FORM 10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

                  For the quarterly period ended June 30, 2000

                                       OR

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


Commission file number 0-24701

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


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

                             160 South Whisman Road
                         Mountain View, California 94041

                                 (650) 960-1025

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



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

         As of June 30, 2000,  there were 12,835,381  shares of the Registrant's
Common Stock, $0.001 par value, outstanding.


<PAGE>

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

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

Condensed Consolidated Balance Sheets at June 30, 2000 and September 30, 1999                        3

Condensed Consolidated Income Statements for the three and nine months ended
         June 30, 2000 and 1999                                                                      4

Condensed Consolidated Statements of Cash Flow for the nine months ended
         June 30, 2000 and 1999                                                                      5

Notes to Condensed Consolidated Financial Statements                                                 6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                                   8

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                 12

Part II--Other Information

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

Signatures                                                                                          17

</TABLE>

                                               2

<PAGE>


Part I.  Financial Information

Item 1.  Financial Statements
<TABLE>
                                 CATAPULT COMMUNICATIONS CORPORATION
                                CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (in thousands, except share data)
                                             (unaudited)
<CAPTION>
                                                                       June 30,            September 30,
                                                                         2000                   1999
                                                                         ----                   ----

                                               ASSETS
<S>                                                                     <C>                  <C>
Current Assets:
   Cash and cash equivalents..............................              $ 4,197              $ 8,486
   Short-term investments.................................               42,606               33,168
   Accounts receivable, net...............................                6,036                5,852
   Inventories, net.......................................                  834                  705
   Deferred income taxes..................................                  890                  890
   Prepaid expenses.......................................                  829                  349
                                                                        -------              -------
      Total current assets................................               55,392               49,450
Property and equipment, net...............................                1,403                  998
Other assets..............................................                  102                  219
                                                                        -------              -------
      Total assets........................................              $56,897              $50,667
                                                                        =======              =======


                                LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable.......................................              $ 1,103              $   444
   Accrued liabilities....................................                4,766                4,782
   Deferred revenue.......................................                2,228                1,852
                                                                        -------              -------
      Total current liabilities...........................                8,097                7,078

Stockholders' Equity:
   Common stock                                                              13                   13
   Additional paid-in capital.............................               20,231               20,040
   Deferred compensation..................................                 (78)                (132)
   Retained earnings......................................               28,313               23,796
   Accumulated other comprehensive income.................                  621                  172
   Treasury stock (50,000 shares at cost).................                (300)                (300)
                                                                        -------              -------
      Total stockholders' equity..........................               48,800               43,589
                                                                        -------              -------
      Total liabilities and stockholders' equity..........              $56,897              $50,667
                                                                        =======              =======


<FN>
                      See Notes to condensed consolidated financial statements.
</FN>
</TABLE>

                                                 3

<PAGE>

<TABLE>
                                          CATAPULT COMMUNICATIONS CORPORATION
                                       CONDENSED CONSOLIDATED INCOME STATEMENTS
                                    (in thousands, except share and per share data)
                                                      (unaudited)
<CAPTION>


                                                         For the three months ended          For the nine months ended
                                                                  June 30,                           June 30,
                                                            2000             1999              2000             1999
                                                            ----             ----              ----             ----
<S>                                                      <C>                 <C>             <C>               <C>
Revenues:
   Product sales...............................          $ 6,223             $ 5,806         $ 15,655          $ 19,396
   Services....................................            1,284                 901            3,527             2,292
                                                         -------             -------         --------          --------
     Total revenues............................            7,507               6,707           19,182            21,688
                                                         -------             -------         --------          --------

Cost of revenues:
   Product sales...............................          $   577             $   509         $  1,472          $  1,908
   Services....................................              264                 236              830               627
                                                         -------             -------         --------          --------
     Total cost of revenues....................              841                 745            2,302             2,535
                                                         -------             -------         --------          --------
Gross profit...................................            6,666               5,962           16,880            19,153

