##### Table of Contents



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, 2002

OR

o     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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x    No

As of January 31, 2003, there were 13,070,513 shares of the Registrants
Common Stock, $0.001 par value, outstanding.





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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|Part I. Financial Information
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF INCOME         
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                              | 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 1. Legal Proceedings                                                                    
|                              | Item 2. Changes in Securities and Use of Proceeds                                            
|                              | Item 3. Defaults Upon Senior Securities                                                      
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                              | Item 5. Other Information                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                   
|EXHIBIT INDEX                
|EXHIBIT 99.1                 



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CATAPULT COMMUNICATIONS CORPORATION
FORM 10-Q

INDEX

|                                                                                                      |  |      |    | 
|----------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                      |  | Page
|Part IFinancial Information                                                                          |  |      |    | 
|Item 1. Financial Statements (unaudited)                                                              |  |      |    | 
|Condensed Consolidated Balance Sheets at December 31, 2002 and September 30, 2002                     |  |      | 3  | 
|Condensed Consolidated Statements of Income for the three months ended December 31, 2002 and 2001     |  |      | 4  | 
|Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2002 and 2001 |  |      | 5  | 
|Notes to Condensed Consolidated Financial Statements                                                  |  |      | 6  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations         |  |      | 13 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                    |  |      | 21 | 
|Part IIOther Information                                                                             |  |      |    | 
|Item 1. Legal Proceedings                                                                             |  |      | 22 | 
|Item 2. Changes in Securities and Use of Proceeds                                                     |  |      | 22 | 
|Item 3. Defaults
Upon Senior Securities                                                               |  |      | 22 | 
|Item 4. Submission of Matters to a Vote of Security Holders                                           |  |      | 23 | 
|Item 5. Other Information                                                                             |  |      | 23 | 
|Item 6. Exhibits and Reports on Form 8-K                                                              |  |      | 23 | 
|Signatures                                                                                            |  |      | 23 | 

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##### Table of Contents






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,
|                                    |                                           |  |                                            |                                      |   | 2002         |        | 2002         
|                                    |                                           |  |                                            |                                      |   |              |        |              
|                                    |                                           |  |                                            | ASSETS                               |   |              |        |               |   |         |  | 
|Current Assets:                     |                                           |  |                                            |                                      |   |              |        |               |  
|                                    | Cash and cash equivalents                 |  | $                                          | 15,671                               |   |              | $      | 12,575        |  
|                                    | Short-term investments                    |  |                                            | 16,112                               |   |              |        | 22,790        |  
|                                    | Accounts receivable, net                  |  |                                            | 10,999                               |   |              |        | 11,009        |  
|                                    | Inventories                               |  |                                            | 3,603                                |   |              |        | 3,869         |  
|                                    | Deferred income taxes                     |  |                                            | 1,222                                |   |              |        | 1,214         |  
|                                    | Prepaid expenses and other current assets |  |                                            | 1,322                                |   |              |        | 1,563         |  
|                                    | Assets of discontinued operations         |  |                                            | 83                                   |   |              |        | 2,636         |  
|                                    |                                           |  |                                            |                                      |   |              |        |               |  
|                                    |                                           |  | Total current assets                       |                                      |   | 49,012       |        |               |   | 55,656  | 
|Property and equipment, net         |                                           |  | 3,757                                      |                                      |   |              | 3,874  |              
|Goodwill and other intangibles, net |                                           |  | 56,692                                     |                                      |   |              | 57,148 |              
|Other assets                        |                                           |  | 1,738                                      |                                      |   |              | 1,172  |              
|                                    |                                           |  |                                            |                                      |   |              |        |               |  
|                                    |                                           |  | Total assets                               |                                      | $ | 111,199      |        |               | $ | 117,850 | 
|                                    |                                           |  |                                            |                                      |   |              |        |               |  
|                                    |                                           |  |                                            | LIABILITIES AND STOCKHOLDERS EQUITY |   |              |        |               |   |         |  | 
|Current Liabilities:                |                                           |  |                                            |                                      |   |              |        |               |  
|                                    | Accounts payable                          |  | $                                          | 884                                  |   |              | $      | 2,594         |  
|                                    | Accrued liabilities                       |  |                                            | 13,495                               |   |              |        | 18,829        |  
|                                    | Deferred revenue                          |  |                                            | 5,158                                |   |              |        | 4,492         |  
|                                    | Liabilities of discontinued operations    |  |                                            | 168                                  |   |              |        | 889           |  
|                                    |                                           |  |                                            |                                      |   |              |        |               |  
|                                    |                                           |  | Total current liabilities                  |                                      |   | 19,705       |        |               |   | 26,804  | 
|Convertible notes payable           |                                           |  | 17,979                                     |                                      |   |              | 18,081 |              
|                                    |                                           |  |                                            |                                      |   |              |        |               |  
|                                    |                                           |  | Total liabilities                          |                                      |   | 37,684       |        |               |   | 44,885  | 
|                                    |                                           |  |                                            |                                      |   |              |        |               |  
|Stockholders Equity:               |                                           |  |                                            |                                      |   |              |        |              
|                                    | Common stock                              |  |                                            | 13                                   |   |              |        | 13            |  
|                                    | Additional paid-in capital                |  |                                            | 22,778                               |   |              |        | 22,625        |  
|                                    | Deferred stock-based compensation         |  |                                            | (102                                 | ) |              |        | (111          | )
|                                    | Treasury stock (50,000 shares at cost)    |  |                                            | (300                                 | ) |              |        | (300          | )
|                                    | Accumulated other comprehensive income    |  |                                            | 459                                  |   |              |        | 182           |  
|                                    | Retained earnings                         |  |                                            | 50,667                               |   |              |        | 50,556        |  
|                                    |                                           |  |                                            |                                      |   |              |        |               |  
|                                    |                                           |  | Total stockholders equity                 |                                      |   | 73,515       |        |               |   | 72,965  | 
|                                    |                                           |  |                                            |                                      |   |              |        |               |  
|                                    |                                           |  | Total liabilities and stockholders equity |                                      | $ | 111,199      |        |               | $ | 117,850 | 
|                                    |                                           |  |                                            |                                      |   |              |        |               |  

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CATAPULT COMMUNICATIONS CORPORATION




