<PAGE>

                                    FORM 10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)

/X/    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES 
                              EXCHANGE ACT OF 1934

For the quarterly period ended MARCH 31, 1999

                                       OR

/ /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934


Commission file number 0-24701

                       CATAPULT COMMUNICATIONS CORPORATION
             (Exact name of Registrant as specified in its charter)


           NEVADA                                         77-0086010
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                     Identification Number)

                             160 SOUTH WHISMAN ROAD
                         MOUNTAIN VIEW, CALIFORNIA 94041

                                 (650) 960-1025

          (Address, including zip code, and telephone number, including
                   area code, of principal executive offices)


     Indicate by check mark whether the registrant (1) has filed all reports 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.

Yes / /   No  /X/*

     As of April 30, 1999, there were 12,631,379 shares of the Registrant's
Common Stock, $.001 par value, outstanding.

     * Registrant became subject to filing requirements of the Securities 
           Exchange Act of 1934, as amended, upon its initial public
                         offering on February 11, 1999

<PAGE>

                       CATAPULT COMMUNICATIONS CORPORATION
                                    FROM 10-Q
                                      INDEX

<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION                                               PAGE
                                                                            ----
<S>                                                                         <C>
Item 1.   Consolidated Financial Statements

          Consolidated Balance Sheets at March 31, 1999 and                   3
          September 30, 1998

          Consolidated Income Statements for the three and six                4
          Months ended March 31, 1999

          Consolidated Statements of Cash Flow for the six                    5
          Months ended March 31, 1999 and 1998

          Notes to Consolidated Financial Statements                          6

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

Item 3.   Quantitative and Qualitative Disclosures About Market Risk         15



PART II--OTHER INFORMATION  

Item 2.   Changes in Securities and Use of Proceeds                          16

Item 6.   Exhibits and Reports on Form 8-K                                   17


SIGNATURES
</TABLE>

<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

                       CATAPULT COMMUNICATIONS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                      SEPTEMBER 30,    MARCH 31, 
                                                                           1998          1999
                                                                           ----          ----
<S>                                                                   <C>             <C>
                                 ASSETS
Current Assets:
   Cash and cash equivalents ......................................     $ 15,229      $ 20,268
     Short-term investments .......................................         --          16,710
   Accounts receivable, net of allowances of $75 and $77
      (unaudited) .................................................        2,007         6,084
   Inventories ....................................................          612           628
   Prepaid expenses ...............................................           95           348
   Deferred income taxes ..........................................          406           406
                                                                        --------      --------
      Total current assets ........................................       18,349        44,444
Property and equipment, net .......................................          778           809
Other assets ......................................................          368           395
                                                                        --------      --------
      Total assets ................................................     $ 19,495      $ 45,648
                                                                        --------      --------
                                                                        --------      --------
      LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable ...............................................     $    782      $    653
   Accrued liabilities ............................................        2,339         4,546
   Deferred revenue ...............................................        1,222         1,515
                                                                        --------      --------
      Total current liabilities ...................................        4,343         6,714
Deferred income taxes .............................................            2             2
                                                                        --------      --------
      Total liabilities ...........................................        4,345         6,716
                                                                        --------      --------
Redeemable common stock ...........................................        5,000          --
                                                                        --------      --------

Stockholders' Equity:
   Common stock, $0.001 par value, 40,000,000 shares
      authorized; 9,992,317 and 12,631,379 (unaudited)
      issued and outstanding actual ...............................           10            13
   Additional paid-in capital .....................................         --          20,303
   Deferred compensation ..........................................         (609)         (509)
   Retained earnings ..............................................       10,756        19,465
   Cumulative translation adjustment ..............................           (7)          (40)
   Treasury stock (50,000 shares at cost) .........................                       (300)
                                                                        --------      --------
      Total stockholders' equity ..................................       10,150        38,932
                                                                        --------      --------
      Total liabilities, redeemable common stock and
        stockholders' equity ......................................     $ 19,495      $ 45,648
                                                                        --------      --------
                                                                        --------      --------
</TABLE>

See Notes to consolidated financial statements.


                                       3
<PAGE>

                       CATAPULT COMMUNICATIONS CORPORATION
                         CONSOLIDATED INCOME STATEMENTS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                         THREE MONTHS                SIX MONTHS
                                                        ENDED MARCH 31,            ENDED MARCH 31,
                                                    ----------------------     ----------------------
                                                      1998           1999         1998         1999
                                                    --------      --------     --------      --------
<S>                                                 <C>           <C>          <C>           <C>     
Revenues:
   Product sales ..............................     $  4,440      $  9,066     $  7,293      $ 13,590
   Services ...................................          573           686        1,166         1,391
                                                    --------      --------     --------      --------
     Total revenues ...........................        5,013         9,752        8,459        14,981
                                                    --------      --------     --------      --------

Cost of revenues:
   Product sales ..............................          379           788          689         1,399
   Services ...................................          129           202          239           391
                                                    --------      --------     --------      --------
     Total cost of revenues ...................          508           990          928         1,790
                                                    --------      --------     --------      --------
Gross profit ..................................        4,505         8,762        7,531        13,191

Operating expenses:
   Research and development ...................          471           744          885         1,297
   Sales and marketing ........................          677         1,302        1,347         2,494
   General and administrative .................          597           734        1,047         1,313
                                                    --------      --------     --------      --------
     Total operating expenses .................        1,745         2,780        3,279         5,104
                                                    --------      --------     --------      --------
Operating income ..............................        2,760         5,982        4,252         8,087

