##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from    to
 Commission file number 0-24701
 CATAPULT COMMUNICATIONS CORPORATION
  Nevada
    
    77-0086010(State or other jurisdiction of 
Incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 160 South Whisman Road
Mountain View, California 94041
 (650) 960-1025
 
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



CATAPULT COMMUNICATIONS CORPORATION
 FORM 10-Q
 INDEX
 PagePart IFinancial Information
    
    
    1Item 1. Financial Statements
    
    
    1Unaudited Condensed Consolidated Balance Sheets as of June 30, 2008 and September 30, 2007
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended June 30,
2008 and 2007
    
    
    2Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2008
and 2007
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 4. Controls and Procedures
    
    
    16Part IIOther Information
    
    
    16Item 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 6. Exhibits
    
    
    17Signature
    
    
    18EXHIBIT 10.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  ii




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 CATAPULT COMMUNICATIONS CORPORATION
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    September 30,2008
    
    
    2007(In thousands, except shareand par value data)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    47,668
    
    
    $
    23,351Short-term investments
    
    
    810
    
    
    
    38,891Accounts receivable, net of allowances of $16 and $61 as of
June 30, 2008 and September 30, 2007, respectively
    
    
    7,350
    
    
    
    7,015Inventories
    
    
    2,276
    
    
    
    2,485Deferred tax assets
    
    
    267
    
    
    
    96Prepaid expenses and other current assets
    
    
    1,970
    
    
    
    1,767Total current assets
    
    
    60,341
    
    
    
    73,605Long-term investments (Note 14)
    
    
    6,125
    
    
    
    Property and equipment, net
    
    
    1,198
    
    
    
    1,585Goodwill
    
    
    49,394
    
    
    
    49,394Other intangibles, net
    
    
    89
    
    
    
    143Other assets
    
    
    3,902
    
    
    
    2,243Total assets
    
    $
    121,049
    
    
    $
    126,970LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    1,027
    
    
    $
    617Accrued liabilities
    
    
    4,261
    
    
    
    4,956Deferred revenue
    
    
    7,874
    
    
    
    6,206Total current liabilities
    
    
    13,162
    
    
    
    11,779Deferred revenue, long-term
    
    
    146
    
    
    
    406Deferred taxes and other liabilities, long-term
    
    
    4,863
    
    
    
    3,009Total liabilities
    
    
    18,171
    
    
    
    15,194Commitments and contingencies (Note 11)Stockholders Equity:Common stock, $0.001 par value, 40,000,000 shares
authorized; 12,674,316 and 13,427,073 issued and
outstanding as of June 30, 2008 and September 30, 2007,
respectively
    
    
    13
    
    
    
    13Additional paid-in capital
    
    
    46,631
    
    
    
    48,661Accumulated other comprehensive income
    
    
    1,136
    
    
    
    1,026Retained earnings
    
    
    55,098
    
    
    
    62,076Total stockholders equity
    
    
    102,878
    
    
    
    111,776Total liabilities and stockholders equity
    
    $
    121,049
    
    
    $
    126,970
  1




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##### Table of Contents



CATAPULT COMMUNICATIONS CORPORATION
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except per share amounts)Revenues:Products
    
    $
    5,468
    
    
    $
    4,839
    
    
    $
    19,163
    
    
    $
    17,464Services
    
    
    3,046
    
    
    
    3,636
    
    
    
    9,587
    
    
    
    11,171Total revenues
    
    
    8,514
    
    
    
    8,475
    
    
    
    28,750
    
    
    
    28,635Cost of revenues:Products
    
    
    999
    
    
    
    1,400
    
    
    
    3,472
    
    
    
    3,818Services
    
    
    484
    
    
    
    765
    
    
    
    2,034
    
    
    
    2,367Amortization of purchased technology
    
    
    12
    
    
    
    13
    
    
    
    36
    
    
    
    37Total cost of revenues
    
    
    1,495
    
    
    
    2,178
    
    
    
    5,542
    
    
    
    6,222Gross profit
    
    
    7,019
    
    
    
    6,297
    
    
    
    23,208
    
    
    
    22,413Operating expenses:Research and development
    
    
    2,060
    
    
    
    3,463
    
    
    
    9,079
    
    
    
    9,748Sales and marketing
    
    
    4,012
    
    
    
    4,177
    
    
    
    12,598
    
    
    
    12,409General and administrative
    
    
    1,812
    
    
    
    2,281
    
    
    
    6,090
    
    
    
    6,759Restructuring costs (Note 13)
    
    
    
    
    
    
    
    
    
    
    2,197
    
    
    
    Total operating expenses
    
    
    7,884
    
    
    