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


|                                       |                            |                          |       |                    |        |      |        |        |        | 
|-------------------------------------- | -------------------------- | ------------------------ | ----- | ------------------ | ------ | ---- | ------ | ------ | ------ | 
|                                       |                            |                          |       | Three Months Ended
|                                       |                            |                          |       | December 31,      
|                                       |                            |                          |       |                   
|                                       |                            |                          |       | 2002               |        | 2001
|                                       |                            |                          |       |                    |        |     
|Revenues:                              |                            |                          |       |                    |        |      |        |       
|                                       | Products                   |                          | $     | 7,985              |        |      | $      | 9,526  |       
|                                       | Services                   |                          |       | 2,400              |        |      |        | 1,357  |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|                                       |                            | Total
revenues           |       |                    | 10,385 |      |        |        | 10,883 | 
|                                       |                            |                          |       |                    |        |      |        |        |       
|Cost of revenues:                      |                            |                          |       |                    |        |      |        |       
|                                       | Products                   |                          |       | 1,377              |        |      |        | 614    |       
|                                       | Services                   |                          |       | 697                |        |      |        | 263    |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|                                       |                            | Total cost of
revenues   |       |                    | 2,074  |      |        |        | 877    | 
|                                       |                            |                          |       |                    |        |      |        |        |       
|Gross
profit                           |                            |                          | 8,311 |                    |        |      | 10,006 |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|Operating expenses                     |                            |                          |       |                    |        |      |        |       
|                                       | Research and development   |                          |       | 3,368              |        |      |        | 1,638  |       
|                                       | Sales and
marketing        |                          |       | 3,522              |        |      |        | 2,774  |       
|                                       | General and administrative |                          |       | 2,184              |        |      |        | 1,179  |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|                                       |                            | Total operating
expenses |       |                    | 9,074  |      |        |        | 5,591  | 
|                                       |                            |                          |       |                    |        |      |        |        |       
|Operating income (loss)                |                            |                          | (763  | )                  |        |      | 4,415  |       
|Interest income (expense), net         |                            |                          | 199   |                    |        |      | 433    |       
|Other income (expense), net            |                            |                          | 718   |                    |        |      | (178   | )     
|                                       |                            |                          |       |                    |        |      |        |        |       
|Income before income taxes             |                            |                          | 154   |                    |        |      | 4,670  |       
|Provision for income taxes             |                            |                          | 43    |                    |        |      | 1,308  |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|Net
income                             |                            | $                        | 111   |                    |        | $    | 3,362  |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|Net income per share:                  |                            |                          |       |                    |        |      |        |       
|                                       | Basic                      |                          | $     | 0.01               |        |      | $      | 0.26   |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|                                       | Diluted                    |                          | $     | 0.01               |        |      | $      | 0.25   |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|Shares used in per share calculations: |                            |                          |       |                    |        |      |        |       
|                                       | Basic                      |                          |       | 13,065             |        |      |        | 13,008 |       
|                                       |                            |                          |       |                    |        |      |        |        |       
|                                       | Diluted                    |                          |       | 13,214             |        |      |        | 13,353 |       
|                                       |                            |                          |       |                    |        |      |        |        |       

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CATAPULT COMMUNICATIONS CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)


|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |      |        |       | 
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------- | -------------------------------------- | ------------------------------------------------- | --------------------------------------------------- | ----- | ------ | ------ | ----- | ---- | ------ | ----- | 
|                                                             |                                                                                             |                                        | Three Months Ended                               
|                                                             |                                                                                             |                                        | December 31,                                     
|                                                             |                                                                                             |                                        |                                                   | 2002                                                |       |        |        | 2001 
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |      
|Cash flows from operating activities:                        |                                                                                             |                                        |                                                   |                                                     |       |        |        |      
|                                                             | Net income                                                                                  |                                        | $                                                 | 111                                                 |       |        | $      | 3,362 |     
|                                                             | Adjustments to reconcile net income to net cash provided by (used in) operating activities: |                                        |                                                   |                                                     |       |        |        |       |     
|                                                             |                                                                                             |                                        | Depreciation and amortization                     |                                                     |       | 433    |        |       |      | 189    |      
|                                                             |                                                                                             |                                        | Amortization of deferred stock-based compensation |                                                     |       | 9      |        |       |      | 6      |      
|                                                             |                                                                                             |                                        | Amortization of acquisition related intangibles   |                                                     |       | 456    |        |       |      |       |      
|                                                             |                                                                                             |                                        | Deferred income taxes                             |                                                     |       | (8     | )      |       |      |       |      
|                                                             |                                                                                             |                                        | Amortization of premium on note payable           |                                                     |       | (102   | )      |       |      |       |      
|                                                             |                                                                                             |                                        | Change in current assets and liabilities:         |                                                     |       |        |        |       |      |        |      
|                                                             |                                                                                             |                                        | Accounts receivable                               |                                                     |       | 10     |        |       |      | (1,583 | )    
|                                                             |                                                                                             |                                        | Inventories                                       |                                                     |       | 266    |        |       |      | 92     |      
|                                                             |                                                                                             |                                        | Prepaid expenses and other current assets         |                                                     |       | 241    |        |       |      | 30     |      
|                                                             |                                                                                             |                                        | Assets of discontinued operations                 |                                                     |       | 2,553  |        |       |      |       |      
|                                                             |                                                                                             |                                        | Other assets                                      |                                                     |       | (566   | )      |       |      | 54     |      
|                                                             |                                                                                             |                                        | Accounts payable                                  |                                                     |       | (1,710 | )      |       |      | (499   | )    
|                                                             |                                                                                             |                                        | Accrued liabilities                               |                                                     |       | (5,334 | )      |       |      | (198   | )    
|                                                             |                                                                                             |                                        | Deferred revenue                                  |                                                     |       | 666    |        |       |      | (282   | )    
|                                                             |                                                                                             |                                        | Liabilities of discontinued operations            |                                                     |       | (721   | )      |       |      |       |      
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     
|                                                             |                                                                                             |                                        |                                                   | Net cash provided by (used in) operating activities |       |        | (3,696 | )     |      |        | 1,171 | 
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     
|Cash flows from investing activities:                        |                                                                                             |                                        |                                                   |                                                     |       |        |        |      
|                                                             |                                                                                             | Sales (purchases) of investments, net  |                                                   |                                                     | 6,678 |        |        |       | 844  |       
|                                                             |                                                                                             | Purchases of property and equipment    |                                                   |                                                     | (316  | )      |        |       | (177 | )     
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     
|                                                             |                                                                                             |                                        |                                                   | Net cash provided by investing activities           |       |        | 6,362  |       |      |        | 667   | 
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     
|Cash flows from financing activities:                        |                                                                                             |                                        |                                                   |                                                     |       |        |        |      
|                                                             |                                                                                             | Proceeds from issuance of common stock |                                                   |                                                     | 153   |        |        |       | 525  |       
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     
|                                                             |                                                                                             |                                        |                                                   | Net cash provided by financing activities           |       |        | 153    |       |      |        | 525   | 
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     
|Effect of exchange rate changes on cash and cash equivalents |                                                                                             |                                        | 277                                               |                                                     |       |        | (93    | )    
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     
|Increase in cash and cash equivalents                        |                                                                                             |                                        | 3,096                                             |                                                     |       |        | 2,270  |      
|Cash and cash equivalents, beginning of period               |                                                                                             |                                        | 12,575                                            |                                                     |       |        | 44,202 |      
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     
|Cash and cash equivalents, end of period                     |                                                                                             | $                                      | 15,671                                            |                                                     |       | $      | 46,472 |      
|                                                             |                                                                                             |                                        |                                                   |                                                     |       |        |        |       |     

The accompanying notes are an integral part of these condensed consolidated financial statements.