Operating expenses:
   Research and development....................          $   828             $   792         $  2,137          $  2,089
   Sales and marketing.........................            2,305               1,446            6,708             3,940
   General and administrative..................              981                 742            2,589             2,055
                                                         -------             -------         --------          --------
     Total operating expenses..................            4,114               2,980           11,434             8,084
                                                         -------             -------         --------          --------
Operating income...............................            2,552               2,982            5,446            11,069

Interest income................................              615                 501            1,901               903
Other income (expense).........................              233                 (47)              18              (159)
                                                         -------             -------         --------          --------

Income before taxes............................            3,400               3,436            7,365            11,813
Provision for taxes............................            1,326               1,477            2,873             5,079
                                                         -------             -------         --------          --------

 Net income....................................          $ 2,074             $ 1,959         $  4,492          $  6,734
                                                         =======             =======         ========          ========

Earnings per share:
   Basic.......................................          $  0.16             $  0.16         $   0.35          $   0.58
                                                         =======             =======         ========          ========

   Diluted.....................................          $  0.16             $  0.15         $   0.34          $   0.56
                                                         =======             =======         ========          ========


     Weighted average shares:
   Basic.......................................       12,832,000          12,632,000       12,785,000        11,595,000
                                                      ==========          ==========       ==========        ==========

   Diluted.....................................       13,116,000          13,091,000       13,070,000        12,039,000
                                                      ==========          ==========       ==========        ==========



<FN>
                               See Notes to condensed consolidated financial statements.
</FN>
</TABLE>
                                                          4

<PAGE>

<TABLE>
                                 CATAPULT COMMUNICATIONS CORPORATION
                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (in thousands)
                                             (unaudited)
<CAPTION>

                                                                            Nine months ended
                                                                                 June 30,

                                                                         2000                 1999
                                                                         ----                 ----
<S>                                                                     <C>                  <C>
Cash flows from operating activities:
Net income........................................................      $ 4,492              $ 6,734
Adjustments to reconcile net income to net cash provided (used) by
   operating activities:
   Depreciation and amortization..................................          225                  221
   Amortization of deferred stock compensation....................           54                  150
   Change in current assets and liabilities:
      Accounts receivable.........................................         (184)                (524)
      Inventories.................................................         (129)                 (68)
      Prepaid expenses............................................         (480)                (220)
      Other assets................................................          117                  (74)
      Accounts payable............................................          659                 (291)
      Accrued liabilities.........................................          (16)               1,163
      Deferred revenue............................................          376                  862
                                                                        -------              -------
        Net cash provided by operating activities.................        5,114                7,953
Cash flows from investing activities:
   Purchases of investments, net..................................       (9,438)             (27,716)
   Purchase of property and equipment.............................         (605)                (344)
                                                                        -------              -------
        Net cash used by investing activities.....................      (10,043)             (28,060)
Cash flows from financing activities:
   Stock issuances................................................          191               19,264
   Purchase of treasury stock.....................................            -                 (300)
                                                                        -------              -------
        Net cash provided by financing activities.................          191               18,964

Effect of comprehensive income changes............................          449                  (73)
                                                                        -------              -------

Increase (decrease) in cash and cash equivalents..................       (4,289)              (1,216)
Cash and cash equivalents, beginning of period....................        8,486               15,229
                                                                        -------              -------

Cash and cash equivalents, end of period..........................      $ 4,197              $14,013
                                                                        =======              =======


<FN>
                      See Notes to condensed consolidated financial statements.
</FN>
</TABLE>
                                                 5

<PAGE>


                       CATAPULT COMMUNICATIONS CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

NOTE 1--THE COMPANY AND BASIS OF PRESENTATION

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

         These  accompanying  condensed  consolidated  financial  statements and
related  notes  are  unaudited.  However,  in the  opinion  of  management,  all
adjustments   (consisting  only  of  normal  recurring  adjustments)  which  are
necessary for the fair  presentation  of the  financial  position and results of
operations for the interim periods presented have been included.  The results of
operations  for such  periods are not  necessarily  indicative  of results to be
expected  for any future  period or the fiscal year ending  September  30, 2000.
These  financial  statements,  including  the notes  thereto,  should be read in
conjunction with the audited  financial  statements for the year ended September
30, 1999,  which were  included as part of the  Company's  Annual Report on Form
10-K for the year ended September 30, 1999.

