<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 JUNE 30, 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 /X/      No / /

     As of July 31, 1999, there were 12,654,045 shares of the Registrant's
Common Stock, $.001 par value, outstanding.

<PAGE>

                       CATAPULT COMMUNICATIONS CORPORATION
                                    FROM 10-Q
                                      INDEX
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PART I--FINANCIAL INFORMATION

Item 1.       Consolidated Financial Statements

              Consolidated Balance Sheets at June 30, 1999 and                3
              September 30, 1998

              Consolidated Income Statements for the three and nine           4
              Months ended June 30, 1999

              Consolidated Statements of Cash Flow for the nine               5
              Months ended June 30, 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     16



PART II--OTHER INFORMATION

Item 2.       Changes in Securities and Use of Proceeds                      16

Item 6.       Exhibits and Reports on Form 8-K                               16


SIGNATURES

</TABLE>


                                       2
<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

                            CATAPULT COMMUNICATIONS CORPORATION
                                CONSOLIDATED BALANCE SHEETS
                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                        (UNAUDITED)
<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,        JUNE 30,
                                                                         1998              1999
                                                                         -----             ----
<S>                                                                  <C>                  <C>
                                           ASSETS

    Current Assets:
       Cash and cash equivalents..............................         $15,229            $14,013
       Short-term investments.................................              --             27,716
       Accounts receivable, net of allowances of $75 and $77..           2,007              2,531
       Inventories............................................             612                680
       Prepaid expenses.......................................              95                315
       Deferred income taxes..................................             406                406
                                                                       --------           --------
          Total current assets................................          18,349             45,661
    Property and equipment, net...............................             778                925
    Other assets..............................................             368                420
                                                                       --------           --------
          Total assets........................................         $19,495            $47,006
                                                                       ========           ========

                 LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY

    Current Liabilities:
       Accounts payable.......................................            $782               $491
       Accrued liabilities....................................           2,339              3,502
       Deferred revenue.......................................           1,222              2,084
                                                                       --------           --------
          Total current liabilities...........................           4,343              6,077
    Deferred income taxes.....................................               2                  2
                                                                       --------           --------
          Total liabilities...................................           4,345              6,079
                                                                       --------           --------
    Redeemable common stock...................................           5,000                 --
                                                                       --------           --------
    Stockholders' Equity:
       Common stock, $0.001 par value, 40,000,000 shares
          authorized; 9,992,317 and 12,654,045
          issued and outstanding..............................              10                 13
       Additional paid-in capital.............................              --             20,018
       Deferred compensation..................................            (609)              (150)
       Retained earnings......................................          10,756             21,424
       Accumulated other comprehensive income.................              (7)               (78)
       Treasury stock (50,000 shares at cost).................                               (300)
                                                                        ------             ------
          Total stockholders' equity..........................          10,150             40,927
                                                                        ------             ------
          Total liabilities, redeemable common stock and
            stockholders' equity..............................         $19,495            $47,006
                                                                       ========           =======
</TABLE>

See Notes to consolidated financial statements.


                                                3
<PAGE>

                                   CATAPULT COMMUNICATIONS CORPORATION
                                     CONSOLIDATED INCOME STATEMENTS
                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                               (UNAUDITED)
<TABLE>
<CAPTION>
                                                           THREE MONTHS              NINE MONTHS
                                                          ENDED JUNE 30,            ENDED JUNE 30,
                                                         ----------------          ----------------
                                                          1998      1999            1998      1999
                                                         ------    ------          ------    ------
   <S>                                                   <C>       <C>             <C>       <C>
   Revenues:
      Product sales...............................       $4,092    $5,806          $11,385   $19,396
      Services....................................          529       901            1,695     2,292
                                                         ------    ------          -------   -------
        Total revenues............................        4,621     6,707           13,080    21,688
                                                         ------    ------          -------   -------
   Cost of revenues:
      Product sales...............................          569       509            1,258     1,908
      Services....................................          150       236              389       627
                                                         ------    ------          -------   -------
        Total cost of revenues....................          719       745            1,647     2,535
                                                         ------    ------          -------   -------
   Gross profit...................................        3,902     5,962           11,433    19,153
                                                         ------    ------          -------   -------
   Operating expenses:
      Research and development....................          534       792            1,419     2,089
      Sales and marketing.........................          847     1,446            2,194     3,940
      General and administrative..................          549       742            1,596     2,055
                                                         ------    ------          -------   -------
        Total operating expenses..................        1,930     2,980            5,209     8,084
                                                         ------    ------          -------   -------
   Operating income...............................        1,972     2,982            6,224    11,069