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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 founded in 1986 and has been incorporated in Nevada since June 19, 1998.
The Company has operations in the United States, Canada, the United Kingdom and
Europe, Australia and Japan. The Company conducts its business within one
industry segment.

On August 30, 2002, the Company purchased certain assets and assumed
certain liabilities of the Network Diagnostics Business (NDB) of Tekelec. The
assets acquired included the shares of Tekelecs Japanese subsidiary, Tekelec
Limited. The total purchase price of $69.4 million consisted of a cash payment
of $42.5 million, two 2% convertible subordinated notes in the aggregate
principal amount of $17.3 million maturing on August 30, 2004, an independent
valuation premium of $0.8 million ascribed to the convertible notes payable,
transaction costs of $4.3 million and a net working capital adjustment in the
estimated amount of $4.5 million pursuant to the terms of the Asset Purchase
Agreement payable following the completion of a closing date balance sheet
audit. The amount of this adjustment has not yet been agreed or paid and the
amounts included in these condensed consolidated financial statements relating
to the purchase price and the assets and liabilities acquired are preliminary
estimates subject to the networking capital adjustment.

The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations. These condensed financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Companys Report on Form 10-K for the year
ended September 30, 2002, and filed with the Securities and Exchange
Commission. The unaudited financial statements as of December 31, 2002, and for
the three months ended December 31, 2002 and 2001, reflect, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial information set forth herein. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for any subsequent interim period or for an entire
year. The September 30, 2002 balance sheet was derived from audited financial

statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America.

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES

The Company has identified the policies below as critical to its business
operations and the understanding of its results of operations. The impact and
any associated risks related to these policies on its business operations are
discussed throughout Managements Discussion and Analysis of Financial
Condition and Results of Operations where such policies affect the Companys
reported and expected financial results. For a detailed discussion on the
application of these and other accounting policies, see Note 1 in the Notes to
the Consolidated Financial Statements in the Companys Annual Report on Form
10-K.

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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 reasonably assured. Training and
maintenance revenues are based on the Companys established history of separate
sales of training and maintenance. Revenues allocated to training are
recognized at the time the training is complete. Revenues allocated to
maintenance are recognized ratably over the term of the maintenance contract.

Foreign Currency Translations

Certain of the Companys foreign subsidiaries use their respective local
currencies as their functional currencies because the majority of their
revenues, expenses, assets and liabilities are denominated in those local
currencies. In consolidation, assets and liabilities are translated at
period-end currency exchange rates and revenue and expense items are translated
at average currency exchange rates prevailing during the period. Gains and
losses from foreign currency translation are recorded in accumulated other
comprehensive income, which is a component of stockholders equity. Only gains
and losses resulting from foreign currency transactions are included in the
consolidated statement of income.

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
exchange rates on foreign currency denominated sales made to foreign
subsidiaries. The Company utilizes foreign currency forward exchange contracts
and options to mitigate the risk of future movements in foreign exchange rates
that affect certain foreign currency denominated inter-company receivables. The
Company attempts to match the forward contracts with specific underlying
receivables in terms of currency, amount and maturity. The Company does not use
derivative financial instruments for speculative or trading purposes.

Use of estimates; allowance for doubtful accounts

The preparation of financial statements requires the Company to make
estimates and assumptions that affect the reported amount of assets and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. The Company specifically analyzes accounts receivable,
historical bad debt experience, customer concentration, customer
credit-worthiness, current economic trends and changes in customer payment
terms when evaluating the adequacy of the allowance for doubtful accounts.

Accounting for income taxes

As part of the process of preparing consolidated financial statements, the
Company is required to estimate income taxes in each of the jurisdictions in
which it operates. This process involves estimating the Companys actual
current tax exposure together with assessing temporary differences resulting
from differing treatment of items, such as deferred revenue, for tax and
accounting purposes. These differences result in deferred tax assets and
liabilities, which are included within its consolidated balance sheet. The
Company must then assess the likelihood that its deferred tax assets will be
recovered from future taxable income and to the extent it believes that
recovery is not likely, it must establish a valuation allowance. To the extent
it establishes a valuation allowance or increases this allowance in a period,
it must include an expense within the tax provision in the statement of
operations.

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Recent Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 requires that a liability be recorded in the guarantors
balance sheet upon issuance of a guarantee. In addition, FIN 45 requires
disclosures about the guarantees that an entity has issued, including a
reconciliation of changes in the entitys product warranty liabilities. The
initial recognition and initial measurement provisions of FIN 45 are applicable
on a prospective basis to guarantees issued or modified after December 31,
2002, irrespective of the guarantors fiscal year-end. The disclosure
requirements of FIN 45 are effective for financial statements of interim or
annual periods ending after December 15, 2002. The Company believes that the
adoption of this standard will have no material impact on its financial
statements.

The following table represents the activity in Warranty Accrual for the
three months ended December 31, 2002 (in thousands):

|                              |                                         |   |     |     |  
|----------------------------- | --------------------------------------- | - | --- | --- | -
|Balance at September 30, 2002 |                                         | $ | 600 |    
|                              | Adjustments
for payments made           |   |     | (49 | )
|                              | Charged (credited) to cost and expenses |   |     | 49  |  
|                              |                                         |   |     |    
|Balance at December 31, 2002  |                                         | $ | 600 |    
|                              |                                         |   |     |    

In December 2002, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 148, Accounting for Stock-Based Compensation,
Transition and Disclosure. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. SFAS No. 148 also requires that
disclosures of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the
pro forma effect in interim financial statements. The transition and annual
disclosure requirements of SFAS No. 148 are effective for fiscal years ending
after December 15, 2002. The interim disclosure requirements are effective for
interim periods commencing after December 15, 2002. The Company believes that
the adoption of this standard will have no material impact on its financial
statements.

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.