NOTE 2 - RECENT ISSUED ACCOUNTING STANDARDS

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities".
SFAS  No.  133  established  new  standards  of  accounting  and  reporting  for
derivative  instruments and hedging  activities.  SFAS No. 133 requires that all
derivatives be recognized at fair value in the statement of financial  position,
and that the  corresponding  gains or losses be reported either in the statement
of operations or as a component of comprehensive income (loss), depending on the
type of hedging relationship that exists. In July 1999, the FASB issued SFAS No.
137 "Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the  Effective  Date of FASB  Statement  No.  133".  SFAS No. 137  deferred  the
effective date of SFAS No. 133 until fiscal years beginning after June 15, 2000.
The  Company  does  believe  that the  adoption of SFAS 133 will have a material
impact on its reported operations, or its financial condition.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements",  which  provides  guidance on the  recognition,  presentation,  and
disclosure of revenue in financial  statements  filed with SEC. SAB 101 outlines
the basic criteria that must be met to recognize  revenue and provides  guidance
for disclosures  related to revenue  recognition  policies.  Management believes
that the Company has complied with the guidance of SAB 101.

         In  March  2000,  the  Financial   Accounting  Standards  Board  issued
Interpretation No. 44 ("FIN 44") "Accounting for Certain Transactions  Involving
Stock  Compensation,  an Interpretation of APB Opinion No. 25". FIN 44 clarifies
the  application  of  Opinion  No. 25 for (a) the  definition  of  employee  for
purposes of applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting  consequences of various
modifications  to the terms of a previously fixed stock option or award, and (d)
the  accounting  for an  exchange  of stock  compensation  awards in a  business
combination.


                                        6

<PAGE>

FIN 44 is effective July 1, 2000, but certain  conclusions cover specific events
that occur after either  December 15, 1998, or January 12, 2000. The adoption of
certain  provisions  of FIN 44 prior to March 31,  2000 did not have a  material
impact on the financial statements. Management does not expect that the adoption
of the  remaining  provisions  will  have a  material  effect  on the  financial
position or results of operations of the Company.

         In   various   areas,   including   revenue   recognition   and   other
Internet-related issues,  accounting standards and practices continue to evolve.
The SEC is preparing to issue  interpretative  guidance relating to SAB 101, and
the FASB's  Emerging  Issues Task Force  continues to address  revenue and other
Internet-related accounting issues. The management of the Company believes it is
in  compliance  with all of the rules and  related  guidance  as they  currently
exist. However, any changes to generally accepted accounting principles in these
areas could impact the Company's accounting for operations.

NOTE 3--BASIC AND DILUTED EARNINGS PER SHARE
<TABLE>
         Basic earnings per share are computed using the weighted average number
of common  shares  outstanding  during the period.  Diluted  earnings  per share
include the effect of dilutive  potential  common shares (options) issued during
the period using the treasury  stock method.  The following data is presented in
thousands except share and per share data:
<CAPTION>
                                                              Three months ended               Nine months ended
                                                                   June 30,                        June 30,
                                                              2000            1999            2000            1999
                                                              ----            ----            ----            ----
                                                                (in thousands, except share and per share data)
<S>                                                      <C>             <C>             <C>              <C>
Net income                                                   $2,074          $1,959          $4,492           $6,734
                                                             ======          ======          ======           ======


Weighted average shares outstanding................      12,832,000      12,632,000      12,785,000       11,595,000
Dilutive options...................................         284,000         459,000         285,000          444,000
                                                         ----------      ----------      ----------       ----------
Weighted average shares assuming dilution                13,116,000      13,091,000      13,070,000       12,039,000
                                                         ==========      ==========      ==========       ==========

