### FORM
  10-Q

UNITED
  STATESSECURITIES
  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, 2001
      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(State or other jurisdiction of
      incorporation or organization) |  | 77-0086010
        (I.R.S. Employer
        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 June 30, 2001, there were 12,993,892 shares of the Registrants Common
  Stock, $0.001 par value, outstanding.

---

CATAPULT
  COMMUNICATIONS CORPORATIONFORM 10-Q

INDEX

|Part
      IFinancial Information                                                    | Page                                                             
|------------------------------------------------------------------------------------- | -----------------------------------------------------------------
|                                                                                      |                                                                  
|Item 1.                                                                               | Financial
      Statements (unaudited)                           
|                                                                                      |                                                                  
|Condensed
      Consolidated Balance Sheets at June 30, 2001 and September 30, 2000   | 3                                                                
|                                                                                      |                                                                  
|Condensed
      Consolidated Statements of Income for the three and nine months ended |                                                                  
|                                                                                      | June
      30, 2001 and 2000                                     
|                                                                                      |                                                                  
|Condensed
      Consolidated Statements of Cash Flows for the nine months ended       |                                                                  
|                                                                                      | June
      30, 2001 and 2000                                     
|                                                                                      |                                                                  
|Notes
      to Condensed Consolidated Financial Statements                            | 6                                                                
|                                                                                      |                                                                  
|Item 2.                                                                               | Managements
      Discussion and Analysis of Financial Condition
|                                                                                      | and
      Results of Operations                                  
|                                                                                      |                                                                  
|Item 3.                                                                               | Quantitative
      and Qualitative Disclosures About Market Risk 
|                                                                                      |                                                                  
|Part
      IIOther Information                                                       |                                                                  
|                                                                                      |                                                                  
|Item 6.                                                                               | Exhibits
      and Reports on Form 8-K                           
|                                                                                      |                                                                  
|Signatures                                                                            | 17                                                               

2

---

Part   I.  Financial Information

Item
  1.  Financial Statements

CATAPULT
  COMMUNICATIONS CORPORATION
  CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except
  share data)
  (unaudited)

|                                                 | June
      30,
      2001 |        | September
      30,
      2000 |  
|------------------------------------------------ | ------------------------- | ------ | ------------------------------ | -
|                                                 |                           |        |                                |  
|ASSETS                                          
|Current
      Assets:                            |                           |        |                                |  
|Cash
      and cash equivalents                  | $                         | 39,900 |                                | $
|Short-term
      investments                     |                           | 18,740 |                                |  
|Accounts
      receivable, net                   |                           | 4,521  |                                |  
|Inventories                                      |                           | 1,441  |                                |  
|Deferred
      income taxes                      |                           | 1,263  |                                |  
|Prepaid
      expenses and other current assets  |                           | 719    |                                |  
|                                                 |                           |        |                                |  
|Total
      current assets                       |                           | 66,584 |                                |  
|Property and equipment,
      net                |                           | 1,484  |                                |  
|Other assets                                     |                           | 587    |                                |  
|                                                 |                           |        |                                |  
|Total
      assets                               | $                         | 68,655 |                                | $
|                                                 |                           |        |                                |  
|                                                 |                           |        |                                |  
|LIABILITIES
      AND STOCKHOLDERS EQUITY      
|                                                 |                           |        |                                |  
|Current Liabilities:                             |                           |        |                                |  
|Accounts
      payable                           | $                         | 693    |                                | $
|Accrued
      liabilities                        |                           | 5,720  |                                |  
|Deferred
      revenue                           |                           | 2,021  |                                |  
|                                                 |                           |        |                                |  
|Total
      current liabilities                  |                           | 8,434  |                                |  
|Stockholders Equity:                            |                           |        |                                |  
|Common
      stock                               |                           | 13     |                                |  
|Additional
      paid-in capital                 |                           | 21,057 |                                |  
|Deferred
      compensation                      |                           | (6     | )                              |  
|Treasury
      stock (50,000 shares at cost)     |                           | (300   | )                              |  
|Accumulated
      other comprehensive income     |                           | 544    |                                |  
|Retained
      earnings                          |                           | 38,913 |                                |  
|                                                 |                           |        |                                |  
|Total
      stockholders equity                 |                           | 60,221 |                                |  
|                                                 |                           |        |                                |  
|Total
      liabilities and stockholders equity | $                         | 68,655 |                                | $
|                                                 |                           |        |                                |  

See Notes
  to condensed consolidated financial statements.