    9,921
    
    
    
    29,964
    
    
    
    28,916Operating loss
    
    
    (865
    )
    
    
    (3,624
    )
    
    
    (6,756
    )
    
    
    (6,503
    )Interest income
    
    
    358
    
    
    
    825
    
    
    
    1,694
    
    
    
    2,472Other income (expense), net (Note 12)
    
    
    (163
    )
    
    
    (81
    )
    
    
    202
    
    
    
    1,747Loss before income taxes
    
    
    (670
    )
    
    
    (2,880
    )
    
    
    (4,860
    )
    
    
    (2,284
    )Provision for (benefit from) income taxes
    
    
    345
    
    
    
    (541
    )
    
    
    676
    
    
    
    435Net loss
    
    $
    (1,015
    )
    
    $
    (2,339
    )
    
    $
    (5,536
    )
    
    $
    (2,719
    )Net loss per
share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.17
    )
    
    $
    (0.42
    )
    
    $
    (0.19
    )Shares used in per share calculation:Basic and diluted
    
    
    12,867
    
    
    
    13,739
    
    
    
    13,120
    
    
    
    13,938
  2




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CATAPULT COMMUNICATIONS CORPORATION
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months endedJune 30,2008
    
    
    2007(In thousands)Cash flows from operating activities:Net loss as reported
    
    $
    (5,536
    )
    
    $
    (2,719
    )Adjustments to reconcile net loss to net cash provided by  (used in) operating activities:Depreciation and amortization of property and equipment
    
    
    663
    
    
    
    672Amortization of purchased technology
    
    
    37
    
    
    
    37Amortization of other acquisition related intangibles
    
    
    18
    
    
    
    18Provision for doubtful accounts
    
    
    (45
    )
    
    
    1Deferred income taxes
    
    
    283
    
    
    
    383Stock based compensation expenses
    
    
    1,954
    
    
    
    2,244Gain on disposal of fixed assets
    
    
    
    
    
    
    (25
    )Change in assets and liabilities:Accounts receivable
    
    
    (346
    )
    
    
    2,739Inventories
    
    
    213
    
    
    
    321Prepaid expenses and other current assets
    
    
    (200
    )
    
    
    (265
    )Other assets
    
    
    5
    
    
    
    (1,804
    )Accounts payable
    
    
    405
    
    
    
    (399
    )Accrued liabilities
    
    
    684
    
    
    
    (84
    )Deferred revenue
    
    
    1,400
    
    
    
    (535
    )Net cash provided by (used in) operating activities
    
    
    (465
    )
    
    
    584Cash flows from investing activities:Sale and maturities of short-term investments
    
    
    56,139
    
    
    
    67,288Purchase of investments
    
    
    (24,144
    )
    
    
    (58,630
    )Capitalized software development costs
    
    
    (1,660
    )
    
    
    Purchase of property and equipment
    
    
    (266
    )
    
    
    (436
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    65Net cash provided by investing activities
    
    
    30,069
    
    
    
    8,287Cash flows from financing activities:Repurchase of common stock
    
    
    (5,533
    )
    
    
    (7,643
    )Proceeds from exercise of stock options
    
    
    124
    
    
    
    130Net cash used in financing activities
    
    
    (5,409
    )
    
    
    (7,513
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    122
    
    
    
    195Net increase in cash and cash equivalents
    
    
    24,317
    
    
    
    1,553Cash and cash equivalents, beginning of period
    
    
    23,351
    
    
    
    22,462Cash and cash equivalents, end of period
    
    $
    47,668
    
    
    $
    24,015Supplemental disclosure of cash flow information:Cash paid for income taxes
    
    $
    833
    
    
    $
    305
  3




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CATAPULT COMMUNICATIONS CORPORATION
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1THE COMPANY AND BASIS OF PRESENTATION
   Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
 NOTE 2RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements. Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements Purposes of
Lease Classification or Measurement under Statement 13 Effective Date of
FASB Statement No. 157
 Business
Combinations,
 4




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##### Table of Contents



Noncontrolling Interests in
Consolidated Financial Statementsan amendment of ARB No. 51.
 Disclosures about Derivative
Instruments and Hedging Activities-an amendment of SFAS No. 133
 The Hierarchy of Generally Accepted
Accounting Principles The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles
 Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
 NOTE 3  STOCK-BASED COMPENSATION
 Share-Based Payment,
  Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Stock-Based Compensation Expense:Cost of
sales  products
    
    $
    42
    
    
    $
    49
    
    
    $
    132
    
    
    $
    112Cost of
sales  services
    
    
    2
    
    
    
    67
    
    
    
    123
    
    
    