Earnings per share:
Basic..............................................      $     0.16      $     0.16      $     0.35       $     0.58
                                                         ==========      ==========      ==========       ==========

Diluted............................................      $     0.16      $     0.15      $     0.34       $     0.56
                                                         ==========      ==========      ==========       ==========
</TABLE>

NOTE 4--COMPREHENSIVE INCOME
<TABLE>
         The components of comprehensive  income, net of tax, are as follows (in
thousands):
<CAPTION>
                                                              Three months ended               Nine months ended
                                                                    June 30,                        June 30,
                                                              2000            1999            2000             1999
                                                             -----           -----           -----            -----
<S>                                                          <C>             <C>             <C>              <C>
Net income.........................................          2,074           1,959           4,492            6,734
Currency translation adjustment....................            256             (40)            449              (73)
                                                             -----           -----           -----            -----
Comprehensive income                                         2,330           1,919           4,941            6,661
                                                             =====           =====           =====            =====
</TABLE>


                                                               7

<PAGE>

NOTE 5--INVENTORIES (in thousands)

                                                        June 30,   September 30,
                                                          2000          1999
                                                          ----          ----

Raw Materials......................................       $715          $554
Work-in-process....................................         46            79
Finished goods.....................................         73            72
                                                          ----          ----
                                                          $834          $705
                                                          ====          ====


NOTE 6 - SEGMENT REPORTING

         The  Company is  organized  to operate  and  service a single  industry
segment: the design, development, manufacture, marketing and support of advanced
software-based test systems globally.
<TABLE>
         The Company's principal geographical areas of operations, sales, income
and assets by region for each fiscal year end were as follows (in thousands):
<CAPTION>
                                                         North        UK and                      Consolidated
                                                       America        Europe         Japan            Total
                                                       -------        ------         -----            -----
<S>                                                    <C>           <C>            <C>              <C>
Nine months ended June 30, 2000

Sales to unaffiliated customers................        $ 6,447       $ 3,338        $ 9,397          $19,182
Net income.....................................          3,982          (304)           814            4,492
Total assets...................................         47,982         3,744          5,171           56,897

Nine months ended June 30, 1999

Sales to unaffiliated customers................         $3,892        $2,224        $15,572          $21,688
Net income.....................................          5,930          (143)           947            6,734
Total assets...................................         40,225         2,087          4,693           47,005
</TABLE>
         The result of  operations  by geographic  region  includes  significant
sales  principally from the United States to the Company's  foreign locations at
agreed upon transfer prices.

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

         The following  discussion  and analysis  should be read in  conjunction
with  "Selected  Consolidated  Financial  Data" and the  Company's  Consolidated
Financial  Statements  and Notes  thereto  included in the Annual Report on Form
10-K and Registration Statement on Form S-1.

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."


                                       8

<PAGE>

         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 by or on
behalf of the Company.

Overview

         The Company designs,  develops,  manufactures,  markets and supports an
advanced  software-based  test system  offering an  integrated  suite of testing
applications for the global telecommunications industry. The Company's family of
digital communication test systems is designed to enable equipment manufacturers
and network  operators to deliver complex digital  telecommunications  equipment
and services more quickly and cost-effectively.  The DCT product line performs a
variety  of test  functions,  including  simulation,  load and  stress  testing,
feature verification,  conformance testing and monitoring. The company maintains
an  extensive  library  of  software  modules  that  support  approximately  160
protocols  and  variants.  The DCT system  consists  of  advanced  software  and
hardware  running on a  third-party  UNIX-based  workstation.  In addition,  the
Company offers customer  support under software  support  contracts,  as well as
installation and training.