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|                                                                                         |  |                                       |        |      |  |   |        | 
|---------------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | ---- |  | - | ------ | 
|                                                                                         |  | Three Months Ended                   
|                                                                                         |  | December 31,                         
|                                                                                         |  |                                      
|                                                                                         |  | 2002                                  |        | 2001
|                                                                                         |  |                                       |        |     
|                                                                                         |  | (in thousands, except per share data)
|Net income                                                                               |  | $                                     | 111    |      |  | $ | 3,362  | 
|                                                                                         |  |                                       |        |      |  |   |        | 
|Weighted average shares
outstanding                                                      |  |                                       | 13,065 |      |  |   | 13,008 | 
|Dilutive options                                                                         |  |                                       | 149    |      |  |   | 345    | 
|                                                                                         |  |                                       |        |      |  |   |        | 
|Weighted average shares assuming dilution                                                |  |                                       | 13,214 |      |  |   | 13,353 | 
|                                                                                         |  |                                       |        |      |  |   |        | 
|Net income per share:                                                                    |  |                                       |        |      |  |   |        | 
|Basic                                                                                    |  | $                                     | 0.01   |      |  | $ | 0.26   | 
|                                                                                         |  |                                       |        |      |  |   |        | 
|Diluted                                                                                  |  | $                                     | 0.01   |      |  | $ | 0.25   | 
|                                                                                         |  |                                       |        |      |  |   |        | 
|Antidilutive common equivalent shares excluded in calculating diluted earnings per share |  |                                       | 1,745  |      |  |   | 33     | 
|                                                                                         |  |                                       |        |      |  |   |        | 

NOTE 4  GOODWILL AND OTHER INTANGIBLE ASSETS

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 provides
specific criteria for determining which intangible assets acquired in a
business combination should be reported separately from goodwill. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB No. 17, Intangible Assets. It changes
the accounting for goodwill from an amortization method to an impairment-only
approach. This pronouncement also requires that intangible assets with
estimable useful lives be amortized over their respective estimated useful
lives and reviewed for impairment in accordance with SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and For Long-Lived Assets to be
Disposed of.

The Company adopted the provisions of SFAS No.142 effective October 1,
2002. As of October 1, 2002, approximately $49.8 million of goodwill will no
longer be amortized but will be tested annually for impairment in accordance
with the requirements of SFAS No. 142. The Company performed its annual
impairment test on October 1, 2002, showing no impairment of goodwill. As such,
there was no writedown of the goodwill balance.

As required by SFAS No. 142, the results for the prior years quarter have
not been restated. Had SFAS No. 142 been adopted on October 1, 2001, the
Company would have reported no difference in its reported net income and net
income per share for the three months ended December 31, 2001.

Between October 1, 2002 and December 31, 2002, there were no changes to
the Company s goodwill balance. Goodwill information is as follows (in
millions):

|                              |  |   |      | 
|----------------------------- |  | - | ---- | 
|Balance at September 30, 2002 |  | $ | 49.8 | 
|Goodwill acquired             |  |   |     | 
|Adjustments                   |  |   |     | 
|                              |  |   |      | 
|Balance at December 31, 2002  |  | $ | 49.8 | 
|                              |  |   |      | 

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Intangible assets subject to amortization consist of technology and
non-compete agreements that are being amortized over a period of seven to
eight years. The components of intangible assets, excluding goodwill, are as
follows (in thousands):

|                     |  |                          |       |                         |  |              |     |                |  |              |       |              |  |   |       |  |  |   |     |  |  |   |       | 
|-------------------- |  | ------------------------ | ----- | ----------------------- |  | ------------ | --- | -------------- |  | ------------ | ----- | ------------ |  | - | ----- |  |  | - | --- |  |  | - | ----- | 
|                     |  | As of September 30, 2002 |       | As of December 31, 2002
|                     |  | Gross Carrying           |       | Accumulated             |  | Net Carrying |     | Gross Carrying |  | Accumulated  |       | Net Carrying
|                     |  | Amount                   |       | Amortization            |  | Amount       |     | Amount         |  | Amortization |       | Amount      
|                     |  |                          |       |                         |  |              |     |                |  |              |       |             
|Purchased Technology |  | $                        | 5,800 |                         |  | $            | 69  |                |  | $            | 5,731 |              |  | $ | 5,800 |  |  | $ | 276 |  |  | $ | 5,524 | 
|Other Intangibles    |  |                          | 1,800 |                         |  |              | 216 |                |  |              | 1,584 |              |  |   | 1,800 |  |  |   | 464 |  |  |   | 1,336 | 
|                     |  |                          |       |                         |  |              |     |                |  |              |       |              |  |   |       |  |  |   |     |  |  |   |       | 
|Total                |  | $                        | 7,600 |                         |  | $            | 285 |                |  | $            | 7,315 |              |  | $ | 7,600 |  |  | $ | 740 |  |  | $ | 6,860 | 
|                     |  |                          |       |                         |  |              |     |                |  |              |       |              |  |   |       |  |  |   |     |  |  |   |       | 

The estimated future amortization expense of purchased intangible assets
as of December 31, 2002 was as follows:

|            |  |               |     | 
|----------- |  | ------------- | --- | 
|            |  | Amount       
|Fiscal Year |  | (in millions)
|2003        |  | $             | 0.8 | 
|2004        |  |               | 1.0 | 
|2005        |  |               | 1.0 | 
|2006        |  |               | 1.0 | 
|2007        |  |               | 1.0 | 
|Thereafter  |  |               | 2.1 | 
|            |  |               |     | 
|Total       |  | $             | 6.9 | 
|            |  |               |     | 

NOTE 5  DISCONTINUED OPERATIONS

Effective September 30, 2002, the Company discontinued the distribution
and consulting businesses engaged in by Tekelec Limited in Japan. The assets
and liabilities of the discontinued operations are segregated in the condensed
consolidated balance sheet. The pre-tax loss attributable to discontinued
operations was incurred and recognized in September 2002.

NOTE 6  RESTRUCTURING OF ACQUIRED BUSINESS

Prior to the effective date of the acquisition, the Company developed a
formal plan to restructure NDB by reducing the staff complement of the acquired
business by 66 employees, or approximately 39%, and by closing the Tokyo office
of Tekelec Limited due to redundancy with the Companys previously established
Tokyo office. A summary of the movements in the restructuring accrual is as
follows (in millions):

|                              |  |                    |     |                   |  |                   |     |  |  |   |     | 
|----------------------------- |  | ------------------ | --- | ----------------- |  | ----------------- | --- |  |  | - | --- | 
|                              |  | Accrual
as at      |     | Paid through      |  | Balance at       
|Restructuring costs           |  | September
30, 2002 |     | December 31, 2002 |  | December 31, 2002
|                              |  |                    |     |                   |  |                  
|Redundancy compensation costs |  | $                  | 1.2 |                   |  | $                 | 0.8 |  |  | $ | 0.4 | 
|Occupancy costs               |  |                    | 0.3 |                   |  |                   | 0.2 |  |  |   | 0.1 | 
|Professional costs            |  |                    | 0.2 |                   |  |                   | 0.1 |  |  |   | 0.1 | 
|                              |  |                    |     |                   |  |                   |     |  |  |   |     | 
|Totals                        |  | $                  | 1.7 |                   |  | $                 | 1.1 |  |  | $ | 0.6 | 
|                              |  |                    |     |                   |  |                   |     |  |  |   |     | 