3

---

CATAPULT
  COMMUNICATIONS CORPORATION
  CONDENSED CONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share data)(unaudited)

|                                      | For the
      three
      months ended
      June 30, |   | For the
      nine
      months ended
      June 30,
|------------------------------------- | ----------------------------------------------------- | - | ----------------------------------------------------
|
|                                      |                                                       |   |                                                     
|Revenues:                             |                                                       |   |                                                     
|Product
      sales                   | $   8,354                                             |   | $  6,223                                            
|Services                              | 1,173                                                 |   | 1,284                                               
|                                      |                                                       |   |                                                     
|Total
      revenues                  | 9,527                                                 |   | 7,507                                               
|                                      |                                                       |   |                                                     
|Cost of revenues:                    
|Product
      sales                   | 1,080                                                 |   | 577                                                 
|Services                              | 155                                                   |   | 264                                                 
|                                      |                                                       |   |                                                     
|Total
      cost of revenues          | 1,235                                                 |   | 841                                                 
|                                      |                                                       |   |                                                     
|Gross
      profit                    | 8,292                                                 |   | 6,666                                               
|Operating expenses:                  
|Research
      and development        | 1,168                                                 |   | 828                                                 
|Sales
      and marketing             | 2,687                                                 |   | 2,305                                               
|General
      and administrative      | 1,341                                                 |   | 981                                                 
|                                      |                                                       |   |                                                     
|Total
      operating expenses        | 5,196                                                 |   | 4,114                                               
|                                      |                                                       |   |                                                     
|Income
      from Operations          | 3,096                                                 |   | 2,552                                               
|Interest income                       | 656                                                   |   | 615                                                 
|Other
      expense, net              | (48                                                   | ) | 233                                                 
|                                      |                                                       |   |                                                     
|Income before income taxes            | 3,704                                                 |   | 3,400                                               
|Provision
      for income taxes      | 1,249                                                 |   | 1,326                                               
|                                      |                                                       |   |                                                     
|Net income                            | $   2,455                                             |   | $  2,074                                            
|                                      |                                                       |   |                                                     
|Earnings per share:                  
|Basic                                 | $     0.19                                            |   | $    0.16                                           
|                                      |                                                       |   |                                                     
|Diluted                               | $     0.18                                            |   | $    0.16                                           
|                                      |                                                       |   |                                                     
|Shares used in per share calculation:
|Basic                                 | 12,954                                                |   | 12,832                                              
|                                      |                                                       |   |                                                     
|Diluted                               | 13,528                                                |   | 13,116                                              
|                                      |                                                       |   |                                                     

See Notes
  to condensed consolidated financial statements.

4

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CATAPULT
  COMMUNICATIONS CORPORATION
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)

|                                                               | Nine months
      ended
      June 30,
|-------------------------------------------------------------- | --------------------------------------
|
|                                                               |                                       
|Cash
      flows from operating activities:                    |                                       
|Net
      income                                               | $   8,551                             
|Adjustments
      to reconcile net income to net cash provided |                                       
|(used)
      by operating activities:                          |                                       
|Depreciation
      and amortization                            | 521                                   
|Amortization
      of deferred stock compensation              | 54                                    
|Gain
      on sale of property and equipment                   | (9                                    
|Change
      in current assets and liabilities:                |                                       
|Accounts
      receivable                                      | 1,109                                 
|Inventories                                                    | (42                                   
|Prepaid
      expenses                                         | (28                                   
|Other
      assets                                             | (393                                  
|Accounts
      payable                                         | (169                                  
|Accrued
      liabilities                                      | (15                                   
|Deferred
      revenue                                         | 162                                   
|                                                               |                                       
|Net
      cash provided by operating activities                | 9,741                                 
|                                                               |                                       
|Cash
      flows from investing activities:                    |                                       
|Sales
      (Purchases) of investments, net                    | 24,690                                
|Sale
      of property and equipment                           | 37                                    
|Purchases
      of property and equipment                      | (504                                  
|                                                               |                                       
|Net
      cash provided (used) by investing activities         | 24,223                                
|                                                               |                                       
|Cash
      flows from financing activities:                    |                                       
|Proceeds
      from issuance of common stock                   | 787                                   
|                                                               |                                       
|Net
      cash provided by financing activities                | 787                                   
|Effect of exchange rate changes on cash                        | (51                                   
|                                                               |                                       
|Increase (decrease) in cash and cash equivalents               | 34,700                                
|Cash
      and cash equivalents, beginning of period           | 5,200                                 
|                                                               |                                       
|Cash and cash equivalents, end of period                       | $ 39,900                              
|                                                               |                                       

