      $ 29,112,255
   Short-term investments                                                                 41,182,958        23,760,812
   Accounts receivable, net of allowance for doubtful accounts
      of $9,500 at September 30, 1996 and June 30, 1996                                      537,541           398,997
   Receivable from related party                                                                  --            21,725
   Inventories                                                                               274,328           162,516
   Prepaid expenses                                                                          204,417           234,339
   Notes receivable from related parties                                                          --           256,656
   Other current assets                                                                      502,303           340,291
                                                                                       -------------      ------------
             Total current assets                                                         52,131,999        54,287,591
Property and equipment, net                                                                2,951,761         2,835,355
Notes receivable from related parties                                                          8,556             5,760
Deposits and other assets                                                                     59,910            59,188
                                                                                       -------------      ------------
                                                                                       $  55,152,226      $ 57,187,894
                                                                                       =============      =============

                                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                                     $     472,455      $    511,386
  Accrued compensation and related benefits                                                  341,432           193,511
  Other accrued expenses                                                                     785,657           883,569
  Current obligations under capital leases                                                   837,302           671,538
                                                                                       -------------      ------------
           Total current liabilities                                                       2,436,846         2,260,004
Long-term obligations under capital leases                                                   754,781           602,574
Deferred royalty income                                                                    3,000,000         3,000,000
Note payable                                                                               4,500,000         4,500,000
Interest payable                                                                             869,296           774,421
Commitments
Stockholders' equity:
   Preferred stock, $.001 par value; 5,000,000 shares authorized and none
        issued and outstanding at September 30, 1996 and June 30, 1996                            --                --
   Common stock, $.001 par value; 30,000,000 shares authorized; 9,293,100
       shares issued and outstanding at September 30, 1996 and 9,269,332
       at June 30, 1996                                                                        9,293             9,270
   Additional paid-in capital                                                             78,559,876        77,656,634
   Receivables from stockholders                                                            (406,000)         (406,000)
   Accumulated deficit                                                                   (33,603,525)      (31,053,238)
   Deferred compensation                                                                    (968,341)         (155,771)
                                                                                       -------------      ------------
           Total stockholders' equity                                                     43,591,303        46,050,895
                                                                                       -------------      ------------
                                                                                       $  55,152,226      $ 57,187,894
                                                                                       =============      ============
</TABLE>

(1) Derived from the Company's audited consolidated balance sheet as of June 30,
1996 

                See notes to consolidated financial statements.


                                        3
<PAGE>   4
                          CARDIAC PATHWAYS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)




<TABLE>
<CAPTION>
                                                     Three months ended
                                                       September 30,
                                             -----------------------------
                                                1996               1995           
                                             -----------      ------------

<S>                                          <C>              <C>
Net sales                                    $   779,205      $   123,330
Operating expenses:
   Manufacturing start-up and cost
     of goods sold                               607,813          386,256
   Research and development                    2,616,695        1,438,939
   Selling, general and administrative           680,062          376,375
                                             -----------      -----------
           Total operating expenses            3,904,570        2,201,570
                                             -----------      -----------
Loss from operations                          (3,125,365)      (2,078,240)
Other income (expense):
   Interest income                               696,441          153,388
   Interest expense                             (125,031)        (139,080)
   Other, net                                      3,668            8,811
                                             -----------      -----------
           Total other income (expense)          575,078           23,119
                                             -----------      -----------
Net loss                                     $(2,550,287)     $(2,055,121)
                                             ===========      ===========

Net loss per share                           $     (0.27)
                                             ===========

Shares used in computing
    net loss per share                         9,284,000
                                             ===========

Pro forma net loss per share                                  $     (0.29)
                                                              ===========

Shares used in computing pro forma
    net loss per share                                          6,975,000
                                                              ===========
</TABLE>

                See notes to consolidated financial statements.


                                        4
<PAGE>   5
                          CARDIAC PATHWAYS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                      Three months ended
                                                                         September 30,
                                                             -----------------------------------
                                                                 1996                   1995
                                                             -------------          ------------ 
<S>                                                         <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                     $ (2,550,287)          $ (2,055,121)
Adjustments to reconcile net loss to net cash
   used in operating activities:
   Depreciation and amortization                                  238,418                172,907
   Amortization of deferred compensation                           42,930                    --
   Loss on disposal of property and equipment                        --                   12,860
Changes in operating assets and liabilities:
   Accounts receivable                                           (138,544)               (70,189)
   Receivable from related party                                   21,725                108,403
   Inventories                                                   (111,812)                23,909
   Prepaid expenses                                                29,922                 43,070
   Other current assets                                          (162,012)                85,761
   Accounts payable                                               (38,931)              (446,380)
   Accrued compensation and related benefits                      147,921                110,787
   Other accrued expenses                                         (97,912)              (156,621)
   Interest payable                                                94,875                100,000
                                                             ------------            -----------
Net cash used in operating activities                          (2,523,707)            (2,070,614)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments                            (21,922,146)                    --
Maturities of short-term investments                            4,500,000              1,016,003
Purchase of property and equipment, net                                --               (166,865)
Decrease in notes receivable                                      253,860                  3,750
(Increase) in deposits and other assets                              (722)                (3,845)
                                                             ------------            -----------
Net cash provided by (used in) investing activities           (17,169,008)               849,043
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligations               (177,718)              (133,852)
Capital lease obligations incurred, net                           140,865                     --
Proceeds from sale of common stock                                 47,765                    400
                                                             ------------            -----------
Net cash provided by (used in) financing activities                10,912               (133,452)
                                                             ------------            -----------
Net decrease in cash and cash equivalents                     (19,681,803)            (1,355,023)
   Cash and cash equivalents at beginning of period            29,112,255              5,372,945
                                                             ------------            -----------
   Cash and cash equivalents at end of period                $  9,430,452            $ 4,017,922
                                                             ============            ===========
</TABLE>




                See notes to consolidated financial statements.