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NOTE 7 COMPREHENSIVE INCOME

The components of comprehensive income, net of tax, are as follows:

|                                      |  |                    |     |      |  |   |       |  
|------------------------------------- |  | ------------------ | --- | ---- |  | - | ----- | -
|                                      |  | Three Months Ended
|                                      |  | December 31,      
|                                      |  | 2002               |     | 2001
|                                      |  |                    |     |      | 
|                                      |  | (in thousands)    
|Net income                            |  | $                  | 111 |      |  | $ | 3,362 |  
|Currency translation adjustment       |  |                    | 258 |      |  |   | (93   | )
|Unrealized gain (loss) on investments |  |                    | 19  |      |  |   | (38   | )
|                                      |  |                    |     |      |  |   |       |  
|Comprehensive income                  |  | $                  | 388 |      |  | $ | 3,231 |  
|                                      |  |                    |     |      |  |   |       |  

NOTE 8INVENTORIES

|                |  |                |               |      |  |   |       | 
|--------------- |  | -------------- | ------------- | ---- |  | - | ----- | 
|                |  | December 31,   | September 30,
|                |  | 2002           |               | 2002
|                |  |                |               |     
|                |  | (In thousands)
|Raw materials   |  | $              | 3,145         |      |  | $ | 3,371 | 
|Work-in-process |  |                | 24            |      |  |   | 21    | 
|Finished goods  |  |                | 434           |      |  |   | 477   | 
|                |  |                |               |      |  |   |       | 
|                |  | $              | 3,603         |      |  | $ | 3,869 | 
|                |  |                |               |      |  |   |       | 

NOTE 9  CONVERTIBLE NOTES PAYABLE

In connection with the acquisition of NDB described in Note 2, the
Companys Irish subsidiary issued two convertible notes to Tekelec in the
principal amounts of $10.0 million and $7.3 million, respectively. These notes
have been guaranteed by the Company, bear interest at 2% and are due and
payable on or before August 30, 2004. The notes are convertible at the option
of the holder into 1,081,250 shares of the Companys common stock (subject to
adjustment for certain events) between August 30, 2003 and the maturity date.
The Company also granted Tekelec certain rights to require the Company to
register with the Securities and Exchange Commission for resale by Tekelec any
common stock acquired by Tekelec upon conversion of the notes.

The fair value of the notes, as determined by an independent valuation,
was $18.1 million, which has been recorded in the balance sheet. The premium of
$0.8 million is being amortized to interest income over the term of the notes
using the effective interest method with a credit to interest income of
$102,000 recorded in the quarter.

On the maturity date of the $10.0 million note, the Company is entitled to
pay the principal balance in any combination of cash and/or common stock,
provided that the common stock shall be at a value of 82.5% of the fair market
value of the stock, determined pursuant to a formula set forth in the note.

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NOTE 10  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, revenues and net
income for the three month periods ended December 31, 2002 and 2001 and
long-lived assets by region at December 31, 2002 and September 30, 2002 were as
follows (in thousands):

|                                        |  |         |  |        |  |       |        |   |  |       |  |       |  |   |        |   |  |  |  |  |  |  |  |  |  |              |       |  |  |  |  |  |  |   |        |  |  |  |  | 
|--------------------------------------- |  | ------- |  | ------ |  | ----- | ------ | - |  | ----- |  | ----- |  | - | ------ | - |  |  |  |  |  |  |  |  |  | ------------ | ----- |  |  |  |  |  |  | - | ------ |  |  |  |  | 
|                                        |  |         |  |        |  | North |        |   |  |       |  | UK &  |  |   |        |   |  |  |  |  |  |  |  |  |  | Consolidated
|                                        |  | America |  | Europe |  |       |        |   |  | Japan |  | Total
|Three Months Ended December 31, 2002    |  |         |  |        |  |       |        |  
|                                        |  |         |  |        |  |       |        |   |  |       |  |       |  |   |        |   |  |  |  |  |  |  |  |  |  |              |       |  |  |  |  |  |  |   |        |  |  |  |  | 
|Revenues from unaffiliated customers    |  |         |  |        |  | $     | 5,917  |   |  |       |  |       |  | $ | 2,436  |   |  |  |  |  |  |  |  |  |  | $            | 2,032 |  |  |  |  |  |  | $ | 10,385 |  |  |  |  | 
|Net income (loss)                       |  |         |  |        |  |       | 532    |   |  |       |  |       |  |   | (645   | ) |  |  |  |  |  |  |  |  |  |              | 224   |  |  |  |  |  |  |   | 111    |  |  |  |  | 
|Long-Lived
Assets atDecember 31, 2002   |  |         |  |        |  | $     | 39,859 |   |  |       |  |       |  | $ | 21,000 |   |  |  |  |  |  |  |  |  |  | $            | 641   |  |  |  |  |  |  | $ | 61,500 |  |  |  |  | 
|                                       
|Three Months Ended December 31, 2001    |  |         |  |        |  |       |        |   |  |       |  |       |  |   |        |  
|                                        |  |         |  |        |  |       |        |   |  |       |  |       |  |   |        |  
|Revenues from unaffiliated customers    |  |         |  |        |  | $     | 926    |   |  |       |  |       |  | $ | 5,013  |   |  |  |  |  |  |  |  |  |  | $            | 4,944 |  |  |  |  |  |  | $ | 10,883 |  |  |  |  | 
|Net income (loss)                       |  |         |  |        |  |       | (548   | ) |  |       |  |       |  |   | 3,836  |   |  |  |  |  |  |  |  |  |  |              | 74    |  |  |  |  |  |  |   | 3,362  |  |  |  |  | 
|Long-Lived Assets at September 30, 2002 |  |         |  |        |  | $     | 40,581 |   |  |       |  |       |  | $ | 20,520 |   |  |  |  |  |  |  |  |  |  | $            | 330   |  |  |  |  |  |  | $ | 61,431 |  |  |  |  | 

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

NOTE 11  CONTINGENCIES

A lawsuit was instituted in October 2002 against the Company and one of
its subsidiaries, Catapult Communications International Limited, an Irish
corporation, in the Antwerp Commercial Court, Antwerp, Belgium, by Tucana
Telecom NV, a Belgian company (Tucana). Tucana has been a distributor of
products for Tekelec, the company from which NDB was acquired in August 2002.
The writ alleges that the defendants improperly terminated an exclusive
distribution agreement with Tucana following the acquisition of NDB and seeks
damages of 12,461,000 euros plus costs. A preliminary hearing on the matter has
been scheduled for March 6, 2003 at which time the Company expects that a trial
date will be established. The Company strongly believes that it properly
terminated any contract it had with Tucana and that Tucana is not entitled to
any damages in this matter. The Company intends to defend itself vigorously.
The Company anticipates that it would seek indemnification from Tekelec for any
damages assessed against it in this matter under the terms of the Asset
Purchase Agreement it entered into with Tekelec.