See Notes
  to condensed consolidated financial statements.

5

---

CATAPULT
  COMMUNICATIONS CORPORATIONNOTES TO CONDENSED
  CONSOLIDATED FINANCIAL STATEMENTS(unaudited)

NOTE 1THE COMPANY
  AND BASIS OF PRESENTATION

Catapult
  Communications Corporation (the Company) designs, develops, manufactures,
  markets and supports an advanced software-based test system offering an integrated
  suite of testing applications for the global telecommunications industry. The
  Companys advanced test systems assist its customers in the design, integration,
  installation and acceptance testing of a broad range of digital telecommunications
  equipment and services. The Company has been incorporated in Nevada since June
  19, 1998. The Company has operations in the United States, Canada, the United
  Kingdom, Europe and Japan. The Company conducts its business within one industry
  segment.

These
  accompanying condensed consolidated financial statements and related notes are
  unaudited. However, in the opinion of management, all adjustments (consisting
  only of normal recurring adjustments) that are necessary for the fair presentation
  of the financial position and results of operations for the interim periods
  presented have been included. The results of operations for such periods are
  not necessarily indicative of results to be expected for any future period or
  the fiscal year ending September 30, 2001. These financial statements, including
  the notes thereto, should be read in conjunction with the audited financial
  statements for the year ended September 30, 2000, which were included as part
  of the Companys Annual Report on Form 10-K for the year ended September
  30, 2000.

Revenue Recognition

Sales
  of the Companys product arrangements normally include hardware and software.
  Certain of the Companys sales may also include installation. The Company
  also offers training and maintenance services. The Company recognizes revenue
  on system sales upon shipment or when installed, if installation services are
  purchased, provided collection is probable. Training and maintenance revenues
  are based on the Companys established history of separate sales of training
  and maintenance. Training revenues are recognized at the time the training is
  complete. Maintenance revenues are recognized ratably over the term of the maintenance
  contract.

NOTE 2RECENTLY
  ISSUED ACCOUNTING STANDARDS

In
  various areas, including revenue recognition, accounting standards and practices
  continue to evolve. The FASBs Emerging Issues Task Force continues to
  address revenue related accounting issues. The management of the Company believes
  it is in compliance with all of the rules and related guidance as they currently
  exist. However, any changes to generally accepted accounting principles in these
  areas could impact the Companys accounting for its operations.

NOTE 3BASIC AND
  DILUTED EARNINGS PER SHARE

Basic
  earnings per share are computed using the weighted average number of common
  shares outstanding during the period. Diluted earnings per share include 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 share and per share data:

6

---

|                                                | Three
      months ended
      June 30,       |        | Nine
      months ended
      June 30,
|----------------------------------------------- | --------------------------------------------- | ------ | --------------------------------------
|                                                | 2001                                          |        | 2000                                  
|                                                |                                               |        |                                       
|                                                | (in
        thousands, except per share data)
|                                                |                                              
|Net
      income                                | $                                             | 2,455  |                                       
|                                                |                                               |        |                                       
|Weighted average shares outstanding             |                                               | 12,954 |                                       
|Dilutive
      options                          |                                               | 574    |                                       
|                                                |                                               |        |                                       
|Weighted
      average shares assuming dilution |                                               | 13,528 |                                       
|                                                |                                               |        |                                       
|Earnings per share:                            
|Basic                                           | $                                             | 0.19   |                                       
|                                                |                                               |        |                                       
|Diluted                                         | $                                             | 0.18   |                                       
|                                                |                                               |        |                                       
|Anitdilutive common equivalent shares          
|excluded
      in calculating diluted earnings 
|per share                                       |                                               |       |                                       
|                                                |                                               |        |                                       