   Interest income................................          168       501              417       903
   Other income (expense).........................         (166)      (47)            (303)     (159)
                                                         ------    ------          -------   -------
   Income before taxes............................        1,974     3,436            6,338    11,813
   Provision for taxes............................          849     1,477            2,721     5,079
                                                         ------    ------          -------   -------
   Net income.....................................       $1,125    $1,959           $3,617    $6,734
                                                         ======    ======           ======    ======
   Earnings per share:
      Basic.......................................        $0.11     $0.16            $0.35     $0.58
                                                         ======    ======           ======    ======
      Diluted.....................................        $0.10     $0.15            $0.33     $0.56
                                                         ======    ======           ======    ======
   Weighted average shares:
      Basic.......................................       10,424    12,632           10,328    11,595
                                                         ======    ======           ======    ======
      Diluted.....................................       10,933    13,091           10,889    12,039
                                                         ======    ======           ======    ======
</TABLE>

See Notes to consolidated financial statements.


                                                  4
<PAGE>

                           CATAPULT COMMUNICATIONS CORPORATION
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (IN THOUSANDS)
                                       (UNAUDITED)
<TABLE>
<CAPTION>
                                                                       NINE MONTHS ENDED JUNE 30,
                                                                           1998          1999
                                                                           ----          ----
<S>                                                                       <C>           <C>
Cash flows from operating activities:
Net income...........................................................    $ 3,617       $ 6,734
Adjustments to reconcile net income to net cash provided by operating
   activities:
   Depreciation and amortization.....................................        120           221
   Amortization of deferred stock compensation.......................        125           150
   Deferred income taxes.............................................        237            --
   Change in current assets and liabilities:
     Accounts receivable.............................................     (1,877)         (524)
     Inventories.....................................................        (64)          (68)
     Prepaid expenses................................................        323          (220)
     Other assets....................................................       (306)          (74)
     Accounts payable................................................        247          (291)
     Accrued liabilities.............................................         97         1,163
     Deferred revenue................................................        374           862
                                                                         --------      --------
        Net cash provided by operating activities....................      2,893         7,953
                                                                         --------      --------
Cash flows from investing activities:
   Purchases of investments, net.....................................         --       (27,716)
   Purchase of property and equipment................................       (423)         (344)
                                                                         --------      --------
        Net cash used by investing activities........................       (423)      (28,060)
                                                                         --------      --------
Cash flows from financing activities:
   Stock issuances...................................................        212        19,264
   Purchase of treasury stock........................................         --          (300)
                                                                         --------      --------
        Net cash provided by financing activities....................        212        18,964
                                                                         --------      --------
Effect of exchange rate changes......................................       (100)          (73)
                                                                         --------      --------
Increase (decrease) in cash and cash equivalents.....................      2,582        (1,216)
Cash and cash equivalents, beginning of period.......................     10,672        15,229
                                                                         --------      --------
Cash and cash equivalents, end of period.............................    $13,254       $14,013
                                                                         ========      ========
</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 Financial Accounting Standards Board 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 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 stockholders of the Company. The
proceeds, net of underwriters' fees, to the company from the offering were
approximately $19.5 million. Additional offering expenses were estimated at
$1.1 million. During the quarter ended September 30, 1998, the Company
expensed $769,000 of costs related to its delayed public offering. On March
12, a selling stockholder sold an additional 502,875 shares of the Company's
Common Stock at a price to the public of $10.00 per share upon exercise of
the Underwriters' over-allotment option. The Company did not receive any of
the proceeds from the sale of shares by the selling stockholders. Concurrent
with the Company's initial public offering, shares with a redemption value of
$5 million were reclassified into stockholders' equity pursuant to the
redemption terms.

