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 December 31, 1999

                                       OR

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


Commission file number 0-24701


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


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

                             160 South Whisman Road
                         Mountain View, California 94041

                                 (650) 960-1025

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



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

         As  of  December  31,  1999,  there  were  12,738,734   shares  of  the
Registrant's Common Stock, $0.001 par value, outstanding.



<PAGE>

<TABLE>
                       CATAPULT COMMUNICATIONS CORPORATION
                                    FORM 10-Q
<CAPTION>
                                      INDEX

Part I--Financial Information                                                                     Page
-----------------------------                                                                     ----
<S>                                                                                                <C>
Item. 1.  Condensed Consolidated Financial Statements (unaudited)

          Condensed  Consolidated  Balance  Sheets  at  December  31,  1999  and
          September 30, 1999                                                                        3

          Condensed  Consolidated  Income  Statements for the three months ended
          December 31, 1999 and 1998                                                                4

          Condensed  Consolidated  Statements  of Cash Flow for the three months
          ended December 31, 1999 and 1998                                                          5

          Notes to Condensed Consolidated Financial Statements                                      6

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

Item 3.   Quantitative and Qualitative Disclosures About Market Risk                               11

Part II--Other Information

Item 2.   Changes in Securities and Use of Proceeds                                                15

Item 6.   Exhibits and Reports on Form 8-K                                                         15

Signatures                                                                                         16
----------
</TABLE>


                                       2
<PAGE>

Part I.  Financial Information

Item 1.  Financial Statements

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


                                                    December 31,   September 30,
                                                        1999           1999
                                                      --------       --------
                                     ASSETS
Current Assets:
  Cash and cash equivalents ..................        $  3,114       $  8,486
  Short-term investments .....................          40,442         33,168
  Accounts receivable, net ...................           3,681          5,852
  Inventories, net ...........................             770            705
  Deferred income taxes ......................             890            890
  Prepaid expenses ...........................             370            349
                                                      --------       --------
    Total current assets .....................          49,267         49,450
Property and equipment, net ..................           1,108            998
Other assets .................................             209            219
                                                      --------       --------
    Total assets .............................        $ 50,584       $ 50,667
                                                      ========       ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable ...........................        $    512       $    444
  Accrued liabilities ........................           3,640          4,782
  Deferred revenue ...........................           2,107          1,852
                                                      --------       --------
    Total current liabilities ................           6,259          7,078
                                                      --------       --------

Stockholders' Equity:
  Common stock ...............................              13             13
  Additional paid-in capital .................          20,151         20,040
  Deferred compensation ......................            (114)          (132)
  Retained earnings ..........................          24,101         23,796
  Accumulated other comprehensive income .....             474            172
  Treasury stock (50,000 shares at cost) .....            (300)          (300)
                                                      --------       --------
    Total stockholders' equity ...............          44,325         43,589
                                                      --------       --------
    Total liabilities and stockholders'
       equity ................................        $ 50,584       $ 50,667
                                                      ========       ========


            See Notes to condensed consolidated financial statements.

                                       3
<PAGE>

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


                                                Three Months
                                              Ended December 31,
                                       ---------------------------------
                                            1999                 1998
                                       ------------         ------------

Revenues:
  Product sales .................      $      3,872         $      4,524
  Services ......................             1,112                  705
                                       ------------         ------------
    Total revenues ..............             4,984                5,229
                                       ------------         ------------

Cost of revenues:
  Product sales .................               460                  611
  Services ......................               312                  189
                                       ------------         ------------
    Total cost of revenues ......               772                  800
                                       ------------         ------------
Gross profit ....................             4,212                4,429
                                       ------------         ------------

Operating expenses:
  Research and development ......               615                  553
  Sales and marketing ...........             1,990                1,192
  General and administrative                    697                  579
                                       ------------         ------------
    Total operating expenses ....             3,302                2,324
                                       ------------         ------------
Operating income ................               910                2,105

Interest income .................               604                  151
Other income (expense) ..........              (187)                (166)
                                       ------------         ------------

Income before taxes .............             1,327                2,090
Provision for taxes .............               510                  899
                                       ------------         ------------

Net income ......................      $        817         $      1,191
                                       ============         ============

Earnings per share:
  Basic .........................      $       0.06         $       0.11
                                       ============         ============

  Diluted .......................      $       0.06         $       0.11
                                       ============         ============

Weighted average shares:
  Basic .........................        12,727,000           10,517,000
                                       ============         ============

  Diluted .......................        13,103,000           10,953,000
                                       ============         ============


            See Notes to condensed consolidated financial statements.