NOTE 4COMPREHENSIVE
  INCOME

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

|                                            | Three
        months ended
        June 30, |       | Nine
        months ended
        June 30,
|------------------------------------------- | ------------------------------------------- | ----- | ------------------------------------------
|                                            | 2001                                        |       | 2000                                      
|                                            |                                             |       |                                           
|Net
      income                            | $                                           | 2,455 |                                           
|Currency
      translation adjustment       |                                             | 137   |                                           
|Unrealized
      gain (loss) on investments |                                             | 24    |                                           
|                                            |                                             |       |                                           
|Comprehensive
      income                  | $                                           | 2,616 |                                           
|                                            |                                             |       |                                           

NOTE 5INVENTORIES(in thousands)

|                | June
        30,
        2001 |        | September
        30,
        2000
|--------------- | ----------------------------- | ------ | ----------------------------------
|                |                               |        |                                   
|                |                               |        |                                   
|Raw Materials   |                               | $1,411 |                                   
|Work-in-process |                               | 11     |                                   
|Finished goods  |                               | 19     |                                   
|                |                               |        |                                   
|                |                               | $1,441 |                                   
|                |                               |        |                                   

NOTE 6SEGMENT
  REPORTING

The
  Company is organized to operate and service a single industry segment: the design,
  development, manufacture, marketing and support of advanced software-based test
  systems globally.

The
  Companys principal geographical areas of operations, sales, income and
  assets by region for the current and previous nine month periods ended June
  30 were as follows (in thousands):

7

---

|                                           | North
      America |       | Europe |       | Japan |   | Consolidated
      Total
|------------------------------------------ | ------------------- | ----- | ------ | ----- | ----- | - | ------------------------
|                                           |                     |       |        |       |       |   |                         
|Nine
      months ended June 30, 2001      |                     |       |        |       |       |   |                         
|Sales to unaffiliated
      customers      | $                   | 9,794 |        | $     | 6,648 |   | $                       
|Net income                                 |                     | 5,024 |        |       | 2,573 |   |                         
|Identifiable assets
      at June 30, 2001 | 61,194              |       |        | 5,805 |       |   | 1,656                   
|                                           |                     |       |        |       |       |   |                         
|Nine months ended
      June 30, 2000      |                     |       |        |       |       |   |                         
|Sales to unaffiliated
      customers      | $                   | 6,447 |        | $     | 3,338 |   | $                       
|Net income                                 |                     | 3,982 |        |       | (304  | ) |                         
|Identifiable assets
      at June 30, 2000 | 47,982              |       |        | 3,744 |       |   | 5,171                   

The
  result of operations by geographic region includes significant sales principally
  from the United States to the Companys foreign locations at agreed upon
  transfer prices.

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 Companys Annual Report on
  Form 10-K for 2000.

Forward-looking Statements

The
  following discussion contains statements that are not historical facts but are
  forward-looking statements. Such statements are generally identified by the
  use of forward-looking words and phrases, such as intended, expects,
  anticipates and is (or are) expected (or anticipated).
  These forward-looking statements include but are not limited to those identified
  in this report with an asterisk (*) symbol. Actual results may differ materially
  from those discussed in such forward-looking statements, and the Companys
  stockholders should carefully review the cautionary statements set forth in
  this report on Form 10-Q, including those set forth under the caption Factors
  That May Affect Future Results.

The
  Company may from time to time make additional written and oral forward-looking
  statements, including statements contained in the Companys filings with
  the Securities and Exchange Commission and in its reports to Stockholders. The
  Company does not undertake to update any forward-looking statements that may
  be made in this Form 10-Q and from time to time or on behalf of the Company.

Overview

The
  Company designs, develops, manufactures, markets and supports an advanced software-based
  test system offering an integrated suite of testing applications for the global
  telecommunications industry. The Companys family of digital communication
  test systems is designed to enable equipment manufacturers and network operators
  to deliver complex digital telecommunications equipment and services more quickly
  and cost-effectively. The DCT product line performs a variety of test functions,
  including simulation, load and stress testing, feature verification, conformance
  testing and monitoring. The Company maintains an extensive library of software
  modules that support a large number of protocols and variants. The DCT system
  consists of advanced software and 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 services.