Interest income ...............................          135           251          249           402
Other income (expense) ........................          (37)           54         (137)         (112)
                                                    --------      --------     --------      --------

Income before taxes ...........................        2,858         6,287        4,364         8,377
Provision for taxes ...........................        1,226         2,703        1,872         3,602
                                                    --------      --------     --------      --------

Net income ....................................     $  1,632      $  3,584     $  2,492      $  4,775
                                                    --------      --------     --------      --------
                                                    --------      --------     --------      --------
Earnings per share:
   Basic ......................................     $   0.16      $   0.31     $   0.24      $   0.43
                                                    --------      --------     --------      --------
                                                    --------      --------     --------      --------
   Diluted ....................................     $   0.15      $   0.30     $   0.23      $   0.41
                                                    --------      --------     --------      --------
                                                    --------      --------     --------      --------

Weighted average shares:
   Basic ......................................       10,398        11,636       10,280        11,076
                                                    --------      --------     --------      --------
                                                    --------      --------     --------      --------
   Diluted ....................................       10,925        12,073       10,867        11,513
                                                    --------      --------     --------      --------
                                                    --------      --------     --------      --------
</TABLE>


See Notes to consolidated financial statements.


                                       4

<PAGE>

                       CATAPULT COMMUNICATIONS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         SIX MONTHS ENDED MARCH 31,
                                                                            1998          1999
                                                                          --------      --------
<S>                                                                       <C>           <C>     
Cash flows from operating activities:
Net income ..........................................................     $  2,492      $  4,775
Adjustments to reconcile net income to net cash provided by operating
   activities:
   Depreciation and amortization ....................................           80           156
   Amortization of deferred stock compensation ......................           70           100
   Deferred income taxes ............................................         (113)         --
   Gain on sale of fixed assets .....................................         --               3
   Change in current assets and liabilities:
      Accounts receivable ...........................................       (2,673)       (4,077)
      Inventories ...................................................          (79)          (16)
      Prepaid expenses ..............................................          830          (253)
      Other assets ..................................................            3           (27)
      Accounts payable ..............................................          276          (129)
      Accrued liabilities ...........................................          592         2,207
      Deferred revenue ..............................................          461           293
                                                                          --------      --------
        Net cash provided by operating activities ...................        1,939         3,032
Cash flows from investing activities:
   Proceeds from sale of investments, net ...........................         --         (16,710)
   Purchase of property and equipment ...............................         (188)         (190)
                                                                          --------      --------
        Net cash used by investing activities .......................         (188)      (16,900)
Cash flows from financing activities:
   Stock issuances ..................................................          167        19,240
   Purchase of treasury stock .......................................         --            (300)
                                                                          --------      --------
        Net cash provided by financing activities ...................          167        18,940

Effect of exchange rate changes .....................................           (9)          (33)
                                                                          --------      --------

Increase in cash and cash equivalents ...............................        1,909         5,039
Cash and cash equivalents, beginning of period ......................       10,672        15,229
                                                                          --------      --------

Cash and cash equivalents, end of period ............................     $ 12,581      $ 20,268
                                                                          --------      --------
                                                                          --------      --------
</TABLE>


See Notes to consolidated financial statements.


                                       5
<PAGE>

                       CATAPULT COMMUNICATIONS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1--BASIS OF PRESENTATION:

     These accompanying consolidated financial statements and related notes are
unaudited. However, in the opinion of management, all adjustments, (consisting
only of normal recurring adjustments), which are necessary for the fair
presentation of the financial position and results of operations for the interim
periods presented have been included. These financial statements should be read
in conjunction with the Catapult Communications Corporation ("the Company")
audited financial statements for the year ended September 30, 1998, which were
included as part of the Company's Registration Statement on Form S-1
(Registration No. 333-56627), as declared effective by the Securities and
Exchange Commission on February 11, 1999 (the "Registration Statement"). The
results of operations for the current periods are not necessarily indicative of
results to be expected for the full fiscal year.

NOTE 2--RECENTLY ISSUED ACCOUNTING STANDARDS:

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). This statement will be effective for the Company's fiscal year
ending September 30, 1999. The statement requires the Company to report certain
financial information about operating segments. It also requires that the
Company report certain information about its services, the geographic areas in
which it operates and its major customers. The method specified in SFAS 131 for
determining information to be reported is referred to as the "management
approach." The management approach is based on the way that management organizes
the segments within the enterprise for making operating decisions and assessing
performance. The adoption of SFAS 131 is not expected to have a significant
impact on the Company's financial statement disclosures.

NOTE 3--INITIAL PUBLIC OFFERING

     On February 11, 1999, the Company consummated an initial public offering of
3,352,500 shares of its common stock at a price to the public of $10.00 per
share, of which 2,100,000 shares were issued and sold by the Company and
1,252,500 shares were sold by certain shareholders of the Company. The proceeds,
net of underwriters' fees, to the company from the offering were approximately
$19.5 million. Additional offering expenses are estimated at $1.0 million. On
March 12, 1999 a selling shareholder sold an additional 502,875 shares of the
Company's Common Stock at a price to the public of $10.00 per share unpon
consummation of the exercise of the Underwriters' over-allotment option. The
Company did not receive any of the proceeds from the sale of shares by the
selling shareholders.