    185Research and development expense
    
    
    36
    
    
    
    222
    
    
    
    397
    
    
    
    546Selling and marketing expense
    
    
    163
    
    
    
    184
    
    
    
    469
    
    
    
    498General and administrative expense
    
    
    232
    
    
    
    351
    
    
    
    833
    
    
    
    903Total stock-based compensation expense
    
    
    475
    
    
    
    873
    
    
    
    1,954
    
    
    
    2,244Tax effect on stock-based compensation expenses
    
    
    (6
    )
    
    
    (5
    )
    
    
    (14
    )
    
    
    (14
    )Net effect on net income
    
    $
    469
    
    
    $
    868
    
    
    $
    1,940
    
    
    $
    2,230
 5




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Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed
 Balance at April 1, 2008
    
    $
    Stock-based compensation expense capitalized during the period
    
    
    23Amortization of capitalized stock-based compensation
    
    
    Balance at June 30, 2008
    
    $
    23
  Employee Stock Option PlansThree months ended
    
    Nine months endedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Expected life of
option
    
    5.32 years
    
    5.41 years
    
    5.22 years
    
    5.23 yearsExpected volatility
    
    
    59.0
    %
    
    
    64.0
    %
    
    
    58.6
    %
    
    
    63.5
    %Dividend
yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free interest rate
    
    
    3.15
    %
    
    
    4.52
    %
    
    
    3.17
    %
    
    
    4.54
    %
  NOTE 4  BASIC AND DILUTED NET LOSS PER SHARE
 Earnings per
Share
 Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except per share amounts)Net loss, as reported for basic and diluted net loss per
share
    
    $
    (1,015
    )
    
    $
    (2,339
    )
    
    $
    (5,536
    )
    
    $
    (2,719
    )Weighted average shares outstanding
    
    
    12,867
    
    
    
    13,739
    
    
    
    13,120
    
    
    
    13,938Dilutive options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average shares assuming dilution
    
    
    12,867
    
    
    
    13,739
    
    
    
    13,120
    
    
    
    13,938Net loss per share:Basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.17
    )
    
    $
    (0.42
    )
    
    $
    (0.19
    )
  Three months ended
    
    Nine months endedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007(In thousands)Common stock options
    
    
    2,931
    
    
    
    2,651
    
    
    
    2,657
    
    
    
    2,343
 6




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NOTE 5  INVENTORIES
  June 30,
    
    
    September 30,2008
    
    
    2007(In thousands)Inventories:Raw materials
    
    $
    1,711
    
    
    $
    2,235Work-in-process
    
    
    194
    
    
    
    23Finished goods
    
    
    371
    
    
    
    227$
    2,276
    
    
    $
    2,485
 NOTE 6  GOODWILL AND INTANGIBLE ASSETS
   NOTE 7  INCOME TAXES
  Accounting for Uncertainty in Income Taxes,
an interpretation of FASB Statement No. 109
   7




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NOTE 8  STOCKHOLDERS EQUITY
 Comprehensive loss
  Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Net loss, as reported
    
    $
    (1,015
    )
    
    $
    (2,339
    )
    
    $
    (5,536
    )
    
    $
    (2,719
    )Currency translation adjustment
    
    
    (26
    )
    
    
    29
    
    
    
    117
    
    
    
    206Unrealized losses on investments
    
    
    (8
    )
    
    
    (5
    )
    
    
    (6
    )
    
    
    (7
    )Comprehensive loss
    
    $
    (1,049
    )
    
    $
    (2,315
    )
    
    $
    (5,425
    )
    
    $
    (2,520
    )
 Stock Option Plans
  Repurchase of Common Stock
  NOTE 9  GEOGRAPHICAL INFORMATION
  8




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Europe, Middle
    
    
    
    
    
    
    
    
    
    ConsolidatedAmericas
    
    East & Africa
    
    Japan
    
    Asia-Pacific
    
    Total(In thousands)Nine months ended June 30, 2008Revenues from unaffiliated customers
    
    $
    6,390
    
    
    $
    7,768
    
    
    $
    10,053
    
    
    $
    4,539
    
    
    $
    28,750Nine months ended June 30, 2007Revenues from unaffiliated customers
    
    $
    8,177
    
    
    $
    9,197
    
    
    $
    6,816
    
    
    $
    4,445
    
    
    $
    28,635As of June 30, 2008Goodwill
    
    $
    22,896
    
    
    $
    26,498
    
    
    $
    
    
    
    $
    
    
    
    $
    49,394Long-lived assets
    
    $
    678
    
    
    $
    167
    
    
    $
    196
    
    
    $
    157
    
    
    $
    1,198As of September 30, 2007Goodwill
    
    $
    22,896
    
    
    $
    26,498
    
    
    $
    
    
    