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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 2002.

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

Catapult Communications Corporation (Catapult, the Company or the
Registrant) designs, develops, manufactures, markets and supports advanced
software-based test systems offering integrated suites of testing applications
for the global telecommunications industry. Catapults DCT and MGTS products
are digital communications test systems designed to enable equipment
manufacturers and network operators to deliver complex digital
telecommunications equipment and services more quickly and cost-effectively,
while helping to ensure interoperability and reliability. The Companys
advanced software and hardware assist customers in the design, integration,
installation and acceptance testing of a broad range of digital
telecommunications equipment and services. The DCT and MGTS products perform 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
industry standard protocols and variants thereon. In addition, the Company
offers customer support under software support contracts, as well as
installation and training services.

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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.

|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   |  | 
|------------------------------ | -------------------------- | ------------------------ | ---- | ------------------------------- | ----- |  | - | - |  | ---- | ---- | ---- | ----- |  | - | - |  | 
|                               |                            |                          |      | Three Months Ended December 31,
|                               |                            |                          |      |                                
|                               |                            |                          |      | 2002                            |       |  |   |   |  | 2001 |      |      |       | 
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       | 
|Revenues:                      |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |  
|                               | Products                   |                          |      | 76.9                            |       |  |   | % |  |      |      | 87.5 |       |  |   | % | 
|                               | Services                   |                          |      | 23.1                            |       |  |   |   |  |      |      | 12.5 |       |  |   |   | 
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|                               |                            | Total revenues           |      |                                 | 100.0 |  |   |   |  |      |      |      | 100.0 |  |   |   |  | 
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|Cost of revenues:              |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |  
|                               | Products                   |                          |      | 13.3                            |       |  |   |   |  |      |      | 5.7  |       |  |   |   | 
|                               | Services                   |                          |      | 6.7                             |       |  |   |   |  |      |      | 2.4  |       |  |   |   | 
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|                               |                            | Total cost of revenues   |      |                                 | 20.0  |  |   |   |  |      |      |      | 8.1   |  |   |   |  | 
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|Gross margin                   |                            |                          | 80.0 |                                 |       |  |   |   |  |      | 91.9 |      |       |  |   |  
|Operating expenses:            |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |  
|                               | Research and development   |                          |      | 32.4                            |       |  |   |   |  |      |      | 15.0 |       |  |   |   | 
|                               | Sales and marketing        |                          |      | 33.9                            |       |  |   |   |  |      |      | 25.5 |       |  |   |   | 
|                               | General and administrative |                          |      | 21.0                            |       |  |   |   |  |      |      | 10.8 |       |  |   |   | 
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|                               |                            | Total operating expenses |      |                                 | 87.4  |  |   |   |  |      |      |      | 51.3  |  |   |   |  | 
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|Operating income (loss)        |                            |                          | (7.3 | )                               |       |  |   |   |  |      | 40.6 |      |       |  |   |  
|Interest income (expense), net |                            |                          | 1.9  |                                 |       |  |   |   |  |      | 4.0  |      |       |  |   |  
|Other income (expense), net )  |                            |                          | 6.9  |                                 |       |  |   |   |  |      | (1.7 | )    |       |  |   |  
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|Income before income taxes     |                            |                          | 1.5  |                                 |       |  |   |   |  |      | 42.9 |      |       |  |   |  
|Provision for income taxes     |                            |                          | 0.4  |                                 |       |  |   |   |  |      | 12.0 |      |       |  |   |  
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|Net income                     |                            |                          | 1.1  |                                 |       |  | % |   |  |      | 30.9 |      |       |  | % |  
|                               |                            |                          |      |                                 |       |  |   |   |  |      |      |      |       |  |   |   | 
|Gross margin on products       |                            |                          | 82.8 |                                 |       |  | % |   |  |      | 93.6 |      |       |  | % |  
|Gross margin on services       |                            |                          | 71.0 |                                 |       |  | % |   |  |      | 80.6 |      |       |  | % |  

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Comparison of the Three Month Periods Ended December 31, 2002 and 2001

Revenues, cost of revenues and expenses for the three months ended
December 31, 2002 include the results of the continuing operations of NDB,
which was acquired by the Company on August 30, 2002 as described in more
detail in Note 1 to the Condensed Consolidated Financial Statements.

Revenues

Revenues decreased by approximately 5% from $10.9 million for the three
months ended December 31, 2001 to $10.4 million for the three months ended
December 31, 2002. Over the same period, product revenues decreased by
approximately 16% from $9.5 million to $8.0 million. The decrease in product
revenues was attributable to reduced demand for the Companys DCT test systems
due to reductions in research and development spending on the part of most of
its major customers, largely offset by the presence in the latter period of
revenues from the Companys MGTS products acquired with NDB. Services revenues
increased 76.9% from $1.4 million to $2.4 million. The increase in services
revenues was due to the addition of the service revenue stream from the MGTS
installed base acquired with NDB.

Cost of Revenues

Cost of product revenues 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. In addition, in the three months ended
December 31, 2002, cost of product revenues included fees paid to Tekelec for
the manufacture of the MGTS products under a transitional services agreement
that expires February 28, 2003. Cost of product revenues increased
approximately 124% from $614,000 for the three months ended December 31, 2001
to $1.4 million for the three months ended December 31, 2002 and gross margin
on product revenues decreased from 94% to 83% due to the inclusion of MGTS
product, which has lower margins than the Companys DCT products, and to
$440,000 in manufacturing fees paid under the transitional services agreement.
The Company expects cost of product revenues to decrease and gross margin on
product revenues to increase with the expiry of the transitional services
agreement.*

Cost of services revenues consists primarily of the costs of payroll and
benefits for customer support, installation and training personnel. Cost of
services revenues increased by approximately 165% from $263,000 for the three
months ended December 31, 2001 to $697,000 for the three months ended December
31, 2002 and gross margin on services revenues decreased from 81% to 71% due to
a 120% increase in the number of customer service personnel as a result of the
NDB acquisition.