Results of Operations
<TABLE>
         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.
<CAPTION>
                                                          For the three months ended     For the nine months ended
                                                                  June 30,                       June 30,
                                                              2000         1999             2000          1999
                                                              ----         ----             ----          ----
<S>                                                          <C>          <C>              <C>           <C>
   Revenues:
      Product sales................................           82.9%        86.6%            81.6%         89.4%
      Services.....................................           17.1         13.4             18.4          10.6
                                                             -----        -----            -----         -----
        Total revenues                                       100.0        100.0            100.0         100.0

   Cost of revenues:
      Product sales................................            7.7          7.6              7.7           8.8
      Services.....................................            3.5          3.5              4.3          28.9
                                                             -----        -----            -----         -----
        Total cost of revenues.....................           11.2         11.1             12.0          11.7
                                                             -----        -----            -----         -----
   Gross profit....................................           88.8         88.9             88.0          88.3

   Operating expenses:
      Research and development.....................           11.0         11.8             11.1           9.6
      Sales and marketing..........................           30.7         21.5             35.0          18.2
      General and administrative...................           13.1         11.1             13.5           9.5
                                                             -----        -----            -----         -----
        Total operating expenses...................           54.8         44.4             59.6         37.3
                                                             -----        -----            -----         -----

   Operating income................................           34.0         44.5             28.4          51.0
   Interest income.................................            8.2          7.5              9.9           4.2
   Other income (expense)..........................            3.1         (0.8)             0.0          (0.7)
                                                             -----        -----            -----         -----

   Income before taxes.............................           45.3         51.2             38.3          54.5
                                                             -----        -----            -----         -----
   Provision for taxes.............................           17.7         22.0             14.9          23.4
                                                             -----        -----            -----         -----

   Net income......................................          27.6%         29.2%            23.4%         31.0%
                                                             =====         =====           =====         =====

   Gross margin on product sales...................          90.7%         91.2%            90.6%         90.2%
                                                             =====         =====           =====         =====

   Gross margin on services........................          79.4%         73.8%            76.5%         72.6%
                                                             =====         =====           =====         =====
</TABLE>

                                                               9

<PAGE>

Three Months Ended June 30, 2000 and 1999


         Revenues. Revenues increased by approximately 12% from $6.7 million for
the three  months ended June 30, 1999 to $7.5 million for the three months ended
June 30, 2000. Over the same period, product sales increased by approximately 7%
from $5.8 million to $6.2 million.  Services revenue  increased by approximately
43% from $901,000 to $1.3  million.  The increase in product sales was primarily
attributable to the results generated from the Company's increased focus on test
systems for third generation (3G) digital cellular and voice over IP (VoIP). The
increase in  services  revenue was  primarily  due to sales of software  support
contracts  associated with new system sales as well as support contract renewals
and  customer  training.  Services  revenue  will vary  depending in part on the
relative   contribution  of  each  sales  region.  In  Japan,  the  Company  has
historically received lower services revenue in proportion to its product sales,
principally due to market factors affecting the pricing of such services.

         Cost of revenues.  Cost of product sales consists of the costs of board
assembly by independent contractors,  purchased components, payroll and benefits
for personnel in product testing, purchasing, shipping and inventory management,
as well as supplies,  media and freight.  Cost of services consists primarily of
the costs of payroll and benefits for customer support  personnel,  installation
and training.  Cost of sales increased  approximately  13% from $745,000 for the
three months ended June 30, 1999 to $841,000 for the three months ended June 30,
2000. Over the same period, the cost of product sales increased by approximately
13%. Gross margin for product sales increased from 91.2% to 90.7% over this same
period as the  Company's  sales mix had a greater  proportion  of higher  margin
products.  Cost of services increased by approximately 12% from $236,000 for the
three months ended June 30, 1999 to $264,000 for the three months ended June 30,
2000 due  primarily  to  increased  compensation  costs.  Over the same  period,
service gross margin on services  increased from 73.8% to 79.4%. Gross margin on
services will vary depending in part on the amount of sales to Japan,  where the
Company has  historically  generated  lower  margins on services  revenue due to
market factors affecting pricing, and timing of service contract renewals.