    $
    
    
    
    $
    49,394Long-lived assets
    
    $
    937
    
    
    $
    323
    
    
    $
    223
    
    
    $
    102
    
    
    $
    1,585
   NOTE 10  CUSTOMER INFORMATION
  Percentage of Accounts Receivable as of
    
    
    Percentage of RevenuesThree months ended
    
    
    Nine months endedJune 30,
    
    
    September 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Customer A
    
    
    
    
    
    
    
    
    
    
    11
    %
    
    
    
    
    
    
    13
    %
    
    
    Customer B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    %Customer C
    
    
    21
    %
    
    
    22
    %
    
    
    18
    %
    
    
    16
    %
    
    
    13
    %
    
    
    10
    %Customer D
    
    
    27
    %
    
    
    33
    %
    
    
    18
    %
    
    
    13
    %
    
    
    14
    %
    
    
    10
    %Customer E
    
    
    10
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Customer F
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    %
    
    
    
 NOTE 11  CONTINGENCIES
   9




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Accounting for Contingencies
 NOTE 12  LEGAL SETTLEMENT
  NOTE 13  RESTRUCTURING COSTS
  NOTE 14  LONG-TERM INVESTMENTS
    NOTE 15  CAPITALIZED SOFTWARE DEVELOPMENT COSTS
 Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed
   10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-looking Statements
   
    
    the variable size and timing of individual purchases by our customers, including delays
in customer purchasing decisions or orders due to customer consolidation;
    
    the absence of long-term customer purchase contracts;
    
    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;
    
    the relatively long sales cycles for our products;
    
    competitive conditions in our markets;
    
    exchange rate fluctuations;
    
    the timing of the introduction and market acceptance of new products or product
enhancements by us and by our customers, competitors and suppliers;
    
    costs associated with developing and introducing new products;
    
    product life cycles;
    
    changes in the level of operating expenses relative to revenues;
    
    product defects and other quality problems;
    
    customer order deferrals in anticipation of new products;
    
    supply interruptions;
    
    changes in global or regional economic conditions or in the telecommunications
industry;
    
    asset impairment, valuation allowance and restructuring charges;
    
    changes in our tax rate;
    
    changes in the mix of products sold;
    
    changes in the regulatory environment; and
    
    adverse results from litigation.
  11




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##### Table of Contents



Overview
 Our Business and Products
 ® ®
 Conditions and Trends in Our Industry
   Summary of Our Financial Performance in the Third Quarter of Fiscal 2008
   Critical Accounting Policies and Estimates
 Accounting for Uncertainty in Income Taxes, an interpretation of
FASB Statement No. 109
 12




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Results of Operations
  Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Products
    
    
    64.2
    %
    
    
    57.1
    %
    
    
    66.7
    %
    
    
    61.0
    %Services
    
    
    35.8
    
    
    
    42.9
    
    
    
    33.3
    
    
    
    39.0Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of revenues:Products
    
    
    11.7
    
    
    
    16.5
    
    
    
    12.1
    
    
    
    13.3Services
    
    
    5.7
    
    
    
    9.0
    
    
    
    7.1
    
    
    
    8.3Amortization of purchased technology
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1Total cost of revenues
    
    
    17.6
    
    
    
    25.7
    
    
    
    19.3
    
    
    
    21.7Gross profit
    
    
    82.4
    
    
    
    74.3
    
    
    
    80.7
    
    
    
    78.3Operating expenses:Research and development
    
    
    24.2
    
    
    
    40.9
    
    
    
    31.6
    
    
    
    34.0Sales and marketing
    
    
    47.1
    
    
    
    49.3
    
    
    
    43.8
    
    
    
    43.3General and administrative
    
    
    21.3
    
    
    
    26.9
    
    
    
    21.2
    
    
    
    23.6Restructuring costs
    
    
    
    
    
    
    
    
    
    
    7.6
    
    
    
    Total operating expenses
    
    
    92.6
    
    
    
    117.1
    
    
    
    104.2
    
    
    
    100.9Operating loss
    
    
    (10.2
    )
    
    
    (42.8
    )
    
    
    (23.5
    )
    
    
    (22.7
    )Interest income
    
    
    4.2
    
    
    
    9.7
    
    
    
    5.9
    
    
    
    8.6Other income (expense), net
    
    
    (1.9
    )
    
    
    (0.9
    )
    
    
    0.7
    
    
    
    6.1Loss before income taxes
    
    
    (7.9
    )
    
    
    (34.0
    )
    
    
    (16.9
    )
    