                                       4
<PAGE>
<TABLE>
                       CATAPULT COMMUNICATIONS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
<CAPTION>
                                                                                Three Months
                                                                              Ended December 31,
                                                                          -------------------------
                                                                            1999             1998
                                                                          --------         --------
<S>                                                                       <C>              <C>
Cash flows from operating activities:
  Net income .......................................................      $    817         $  1,191
  Adjustments to reconcile net income to net cash provided (used)
    by operating activities:
    Depreciation and amortization ..................................            98               77
    Amortization of deferred stock compensation ....................            18               50
    Change in current assets and liabilities:
      Accounts receivable ..........................................         2,171           (1,413)
      Inventories ..................................................           (65)              39
      Prepaid expenses .............................................           (21)            (284)
      Other assets .................................................            10               (3)
      Accounts payable .............................................            68             (290)
      Accrued liabilities ..........................................        (1,142)            (273)
      Deferred revenue .............................................           255             (231)
                                                                          --------         --------
        Net cash provided (used) by operating activities ...........         2,209           (1,137)
  Cash flows from investing activities:
    Purchase of investments, net ...................................        (7,182)            --
    Purchase of property and equipment .............................          (208)             (49)
                                                                          --------         --------
      Net cash used by investing activities ........................        (7,390)             (49)
                                                                          --------         --------
  Cash flows from financing activities:
    Stock issuances ................................................           111               17
    Purchase of treasury stock .....................................          --               (300)
                                                                          --------         --------
      Net cash provided (used) by financing activities .............           111             (283)
                                                                          --------         --------

  Effect of exchange rate changes ..................................          (302)              (1)
                                                                          --------         --------

  Decrease in cash and cash equivalents ............................        (5,372)          (1,470)
  Cash and cash equivalents, beginning of period ...................         8,486           15,229
                                                                          --------         --------

  Cash and cash equivalents, end of period .........................      $  3,114         $ 13,759
                                                                          ========         ========
<FN>
            See Notes to condensed consolidated financial statements.
</FN>
</TABLE>


                                       5
<PAGE>




                       CATAPULT COMMUNICATIONS CORPORATION

              NOTES 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
was  incorporated in California in October 1985 and has operations in the United
States,  Canada, the United Kingdom,  Europe and Japan. 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  accompanying   condensed  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.  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, 2000.
These  financial  statements, including  the  notes  thereto, should  be read in
conjunction with the audited  financial  statements for the year ended September
30, 1999,  which were  included as part of the  Company's  Annual Report on Form
10-K for the year ended  September 30, 1999 and  Registration  Statement on Form
S-1 on file with the Securities and Exchange Commission.


NOTE 2 - RECENT ISSUED ACCOUNTING STANDARDS

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
Financial Accounting  Statement No. 133 ("FAS 133"),  "Accounting for Derivative
Instruments and Hedging Activities." The Company is required to adopt FAS 133 in
fiscal 2001. FAS 133 established methods of accounting for derivative  financial
instruments and hedging activities related to those instruments as well as other
hedging activities. The Company continues assessing the effect of FAS 133 on the
operations and financial position of the Company.


NOTE 3--BASIC AND DILUTED 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:

                                                     Three months ended
                                                         December 31,
                                                    1999               1998
                                                 -----------        ------------
                                                  (in thousands, except share
                                                      and per share data)

Net income ..............................        $       817        $     1,191
                                                 ===========        ===========


                                       6
<PAGE>


Weighted average shares outstanding .....         12,727,000         10,517,000
Dilutive options ........................            376,000            436,000
                                                 -----------        ------------
Weighted average shares assuming dilution         13,103,000         10,953,000
                                                 ===========        ===========
Earnings per share:
Basic ...................................        $      0.06        $      0.11
                                                 ===========        ===========

Diluted .................................        $      0.06        $      0.11
                                                 ===========        ===========


NOTE 4--COMPREHENSIVE INCOME

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

                                             Three Months Ended
                                                December 31,
                                              1999       1998
                                              ----       ----
Net income ................................  $  817     $1,191
Foreign currency translation adjustment ...     302         (1)
                                             ------     ------
Comprehensive income ......................  $1,119     $1,190
                                             ======     ======

NOTE 5--INVENTORIES (in thousands)

                                        December 31,  September 30,
                                           1999            1999
                                           ----            ----

                    Raw Materials .....    $655            $554
                    Work-in-process ...      63              79
                    Finished goods ....      52              72
                                           ----            ----
                                           $770            $705
                                           ====            ====


                                       7
<PAGE>

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 Annual Report on Form
10-K and Registration  Statement on Form S-1. 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  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 by 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  approximately  160 protocols and variants.  The DCT systems 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.