         Research and  development.  Research and development  expenses  consist
primarily  of the  costs of  payroll  and  benefits  for  engineers,  materials,
equipment and consulting services.  The Company's policy is to evaluate software
development  projects for  technological  feasibility  to determine if they meet
capitalization  requirements.  To date, all software development costs have been
expensed  as  research  and  development  expenses  as  incurred.  Research  and
development  expenses  increased by approximately 5% from $792,000 for the three
months ended June 30, 1999 to $828,000 for the three months ended June 30, 2000.
As a percentage of total revenues,  research and development  expenses decreased
from 11.8% to 11.0% over the same period.  The increase in absolute  dollars was
due to an increase in compensation expense in the engineering group. The Company
expects that research and development expenses will increase in absolute dollars
for the  foreseeable  future as the  Company  intends to  continue  to invest in
product development.*

         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  59.4% from $1.4 million for the three months
ended June 30, 1999 to $2.3 million for the three months ended June 30, 2000. As
a percentage of total  revenues,  sales and marketing  expenses  increased  from
21.5% for the three  months  ended June 30,  1999 to 30.7% for the three  months
ended June 30, 2000.  The increase in absolute  dollars was due  primarily to an
increase in marketing  personnel and the  expansion of the  Company's  sales and
support  offices.  The Company  expects that sales and  marketing  expenses will
increase in absolute  dollars for the foreseeable  future as the Company intends
to continue to invest in its sales and marketing capabilities.*

--------------------------------------------------
* See "Forward-looking Statements" on Page 8


                                       10

<PAGE>

         General and administrative. General and administrative expenses include
costs associated with the Company's general and risk management,  meeting public
company reporting  requirements,  employee  recruitment and retention,  investor
relations and finance functions.  General and administrative  expenses increased
32.2% from $742,000 for the three months ended June 30, 1999 to $981,000 for the
three  months  ended  June 30,  2000 due  primarily  to an overall  increase  in
temporary  staffing  costs,  recruiting  costs and public  company  costs.  As a
percentage of total revenues, general and administrative expenses increased from
11.1% to 13.1% over the same period.

         Interest income.  Interest income consists primarily of interest earned
on cash  and  cash  equivalents  and  short-term  investments.  Interest  income
increased from $501,000 for the three months ended June 30, 1999 to $615,000 for
the three  months ended June 30, 2000 due to an increase in the  Company's  cash
and  cash  equivalent  balances  and  short-term   investments   primarily  from
profitable operations and to higher prevailing interest rates

         Other  income   (expense),   net.  Other  income  (expense)   primarily
represents gains and losses from  fluctuations in exchange rates on transactions
denominated  in foreign  currencies.  Other  expense  was  $47,000 for the three
months ended June 30, 1999. Other income was $233,000 for the three months ended
June 30, 2000 due to foreign exchange gains, including gains realized on forward
contracts  entered into to hedge  transactions  denominated in currencies  other
than the US dollar.

         Provision  for income  taxes.  Provision  for income  tax  consists  of
federal,  state and international income taxes. The Company's effective tax rate
was 43.0%  for the  three  months  ended  June 30,  1999 and 39.0% for the three
months ended June 30, 2000.  These tax rates  primarily  reflect the anticipated
percentages of revenues derived by the Company from international operations and
a decrease in the top tax rate in Japan. The Company expects that its future tax
rate may vary  depending  in part on the  relative  income  contribution  by its
domestic and foreign operations.*

Nine Months Ended June 30, 2000 and 1999

         Revenues.  Revenues decreased by approximately 11.6% from $21.7 million
in nine  months  ended June 30, 1999 to $19.2  million in the nine months  ended
June 30, 2000. Over the same period,  product sales  decreased by  approximately
19%  from  $19.4  million  to  $15.7million.   Services  revenue   increased  by
approximately  54% from $2.3  million in the nine months  ended June 30, 1999 to
$3.5  million in the nine months  ended June 30,  2000.  The decrease in product
sales was primarily  attributable to a one-time $3.5 million sale to an existing
customer in Japan in 1999 The increase in services  revenue was primarily due to
sales of software support contracts  associated with new system sales as well as
contract renewals.  Services revenue will vary depending in part on the relative
contributions  of each sales  region.  In Japan,  the Company  has  historically
received lower services revenue in proportion to its product sales,  principally
due to market factors affecting the pricing of such services.