8

---

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.

|                                    | For
      the three months
      Ended June 30, |   | For
      the nine months
      ended June 30, |  
|----------------------------------- | ----------------------------------------------- | - | ---------------------------------------------- | -
|                                    | 2001                                            |   | 2000                                           |  
|                                    |                                                 |   |                                                |  
|Revenues:                           |                                                 |   |                                                |  
|Product
      sales                 | 87.7                                            | % | 82.9                                           | %
|Services                            | 12.3                                            |   | 17.1                                           |  
|                                    |                                                 |   |                                                |  
|Total
      revenues                | 100.0                                           |   | 100.0                                          |  
|Cost of revenues:                   |                                                 |   |                                                |  
|Product
      sales                 | 11.4                                            |   | 7.7                                            |  
|Services                            | 1.6                                             |   | 3.5                                            |  
|                                    |                                                 |   |                                                |  
|Total
      cost of revenues        | 13.0                                            |   | 11.2                                           |  
|                                    |                                                 |   |                                                |  
|Gross profit                        | 87.0                                            |   | 88.8                                           |  
|Operating expenses:                 |                                                 |   |                                                |  
|Research
      and development      | 12.2                                            |   | 11.0                                           |  
|Sales
      and marketing           | 28.2                                            |   | 30.7                                           |  
|General
      and administrative    | 14.1                                            |   | 13.1                                           |  
|                                    |                                                 |   |                                                |  
|Total
      operating expenses      | 54.5                                            |   | 54.8                                           |  
|                                    |                                                 |   |                                                |  
|                                    |                                                 |   |                                                |  
|Operating income                    | 32.5                                            |   | 34.0                                           |  
|Interest income                     | 6.9                                             |   | 8.2                                            |  
|Other income (expense)              | (0.5                                            | ) | 3.1                                            |  
|                                    |                                                 |   |                                                |  
|                                    |                                                 |   |                                                |  
|Income before taxes                 | 38.9                                            |   | 45.3                                           |  
|                                    |                                                 |   |                                                |  
|Provision for taxes                 | 13.1                                            |   | 17.7                                           |  
|                                    |                                                 |   |                                                |  
|                                    |                                                 |   |                                                |  
|Net income                          | 25.8                                            | % | 27.6                                           | %
|                                    |                                                 |   |                                                |  
|                                    |                                                 |   |                                                |  
|Gross margin on product
      sales | 87.0                                            | % | 90.7                                           | %
|                                    |                                                 |   |                                                |  
|                                    |                                                 |   |                                                |  
|Gross margin on services            | 86.8                                            | % | 79.4                                           | %
|                                    |                                                 |   |                                                |  

Three Months Ended
  June 30, 2001 and 2000

Revenues

Revenues
  increased by approximately 27% from $7.5 million for the three months ended
  June 30, 2000 to $9.5 million for the three months ended June 30, 2001. Over
  the same period, product sales increased by approximately 34% from $6.2 million
  to $8.4 million. Services revenue decreased by approximately 9% from $1.3 million
  to $1.2 million. The increase in product sales was primarily attributable to
  the results generated from the Companys increased focus on test systems
  for third generation (3G) digital cellular. The decrease
  in services revenue was due to the late renewal of a significant maintenance
  contract which had expired at the end of the previous quarter. The renewal purchase
  order was received after the end of the current quarter and will be reflected
  in the next quarter.

9

---

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, installation and training personnel. Cost of sales increased
  approximately 47% from $841,000 for the three months ended June 30, 2000 to
  $1.2 million for the three months ended June 30, 2001. Over the same period,
  the cost of product sales increased by approximately 87%. Gross margin for product
  sales decreased from 90.7% to 87.0% over this same period as the Companys
  sales mix had a greater proportion of lower margin third-party hardware. Cost
  of services decreased by approximately 41% from $264,000 for the three months
  ended June 30, 2000 to $155,000 for the three months ended June 30, 2001. Over
  the same period, gross margin on services increased from 79.4% to 86.8%.