NOTE 4--COMPREHENSIVE INCOME

         The components of comprehensive income are as follows (in thousands):
<TABLE>
<CAPTION>
                                                  Three months ended          Nine months ended
                                                       June 30,                    June 30,
                                                   1998       1999             1998       1999
                                                   ----       ----             ----       ----
<S>                                               <C>         <C>             <C>        <C>
Net income                                        $1,125      $1,959          $3,617     $6,734

Translation adjustments.......................       (91)        (38)           (100)       (71)
                                                  -------     -------         -------   --------
Comprehensive income..........................    $1,034      $1,921          $3,517     $6,663
                                                  =======     =======         =======    =======
</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            Nine months ended
                                                         June 30,                      June 30,
                                                     1998        1999              1998        1999
                                                     ----        ----              ----        ----
<S>                                                 <C>         <C>              <C>        <C>
Net income                                          $ 1,125     $ 1,959          $ 3,617     $ 6,734

Weighted average shares outstanding...........       10,424      12,632           10,328      11,595
Dilutive options..............................          509         459              561         444
                                                    --------    --------         --------    --------
Weighted average shares assuming dilution.....       10,933      13,091           10,889      12,039
                                                    ========    ========         ========    ========
Earnings per share:
Basic.........................................        $0.11       $0.16            $0.35       $0.58
                                                    ========    ========         ========    ========
Diluted.......................................        $0.10       $0.15            $0.33       $0.56
                                                    ========    ========         ========    ========
</TABLE>

NOTE 6--INVENTORIES

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

Raw materials.................................                    $391              $587
Work-in-process...............................                      39                53
Finished goods................................                     182                40
                                                                 ------            ------
                                                                  $612              $680
                                                                 ======            ======
</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 125 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 nine months
                                                ended June 30,            ended June 30,
                                               1998        1999          1998       1999
                                              ------      ------        ------     ------
   <S>                                        <C>         <C>           <C>        <C>
   Revenues:
      Product sales.......................     86.6%       87.0%         89.4%      88.6%
      Services............................     11.4        13.4          13.0       10.6
                                              ------      ------        ------     ------
        Total revenues                        100.0       100.0         100.0      100.0
                                              ------      ------        ------     ------

   Cost of revenues:
      Product sales.......................     12.3         7.6           9.6        8.8
      Services............................      3.2         3.5           3.0        2.9
                                              ------      ------        ------     ------
        Total cost of revenues............     15.5        11.1          12.6       11.7
                                              ------      ------        ------     ------
   Gross profit...........................     84.5        88.9          87.4       88.3
                                              ------      ------        ------     ------

   Operating expenses:
      Research and development............     11.6        11.7          10.8        9.6
      Sales and marketing.................     18.3        21.6          16.8       18.2
      General and administrative..........     11.9        11.1          12.2        9.5
                                              ------      ------        ------     ------
        Total operating expenses..........     41.8        44.4          39.8       37.3
                                              ------      ------        ------     ------

   Operating income.......................     42.7        44.5          47.6       51.0
   Interest income........................      3.6         7.4           3.2        4.2
   Other income (expense).................     (3.6)       (0.7)         (2.3)      (0.8)
                                              ------      ------        ------     ------

   Income before taxes....................     42.7        51.2          48.5       54.4
                                              ------      ------        ------     ------
   Provision for taxes....................     18.4        22.0          20.8       23.4
                                              ------      ------        ------     ------

   Net income.............................     24.3%       29.2%         27.7%      31.0%
                                              ======      ======        ======     ======
   Gross margin on product sales..........     86.1%       91.2%         89.0%      90.2%