                                        5
<PAGE>   6
                          CARDIAC PATHWAYS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996
                                   (UNAUDITED)


1.       BASIS OF PRESENTATION

         The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

         The operating results for the three month period ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 1997. The accompanying consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1996.

2.        SHORT-TERM INVESTMENTS

         At September 30, 1996 and June 30, 1996, all short-term investments
were classified as held-to-maturity and available-for-sale. The amortized cost
of held-to-maturity securities is adjusted for the amortization of premiums and
the accretion of discounts to maturity. Such amortization of premiums and
accretion of discounts are included in interest income. At September 30, 1996
and June 30, 1996, these securities were valued at amortized cost, which
approximates fair value. Available-for-sale securities are carried at fair value
with unrealized gains and losses, net of tax, reported as a separate component
of stockholders' equity. To date, the Company has not experienced any
significant unrealized gains or losses on available-for-sale securities and,
accordingly, no adjustments have been made to stockholders' equity.

                                        6
<PAGE>   7
         The following is a summary of held-to-maturity and available-for-sale
securities at cost which approximates fair value:

<TABLE>
<CAPTION>

                                    SEPTEMBER 30,              JUNE 30,
DESCRIPTION                             1996                     1996
-----------                         -------------           ----------------

<S>                                 <C>                     <C>
Held-to-maturity:
    U.S. government agency          $  10,980,724           $    1,999,879
    U.S. corporate bonds               23,902,234               16,760,933
Available-for-sale:
    Money market instruments            6,300,000                 5,000,000
                                    -------------           ---------------

                                    $  41,182,958           $    23,760,812
                                    =============           ===============
</TABLE>

         There were no realized gains or losses for the three month periods
ending September 30, 1996 and 1995. The cost of securities sold is based on the
specific identification method. Held-to-maturity securities at September 30,
1996 mature at various dates through December 1997.

3.       CONSOLIDATED BALANCE SHEET COMPONENTS

         Certain balance sheet components are as follows:


<TABLE>
<CAPTION>

                                              SEPTEMBER 30,          JUNE 30,
                                                   1996                1996
                                             --------------        ----------
<S>                                          <C>                   <C>
Inventories:
     Raw materials                             $  177,226          $  125,459
     Work-in-process                               10,208                  --
     Finished goods                                86,894              37,057
                                               ----------          ----------
                                     
                                               $  274,328          $  162,516
                                               ==========          ==========
</TABLE>


<TABLE>
<CAPTION>

                                             SEPTEMBER 30,          JUNE 30,
                                                1996                  1996
                                             -------------         ---------- 
<S>                                          <C>                  <C>
Property and equipment:
     Equipment                               $  3,763,606         $ 3,472,535
     Leasehold improvements                       103,840              83,047
     Equipment-in-process                       1,070,832           1,027,872
                                             ------------         -----------
                                                4,938,278           4,583,454
     Less accumulated depreciation and
     amortization                               1,986,517           1,748,099
                                             ------------         -----------
                                             $  2,951,761         $ 2,835,355
                                             ============         ===========
</TABLE>



                                        7
<PAGE>   8
4.       STOCKHOLDERS' EQUITY

         In June 1996, the Company completed its initial public offering of
2,500,000 shares of common stock. The net proceeds to the Company were
approximately $43,137,000. Upon completion of the offering, all of the preferred
stock outstanding automatically converted into common stock.

5.       NET LOSS PER SHARE

         Except as noted below, net loss per share is computed using the
weighted average number of shares of common stock outstanding. Common equivalent
shares from stock options, warrants and convertible preferred stock are excluded
from the computation of net loss per share for the three months ended September
30, 1996 as their effect is antidilutive. Pro forma net loss per share for the
three months ended September 30, 1995 is computed using the weighted average
number of shares of common stock outstanding and includes, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common and common
equivalent shares issued at prices substantially below the public offering price
during the twelve-month period prior to the filing of the initial public
offering as if they were outstanding for the entire period (using the treasury
stock method). In addition, the computation of pro forma net loss per share for
the three months ended September 30, 1995 gives effect to the conversion of
convertible preferred shares not included above that automatically converted
upon completion of the Company's initial public offering (using the if-converted
method) from the original date of issuance.



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

         The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements based
upon current expectations that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, that include, but are
not limited to, the risks discussed in "Factors That May Impact Future
Operations" as well as those discussed in the following "Overview" section.
These forward-looking statements include the statement in the first paragraph of
"Overview" relating to expectations of operating losses, the statement in the
second paragraph of "Overview" relating to anticipated filing and approval time
periods for PMA applications, the statement in the second paragraph of "Net
Sales" relating to the time period within which Arrow will begin to manufacture
a product, the last sentence in each of the "Manufacturing Start-up and Cost of
Goods Sold", "Research and Development" and "Selling, General, and
Administrative" paragraphs, the statements regarding future capital expenditures
in the third paragraph of "Liquidity and Capital Resources" and the Company's
forecast in the fourth paragraph of "Liquidity and Capital Resources" of the
period of time through which its financial resources will be adequate to support
its operations.