Research and Development

Research
  and development expenses consist primarily of the costs of payroll and benefits
  for engineers, materials, equipment and consulting services. To date, all software
  development costs have been expensed as research and development expenses as
  incurred. Research and development expenses increased by approximately 41% from
  $828,000 for the three months ended June 30, 2000 to $1.2 million for the three
  months ended June 30, 2001. As a percentage of total revenues, research and
  development expenses increased from 11% to 12% over the same period. The increase
  in absolute dollars was due primarily to an increase in personnel in the engineering
  group. 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, occupancy costs, travel and promotional expenses, such
  as product brochures and trade show costs. Sales and marketing expenses increased
  by approximately 17% from $2.3 million for the three months ended June 30, 2000
  to $2.7 million for the three months ended June 30, 2001. As a percentage of
  total revenues, sales and marketing expenses decreased from 31% for the three
  months ended June 30, 2000 to 28% for the three months ended June 30, 2001.
  The increase in absolute dollars was due primarily to an increase in sales and
  marketing personnel resulting in increased salary, commissions, and bonuses,
  increased travel expenses, 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 and risk management, meeting public company reporting requirements,
  employee recruitment and retention, investor relations and finance functions.
  General and administrative expenses increased by approximately 37% from $981,000
  for the three months ended June 30, 2000 to $1.3 million for the three months
  ended June 30, 2001 due primarily to an overall increase in personnel which
  resulted in increased salary and bonus expenses in addition to increased legal
  and accounting fees, and facility costs. As a percentage of total revenues,
  general and administrative expenses increased from 13% to 14% over the same
  period.

Interest Income

Interest
  income consists primarily of interest earned on cash and cash equivalents and
  short-term investments. Interest income increased from $615,000 for the three
  months ended June 30, 2000 to $656,000

10

---

for the three months ended
  June 30, 2001 due to an increase in the Companys cash and cash equivalent
  balances and short-term investments primarily from profitable operations.

Other Income (Expense),
  net

Other
  income (expense) represents primarily gains and losses from fluctuations in
  exchange rates on transactions denominated in foreign currencies. Other Income
  decreased from $233,000 for the three months ended June 30, 2000 to expense
  of $48,000 for the three months ended June 30, 2001 due to foreign exchange
  losses, including losses realized on forward contracts entered into which were
  denominated in currencies other than the US dollar.

Provision for income
  taxes

Provision
  for income tax consists of federal, state and international income taxes. The
  Companys effective tax rate was 39.0% for the three months ended June
  30, 2000 and 33.7% for the three months ended June 30, 2001. These tax rates
  primarily reflect the anticipated percentages of revenues derived by the Company
  from international operations. The Company expects that its future tax rate
  may vary depending in part on the relative income contribution by its domestic
  and foreign operations.*

Nine Months Ended June
  30, 2001 and 2000

Revenues

Revenues
  increased by approximately 56% from $19.2 million for the nine months ended
  June 30, 2000 to $30.0 million for the nine months ended June 30, 2001. Over
  the same period, product sales increased by approximately 67% from $15.7 million
  to $26.2 million. Services revenue increased by approximately 9% from $3.5 million
  to $3.8 million. The increase in product sales was primarily attributable to
  the results generated from the Companys increased focus on test systems
  for third generation (3G) digital cellular and Voice over IP (VoIP). The increase
  in services revenue was primarily due to sales of software support contracts
  associated with new system sales as well as support contract renewals and customer
  training.

Cost of Revenues

Cost
  of Revenues increased approximately 44% from $2.3 million for the nine months
  ended June 30, 2000 to $3.3 for the nine months ended June 30, 2001. Over the
  same period, the cost of product sales increased by approximately 95%. Gross
  margin from product sales decreased from 90.6% to 89.1% over the same period
  as the Companys sales mix had a greater proportion of lower margin third-party
  products. Cost of services decreased by approximately 46% from $830,000 for
  the nine months ended June 30, 2000 to $446,000 for the nine months ended June
  30, 2001. Over the same period, gross margin on services increased from 76.5%
  to 88.4%.