NOTE 4--COMPREHENSIVE INCOME

     The components of comprehensive income are as follows (in thousands):

<TABLE>
<CAPTION>
                                          Three months ended        Six months ended
                                              March 31,                 March 31,
                                          1998         1999         1998        1999
                                         -------      -------      -------     -------
<S>                                      <C>          <C>          <C>         <C>    
Net income .........................     $ 1,632      $ 3,584      $ 2,492     $ 4,775

Translation adjustments ............         (16)         (33)          (9)        (34)
                                         -------      -------      -------     -------
Comprehensive income ...............     $ 1,616      $ 3,551      $ 2,483     $ 4,741
                                         -------      -------      -------     -------
                                         -------      -------      -------     -------
</TABLE>


                                       6

<PAGE>

NOTE 5--EARNINGS PER SHARE

     Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share includes
the effect of dilutive potential common shares (options) issued during the
period (using the treasury stock method). The following data is presented in
thousands except per share data:

<TABLE>
<CAPTION>
                                                 Three months ended       Six months ended
                                                      March 31,               March 31,
                                                  1998        1999        1998        1999
                                                 -------     -------     -------     -------
<S>                                              <C>         <C>         <C>         <C>    
Net income .................................     $ 1,632     $ 3,584     $ 2,492     $ 4,775

Weighted average shares outstanding ........      10,398      11,636      10,280      11,076
Dilutive options ...........................         527         437         587         437
                                                 -------     -------     -------     -------
Weighted average shares assuming dilution...      10,925      12,073      10,867      11,513
                                                 -------     -------     -------     -------
                                                 -------     -------     -------     -------

Earnings per share:
Basic ......................................     $   .16     $   .31     $   .24     $   .43
                                                 -------     -------     -------     -------
                                                 -------     -------     -------     -------
Diluted ....................................     $   .15     $   .30     $   .23     $   .41
                                                 -------     -------     -------     -------
                                                 -------     -------     -------     -------
</TABLE>


NOTE 6--INVENTORIES

<TABLE>
<CAPTION>
                                                          September 30,             March 31,
                                                              1998                    1999
                                                             -------                 -------
<S>                                                          <C>                     <C>    
Inventories (in thousands):

Raw Materials.................................               $   391                 $   450
Work-in-process...............................                    39                      54
Finished goods................................                   182                     124
                                                             -------                 -------
                                                             $   612                 $   628
                                                             -------                 -------
                                                             -------                 -------
</TABLE>

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

     THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED CONSOLIDATED FINANCIAL DATA" AND THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO INCLUDED IN THE REGISTRATION STATEMENT. THE
FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING WITHOUT LIMITATION, STATEMENTS OF THE COMPANY'S PLANS,
OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE FACTORS APPEARING BELOW UNDER THE
CAPTION "FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS" SHOULD BE READ AS
BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY MAY
APPEAR IN THIS FORM 10-Q. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS DISCUSSED
HERE.

OVERVIEW

     The Company designs, develops, manufactures, markets and supports an
advanced software-based digital telecommunications test system offering an
integrated suite of testing applications for equipment manufacturers and network
operators. The Company introduced the Digital Communications Tester (the "DCT")
in 1985. The Company maintains an extensive library of software modules that
support more than 116 variants of approximately 30 protocols. The DCT system
performs simulation, load and stress testing, feature verification, conformance
testing and monitoring. The DCT system consists of advanced software and


                                       7

<PAGE>

hardware running on a third-party UNIX-based workstation. In addition, the
Company offers customer support under software support contracts, as well as
installation and training.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's consolidated statements of
income to total revenues.

<TABLE>
<CAPTION>
                                   For the three months    For the six months
                                      ended March 31,        ended March 31,
                                     1998        1999       1998        1999
                                     ----        ----       ----        ----
<S>                                  <C>         <C>        <C>         <C>  
Revenues:
   Product sales ...............     88.6%       93.0%      86.2%       90.7%
   Services ....................     11.4         7.0       13.8         9.3
                                   ------      ------     ------      ------
     Total revenues ............    100.0       100.0      100.0       100.0

Cost of revenues:
   Product sales ...............      7.5         8.1        8.2         9.3
   Services ....................      2.6         2.1        2.8         2.6
                                   ------      ------     ------      ------
     Total cost of revenues ....     10.1        10.2       11.0        11.9
                                   ------      ------     ------      ------
Gross profit ...................     89.9        89.8       89.0        88.1

Operating expenses:
   Research and development ....      9.4         7.6       10.5         8.7
   Sales and marketing .........     13.5        13.4       15.9        16.6
   General and administrative ..     11.9         7.5       12.4         8.8
                                   ------      ------     ------      ------
     Total operating expenses ..     34.8        28.5       38.8        34.1
                                   ------      ------     ------      ------

Operating income ...............     55.1        61.3       50.2        54.0
Interest income ................      2.7         2.6        3.0         2.7
Other income (expense) .........     (0.8)        0.6       (1.6)       (0.8)
                                   ------      ------     ------      ------
Income before taxes ............     57.0        64.5       51.6        55.9
                                   ------      ------     ------      ------
Provision for taxes ............     24.4        27.7       22.1        24.0
                                   ------      ------     ------      ------
Net income .....................     32.6%       36.8%      29.5%       31.9%
                                   ------      ------     ------      ------
                                   ------      ------     ------      ------

Gross margin on product sales ..     91.5%       91.3%      90.6%       89.7%

Gross margin on services .......     77.5%       70.6%      79.5%       71.9%
</TABLE>

THREE MONTHS ENDED MARCH 31, 1998 AND 1999

REVENUES. Revenues increased by approximately 95% from $5.0 million for the
three months ended March 31, 1998 to $9.8 million for the three months ended
March 31, 1999. Over the same period, product sales increased by approximately
104% from $4.4 million to $9.1 million, and services revenue increased by
approximately 20% from $573,000 to $686,000. The increase in product sales was
primarily attributable to increased system sales to customers in Japan. The
increase in services revenue was primarily due to sales of software support
contracts associated with new system sales as well as contract renewals.
Services revenue will vary depending in part on the relative contribution of
each sales region. In Japan, the Company has historically received lower
services revenue in proportion to its product sales, principally due to market
factors affecting the pricing of such services.