OVERVIEW

         The Company was founded in April 1991 and to date has engaged primarily
in researching, developing, testing and obtaining regulatory clearances for its
products. The Company has experienced significant operating losses since
inception and, as of September 30, 1996, had an accumulated deficit of
approximately $33.6 million. The Company has generated only limited revenues
from sales of Trio/Ensemble diagnostic catheters and Radii supraventricular
tachycardia mapping and ablation 

                                       8
<PAGE>   9
catheters. The Company expects its operating losses to continue through at least
the end of fiscal 1998 as it continues to expend substantial funds for clinical 
trials in support of regulatory approvals, expansion of research and development
activities, establishment of commercial-scale manufacturing capabilities and 
expansion of sales and marketing activities.

         The Company believes that its Ventricular Tachycardia Ablation System,
Arrhythmia Mapping Systems and Atrial Fibrillation Ablation System and their
component catheters and equipment are currently the Company's only significant
potential products. The Ventricular Tachycardia Ablation System and Arrhythmia
Mapping System for diagnostic mapping of ventricular tachycardia are in the
early stages of clinical testing, and clinical data obtained to date are
insufficient to demonstrate the safety and efficacy of these products under
applicable United States Food and Drug Administration ("FDA") regulatory
guidelines. In addition, the ablation catheter and ablation equipment that
together form the Atrial Fibrillation Ablation System and the mapping catheter
and mapping equipment that together form the Arrhythmia Mapping System for
atrial fibrillation are still under development. The design, manufacturing,
labeling, distribution and marketing of the Company's products are subject to
extensive and rigorous government regulation in the United States and certain
other countries where the process of obtaining required regulatory approvals is
lengthy, expensive and uncertain. In order for the Company to market the
Ventricular Tachycardia Ablation System, Arrhythmia Mapping Systems or Atrial
Fibrillation Ablation System and related catheters and equipment in the United
States, the Company must obtain clearance approval from the FDA. At the
earliest, the Company does not anticipate filing a PMA application for any
system for at least the next two years, and does not anticipate receiving a PMA
for any such system until at least one to three years after such PMA application
is accepted for filing, if at all. The Company will not generate any significant
revenue in the United States until such time, if ever, as its Ventricular
Tachycardia Ablation System, Arrhythmia Mapping Systems or Atrial Fibrillation
Ablation System obtain clearance or approval from the FDA. Even if one or more
of the Company's products obtain FDA clearance or approval, there can be no
assurance that any of the Company's products for diagnosis and treatment of
ventricular tachycardia and atrial fibrillation will be successfully
commercialized or that the Company will achieve significant revenues from either
international or domestic sales.

         The Company does not have any experience in manufacturing, marketing or
selling its products for diagnosis and treatment of ventricular tachycardia and
atrial fibrillation in commercial quantities. If the Company receives FDA
clearance or approval for its products, it will need to expend significant
capital resources and develop manufacturing expertise to establish large-scale
manufacturing capabilities. Manufacturers often encounter difficulties in
scaling up production of new products, including problems involving production
yields, quality control and assurance, component supply shortages, shortages of
qualified personnel, compliance with FDA regulations, and the need for further
FDA approval of new manufacturing processes. In addition, if FDA clearances or
approvals are received, the Company intends to market its products primarily
through a direct sales force in the United States and indirect sales channels
internationally. Establishing a marketing and sales capability sufficient to
support sales in commercial quantities will require substantial efforts and
require significant management and financial resources.

                                       9
<PAGE>   10
RESULTS OF OPERATIONS

         Net Sales. The Company's net sales to date have resulted primarily from
limited sales of the Trio/Ensemble diagnostic catheters and Radii
supraventricular tachycardia mapping and ablation catheters. The Company's net
sales increased to $779,000 for the three months ended September 30, 1996
compared to $123,000 for the three months ended September 30, 1995. The increase
in net sales was primarily attributable to increased sales of Trio/Ensemble
diagnostic catheters.

         In December 1995, the Company received $3.0 million pursuant to a
royalty agreement with Arrow International, Inc. ("Arrow"). This amount was
recorded as deferred royalty income and will be amortized to income for those
Trio/Ensemble catheters that Arrow manufactures and sells. The royalty rate is
5% of the Trio/Ensemble catheter's sales price. To date no royalty income has
been earned by the Company because Arrow has not manufactured the Trio/Ensemble
catheter. The Company believes that Arrow will begin manufacturing the
Trio/Ensemble product by the end of calendar 1996. As a result, by the end of
calendar 1996, Arrow will no longer purchase the Trio/Ensemble catheter from the
Company. At such time the Company will begin to recognize royalty income from
Arrow's sales of the Trio/Ensemble catheter. The prepaid royalty will be
amortized to income based on 5% of the selling price paid by Arrow's customers
for the Trio/Ensemble diagnostic catheters.

         Manufacturing Start-Up and Cost of Goods Sold. Manufacturing start-up
and cost of goods sold primarily includes raw materials costs, catheter
fabrication costs and system assembly and test costs. Manufacturing start-up and
cost of goods sold were $608,000 for the three months ended September 30, 1996,
resulting in a gross margin of approximately $171,000 or 22% of net sales. For
the three months ended September 30, 1995, manufacturing start-up and cost of
goods sold were $386,000, producing a gross margin deficit of approximately
$263,000. The improvement in gross margins was primarily attributable to the
non-recurrence in the three months ended September 30, 1996 of certain
manufacturing start-up costs associated with the expansion of catheter
production capacity, partially offset by increased compensation and associated
labor costs for assembly personnel. In addition, increased production and sales
levels for the Trio/Ensemble diagnostic catheters have resulted in generally
lower per unit manufacturing costs. The Company expects future gross margins to
fluctuate as other products are commercialized.