   Gross margin on services...............     71.6%       73.8%         77.1%      72.6%
</TABLE>

THREE MONTHS ENDED JUNE 30, 1998 AND 1999

REVENUES. Revenues increased by approximately 45% from $4.6 million for the
three months ended June 30, 1998 to $6.7 million for the three months ended June
30, 1999. Over the same period, product sales increased by approximately 42%
from $4.1 million to $5.8 million, and services revenue increased by
approximately 70% from $529,000 to $901,000. The increase in product sales was
primarily attributable to increased system sales to customers in North America
and 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 and customer training. 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 decreased from
$569,000 for the three months ended June 30, 1998 to $509,000 for the three
months ended June 30, 1999. Over the same period, product sales increased by
approximately 42% while the cost of product sales decreased by 11% as the
Company's hardware sales had a greater proportion of higher margin products.
As a result, gross margin for product sales increased from 86.1% to 91.2%
over this same period. Cost of services increased by approximately 57% from
$150,000 for the three months ended June 30, 1998 to $236,000 for the three
months ended June 30, 1999 due to personnel additions. Over the same period,
gross margin on services increased slightly from 71.6% to 73.8%. 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 48% from $534,000 for the three months ended June 30, 1998 to
$792,000 for the three months ended June 30, 1999. As a percentage of total
revenues, research and development expenses increased slightly from 11.6% to
11.7% 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 by approximately 71% from $847,000 for the three months
ended June 30, 1998 to $1.4 million for the three months ended June 30, 1999.
As a percentage of total revenues, sales and marketing expenses increased
from 18.3% for the three months ended June 30, 1998 to 21.6% for the three
months ended June 30, 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 continue 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 by approximately 35%
from $549,000 for the three months ended June 30, 1998 to $742,000 for the
three months ended June 30, 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
slightly from 11.9% to 11.1% over the same period.

         In the three months ended June 30, 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 June 30, 1999, approximately
$150,000 of deferred compensation expense remained to be amortized at a rate
not exceeding $20,000 per quarter.

                                       9
<PAGE>

INTEREST INCOME. Interest income consists primarily of interest earned on cash
balances. Interest income increased from $168,000 for the three months ended
June 30, 1998 to $501,000 for the three months ended June 30, 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 $166,000 for the three
months ended June 30, 1998 and other expense of $47,000 for the three months
ended June 30, 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 43.0% for
the three months ended June 30, 1998 and June 30, 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 will vary
depending in part on the relative income contribution by its domestic and
foreign operations.


NINE MONTHS ENDED JUNE 30, 1998 AND 1999

REVENUES. Revenues increased by approximately 66% from $13.1 million in the nine
months ended June 30, 1998 to $21.7 million in the nine months ended June 30,
1999. Over the same period, product sales increased by approximately 70% from
$11.4 million to $19.4 million. Services revenue increased by approximately 35%
from $1.7 million in the nine months ended June 30, 1998 to $2.3 million in the
nine months ended June 30, 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 and customer
training. 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 $1.6 million in the
nine months ended June 30, 1998 to $2.5 million in the nine months ended June
30, 1999. Product sales increased by approximately 70% during the period,
while the cost of product sales increased by approximately 52%. As a result,
over the same period, gross margin for product sales increased from 89.0% to
90.2% as the Company's hardware sales in the first nine months of 1999 had a
slightly greater proportion of higher margin products. Cost of services
increased by approximately 61% from $389,000 in the nine months ended June
30, 1998 to $627,000 in the nine months ended June 30, 1999. Over the same
period, gross margin on services decreased from 77.1% to 72.6%, 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 increased by
approximately 47% from $1.4 million in the nine months ended June 30, 1998 to
$2.1 million in the nine months ended June 30, 1999. As a percentage of total
revenues, research and development expenses slightly decreased from 10.8% to
9.6% 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 80%
from $2.2 million in the nine months ended June 30, 1998 to $3.9 million in the
nine months ended June 30, 1999. As a percentage of total revenues, sales and
marketing expenses increased from 16.8% to 18.2% 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 29% from $1.6 million in the nine months ended June 30, 1998 to
$2.1 million in the nine months ended June 30, 1999. As a percentage of total
revenues, general and administrative expenses decreased from 12.2% to 9.5% 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 $417,000 in the nine months
ended June 30, 1998 to $903,000 in the nine months ended June 30, 1999 due to an
increase in the Company's cash and cash equivalent balances and short-term
investments.