                                       8

<PAGE>

COST OF REVENUES. Cost of product sales consists of the costs of board assembly
by independent contractors, purchased components, payroll and benefits for
personnel in product testing, purchasing, shipping and inventory management, as
well as supplies, media and freight. Cost of services consists primarily of the
costs of payroll and benefits for customer support personnel, installation and
training. Cost of product sales increased from $379,000 for the three months
ended March 31, 1998 to $788,000 for the three months ended March 31, 1998. Over
the same period, product sales increased by approximately 104% while the cost of
product sales increased by 108%. As a result, gross margin for product sales
slightly decreased from 91.5% to 91.3% over this same period. Cost of services
increased by approximately 57% from $129,000 for the three months ended March
31, 1998 to $202,000 for the three months ended March 31, 1999 due to personnel
additions. Over the same period, gross margin on services decreased from 77.5%
to 70.6%, as the Company added support personnel in anticipation of increased
sales. Gross margin on services will vary depending in part on the amount of
sales to Japan, where the Company has historically generated lower margins on
services revenue due to market factors affecting pricing.

RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
the costs of payroll and benefits for engineers, equipment and consulting
services. The Company's policy is to evaluate software development projects for
technological feasibility to determine if they meet capitalization requirements.
To date, all software development costs have been expensed as research and
development expenses as incurred. Research and development expenses increased by
approximately 58% from $471,000 for the three months ended March 31, 1998 to
$744,000 for the three months ended March 31, 1999. As a percentage of total
revenues, research and development expenses decreased from 9.4% to 7.6% over the
same period. The increase in absolute dollars was due primarily to an increase
in engineering personnel. The Company expects that research and development
expenses will increase in absolute dollars for the foreseeable future as the
Company intends to continue to invest in product development.

SALES AND MARKETING. Sales and marketing expenses consist primarily of the costs
of payroll, benefits, commissions and bonuses, and travel and promotional
expenses, such as brochures and trade shows. Sales and marketing expenses
increased from $677,000 for the three months ended March 31, 1998 to $1.3
million for the three months ended March 31, 1999. As a percentage of total
revenues, sales and marketing expenses decreased slightly from 13.5% for the
three months ended March 31, 1998 to 13.4% for the three months ended March 31,
1999. The increase in absolute dollars was due primarily to an overall increase
in personnel and the expansion of the Company's sales and support offices. The
Company expects that sales and marketing expenses will increase in absolute
dollars for the foreseeable future as the Company intends to invest in its sales
and marketing capabilities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses include costs
associated with the Company's general management, human resources and finance
functions. General and administrative expenses increased 23% from $597,000 for
the three months ended March 31, 1998 to $734,000 for the three months ended
March 31, 1999 due primarily to an overall increase in personnel and the costs
associated with being a public company. As a percentage of total revenues,
general and administrative expenses decreased from 11.9% to 7.5% over the same
period.

     In the three months ended March 31, 1999, the Company recorded amortization
of deferred compensation expense of $50,000 related to the issuance of options
to purchase the Company's Common Stock at exercise prices subsequently deemed to
be below fair market value. Total compensation expense related to options
granted in fiscal 1997 and 1998 aggregated $805,000, which will be amortized to
general and administrative expense over the respective four-year vesting periods
of the options. At March 31, 1999, approximately $509,000 of deferred
compensation expense remained to be amortized at a rate not exceeding $50,000
per quarter.


                                       9

<PAGE>

INTEREST INCOME. Interest income consists primarily of interest earned on cash
balances. Interest income increased from $135,000 for the three months ended
March 31, 1998 to $251,000 for the three months ended March 31, 1999 due to an
increase in the Company's cash and cash equivalent balances and short-term
investments.

OTHER INCOME (EXPENSE). Other income (expense) represents gains and losses from
fluctuations in exchange rates on transactions denominated in foreign currencies
and other miscellaneous expenses. Other expense was $37,000 for the three months
ended March 31, 1998 and other income of $54,000 for the three months ended
March 31, 1999 due to exchange gains and losses related to transactions
denominated in foreign currencies.

PROVISION FOR INCOME TAXES. Provision for income tax consists of federal, state
and international income taxes. The Company's effective tax rate was 42.9% for
the three months ended March 31, 1998 and 43.0% for the three months ended March
31, 1999. These tax rates primarily reflect the significant percentage of
revenues derived by the Company from international operations, particularly its
operations in Japan, which has a relatively high tax rate. The Company expects
that its future tax rate may vary depending in part on the relative income
contribution by its domestic and foreign operations.