         Research and Development. Research and development expenses include
costs associated with product research, clinical trials, prototype development,
obtaining regulatory approvals and costs associated with hiring regulatory,
clinical, research and engineering personnel. Research and development expenses
increased to $2.6 million for the three months ended September 30, 1996 compared
to $1.4 million for the three months ended September 30, 1995. The increase was
primarily attributable to increased costs associated with the hiring of
additional engineering, regulatory and clinical personnel, increased prototype
development costs, and increased costs related to manufacture and placement of
Ventricular Tachycardia Ablation and Arrhythmia Mapping Systems and related
catheter products at clinical sites in the United States and Europe. The Company
believes that research and development expenditures will increase in the future
as the Company invests in product and process improvements related to its
ventricular tachycardia and atrial fibrillation products, expands clinical
research activities and increases its research and development efforts related
to new products and technologies.

                                       10
<PAGE>   11
         Selling, General and Administrative. Selling, general and
administrative expenses include compensation and benefits for sales, marketing,
senior management and administrative personnel, various legal and professional
fees including those in connection with obtaining patent protection, and costs
of trade shows. Selling, general and administrative expenses increased to
$680,000 for the three months ended September 30, 1996 compared to $376,000 for
the three months ended September 30, 1995. The increase was primarily
attributable to increased expenditures for administrative personnel and services
to support expanding international sales and marketing activities, increased
professional fees related to the filing and registration of the Company's
patents, costs related to obtaining certain insurance policies and investor
relations expenses. The Company anticipates that selling, general and
administrative expenses will increase in future periods as additional personnel
are added to support growing business operations in all functional areas.

         Other Income (Expense), Net. Other income (expense), net increased to
net other income of $575,000 for the three months ended September 30, 1996
compared to net other income of $23,000 for the three months ended September 30,
1995. The net increase is the result of interest income earned on substantially
higher cash, cash equivalent and short-term investment balances following the
closing of the Company's initial public offering in June 1996, the net proceeds
of which were approximately $43.1 million.

         Net Loss. The Company's net loss increased to $2.6 million for the
three months ended September 30, 1996 compared to $2.1 million for the three
months ended September 30, 1995. The increase in the net loss primarily resulted
from increased product development and clinical research activity, partially
offset by increased sales and interest income.

LIQUIDITY AND CAPITAL RESOURCES

         Since inception, the Company has financed its operations through a
combination of private placements of equity securities yielding approximately
$33.5 million, a private placement of debt securities yielding approximately
$4.5 million, equipment lease financing arrangements yielding approximately $2.8
million and a prepaid royalty arrangement yielding $3.0 million. In addition,
the Company closed its initial public offering in June 1996 raising net proceeds
of approximately $43.1 million. As of September 30, 1996, the Company had
approximately $50.6 million in cash, cash equivalents and short-term
investments.

         Net cash used in operating activities was approximately $2.5 million
and $2.1 million for the three months ended September 30, 1996 and 1995,
respectively. For such periods, net cash used in operating activities resulted
primarily from net losses. Net cash used in investing activities was
approximately $17.2 million the three months ended September 30, 1996 and net
cash provided by investing activities was approximately $849,000 for the three
months ended September 30, 1995. The net cash used in investing activities for
the three months ended September 30, 1996 was primarily attributable to the
purchase of short-term investments, partially offset by maturities of short-term
investments. The net cash provided by investing activities for the three months
ended September 30, 1995 was primarily attributable to maturities of short-term
investments. Net cash provided by financing activities was approximately $11,000
for the three months ended September 30, 1996 and net cash used in financing
activities was $133,000 for the three months ended September 30, 1995.

         As of September 30, 1996, the Company had capital equipment of $4.9
million less accumulated depreciation and amortization of $2.0 million to
support its clinical, development, manufacturing and administrative activities.
The Company has financed approximately $2.8 million from capital lease


                                       11
<PAGE>   12
obligations through September 30, 1996. The Company currently has an unused
equipment lease line facility of $328,000 which expires on December 31, 1996,
and expects to fully utilize this lease line and a portion of its existing cash
resources in connection with the purchase of additional capital equipment over
the next 12 months. The Company expects capital expenditures to increase over
the next several years as it expands facilities and acquires equipment to
support the planned expansion of manufacturing capabilities.

         The Company's future liquidity and capital requirements will depend
upon numerous factors, including 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, marketing and sales activities, the extent to which
the Company's products gain market acceptance, and competitive developments.
Although the Company believes that the proceeds from its initial public offering
together with the Company's current cash balances and cash generated from the
future sale of products will be sufficient to meet the Company's operating and
capital requirements through calendar 1998, there can be no assurance that the
Company will not require additional financing within this time frame.

         The factors described in the previous paragraph and elsewhere in this
report will impact the Company's future capital requirements and the adequacy of
its available funds. The Company may be required to raise additional funds
through public or private financing, collaborative relationships or other
arrangements. There can be no assurance that such additional funding, if needed,
will be available on terms attractive to the Company, or at all. Furthermore,
any additional equity financing may 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 could have
a material adverse effect on the Company's business, financial condition and
results of operations.