Research and Development

Research
  and development expenses increased by approximately 59% from $2.1 million for
  the nine months ended June 30, 2000 to $3.4 million for the nine months ended
  June 30, 2001. As a percentage of total revenues, research and development expenses
  increased from 11.1% to 11.4% over the same period. The increase in absolute
  dollars was due primarily to an increase in personnel expense in the engineering
  group. 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.*

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Sales and Marketing

Sales and marketing expenses increased by approximately 18% from $6.7 million
  for the nine months ended June 30, 2000 to $7.9 million for the nine months
  ended June 30, 2001. As a percentage of total revenues, sales and marketing
  expenses decreased from 35.0% for the nine months ended June 30, 2000 to 26.4%
  for the nine months ended June 30, 2001. The increase in absolute dollars was
  due primarily to an increase in sales and marketing personnel resulting in increased
  salary, commissions, and bonuses, increased travel expenses, 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 and risk management, meeting public company reporting requirements,
  employee recruitment and retention, investor relations and finance functions.
  General and administrative expenses increased by approximately 57% from $2.6
  million for the nine months ended June 30, 2000 to $4.0 million for the nine
  months ended June 30, 2001 due primarily to an overall increase in personnel
  which resulted in increased salary and bonus expenses in addition to increased
  legal and accounting fees, and facility costs. As a percentage of total revenues,
  general and administrative expenses were consistent at 13.5% in both periods.

Interest Income

Interest
  income consists primarily of interest earned on cash and cash equivalents and
  short-term investments. Interest income increased from $1.9 million for the
  nine months ended June 30, 2000 to $2.3 million for the nine months ended June
  30, 2001 due to an increase in the Companys cash and cash equivalent balances
  and short-term investments primarily from profitable operations.

Other Income (Expense),
  net

Other
  income (expense) primarily represents gains and losses from fluctuations in
  exchange rates on transactions denominated in foreign currencies. Other expense
  decreased from income of $18,000 for the nine months ended June 30, 2000 to
  expense of $552,000 for the nine months ended June 30, 2001 due to foreign exchange
  losses, including losses realized on forward contracts entered into which were
  denominated in currencies other than the US dollar, and to a loss on a sale
  of marketable securities.

Provision for income
  taxes

Provision
  for income tax consists of federal, state and international income taxes. The
  Companys effective tax rate was 39.0% for the nine months ended June 30,
  2000 and 34.6% for the nine months ended June 30, 2001. These tax rates primarily
  reflect the anticipated percentages of revenues derived by the Company from
  international operations. The Company expects that its future tax rate may vary
  depending in part on the relative income contribution by its domestic and foreign
  operations.*

Liquidity and Capital
  Resources

Historically,
  the Company has financed its requirements, including increases in accounts receivable
  and acquisitions of capital equipment, primarily through cash generated from
  operations, cash proceeds from its initial public offering of common stock,
  investment earnings and the sale of the Companys stock through the exercise
  of employee stock options and the Employee Stock Purchase Plan.

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The
  Companys operating activities provided cash of $5.1 million and $9.7 million
  in the nine month periods ended June 30, 2000 and 2001, respectively. The cash
  provided by the Companys operations for the nine months ended June 30,
  2001 was primarily attributable to net income and a decrease in accounts receivable
  that reflected primarily timing of invoicing. Investing activities, consisting
  primarily of purchases and sales of short-term investments and to a lesser extent
  additions to property and equipment, provided cash of $24.2 million in the nine
  months ended June 30, 2001 and used cash of $10.0 million in the nine months
  ended June 30, 2000. Cash flows from financing activities in the nine months
  ended June 30, 2000 and 2001 were attributable to exercises of employee stock
  options and the purchase of shares under the employee stock purchase plan in
  both periods.

As
  of June 30, 2001, the Company had working capital of $58.2 million, cash and
  cash equivalents of $39.9 million and short-term investments of $18.7 million.
  As of June 30, 2001, the Company had no bank indebtedness and no long-term commitments
  other than operating lease obligations. The Company expects that capital expenditures
  will increase in fiscal 2001 over the prior year due to increased personnel
  and office expansion.*

The
  Company believes that cash and cash equivalents, short-term investments and
  funds generated from operations will provide the Company with sufficient funds
  to finance its operations for at least the next 12 months.* The Company may
  require additional funds to support its working capital requirements or for
  other purposes. There can be no assurance that additional financing will be
  available or that, if available, such financing will be obtainable on terms
  favorable to the Company or its stockholders.

Factors That May Affect
  Future 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. See Dependence on Limited Number of Customers below.
  The Companys products generally are shipped within 15 to 30 days after
  orders are received and revenues are recognized upon installation 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, shipped and installed in that quarter.