SIX MONTHS ENDED MARCH 31, 1998 AND 1999

REVENUES. Revenues increased by approximately 77% from $8.5 million in six
months ended March 31, 1998 to $15.0 million in the six months ended March 31,
1999. Over the same period, product sales increased by approximately 86% from
$7.3 million to $13.6 million. Services revenue increased by approximately 19%
from $1.2 million in the six months ended March 31, 1998 to $1.4 million in the
six months ended March 31, 1999. The increase in product sales was primarily
attributable to increased system sales to customers in Japan. The increase in
services revenue was primarily due to sales of software support contracts
associated with new system sales as well as contract renewals. Services revenue
will vary depending in part on the relative contributions of each sales region.
In Japan, the Company has historically received lower services revenue in
proportion to its product sales, principally due to market factors affecting the
pricing of such services.

COST OF REVENUES. Cost of product sales increased from $689,000 in the six
months ended March 31, 1998 to $1.4 million in the six months ended March 31,
1999. Product sales increased by approximately 86% during the period, while the
cost of product sales increased by approximately 103%. As a result, over the
same period, gross margin for product sales decreased from 90.6% to 89.7% as the
Company's hardware sales in the first six months of 1999 had a lower proportion
of higher margin products. Cost of services increased by approximately 64% from
$239,000 in the six months ended March 31, 1998 to $391,000 in the six months
ended March 31, 1999. Over the same period, gross margin on services decreased
from 79.5% to 71.9%, as the Company added support personnel in anticipation of
increased sales. Gross margin on services will vary depending in part on the
amount of sales to Japan, where the Company has historically generated lower
margins on services revenue due to market factors affecting pricing.

RESEARCH AND DEVELOPMENT. Research and development expenses increased by
approximately 47% from $885,000 in the six months ended March 31, 1998 to $1.3
million in the six months ended March 31, 1999. As a percentage of total
revenues, research and development expenses decreased from 10.5% to 8.7% over
the same period. The increase in absolute dollars was due primarily to an
increase in engineering personnel.

SALES AND MARKETING. Sales and marketing expenses increased by approximately 85%
from $1.3 million in the six months ended March 31, 1998 to $2.5 million in the
six months ended March 31, 1999. As a percentage of total revenues, sales and
marketing expenses increased from 15.9% to 16.6% over the same period. The
increases were due primarily to an overall increase in personnel and the
expansion of the Company's sales and


                                       10

<PAGE>

support offices. The Company expects that sales and marketing expenses will
increase in absolute dollars for the foreseeable future as the Company intends
to invest in its sales and marketing capabilities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by
approximately 25% from $1.0 million in the six months ended March 31, 1998 to
$1.3 million in the six months ended March 31, 1999. As a percentage of total
revenues, general and administrative expenses decreased from 12.4% to 8.8% over
the same period. The increase in absolute dollars is due primarily to an overall
increase in personnel and the costs associated with being a public company.

INTEREST INCOME. Interest income increased from $249,000 in the six months ended
March 31, 1998 to $402,000 in the six months ended March 31, 1999 due to an
increase in the Company's cash and cash equivalent balances and short-term
investments.

OTHER INCOME (EXPENSE). Other expense was $137,000 in the six months ended March
31, 1998 and was $112,000 in the six months ended March 31, 1999, due to
exchange losses related to transactions denominated in foreign currencies.

PROVISION FOR INCOME TAXES. The Company's effective tax rate was 42.9% in the
six months ended March 31, 1998 and was 43.0% in the six months ended March 31,
1999. The increase in the tax rate primarily reflects the higher percentage of
revenues derived by the Company from international operations in fiscal 1998,
particularly its operations in Japan, which has a relatively higher tax rate.


LIQUIDITY AND CAPITAL RESOURCES

     Historically, the Company has financed its operations, including increases
in accounts receivable and capital equipment acquisitions, primarily through
cash generated from operations and cash raised through its February 1999 initial
public offering.

     The Company's operating activities provided cash of $1.9 million and $3.0
million in the period ending March 31, 1998 and 1999, respectively, principally
from net income in those periods. The use of cash in the Company's operations
for the six months ended March 31, 1998 and 1999 was primarily attributable to a
significant increase in accounts receivable due to increased sales late in the
period. Investing activities, consisting primarily of purchases of short-term
investments and additions to property and equipment, used cash of $188,000 and
$16.9 million in the six months ending March 31, 1998 and 1999, respectively.
Cash flows provided by financing activities in the six months ending March 31,
1998 were attributable to the exercise of employee stock options, and for the
six months ending March 31, 1999, it was primarily attributable to proceeds of
from the Company's initial public offering in March 1999.

     As of March 31, 1999, the Company had working capital of $37.7 million,
cash and cash equivalents of $20.3 million and short-term investments of $16.7
million. As of March 31, 1999, the Company had no bank indebtedness and no
long-term commitments other than operating lease obligations. The Company
expects that capital expenditures will total approximately $700,000 in fiscal
1999. Accounts receivable increased from $2.0 million at September 30, 1998 to
$6.1 million at March 31, 1999 due to increased sales and to the timing of sales
within each quarter.