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

         Cost of Revenues.  Cost of product sales  decreased  approximately  23%
from $1.9  million in the nine months ended June 30, 1999 to $1.5 million in the
nine months ended June 30, 2000. Over the same period,

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<PAGE>

product sales decreased by approximately 19%. As a result, over the same period,
gross margin for product  sales  increased  from 90.2% to 90.6% as the Company's
hardware sales in the first nine months of 2000 had a higher  proportion of high
margin products.  Cost of services  increased by approximately 32% from $627,000
in the nine months ended June 30, 1999 to $830,000 in the nine months ended June
30, 2000. Over the same period, gross margin on services increased from 72.6% to
76.5%, as support  contract  renewals  increased.  Gross margin on services will
vary  depending  in part on the amount of sales to Japan,  where the Company has
historically  generated lower margins on services  revenue due to market factors
affecting pricing.

         Research  and  Development.  Research  and  development  expenses  were
essentially flat at $2.1 million for the nine months ended June 30, 1999 and the
nine months ended June 30, 2000. As a percentage of total revenues, research and
development expenses increased from 9.6% to 11.1% over the same period.

         Sales  and  Marketing.   Sales  and  marketing  expenses  increased  by
approximately  70% from $3.9  million in the nine months  ended June 30, 1999 to
$6.7 million in the nine months ended June 30,  2000.  As a percentage  of total
revenues,  sales and marketing  expenses  increased from 18.2% to 35.0% over the
same  period.  The  increases  were due  primarily  to an  overall  increase  in
personnel  and the  expansion of the Company's  sales and support  offices.  The
Company  expects that sales and  marketing  expenses  will  increase in absolute
dollars for the foreseeable  future as the Company intends to continue to invest
in its sales and marketing capabilities.*

         General  and  administrative.   General  and  administrative   expenses
increased by  approximately  26% from $2.1 million in the nine months ended June
30, 1999 to $2.6 million in the nine months ended June 30, 2000. As a percentage
of total revenues,  general and  administrative  expenses increased from 9.5% to
13.5% over the same period. The increase in absolute dollars is due primarily to
an overall increase in personnel,  recruiting  expenses and the costs associated
with being a public company.

         Interest  Income.  Interest income  increased from $903,000 in the nine
months  ended June 30, 1999 to $1.9  million in the nine  months  ended June 30,
2000  due  to an  increase  in the  Company's  cash  and  cash  equivalents  and
short-term  investment balances resulting from the February 1999 public offering
and from profitable operations.

         Other Income  (expense).  Other expense was $159,000 in the nine months
ended June 30, 1999 and other  income was $18,000 in the nine months  ended June
30, 2000, due to exchange gains related to  transactions  denominated in foreign
currencies.

         Provision  for  income  taxes.  The  Company's  effective  tax rate was
approximately  43.0% in the nine months ended June 30, 1999 and was 39.0% in the
nine  months  ended  June 30,  2000.  These  tax  rates  primarily  reflect  the
anticipated  percentages of revenues  derived by the Company from  international
operations and a decrease in the top tax rate in Japan.

Liquidity and Capital Resources

         Historically,  the  Company  has  financed  its  operations,  including
increases in account  receivable and capital equipment  acquisitions,  primarily
through cash  generated from  operations,  cash proceeds from its initial public
offering of common stock,  profitable  operations,  investment  earnings and the
exercise of employee stock options.