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 December 31,
                                           1999           1998
                                          -----          -----

Revenues:
  Product sales ........................   77.7%          86.5%
  Services .............................   22.3           13.5
                                          -----          -----
    Total revenues .....................  100.0          100.0
                                          -----          -----

Cost of revenues:
  Product sales ........................    9.2           11.7
  Services  ............................    6.3            3.6
                                          -----          -----
    Total cost of revenues .............   15.5           15.3
                                          -----          -----
Gross profit ...........................   84.5           84.7

Operating expenses:
  Research and development .............   12.3           10.6
  Sales and marketing ..................   39.9           22.8
  General and administrative ...........   14.0           11.0
                                          -----          -----
    Total operating expenses ...........   66.2           44.4
                                          -----          -----



                                       8
<PAGE>

Operating income .......................   18.3           40.3
Interest income ........................   12.1            2.9
Other income (expense) .................   (3.8)          (3.2)
                                          -----          -----

Income before taxes ....................   26.6           40.0
Provision for taxes ....................   10.2           17.2
                                          -----          -----

Net income .............................   16.4%          22.8%
                                          =====          =====

Gross margin on product sales ..........   88.1%          86.5%
                                          =====          =====

Gross margin on services ...............   71.9%          73.2%
                                          =====          =====

Three Months Ended December 31, 1998 and 1999

         Revenues.  Revenues decreased by approximately 5% from $5.2 million for
the three  months  ended  December 31, 1998 to $5.0 million for the three months
ended  December  31,  1999.  Over the same period,  product  sales  decreased by
approximately  14.4% from $4.5 million to $4.0  million,  and  services  revenue
increased by  approximately  56% from $705,000 to $1.1 million.  The decrease in
product sales was primarily  attributable to decreased system sales to customers
in Japan,  specifically  NTT  DoCoMo.  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 to a lesser  extent  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.

         Subsequent  to the fiscal year ended  September  30, 1999,  the Company
received  information that sales to NTT, a major customer in Japan, would likely
be  significantly  reduced  beginning in fiscal 2000. The Company believes it is
likely that sales to NTT will no longer represent as large a percentage of total
revenue,  and this will likely have a negative effect on the Company's long term
growth expectations*. Accordingly, future quarterly results and fiscal 2000 will
likely  be  significantly  reduced  and  different  in terms  of total  revenue,
earnings per share,  geographic sales mix and customer concentration from fiscal
1999.

         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 revenues decreased 3.5% from $800,000 for the three months
ended December 31, 1998 to $772,000 for the three months ended December 31 1999.
Gross  margin on  product  sales  increased  from  86.5% to 88.1% over this same
period as the  Company's  sales mix had a greater  proportion  of higher  margin
products.  Cost of services  increased by approximately  65.1% from $189,000 for
the three months ended  December 31, 1998 to $312,000 for the three months ended
December 31, 1999 due  primarily to personnel  additions.  Over the same period,
gross margin on services  decreased slightly from 73.2% to 71.9% gross margin on
services will vary depending in part on the amount of sales in 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  11.2% from  $553,000  for the three  months  ended
December 31, 1998 to $615,000 for the three months ended December 31, 1999. As a
percentage of


                                       9
<PAGE>

total revenues,  research and development expenses increased from 10.6% to 12.3%
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,  occupancy costs and
travel and promotional  expenses,  such as brochures and trade shows.  Sales and
marketing  expenses increased 66.9% from $1.2 million for the three months ended
December 31, 1998 to $2.0 million for the three months ended  December 31, 1999.
As a percentage of total revenues,  sales and marketing  expenses increased from
22.8% for the three months ended December 31, 1998 to 39.9% for the three months
ended December 31, 1999.  The increase in absolute  dollars was due primarily to
an overall  increase in marketing  personnel  and the expansion of the Company's
sales and support offices. The Company expects that sales and marketing expenses
will  increase in absolute  dollars  for the  foreseeable  future as the Company
intends to invest in its sales and marketing capabilities*.

         General and administrative. General and administrative expenses include
costs associated with the Company's general management, public company reporting
requirements,  human resources and finance functions. General and administrative
expenses  increased  20.4% from $579,000 for the three months ended December 31,
1998 to $697,000 for the three months ended  December 31, 1999 due  primarily to
an overall increase in personnel, temporary staffing costs, recruiting costs and
public  company  costs.  As  a  percentage  of  total   revenues,   general  and
administrative expenses increased from 11.0% to 14.0% over the same period.

         In the three months  ended  December  31,  1999,  the Company  recorded
amortization of deferred  compensation expense of approximately  $18,000 related
to the  issuance of options to purchase the  Company's  Common Stock at exercise
prices  subsequently deemed to be below fair market value. At December 31, 1999,
approximately   $114,000  of  deferred   compensation  expense  remained  to  be
amortized.

         Interest income.  Interest income consists primarily of interest earned
on cash and cash equivalents and short-term investment balances. Interest income
increased from $151,000 for the three months ended December 31, 1998 to $604,000
for the three months ended December 31, 1999 due to an increase in the Company's
cash and cash equivalent  balances and short-term  investments from the proceeds
of the February 1999 public offerings and operations.