                                       11

<PAGE>

                FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; LENGTHY SALES CYCLE

     The Company has experienced, and anticipates that it will continue to
experience, significant fluctuations in quarterly revenues and operating
results. The Company's revenues and operating results are relatively difficult
to forecast for a number of reasons, including (i) the variable size and timing
of individual purchases by customers, (ii) seasonal factors that may affect
capital spending by customers, such as the varying fiscal year ends of customers
and the reduction in business during the summer months, particularly in Europe,
(iii) the relatively long sales cycles for the Company's products, (iv) the
timing of hiring sales and technical personnel, (v) changes in timing and amount
of sales incentive compensation, (vi) competitive conditions in the Company's
markets, (vii) exchange rate fluctuations, (viii) changes in the mix of products
sold, (ix) the timing of the introduction and market acceptance of new products
or product enhancements by the Company, its customers, competitors or suppliers,
(x) costs associated with developing and introducing new products, (xi) product
life cycles, (xii) changes in the level of operating expenses relative to
revenues, (xiii) software defects and other product quality problems, (xiv)
customer order deferrals in anticipation of new products, (xv) delays in
purchasing decisions or customer orders due to customer consolidation, (xvi)
supply interruptions, (xvii) changes in the regulatory environment and (xviii)
changes in global or regional economic conditions or in the telecommunications
industry.

     The Company's revenues in any period generally have been, and are likely to
continue to be, derived from relatively small numbers of sales and service
transactions with relatively high average revenues per order. Therefore, the
loss of any orders or delays in closing such transactions could have a more
significant impact on the Company's quarterly revenues and results of operations
than on those of companies with relatively high volumes of sales or low revenues
per order. The Company's products generally are shipped within 15 to 30 days
after orders are received and revenues are recognized upon shipment of the
products, provided no significant vendor obligations remain and collection of
the related receivable is deemed probable. As a result, the Company generally
does not have a significant backlog of orders, and revenues in any quarter are
substantially dependent on orders booked and shipped in that quarter.

     A customer's decision to purchase the Company's products typically involves
a significant technical evaluation, internal procedural delays associated with
large capital expenditure approvals and testing and acceptance of new systems
that affect key operations. For these and other reasons, the sales cycle
associated with the Company's products is typically lengthy and subject to a
number of significant risks over which the Company has little or no control.
Historically, the period between initial customer contact and purchase of the
Company's products has typically ranged from two to nine months, with sales to
new customers (including new divisions within existing customers) at the longer
end of this range. Because of the lengthy sales cycle and the relatively small
number and large size of customers' orders, if revenues forecast from a specific
customer for a particular quarter are not realized in that quarter, the
Company's operating results for that quarter could be materially adversely
affected.

     The Company's expectations for future revenues are predicated, to a large
extent, on the recruitment and hiring of a significant number of employees,
particularly experienced sales and technical personnel. Failure to hire, or
delays in hiring, sufficient sales and technical personnel could have a material
adverse effect on the Company's results of operations for any period.

     Due to the relatively fixed nature of most of the Company's costs,
including personnel and facilities costs, and because operating expenses are
based on anticipated revenue, a decline in revenue from even a limited number of
transactions, failure to achieve expected revenue in any fiscal quarter or
unanticipated variations in the timing of recognition of specific revenues can
cause significant variations in operating results from quarter to quarter and
may in some future quarter result in losses or have a material adverse effect on
the 


                                       12

<PAGE>

Company's business, financial condition and results of operations. The Company
believes, therefore, that period-to-period comparisons of its operating results
should not be relied upon as an indication of future performance.

     For all of the foregoing factors, as well as other unanticipated factors,
it is possible that in some future quarter the Company's results of operations
could fail to meet the expectations of public market analysts or investors. In
such event, or in the event that adverse conditions prevail or are perceived to
prevail generally or with respect to the Company's business, the price of the
Company's Common Stock will likely be materially adversely affected.

DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS

     The Company's customer base is highly concentrated, and a relatively small
number of companies has accounted for substantially all of the Company's
revenues to date. In the three and six months ended March 31, 1999, the
Company's top four customers represented approximately 95% and 90% of total
revenues, respectively. The Company expects that it will continue to depend upon
a relatively limited number of customers for substantially all of its revenues
in future periods, although no customer is presently obligated either to
purchase a specific amount of products or to provide the Company with binding
forecasts of purchases for any period. The loss of a major customer or the
reduction, delay or cancellation of orders from one or more of the Company's
significant customers could materially adversely affect the Company's business,
financial condition and results of operations.

RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS; FOREIGN EXCHANGE RISK

     The Company derived revenues from international customers were
approximately 93% during the three months ended March 31, 1999 and 80% for the
six months ended March 31, 1999. The Company expects that international sales
will continue to account for a significant portion of its revenues in future
periods. The Company sells its products worldwide through its direct sales
force. The Company has offices located in Ottawa, Canada, Chippenham, United
Kingdom and Tokyo, Japan and plans to open new offices in continental Europe.
International sales and operations are subject to inherent risks, including
difficulties in staffing and managing foreign operations, longer customer
payment cycles, greater difficulty in accounts receivable collection, changes in
regulatory requirements or in economic or trade policy, costs related to
localizing products for foreign countries, potentially weaker protection for
intellectual property in certain foreign countries, the burden of complying with
a wide variety of foreign laws and practices, tariffs and other trade barriers,
and potentially adverse tax consequences, including restrictions on repatriation
of earnings. During the last two fiscal years and during the six months ended
March 31, 1999 a significant portion of the Company's sales has been to
customers in Japan. If economic conditions in Japan continue to deteriorate to a
significant extent, the Company's business, financial condition and results of
operations could be materially adversely affected. In addition, although the
Company cannot predict the potential consequences to the Company's business of
the adoption of the Euro as a common currency in Europe, the transition to the
Euro presents a number of risks, including increased competition from European
firms as a result of increased pricing transparency. An inability to obtain
necessary regulatory approvals in foreign markets on a timely basis could also
have a material adverse effect on the Company's business, financial condition
and results of operations.