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 charged to research
and development expenses as incurred. Research and development expenses
increased by approximately 106% from $1.6 million for the three months ended
December 31, 2001 to $3.4 million for the three months ended December 31, 2002
due to a 102% increase in the number of research and development personnel and
to an increased use of contract developers as a result of the NDB acquisition.
As a percentage of total revenues, research and development expenses increased
from 15% to 32% over the same period. The Company expects research and
development expenses to decrease by approximately $300,000 per quarter in the
remainder of the fiscal year ending September 30, 2003 due to a reduction in
contract development expense.*

15



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##### Table of Contents



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 27% from $2.8 million for the three months
ended December 31, 2001 to $3.5 million for the three months ended December 31,
2002 due primarily to a 30% increase in the number of sales and marketing
personnel as a result of the NDB acquisition. As a percentage of total
revenues, sales and marketing expenses increased from 26% to 34% over the same
period. The company expects sales and marketing expenses to increase as
additional sales support personnel are hired in Europe.*

General and Administrative

General and administrative expenses include costs associated with the
Companys general and risk management, public reporting, employee recruitment
and retention, investor relations and finance functions, as well as
amortization of intangible assets acquired with NDB in 2002. General and
administrative expenses increased approximately 85% from $1.2 million for the
three months ended December 31, 2001 to $2.2 million for the three months ended
December 31, 2002 due primarily to a 50% increase in the number of
administrative personnel as a result of the NDB acquisition and to the
inclusion of $455,000 in amortization expense. As a percentage of total
revenues, general and administrative expenses increased from 11% to 21% over
the same period. The Company expects general and administrative expenses to
decrease by approximately $200,000 per quarter in the remainder of the fiscal
year ending September 30, 2003 due to a reduction in amortization expense.*

Interest Income (Expense), net

Interest income (expense), net consists of interest earned on cash and
cash equivalents and short-term investments and amortization of the valuation
premium attributed to the convertible notes payable, net of interest charges on
those notes. Interest income decreased from $433,000 for the three months ended
December 31, 2001 to $199,000 for the three months ended December 31, 2002. The
decrease is due to a 51% reduction in cash and short-term investments as a
result of the NDB acquisition and to a decrease in interest rates. The $102,000
in amortization of the valuation premium on the convertible notes payable
offset the $87,000 in interest payable on those notes.

Other Income (Expense), net

Other income (expense), net primarily represents gains and losses from
fluctuations in exchange rates on transactions denominated in foreign
currencies and income from miscellaneous refunds. Other income increased by
$896,000 from an expense of $178,000 for the three months ended December 31,
2001 to an income of $718,000 for the three months ended December 31, 2002 due
to a Japanese consumption tax refund of approximately $695,000 recorded in the
latter period and to the absence in the latter period of foreign exchange
losses recorded in the earlier period.

Provision for income taxes

Provision for income tax consists of federal, state and international
income taxes. The Companys effective tax rate was 28.0% for the three months
ended December 31, 2002 and 2001, respectively. The Company expects that its
future tax rate may vary depending in part on the relative income contribution
by its domestic and foreign operations.

16



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Liquidity and Capital Resources

Historically, the Company has financed its operations primarily through
cash generated from operations and from the proceeds of its initial public
offering completed on February 11, 1999. The proceeds to the Company from the
offering, net of underwriter fees and other expenses, were approximately $19.2
million.

The Companys purchase of NDB was additionally financed through the
issuance of two convertible notes in the aggregate principal amount of $17.3
million. The convertible notes were issued by the Companys Irish subsidiary
and are guaranteed by the Company. The notes are convertible at the option of
the holder into an aggregate of 1,081,250 shares of the Companys common stock
(subject to adjustment for certain events) between August 30, 2003 and the
maturity date. The Company is entitled to pay the principal and accrued
interest on one of the notes in the principal amount of $10.0 million in cash
or, in whole or in part, by issuing its common stock at a value of 82.5% of the
fair market value of the stock determined by a formula set forth in the note.

The Companys operating activities used cash of $3.7 million in the three
month period ended December 31, 2002 and provided cash of $1.2 million in the
three month periods ended December 31, 2001. The cash used by the Companys
operations for the three months ended December 31, 2002 was attributable to a
decrease in accounts payable and accrued liabilities of $7.0 million, partially
offset by a realization of $1.8 million on the assets of discontinued
operations net of liabilities paid, an increase of $666,000 in deferred revenue
and non-cash depreciation and amortization charges of $834,000. The cash
provided by the Companys operations for the three months ended December 31,
2001 was primarily attributable to net income and partially offset by an
increase 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 $6.4 million in the three months ended December 31, 2002
compared to $667,000 in the three months ended December 31, 2001. Cash flows
from financing activities for the three months ended December 31, 2002 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 December 31, 2002, the Company had working capital of $29.3 million,
cash and cash equivalents of $15.7 million, short-term investments of $16.1
million and no bank indebtedness. As of December 31, 2002, the Company had the
following contractual obligations, in millions:

|                                          |  |       |      |        |  |                        |     |       |  |         |      |       |  |   |     |  |  |   |     | 
|----------------------------------------- |  | ----- | ---- | ------ |  | ---------------------- | --- | ----- |  | ------- | ---- | ----- |  | - | --- |  |  | - | --- | 
|                                          |  |       |      |        |  | Payments Due by Period |     |       |  |        
|                                          |  |       |      |        |  |                        |     |       |  |        
|                                          |  |       |      |        |  | Less Than              |     | 1-3   |  | 4-5     |      | After
|Contractual Obligations                   |  | Total |      | 1 Year |  | Years                  |     | Years |  | 5 Years
|Principal payable under convertible notes |  | $     | 17.3 |        |  | $                      |    |       |  | $       | 17.3 |       |  | $ |    |  |  | $ |    | 
|Operating leases                          |  |       | 3.9  |        |  |                        | 1.1 |       |  |         | 2.3  |       |  |   | 0.4 |  |  |   | 0.1 | 
|                                          |  |       |      |        |  |                        |     |       |  |         |      |       |  |  
|Total contractual cash obligations        |  | $     | 21.2 |        |  | $                      | 1.1 |       |  | $       | 19.6 |       |  | $ | 0.4 |  |  | $ | 0.1 | 
|                                          |  |       |      |        |  |                        |     |       |  |         |      |       |  |  

The Company expects that capital expenditures will total approximately
$1.2 million in fiscal 2003.*

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.

17



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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 shipment or, if installation
services are purchased, when installed, provided collection is 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.

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.

18



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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 fiscal year ended September 30, 2002, the Companys
top five customers represented approximately 64% 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 Relating to Acquisitions

As part of its business strategy, the Company acquired NDB on August 30,
2002 and may make further acquisitions of, or significant investments in,
companies, products or technologies that it believes are complementary,
although no such acquisitions or investments are currently pending. The NDB
acquisition and any such future transactions would be accompanied by the risks
commonly encountered in making acquisitions of companies, products and
technologies. Such risks include, among others, the difficulties associated
with assimilating the personnel and operations of acquired companies, the
potential disruption of the Companys ongoing business, the distraction of
management and other resources, the integration of personnel and technology of
an acquired Company, difficulties in evaluating the technology of a potential
target, inability to motivate and retain new personnel, the maintenance of
uniform standards, controls, procedures and policies and the impairment of
relationships with employees and clients as a result of the integration of new
management personnel. The Company has no experience in assimilating acquired
companies or product lines into its operations. There can be no assurance that
the Company will be successful in overcoming these risks or any other problems
encountered in connection with the NDB acquisition or any such future
acquisitions. Furthermore, future acquisitions by the Company could result in
the issuance of dilutive equity securities, the incurrence of debt or
contingent liabilities or amortization expenses related to goodwill and other
intangible assets, any of which could have a material adverse effect on the
Companys business, financial condition and results of operation or on the
market price of the Companys common stock.