FACTORS THAT MAY IMPACT FUTURE OPERATIONS

CLINICAL TRIALS

         The Ventricular Tachycardia Ablation System and Arrhythmia Mapping
System for diagnostic mapping of ventricular tachycardia are in the early stages
of clinical testing. Clinical data obtained to date are insufficient to
demonstrate the safety and efficacy of these products under applicable FDA
regulatory guidelines. There can be no assurance that any of the Company's
products will prove to be safe and effective in clinical trials under applicable
United States or international regulatory guidelines or that additional
modifications to the Company's products will not be necessary. In addition, the
clinical trials may identify significant technical or other obstacles to be
overcome prior to obtaining necessary regulatory or reimbursement approvals. In
addition, the ablation catheter and ablation equipment that together form the
Company's Atrial Fibrillation Ablation System and the mapping catheter and
mapping equipment that together form the Company's Arrhythmia Mapping Systems
for atrial fibrillation are still under development. There can be no assurance
that the Company will be successful in completing development of the atrial
fibrillation products and submitting the appropriate IDEs or that the FDA will
permit the Company to undertake clinical trials of the atrial fibrillation
products. If the Ventricular Tachycardia Ablation System, Arrhythmia Mapping
Systems and Atrial Fibrillation Ablation System and their component catheters
and equipment do not prove to be safe and effective in clinical trials or if the
Company is otherwise unable to commercialize these products successfully, the
Company's business, financial condition and results of operations will be
materially 


                                       12
<PAGE>   13
adversely affected. In addition, because ablation treatment of these cardiac
arrhythmias is a relatively new and to date untested treatment, the long-term
effects of radiofrequency ablation on patients are unknown. As a result, the
long-term success of ablation therapy in treating ventricular tachycardia and
atrial fibrillation will not be known for several years.

MARKETING AND DISTRIBUTION

         The Company currently has only a limited sales and marketing
organization. If FDA clearances or approvals are received for the Company's
ventricular tachycardia or atrial fibrillation products, the Company intends to
market its products primarily through a direct sales force in the United States
and indirect sales channels internationally.

         Establishing a marketing and sales capability sufficient to support
sales in commercial quantities will require substantial efforts and require
significant management and financial resources. There can be no assurance that
the Company will be able to build such a marketing staff or sales force, that
establishing such a marketing staff or sales force will be cost-effective or
that the Company's sales and marketing efforts will be successful. If the
Company is successful in obtaining the necessary regulatory approvals for its
ventricular tachycardia and atrial fibrillation products in international
markets, it expects to establish a sales and marketing capability in those
markets primarily through distributors. The Company has not begun discussions
with all needed international distributors. There can be no assurance that the
Company will be able to enter into agreements with desired distributors on a
timely basis or at all, or that such distributors will devote adequate resources
to selling the Company's products. Failure to establish appropriate distribution
relationships could have a material adverse effect upon the Company's business,
financial condition and results of operations.

MANUFACTURING

         Components and raw materials are purchased from various qualified
suppliers and subjected to stringent quality specifications. The Company
conducts quality audits of suppliers and is establishing a vendor certification
program. A number of components such as the computer workstation, the fluid
pump, integrated circuit components, flex circuit and biocompatible coating are
provided by sole source suppliers. For certain of these components, there are
relatively few alternative sources of supply, and establishing additional or
replacement vendors for such components, particularly flex circuits, could not
be accomplished quickly. The Company plans to qualify additional suppliers if
and as future production volumes increase. Because of the long lead time for
some components that are currently available from a single source, a vendor's
inability to supply such components in a timely manner could have a material
adverse effect on the Company's ability to manufacture the mapping basket,
mapping equipment and ablation equipment and therefore on its business,
financial condition and ability to market its products as currently
contemplated.

         The Company has no experience manufacturing its products in the volumes
that will be necessary for the Company to achieve significant commercial sales,
and there can be no assurance that reliable, high-volume manufacturing capacity
can be established or maintained at commercially reasonable costs. If the
Company receives FDA clearance or approval for its products, it will need to
expend significant capital resources and develop manufacturing expertise to
establish large-scale manufacturing capabilities. Manufacturers often encounter
difficulties in scaling up production of new products, including problems
involving production yields, quality control and assurance, component supply
shortages, shortages of qualified personnel, compliance with FDA regulations,
and the need for further FDA approval of new manufacturing processes. In
addition, the Company believes that 


                                       13
<PAGE>   14
substantial cost reductions in its manufacturing operations will be required for
it to commercialize its catheters and systems on a profitable basis. Any
inability of the Company to establish and maintain large-scale manufacturing
capabilities would have a material adverse effect on the Company's business,
financial condition and results of operations.

         The Company's manufacturing facilities are subject to periodic
inspection by regulatory authorities, and its operations must undergo GMP
compliance inspections conducted by the FDA. To date, the Company's facilities
and manufacturing processes have not undergone any such inspections. The Company
will be required to comply with GMP requirements in order to produce products
for sale in the United States and with ISO 9001 standards in order to produce
products for sale in Europe. Any failure of the Company to comply with GMP or
ISO 9001 standards may result in the Company being required to take corrective
actions, such as modification of its policies and procedures. The State of
California also requires that the Company obtain a license to manufacture
medical devices. To date, the Company's facilities and manufacturing processes
have not undergone any such inspection. If the Company is unable to maintain
such a license, it would be unable to manufacture or ship any product, which
inability would have a material adverse effect on the Company's business,
financial condition and results of operations.