RAPID TECHNOLOGICAL CHANGE; UNCERTAINTY OF ACCEPTANCE OF THE COMPANY'S PRODUCTS
AND SERVICES

     The market for telecommunications test systems and services is subject to
rapid technological change, evolving industry standards, rapid changes in
customer requirements and frequent product and service introductions and
enhancements. The Company's future success will depend in part on its ability to
anticipate and respond to these changes by enhancing its existing products and
services and by developing and introducing, on a timely and cost-effective
basis, new products, features and services that address the needs of 


                                       13

<PAGE>

its customer base. There can be no assurance that the Company will be successful
in identifying, developing and marketing new products, product enhancements and
related services that respond to technological change or evolving industry
standards or that adequately meet new market demands

     The Company's test systems currently operate only on the UNIX operating
system. The Company's current and prospective customers may require other
operating systems to be used in their telecommunications test systems, such as
Windows 95, Windows NT or Windows 98 or may require the integration of other
industry standards. There can be no assurance that the Company would be able to
successfully adapt its products to such operating systems on a timely or
cost-effective basis, if at all. The failure of the Company to respond to
rapidly changing technologies and to develop and introduce new products and
services in a timely manner would have a material adverse effect on the
Company's business, financial condition and results of operations.

     The Company's success will depend in part on whether a large number of
telecommunications equipment manufacturers and network operators purchase the
Company's products and services. Because the telecommunications market is
rapidly evolving, it is difficult to predict the future success of products and
services in this market. The customers in this market use products from a number
of competing suppliers for various testing purposes, and there has not been
broad adoption of the products of one company. There can be no assurance that
the Company's current or future products or services will achieve widespread
acceptance among network operators, telecommunications equipment manufacturers
or other potential customers or that solutions developed by competitors will not
render the Company's products obsolete or uncompetitive.

YEAR 2000 COMPLIANCE

     Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. These date code fields
will need to accept four-digit entries to distinguish 21st century dates from
20th century dates. As a result, computer systems and/or software used by many
companies may need to be upgraded to comply with such "Year 2000" requirements.
The Company's internal information systems, including its financial accounting,
product development and operations systems, utilize software and hardware
provided by third parties. In most cases, the Company employs widely available
software applications and other products from leading third-party vendors and
has been advised by such vendors that such products are Year 2000 compliant or
that Year 2000 versions will be provided in a timely fashion. However, the
failure of such third-party products to operate properly with regard to the Year
2000 or thereafter could require the Company to incur unanticipated expenses to
remedy any problems or otherwise disrupt the Company's business.

     Non-information technology systems that utilize embedded technology, such
as microcontrollers, may also need to be replaced or upgraded to become Year
2000 compliant. The Company does not believe that it uses any non-information
technology systems the failure of which would be material to the Company's
business, financial condition and results of operations, although there can be
no assurance in this regard.

     The Company generally represents to its customers that it has achieved Year
2000 compliance for its products and believes this to be the case. The Company's
products do not contain hardware components or software which involve the
rollover of dates. The Company's products may be integrated by the Company or
its customers with, or otherwise interact with, non-compliant hardware and
software produced by other companies, which may expose the Company to claims
from its customers. The foregoing may result in the loss of or delay in market
acceptance of the Company's products and services or increase service and
warranty costs to the Company, both of which would have a material adverse
effect on the Company's business, financial condition and results of operations.
Given the large number of such third-party hardware and software products and
the Company's limited resources, the Company does not intend to review such
products for Year 2000 compliance.


                                       14

<PAGE>

     The Company has begun to survey its key vendors regarding their readiness
and exposure with respect to the Year 2000 problem. The Company believes that it
will have adequate inventory on hand of all key components and will therefore
have adequate time to find a replacement vendor in the event supplies from one
of its key vendors are disrupted due to Year 2000 issues. However, there can be
no assurance that its plans will be adequate and that it will not experience
unanticipated disruption in the supply of components which could delay or result
in the loss of revenue.

     The Company's customers are large companies with complex operations and as
such the Company cannot adequately assess the impact which Year 2000 issues
might have on their operations. In addition, the three and six months ended
March 31, 1999, the Company's top four customers represented approximately 95%
and 90% of total revenues, respectively and the operational disruptions caused
by the Year 2000 could have an adverse effect on the timing and size of the
Company's sales during the Year 2000 and a material impact on its business,
financial condition and results of operations.

     To date, the Company has not incurred material costs associated with its
efforts to become Year 2000 compliant. Furthermore, based on its assessment to
date, the Company believes that any future costs associated with its Year 2000
compliance efforts will not be material.

     The Company does not intend to develop any specific contingency plans to
address the effects of any Year 2000 problems. The Company believes that it has
adequate liquidity to sustain a temporary disruption in its business as a result
of such problems. However, since it cannot forecast with any certainty the
impact, extent and duration of any Year 2000 problems on the Company, its
customers or its suppliers, there can be no assurance that the Company's
resources will be adequate to withstand any prolonged disruption.