    
    (8.0
    )Provision for (benefit from) income taxes
    
    
    4.0
    
    
    
    (6.4
    )
    
    
    2.4
    
    
    
    1.5Net loss
    
    
    (11.9
    )%
    
    
    (27.6
    )%
    
    
    (19.3
    )%
    
    
    (9.5
    )%Gross profit margin on products
products
    
    
    81.7
    %
    
    
    71.1
    %
    
    
    81.9
    %
    
    
    78.1
    %Gross profit margin on services
    
    
    84.1
    %
    
    
    79.0
    %
    
    
    78.8
    %
    
    
    78.8
    %
  Comparison of the Three-Month Periods Ended June 30, 2008 and 2007
 Revenues
   
    
    revenues in the Americas decreased by 27% to $2.1 million;
    
    revenues in Europe, the Middle East and Africa decreased by 17% to $2.7 million;
    
    revenues in Japan increased by 97% to $2.1 million; and
    
    revenues in Asia Pacific outside Japan increased by 28% to $1.6 million.
 
 13




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##### Table of Contents



Cost of Revenues
   Research and Development
  Sales and Marketing
  General and Administrative
  Interest income
  Provision for (benefit from) income taxes
  Comparison of the Nine-Month Periods Ended June 30, 2008 and 2007
 Revenues
   
    
    revenues in the Americas decreased by 22% to $6.4 million;
    
    revenues in Europe, the Middle East and Africa decreased by 16% to $7.8 million;
    
    revenues in Japan increased by 47% to $10.1 million; and
 14




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##### Table of Contents




    
    revenues in Asia Pacific outside Japan increased by 2% to $4.5 million.
  Cost of Revenues
   Research and Development
  Sales and Marketing
  General and Administrative
  Restructuring Charge
  Interest income
  Other income, net
  Provision for income taxes
  Liquidity and Capital Resources
  15




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##### Table of Contents



Recent Accounting Pronouncements
  
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
  
 Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  16




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##### Table of Contents



Risks Related to Our Business
 Our investment in auction rate securities exposes us to risks that may affect the liquidity of
these investments and result in losses.
  We are a defendant in a lawsuit with a distributor in Belgium, and an adverse result in this matter could require us to pay significant damages.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Repurchases of Common StockTotal Number of
    
    
    Maximum NumberTotal
    
    
    
    
    
    
    Shares Purchased
    
    
    of Shares that MayNumber
    
    
    Average
    
    
    as Part of Publicly
    
    
    Yet Be Purchasedof Shares
    
    
    Price Paid
    
    
    Announced
    
    
    Under the PlansPurchased
    
    
    Per Share (1)
    
    
    Plans or Programs
    
    
    Or ProgramsApril 1, 2008 - April 30, 2008
    
    
    75,364
    
    
    $
    6.90
    
    
    
    75,364
    
    
    
    1,478,148May 1, 2008 - May 31, 2008
    
    
    161,980
    
    
    $
    7.38
    
    
    
    161,980
    
    
    
    1,316,168June 1, 2008 - June 30, 2008
    
    
    141,670
    
    
    $
    7.38
    
    
    
    141,670
    
    
    
    1,174,498Total for the Quarter
    
    
    379,014
    
    
    $
    7.28
    
    
    
    379,014
    
    
    
    1,174,498
 
 (1)
    
    Average price paid per share includes brokerage commission  
 Item 6. Exhibits
 10.1
    
    Change of Control Severance
Agreement between the Company and Richard A. Karp, Chairman and Chief Executive Officer, dated June 13, 2008
(identical agreements were entered into on June 13, 2008 between the
Company and its other executive officers, David Mayfield, Christopher
Stephenson, Terry Eastham, Barbara J. Fairhurst, Kathy Omaye-Sosnow,
Adam Fowler and Kalyan Sundhar).31.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32
    
    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.
 17




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##### Table of Contents



SIGNATURE
  CATAPULT COMMUNICATIONS CORPORATIONDate: August 6, 2008
    By:
    /s/ Christopher A. StephensonChristopher A. StephensonVice President and Chief Financial Officer
(Principal Financial Officer) 18




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##### Table of Contents



Exhibit Index
 Number
    
    Description10.1
    
    Change of Control Severance
Agreement between the Company and Richard A. Karp, Chairman and Chief Executive Officer, dated June
13, 2008 (identical agreements were entered into on June 13, 2008
between the Company and its other executive officers, David
Mayfield, Christopher Stephenson, Terry Eastham, Barbara J.
Fairhurst, Kathy Omaye-Sosnow, Adam Fowler and Kalyan Sundhar).31.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32
    
    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.