PATENTS AND PROPRIETARY RIGHTS

         The Company's success will depend in part on its ability to obtain
patent and copyright protection for its products and processes, to preserve its
trade secrets and to operate without infringing or violating the proprietary
rights of third parties. The Company's strategy is to actively pursue patent
protection in the United States and foreign jurisdictions for technology that it
believes to be proprietary and that offers a potential competitive advantage for
its products. The Company holds issued and allowed Patents covering a number of
fundamental aspects of the Company's Ventricular Tachycardia Ablation System,
Arrhythmia Mapping Systems and Atrial Fibrillation Ablation System. The patent
positions of medical device companies, including those of the Company, are
uncertain and involve complex and evolving legal and factual questions. The
coverage sought in a patent application either can be denied or significantly
reduced before or after the patent is issued. Consequently, there can be no
assurance that any patents from pending patent applications or from any future
patent application will be issued, that the scope of any patent protection will
exclude competitors or provide competitive advantages to the Company, that any
of the Company's patents will be held valid if subsequently challenged or that
others will not claim rights in or ownership of the patents and other
proprietary rights held by the Company. In addition, there can be no assurance
that competitors, many of which have substantial resources and have made
substantial investments in competing technologies, will not seek to apply for
and obtain patents that will prevent, limit or interfere with the Company's
ability to make, use or sell its products either in the United States or in
international markets. Litigation or regulatory proceedings, which could result
in substantial cost and uncertainty to the Company may also be necessary to
enforce patent or other intellectual property rights of the Company or to
determine the scope and validity of other parties' proprietary rights. There can
be no assurance that the Company will have the financial resources to defend its
patents from infringement or claims of invalidity.

         In addition to patents, the Company relies on trade secrets and
proprietary know-how to compete, which it seeks to protect, in part, through
appropriate confidentiality and proprietary information agreements. These
agreements generally provide that all confidential information developed or made
known to individuals by the Company during the course of the relationship with
the Company is to by kept confidential and not disclosed to third parties,
except in specific circumstances. The agreements also generally provide that all
inventions conceived by the individual in the course of 


                                       14
<PAGE>   15
rendering service to the Company shall be the exclusive property of the Company.
There can be no assurance that proprietary information or confidentiality
agreements with employees, consultants and others will not be breached, that the
Company will have adequate remedies for any breach, or that the Company's trade
secrets will not otherwise become known to or independently developed by
competitors.

         The medical device industry has been characterized by extensive
litigation regarding patents and other intellectual property rights, and
companies in the medical device industry have employed intellectual property
litigation to gain a competitive advantage. There can be no assurance that the
Company will not become subject to patent infringement claims or litigation in a
court of law, or interference proceedings declared by the United States Patent
and Trademark Office ("USPTO") to determine the priority of inventions or an
opposition to a patent grant in a foreign jurisdiction. The defense and
prosecution of intellectual property suits, USPTO interference or opposition
proceedings and related legal and administrative proceedings are both costly and
time-consuming. Any litigation, opposition or interference proceedings will
result in substantial expense to the Company and significant diversion of effort
by the Company's technical and management personnel. An adverse determination in
litigation or interference proceedings to which the Company may become a party
could subject the Company to significant liabilities to third parties, require
disputed rights to be licensed from third parties or require the Company to
cease using such technology. Although patent and intellectual property disputes
in the medical device area have often been settled through licensing or similar
arrangements, costs associated with such arrangements may be substantial and
could include ongoing royalties. Furthermore, there can be no assurance that
necessary licenses from others would be available to the Company on satisfactory
terms, if at all. Adverse determinations in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent the Company
from manufacturing and selling its products, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company is aware of certain patents owned or licensed by others and relating
to cardiac catheters and cardiac monitoring. Certain enhancements of the
Company's products are still in the design and pre-clinical testing phase.
Depending on the ultimate design specifications and results of pre-clinical
testing of these enhancements there can be no assurance that the Company would
be able to obtain a license to such patents or that a court would find that such
patents are either not infringed by such enhancements or are invalid. Further,
there can be no assurance that owners or licensees of these patents will not
attempt to enforce their patent rights against the Company in a patent
infringement suit or other legal proceeding, regardless of the likely outcome of
such suit or proceeding.

COMPETITION

         At present, the Company considers its primary competition to be
companies involved in current, more established therapies for the treatment of
ventricular tachycardia and atrial fibrillation, including drugs, external
electrical cardioversion and defibrillation, implantable defibrillators,
ablation accompanied by pacemaker implantation, and open-heart surgery. In
addition, several competitors are also developing new approaches and new
products for the treatment and mapping of ventricular tachycardia and atrial
fibrillation, including ablation systems using ultrasound, microwave, laser and
cryoablation technologies and mapping systems using contact mapping,
single-point spacial mapping and non-contact, multisite electrical mapping
technologies. Many of the Company's competitors have an established presence in
the field of interventional cardiology and electrophysiology. Many competitors
have substantially greater financial and other resources than the Company,
including larger research and development staffs and more experience and
capabilities in conducting research and development activities, testing products
in clinical trials, obtaining regulatory approvals, and manufacturing marketing


                                       15
<PAGE>   16
and distributing products. There can be no assurance that the Company will
succeed in developing and marketing technologies and products that are more
clinically efficacious and cost effective than the more established treatments
or the new approaches and products developed and marketed by its competitors.
Furthermore, there can be no assurance that the Company will succeed in
developing new technologies and products that are available prior to its
competitors' products. The failure of the Company to demonstrate the efficacy
and cost effective advantages of its products over those of its competitors or
the failure to develop new technologies and products before its competitors
could have a material adverse effect on the Company's business, financial
condition and results of operations.