     ADDITIONAL FACTORS THAT COULD AFFECT FUTURE OPERATING RESULTS OR THE PRICE
OF THE COMMON STOCK ARE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE
PROSPECTUS DATED FEBRUARY 11, 1999 CONTAINED IN THE REGISTRATION STATEMENT.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

INTEREST RATE RISK

     The Company does not use derivative financial instruments in its investment
portfolio. The Company's investment portfolio is generally comprised of
municipal government securities and commercial paper that mature within fourteen
months. The Company places investments in instruments that meet high credit
quality standards. These securities are subject to interest rate risk, and could
decline in value if interest rates increase. Due to the short duration and
conservative nature of the Company's investment portfolio, the Company does not
expect any material loss with respect to its investment portfolio.

FOREIGN EXCHANGE RISK

     The Company's foreign subsidiaries operate and sell the Company's products
in various global markets. As a result, the Company is exposed to changes in
interest rates and foreign currency exchange rates on foreign currency
denominated sales made to foreign subsidiaries. The Company utilizes foreign
currency forward exchange contracts and options to hedge against future
movements in foreign exchange rates that affect certain foreign currency
denominated intercompany receivables. The Company attempts to match the forward
contracts with the underlying receivables being hedged in terms of currency,
amount and maturity. The Company does not use derivative financial instruments
for speculative or trading purposes. Because the impact of movements in currency
exchange rates on forward contracts offsets the related impact on the exposures
hedged, these financial instruments do not subject the Company to speculative
risk that would otherwise result from changes 


                                       15

<PAGE>

in currency exchange rates. Realized gains and losses on forward exchange
contracts may offset foreign exchange transaction gains or losses from
revaluation of foreign currency denominated intercompany receivable balances
which otherwise would be charged to other income (expense). To date, the Company
has not fully hedged all risk associated with its sales denominated in foreign
currencies, and there can be no assurance that the Company's hedging activities,
if any, will be successful.

     At March 31, 1999 the Company had forward exchange contracts maturing in
fiscal 1999 to sell approximately $10.3 million in Japanese yen and Great
Britain Pounds. The fair market value of the contracts at March 31, 1999 was
immaterial. In addition, at March 31, 1999, the Company had foreign currency
option contracts to sell approximately 455 million Japanese yen maturing in
fiscal 1999. This option was out of the money at March 31, 1999 and had an
immaterial fair market value. The cost of the option has been included in other
income (expense).

     The Company has evaluated the potential near-term losses in future
earnings, fair values and cash flows from reasonably possible near-term changes
in market rates or prices and believes that any such losses would not be
material.


PART II.  OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         (c)  The following information relates to securities sold by the
              Company during the quarter ended March 31, 1999 which were not
              registered under the Securities Act of 1933 at the time of grant,
              issuance or sale:

              1.  The Company granted options to purchase 16,300 shares of
                  Common Stock to thirteen employees at an exercise price of
                  $11.375 pursuant to its 1998 Stock Plan.

              2.  The Company issued 63,342 shares of Common Stock to twelve
                  employees and one member of the Board of Directors at a
                  weighted average price of $.94 pursuant to its 1989 Stock
                  Option Plan.

                  The Company did not employ an underwriter in connection with 
                  the issuance of the securities described above. The Company
                  believes that the grants of options in paragraph one above
                  were exempt from registration under section (4) (2) of the
                  Securities Act of 1933. The Company believes that the
                  issuances of Common Stock in paragraph two above were exempt
                  from registration under Rule 701 of the Securities Act of 1933
                  as transactions made pursuant to a written compensatory
                  benefit plan. All recipients had adequate access to
                  information about the Company.

         (d)  On February 11, 1999, the Commission declared effective the
              Company's Registration Statement (Registration Statement No.
              333-56627) as filed with the Commission in connection with the
              Company's initial public offering of Common Stock, which was 
              managed by Hambrecht & Quist, CIBC Oppenheimer and C.E.
              Unterberg, Towbin. Pursuant to such Registration Statement, the
              Company sold an aggregate of 2,100,000 shares of its Common
              Stock, for a gross aggregate offering price of $21.0 million.
              The Company incurred underwriting discounts and commissions of
              approximately $1.5 million. An additional 1,755,375 shares were
              sold by selling shareholders for a gross aggregate price of
              approximately $17.6 million. Those selling shareholders incurred
              underwriting discounts and commissions of approximately $1.2
              million. In connection with the combined offering, the Company
              incurred expenses of approximately $1.0 million. As of March 31,
              1999, all of the $18.5 million in net proceeds received by the
              Company 

                                       16


<PAGE>


              upon consummation of such offering, pending specific application, 
              were invested in short-term securities of grade AA or better with 
              maturities of two years or less.

              From February 11, 1999, the effective date of the Registration
              Statement, to March 31, 1999 (the Company's quarter end), 
              approximately $1.9 million of the net proceeds were used for 
              general corporate purposes and working capital. None of such 
              payments consisted of direct or indirect payments to directors, 
              officers, 10% shareholders or affiliates of the Company.


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

         (a)  Exhibits.

              27  Financial Data Schedule

         (b)  Reports on Form 8-K.

              No reports on Form 8-K were filed during the quarter for which 
              this on Form 10-Q is filed.



                                   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.

                                   CATAPULT COMMUNICATIONS CORPORATION



Date:    May 7, 1999               By:  /s/ Richard A. Karp
                                   --------------------------------------------
                                   Richard A. Karp
                                   President and Chief Executive Officer
                                   (Principal Executive Officer)


Date:    May 7, 1999               By:  /s/ Joan M. Varrone                    
                                   --------------------------------------------
                                   Joan M. Varrone
                                   Vice President of Finance and
                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)


                                       17