OTHER INCOME (EXPENSE). Other expense was $303,000 in the nine months ended June
30, 1998 and was $159,000 in the nine months ended June 30, 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
nine months ended June 30, 1998 and was 43.0% in the nine months ended June 30,
1999. The increase in the tax rate primarily reflects the higher percentage of
revenues derived by the Company from international operations 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 $2.9 million and
$8.0 million in the nine month period ending June 30, 1998 and 1999,
respectively, principally from net income generated in those periods. The
cash provided by the Company's operations for the nine months ended June 30,
1998 and 1999 was primarily attributable to a significant increase in sales.
Investing activities, consisting primarily of additions to property and
equipment, in the nine months ending June 30, 1998 and 1999, respectively and
the purchase of short-term investments in the nine months ended June 30,
1999. Cash generated by financing activities in the nine months ending June
30, 1998 were attributable to the exercise of employee stock options. Cash
generated by financing activities in the nine months ending June 30, 1999 was
primarily attributable to proceeds of $19.3 million from the Company's
initial public offering in February 1999.

         As of June 30, 1999, the Company had working capital of $39.6 million,
cash and cash equivalents of $14.0 million and short-term investments of $27.7
million. As of June 30, 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.


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


                                      11
<PAGE>

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.

         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 nine months ended
June 30, 1999, the Company's top four customers represented approximately 83%
and 85% 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.


                                      12
<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


                                      13
<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 nine months ended June 30, 1999, the
Company's top four customers represented approximately 83% and 85% 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 as a
percentage of total revenues were approximately 70% during the three months and
80% for the nine months ended June 30, 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 in Ottawa, Canada, Chippenham,
United Kingdom, Munich, Germany 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 nine months ended June 30, 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


                                      14
<PAGE>

introducing, on a timely and cost-effective basis, new products, features and
services that address the needs of 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.

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 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 June 30, 1999 the Company had forward exchange contracts maturing in
fiscal 1999 to sell approximately $2.2 million in Japanese yen and British
pounds. The fair market value of the contracts at June 30, 1999 was immaterial.
In addition, at June 30, 1999, the Company had a foreign currency option to sell
approximately 350 million Japanese yen maturing in fiscal 1999. This option was
out of the money at June 30, 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.


                                      15
<PAGE>

         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 CURRENCY EXCHANGE RATE RISK

         Certain of the Company's sales and marketing expenses are incurred in
local currencies. As a result the Company's international results of operations
are subject to foreign exchange rate fluctuations. The Company utilizes currency
forward exchange contracts and options to hedge against foreign currency rate
fluctuations.


PART II.  OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         (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. From
             February 11, 1999, the effective date of the Registration
             Statement, to June 30, 1999 (the Company's quarter end),
             approximately $5.6 million of the net proceeds to the Company of
             $18.4 million 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, other than salaries and bonuses paid in the ordinary
             course of business.


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
             report on Form 10-Q is filed.


                                      16
<PAGE>

                                  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:    August 10th, 1999             By:/s/ Richard A. Karp
                                       ----------------------------------------
                                       Richard A. Karp
                                       President and Chief Executive Officer
                                       (Duly Authorized Officer)


Date:    August 10th, 1999             By:/s/ John A. DiGirolamo
                                       -----------------------------------------
                                       John DiGirolamo
                                       Acting Chief Financial Officer
                                       (Principal Financial Officer)


                                      17