Risk Associated with International Operations

Company revenues from international customers were approximately 43%
during the three months ended December 31, 2002. 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 international 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, 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 three months ended
December 31, 2002, 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. 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.

19



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Many 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.

Dependence on Rapidly Evolving Telecommunications Industry

The Companys future success is dependent upon the continued growth of the
telecommunications industry. The global telecommunications industry is evolving
rapidly, and it is difficult to predict its potential growth rate or future
trends in technology development. There can be no assurance that the
deregulation, privatization and economic globalization of the worldwide
telecommunications market that have resulted in increased competition and
escalating demand for new technologies and services will continue in a manner
favorable to the Company or its business strategies. In addition, there can be
no assurance that the growth in demand for Internet services and the resulting
need for high speed or enhanced telecommunications equipment will continue at
its current rate or at all.

The Companys future success is dependent upon the increased utilization
of its test solutions by network operators and telecommunications equipment
manufacturers. Industry-wide network equipment and infrastructure development
driving the demand for the Companys products and services may be delayed or
prevented by a variety of factors, including cost, regulatory obstacles or the
lack of or reduction in consumer demand for advanced telecommunications
products and services. There can be no assurance that telecommunications
equipment manufacturers and network operators will develop new technology or
enhance current technology or, if developed, that such new technology or
enhancements will create demand for the Companys products or services.

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

20



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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, such as Windows 2000 or Windows XP, to be used in their
telecommunications test systems 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 telecommunications equipment manufacturers, network
operators 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.




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
interest rates and foreign currency exchange rates on foreign currency
denominated sales made to foreign subsidiaries. The Company utilizes foreign
currency forward exchange contracts and options to mitigate the risk of future
movements in foreign exchange rates that affect certain foreign currency
denominated inter-company receivables. The Company attempts to match the
forward contracts with specific 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
associated exposures, 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 offset foreign
exchange transaction gains or losses from revaluation of foreign currency
denominated inter-company receivable balances which otherwise would be charged
to other income (expense). To date, the Company has not fully mitigated all
risk associated with its sales denominated in foreign currencies, and there can
be no assurance that the Companys foreign exchange risk management activities,
if any, will be successful.

At December 31, 2002 the Company had forward exchange contracts maturing
in fiscal 2003 to sell approximately $3.7 million in Japanese Yen. The fair
market value of these contracts at December 31, 2002 was not material.

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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 2002.

Interest Rate Risk

The Companys exposure to market risk for changes in interest rates
relates primarily to its short-term investment portfolio. As of December 31,
2002, short-term investments consisted of available-for-sale
securities, including those classified as cash equivalents, of
$24.6 million. These fixed income marketable securities included corporate
bonds and government securities, all of which are of high investment grade.
They are subject to interest rate risk and will decline in value if the market
interest rates increase. If the market interest rates were to increase
immediately and uniformly by 10% from levels as of December 31, 2002, the
decline in the fair value of the portfolio would not be material to the
Companys financial position.




Part II. Other Information




Item 1. Legal Proceedings

A lawsuit was instituted in October 2002 against the Company and one of
its subsidiaries, Catapult Communications International Limited, an Irish
corporation, in the Antwerp Commercial Court, Antwerp, Belgium, by Tucana
Telecom NV, a Belgian company (Tucana). Tucana has been a distributor of
products for Tekelec, the company from which NDB was acquired in August 2002.
The writ alleges that the defendants improperly terminated an exclusive
distribution agreement with Tucana following the acquisition of NDB and seeks
damages of 12,461,000 euros plus costs. A preliminary hearing on the matter has
been scheduled for March 6, 2003 at which time the Company expects that a trial
date will be established. The Company strongly believes that it properly
terminated any contract it had with Tucana and that Tucana is not entitled to
any damages in this matter. The Company intends to defend itself vigorously.
The Company anticipates that it would seek indemnification from Tekelec for any
damages assessed against it in this matter under the terms of the Asset
Purchase Agreement it entered into with Tekelec.

Except for the aforementioned, the Company is not currently aware of any
legal proceedings or claims that the Company believes are likely to have a
material adverse effect on the Companys financial position, results of operation
or cash flows. From time to time we have been and expect to continue to be,
subject to legal proceedings and claims by third parties in the ordinary course
of business, including claims of alleged infringement of third party trademarks
and other intellectual property rights against our licensees or us. Third party
claims, like these, even if not meritorious, could result in the expenditure
of significant financial and managerial resources and could materially affect
our business, financial condition, results of operations and cash flows.




Item 2. Changes in Securities and Use of Proceeds

Inapplicable




Item 3. Defaults Upon Senior Securities

Inapplicable

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Item 4. Submission of Matters to a Vote of Security Holders

Inapplicable




Item 5. Other Information

Inapplicable




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



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



| |      |  |                                                                                                                                                                              
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 99.1 |  | Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002



| | (b) |  | Reports on Form 8-K.
| | --- |  | --------------------



| |    |  |                                                                                                                                                                                                                                                               
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. |  | On November 13, 2002, and November 19, 2002,
the Company filed a Current Report on Form 8-K/A to amend the
Form 8-K which was originally filed on September 6, 2002,
reporting the Companys agreement to acquire the Network
Diagnostics Business of Tekelec.




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 12, 2003 |  | By: /s/ Chris Stephenson

Chris Stephenson
Vice President and Chief Financial Officer
(Principal Financial Officer)

23



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I, Richard A. Karp, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Catapult
Communications Corporation;                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: February 12, 2003

|                                                                                        
|----------------------------------------------------------------------------------------
|/s/ Richard A. Karp

(Richard A. Karp)
Chief Executive Officer and Chairman of the Board

24



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I, Christopher A. Stephenson, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Catapult
Communications Corporation;                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: February 12, 2003

|                                                                                  
|----------------------------------------------------------------------------------
|/s/ Christopher A. Stephenson

(Christopher A. Stephenson)
Chief Financial Officer

25



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##### Table of Contents






EXHIBIT INDEX

|               |  |                                                                                                                                                                               |  | 
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                  
|               |  |                                                                                                                                                                              
|99.1           |  | Certification of
Chief Executive Officer and Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

26