         Other income  (expense),  net. 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  December 31, 1998 and $187,000 for the three months
ended December 31, 1999 due  principally  to foreign  exchange gains and losses,
premiums  paid  for  forward   contracts  and  options  entered  into  to  hedge
transactions denominated in currencies other than the US dollar.

         Provision  for income  taxes.  Provision  for income taxes  consists of
federal,  state and international income taxes. The Company's effective tax rate
was 43.0% for the three months  ended  December 31, 1998 and 39.0% for the three
months  ended  December  31,  1999.  These  tax  rates  primarily   reflect  the
anticipated  percentages of revenues  derived by the Company from  international
operations and a decrease in the tax rate in Japan. 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  operations,  including
increases in account  receivable and capital equipment  acquisitions,  primarily
through cash generated from  operations,  cash raised through its


                                       10
<PAGE>

initial  public  offering of common  stock and the  exercise  of employee  stock
options.

         The  Company's  operating  activities  used  cash of $1.1  million  and
provided  $2.3  million  in the  period  ending  December  31,  1998  and  1999,
respectively.  The cash used in the  Company's  operations  for the three months
ended December 31 1998 was primarily  attributable to a significant  increase in
account  receivables  and a reduction in  liabilities.  The cash provided in the
Company's  operations  for the three months ended December 31 1999 was primarily
attributable to profitable  operations and a significant  increase in collection
of account  receivable  offset by an  decrease  in accrued  expenses.  Investing
activities,  consisting  primarily of purchases of  short-term  investments  and
additions to property and  equipment,  using cash of $49,000 and $7.5 million in
the three  months  ending  December 31, 1998 and 1999,  respectively.  Financing
activities  in  the  three  months  ending  December  31,  1998  and  1999  were
attributable  to the exercise of employee  stock  options and the  repurchase of
stock from an officer of the Company in 1998.

         As of December  31,  1999,  the  Company  had working  capital of $43.0
million, cash and cash equivalents of $3.1 million and short-term investments of
$40.4 million. As of December 31, 1999, the Company had no bank indebtedness and
no long-term  commitments  other than operating lease  obligations.  The Company
expects that capital  expenditures will total approximately $1 million in fiscal
2000*.

         The  Company  believes  that  cash  and  cash  equivalents,   temporary
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 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 the 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 are generally  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


                                       11
<PAGE>

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 three months ended December 31, 1999, the Company's top
four customers  represented  approximately  51.7% of total revenue.  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

         Company revenues from  international  customers were  approximately 64%
during the three  months  ended  December  31,  1999.  The Company  expects that
international  sales will continue to account for a  significant  portion of its
revenues in future periods. The Company sells its products worldwide through its
direct sales force. The Company has offices located in Japan, Canada, the United
Kingdom,  Germany,  France  and  Sweden  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,  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,


                                       12
<PAGE>

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 three  months  ended  December  31, 1999 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.

         Subsequent  to the fiscal year ended  September  30, 1999,  the Company
received  information that sales to NTT, a major customer in Japan, would likely
be  significantly  reduced  beginning in fiscal 2000. The Company believes it is
likely that sales to NTT will no longer represent as large a percentage of total
revenue,  and this will likely have a negative effect on the Company's long term
growth expectations.  Accordingly,  results for the quarter and fiscal 2000 will
likely  be  significantly  reduced  and  different  in terms  of total  revenue,
earnings per share,  geographic sales mix and customer concentration from fiscal
1999.

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

         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


                                       13
<PAGE>

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  December  31,  1999 the  Company  had  forward  exchange  contracts
maturing in fiscal 2000 to sell  approximately  $2.9 million in Japanese Yen and
$1.9  million in Pounds  Sterling.  The fair market  value of the  contracts  at
December 31, 1999 was immaterial. In addition, at December 31, 1999, the Company
had a foreign  currency  option to sell  approximately  $2 million  Japanese Yen
maturing in fiscal  2000.  This option had an  immaterial  fair market  value at
December 31, 1999.  As of December 31, the cost of the contracts and option have
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.


Year 2000 Compliance



                                       14
<PAGE>


         To date, the Company has not incurred  material costs  associated  with
Year 2000 compliance nor any disruption with vendors or operations. 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*.

         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 and
in Form 10-K.


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  short-term  investments  are  generally
comprised of  investments  with original  maturities of less than one year.  The
investments  consist of commercial  paper,  investment  quality corporate bonds,
Collateralized Mortgage Obligations, U.S. government securities and money market
funds.  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
Foreign  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

         (c) The following information relates to securities sold by the Company
             during the quarter ended December 31, 1999: NONE.

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


                                       15
<PAGE>

             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:    February 14, 2000                 By: /s/ Richard A. Karp
                                           ------------------------------------
                                           Richard A. Karp
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)
                                           Acting Chief Financial Officer
                                           (Principal Financial Officer)


                                       16