         The Company believes that the primary competitive factors in the market
for cardiac ablation and mapping devices are safety, efficacy, ease of use and
price. In addition, the length of time required for products to be developed and
to receive regulatory and, in some cases, reimbursement approval is an important
competitive factor. The medical device industry is characterized by rapid and
significant technological change. Accordingly, the Company's success will depend
in part on its ability to respond quickly to medical and technological changes
through the development and introduction of new products. Product development
involves a high degree of risk and there can be no assurance that the Company's
new product development efforts will result in any commercially successful
products. The Company believes it competes favorably with respect to these
factors, although there is no assurance that it will be able to continue to do
so.

GOVERNMENT REGULATION

United States

         Clinical testing, manufacture and sale of the Company's products are
subject to regulation by numerous governmental authorities, principally the FDA
and corresponding state and foreign regulatory agencies. Pursuant to the FDC
Act, the FDA regulates the clinical testing, manufacture, labeling, distribution
and promotion of medical devices. Noncompliance with applicable requirements can
result in, among other things, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, failure of the
government to grant premarket clearance or premarket approval for devices,
withdrawal of marketing approvals, a recommendation by the FDA that the Company
not be permitted to enter into government contracts and criminal prosecution.
The FDA also has the authority to request repair, replacement or refund of the
cost of any device manufactured or distributed by the Company.

         Before a new device can be introduced into the market, the manufacturer
must generally obtain marketing clearance through a premarket notification under
Section 510(k) of the FDC Act ("510(k)") or an approval of a PMA application
under Section 515 of the FDC Act. Commercial distribution of a device for which
a 510(k) clearance is required can only begin after the FDA issues an order
finding the device to be "substantially equivalent" to a predicate device. If
the Company cannot establish that a proposed device is substantially equivalent
to a legally marketed predicate device, the Company must seek premarket approval
of the proposed device from the FDA through the submission of a PMA application.

         The process of obtaining a PMA and other required regulatory approvals
can be expensive, uncertain, and lengthy, and there can be no assurance that the
Company will ever obtain such approvals. At the earliest, the Company does not
anticipate filing a PMA application for any system for at least the next two
years, and does not anticipate receiving a PMA for any such system until at
least one to three years after such PMA application is accepted for filing, if
at all. There can be no assurance that the FDA 

                                       16
<PAGE>   17
will act favorably or quickly on any of the Company's submissions to the FDA,
and significant difficulties and costs may be encountered by the Company in its
efforts to obtain FDA clearance that could delay or preclude the Company from
selling its products in the United States. Furthermore, there can be no
assurance that the FDA will not request additional data, require that the
Company conduct further clinical studies, causing the Company to incur
substantial cost and delay. In addition, there can be no assurance that the FDA
will not impose strict labeling requirements, onerous operator training
requirements or other requirements as a condition of its PMA approval, any of
which could limit the Company's ability to market its systems. Labeling and
promotional activities are subject to scrutiny by the FDA and, in certain
circumstances, by the Federal Trade Commission ("FTC"). FDA enforcement policy
strictly prohibits the marketing of FDA cleared or approved medical devices for
unapproved uses. Further, if a company wishes to modify a product after FDA
approval of a PMA, including changes in indications or other modifications that
could affect safety or efficacy, additional clearances or approvals will be
required from the FDA. Failure to receive or delays in receipt of FDA clearances
or approvals, including the need for additional clinical trials or data as a
prerequisite to clearance or approval, or any FDA conditions that limit the
ability of the Company to market its systems, could have a material adverse
effect on the Company's business, financial condition and results of operations.

International

         In order for the Company to market its products in Europe and certain
other foreign jurisdictions, the Company must obtain required regulatory
approvals and clearances and otherwise comply with extensive regulations
regarding safety and manufacturing processes and quality. These regulations,
including the requirements for approvals or clearance to market and the time
required for regulatory review, vary from country to country. There can be no
assurance that the Company will obtain regulatory approvals in such countries or
that it will not be required to incur significant costs in obtaining or
maintaining its foreign regulatory approvals. Delays in receipt of approvals to
market the Company's products, failure to receive these approvals or future loss
of previously received approvals could have a material adverse effect on the
Company's business, financial condition and results of operations.

THIRD-PARTY REIMBURSEMENT AND UNCERTAINTY RELATED TO HEALTH CARE REFORM

         In the United States, health care providers, including hospitals and
physicians, that purchase medical products for treatment of their patients,
generally rely on third-party payors, principally federal Medicare, state
Medicaid and private health insurance plans, to reimburse all or a part of the
costs and fees associated with the procedures performed using these products.
The Company's success will be dependent upon, among other things, the ability of
health care providers to obtain satisfactory reimbursement from third-party
payors for medical procedures in which the Company's products are used.
Third-party payors may deny reimbursement if they determine that a prescribed
device has not received appropriate regulatory clearances or approvals, is not
used in accordance with cost-effective treatment methods as determined by the
payor, or is experimental, unnecessary or inappropriate.