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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 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 have accounted for substantially all of the Companys
  revenues to date. In the nine months ended June 30, 2001, the Companys
  top four customers represented approximately 56% of total revenues. 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

Company
  revenues from international customers were approximately 66% during the nine
  months ended June 30, 2001. 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 Japan, Canada, the United Kingdom, Germany, France,
  Finland, and Australia and plans to add offices, staff and resources worldwide
  from time to time. International sales and operations are subject to inherent
  risks, including difficulties in staffing and managing foreign operations,

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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, 2001
  a significant portion of the Companys sales has been to customers in Japan.
  If economic conditions in Japan 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.

Most
  of the Companys international sales, including its sales in Japan, are
  denominated in local currencies. Although the Company currently engages in hedging
  transactions with respect to certain receivables resulting from certain inter-company
  sales, there can be no assurance that the Company will continue to do so or
  that its hedging activities will be successful. Fluctuations in foreign currency
  exchange rates may contribute to fluctuations in the Companys operating
  results. For example, changes in foreign currency exchange rates could adversely
  affect the revenues, net income, earnings per share and cash flow of the Companys
  operations in affected markets. Similarly, such fluctuations may cause the Company
  to raise prices, which could affect demand for the Companys products and
  services. In addition, if exchange or price controls or other restrictions are
  imposed in countries in which the Company does business, the Companys
  business, financial condition and results of operations would be materially
  adversely affected.

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 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. In addition, because of the rapid technological
  change characteristic of the telecommunications industry, the Company may be
  required to support legacy systems used by its customers, which may place additional
  demands on the Companys personnel and other resources and may require
  the Company to maintain an inventory of otherwise obsolete components.

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 98 or Windows 2000 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

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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. In the event the telecommunications industry
  does not broadly adopt the Companys products or services or does so less
  rapidly than expected by the Company, or in the event the Companys products
  are rendered obsolete or uncompetitive by more advanced solutions, the Companys
  business, financial condition and results of operations would be materially
  adversely affected.

California Energy Crisis

California
  is in the midst of an energy crisis that could disrupt the Companys operations
  and increase its expenses. Suppliers of electric power have on some occasions
  implemented, and may in the future continue to implement, rolling blackouts
  throughout California. The Company currently does not have backup generators
  or alternate sources of power in the event of a blackout, and its current insurance
  does not provide coverage for any damages it or its customers may suffer as
  a result of any interruption in its power supply. If blackouts interrupt the
  Companys power supply, it would be temporarily unable to continue operations
  at its facilities in California. Any such interruption in the Companys
  ability to continue operations at its facilities could damage the Companys
  reputation, harm its ability to retain existing customers and to obtain new
  customers, and could result in lost revenue, any of which could substantially
  harm its business and results of operations.

Item
  3.  Quantitative and Qualitative Disclosures About Market Risk

Foreign Exchange Risk
  and Derivative Financial Instruments

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
  currency exchange rates on sales denominated in foreign currencies. The Company
  utilizes foreign currency forward exchange contracts and options to minimize
  exposure against future movements in foreign exchange rates that affect certain
  foreign currency denominated receivables. The Company attempts to match the
  forward contracts with the underlying receivables 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,
  these financial instruments minimize the 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 receivable balances which otherwise would be
  charged to other income (expense). There can be no assurance that these current
  or future activities will be successful.

At
  June 30, 2001 the Company had forward exchange contracts maturing in fiscal
  2001 to sell approximately $0.2 million in Pounds Sterling and options maturing
  in fiscal 2001 to sell $4.6 million in Yen. The fair market value of the contracts
  and options at June 30, 2001 was not material.

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.*

Additional
  factors that could affect future operating results or the price of the Common
  Stock are set forth under the caption Factors That May Affect Future Results
  in the Companys Annual Report on Form 10-K for 2000.

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Part
  II.  Other Information

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

| | (a) | Exhibits.                                                                                                                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | (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.

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:    July
        31, 2001 | By:
      /s/ Chris Stephenson                                                                          
|                               |                                                                                                         
|                               | Chris StephensonVice President and
        Chief Financial Officer
        (Principal Financial Officer)

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