         Reimbursement systems in international markets vary significantly by
county and by region within some countries, and reimbursement approvals must be
obtained on a country-by-country basis. Many international markets have
government managed health care systems that control reimbursement for new
products and procedures. In most markets, there are private insurance systems as
well as government managed systems. Market acceptance of the Company's products
will depend on the availability and level of reimbursement in international
markets targeted by the Company. There can be no assurance that the Company will
obtain reimbursement in any country within a particular time, for a particular
time, for a particular amount, or at all.

                                       17
<PAGE>   18
         Regardless of the type of reimbursement system, the Company believes
that physician advocacy of the Company's products will be required to obtain
reimbursement. The Company believes that less invasive procedures generally
provide less costly overall therapies as compared to conventional drug, surgery
and other treatments. In addition, the Company believes that a patient's
underlying arrhythmia will typically not recur after treatment with the
Company's procedures. The Company anticipates that hospital administrators and
physicians would justify the use of the Company's products by the attendant cost
savings and clinical benefits that the Company believes would be derived from
the use of its products. However, there can be no assurance that this will be
the case. There can be no assurance that reimbursement for the Company's
products will be available in the United States or in international markets
under either government or private reimbursement systems, or that physicians
will support and advocate reimbursement for procedures using the Company's
products. Failure by hospitals and other users of the Company's products to
obtain reimbursement from third party payors, or changes in government and
private third-party payors' policies toward reimbursement for procedures
employing the Company's products, would have a material adverse effect on the
Company's business, financial condition and results of operations. Moreover, the
Company is unable to predict what additional legislation or regulation, if any,
relating to the health care industry or third-party coverage and reimbursement
may be enacted in the future, or what effect such legislation or regulation
would have on the Company.

PRODUCT LIABILITY AND INSURANCE

         The development, manufacture and sale of medical products entail
significant risk of product liability claims and product failure claims. The
Company has conducted only limited clinical trials and does not yet have, and
will not have for a number of years, sufficient clinical data to allow the
Company to measure the risk of such claims with respect to its products. The
Company faces an inherent business risk of financial exposure to product
liability claims in the event that the use of its products results in personal
injury or death. The Company also faces the possibility that defects in the
design or manufacture of the Company's products might necessitate a product
recall. There can be no assurance that the Company will not experience losses
due to product liability claims or recalls in the future. In addition, the
Company will require increased product liability coverage if any potential
products are successfully commercialized. Such insurance is expensive, difficult
to obtain and may not be available in the future on acceptable terms, or at all.
Any claims against the Company's business, financial condition and results of
operations.

EMPLOYEES

         The Company's ability to operate successfully depends in significant
part upon the continued service of certain key scientific, technical, clinical,
regulatory and managerial personnel, and its continuing ability to attract and
retain additional highly qualified scientific, technical, clinical, regulatory
and managerial personnel. Competition for such personnel is intense, and there
can be no assurance that the Company can retain such personnel or that it can
attract or retain other highly qualified scientific, technical, clinical,
regulatory and managerial personnel in the future, including key sales and
marketing personnel. The loss of key personnel or the inability to hire and
retain qualified personnel could have a material adverse effect upon the
Company's business, financial condition and results of operations.

         In addition, in order to complete clinical trials in progress, prepare
additional products for clinical trials, and develop future products, the
Company believes that it will be required to expand its operations, particularly
in the areas of research and development, manufacturing and sales and 

                                       18
<PAGE>   19
marketing. As the Company expands its operations in these areas, such expansion
will likely result in new and increased responsibilities for management
personnel and place significant strain upon the Company's management, operating
and financial systems and resources. To accommodate any such growth and compete
effectively, the Company will be required to implement and improve information
systems, procedures, and controls, and to expand, train, motivate and manage its
work force. The Company's future success will depend to a significant extent on
the ability of its current and future management personnel to operate
effectively, both independently and as a group. There can be no assurance that
the Company's personnel, systems, procedures and controls will be adequate to
support the Company's future operations. Any failure to implement and improve
the Company's operational, financial and management systems or, to expand,
train, motivate or manage employees as required by future growth, if any, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

                                       19
<PAGE>   20
                          CARDIAC PATHWAYS CORPORATION


PART II.        OTHER INFORMATION

ITEM 6.         EXHIBITS AND REPORTS ON FORM 8-K

                (a)   The exhibits listed on the accompanying Exhibit Index are
                      filed as a part hereof.

                (b)   No reports on Form 8-K were filed by the Registrant during
                      the three months ended September 30, 1996.


                                       20
<PAGE>   21
                          CARDIAC PATHWAYS CORPORATION


                                   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:  NOVEMBER 7, 1996            CARDIAC PATHWAYS CORPORATION


                                   /S/ WILLIAM N. STARLING
                                   ------------------------
                                   WILLIAM N. STARLING
                                   PRESIDENT AND CHIEF EXECUTIVE OFFICER


                                   /S/ DAVID W. GRYSKA
                                   -------------------
                                   DAVID W. GRYSKA
                                   VICE PRESIDENT OF FINANCE AND CHIEF FINANCIAL
                                   OFFICER


                                       21
<PAGE>   22

                          CARDIAC PATHWAYS CORPORATION

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.     EXHIBIT DESCRIPTION                                    PAGE NO.
-----------     ---------------------------------------                --------
<S>             <C>                                                    <C>

   11.1         Statement Regarding Computation of 
                Net Loss Per Share ...................                    23

   27.1         Financial Data Schedule ..............                    24
</TABLE>





                                       22