         The Company's  operating  activities  provided cash of $8.0 million and
$5.1 million in the period ending June 30, 1999 and 2000, respectively. The cash
provided by the Company's  operations for the nine months ended June 30 1999 was
primarily attributable to high profitability and increased accrued expenses

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                                       12

<PAGE>

offset by a significant  increase in account  receivable,  specifically in Japan
from a large one-time sale and a reduction in liabilities.  The cash provided by
the Company's  operations  for the nine months ended June 30, 2000 was primarily
attributable  to  profitable  operations,  and to  increased  levels of accounts
payable  and  deferred  income  offset  by  higher  prepaid  expenses. Investing
activities, consisting primarily of purchases of short-term investments and to a
lesser extent  additions to property and  equipment,  used cash of $28.1 million
and  $10.0   million  in  the  nine  months  ending  June  30,  1999  and  2000,
respectively.  Financing  activities in the nine months ending June 30, 1999 and
2000 were  attributable  to the  proceeds  of the public  offering in the former
period and to exercises of employee stock options in both periods.

         As of June 30, 2000, the Company had working  capital of $47.3 million,
cash and cash  equivalents of $4.2 million and  short-term  investments of $42.6
million.  As of June 30,  2000,  the  Company  had no bank  indebtedness  and no
long-term  commitments  other than  operating  lease  obligations.  The  Company
expects  that  capital  expenditures  will total  approximately  $1.0 million in
fiscal 2000.*

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

Factors That May Affect Future Operating Results

Fluctuations in Quarterly Operating Results; Lengthy Sales Cycle

         The Company has  experienced,  and anticipates that it will continue to
experience,   significant  fluctuations  in  quarterly  revenues  and  operating
results.  The Company's revenues and operating results are relatively  difficult
to forecast for a number of reasons,  including (i) the variable size and timing
of  individual  purchases by customers,  (ii)  seasonal  factors that may affect
capital spending by customers, such as the varying fiscal year ends of customers
and  the  reduction  in  business   during  the  summer   months,   particularly
internationally,  (iii) the  relatively  long  sales  cycles  for the  Company's
products,  (iv) the timing of hiring sales and technical personnel,  (v) changes
in the timing  and  amount of sales  incentive  compensation,  (vi)  competitive
conditions in the Company's markets,  (vii) exchange rate  fluctuations,  (viii)
changes in the mix of products  sold,  (ix) the timing of the  introduction  and
market  acceptance of new products or product  enhancements by the Company,  its
customers,  competitors or suppliers,  (x) costs  associated with developing and
introducing new products,  (xi) product life cycles,  (xii) changes in the level
of operating  expenses  relative to revenues,  (xiii) software defects and other
product quality problems,  (xiv) customer order deferrals in anticipation of new
products, (xv) delays in purchasing decisions or customer orders due to customer
consolidation,  (xvi) supply  interruptions,  (xvii)  changes in the  regulatory
environment and (xviii) changes in global or regional economic  conditions or in
the telecommunications industry.

         The  Company's  revenues  in any period  generally  have been,  and are
likely to continue to be,  derived from  relatively  small  numbers of sales and
service transactions with relatively high average revenues per order. Therefore,
the loss of any orders or delays in closing such transactions  could have a more
significant impact on the Company's quarterly revenues and results of operations
than on those of companies with relatively high volumes of sales or low revenues
per order.  The Company's  products are generally  shipped  within 15 to 30 days
after  orders are received and  revenues  are  recognized  upon  shipment of the
products,

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                                       13

<PAGE>

provided no significant  vendor obligations remain and collection of the related
receivable is deemed probable.  As a result, the Company generally does not have
a significant  backlog of orders,  and revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter.

         A customer's  decision to purchase  the  Company's  products  typically
involves  a  significant  technical   evaluation,   internal  procedural  delays
associated with large capital  expenditure  approvals and testing and acceptance
of new systems  that affect key  operations.  For these and other  reasons,  the
sales cycle  associated  with the  Company's  products is typically  lengthy and
subject to a number of significant risks over which the Company has little or no
control.  Historically, the period between initial customer contact and purchase
of the  Company's  products has typically  ranged from two to nine months,  with
sales to new customers  (including new divisions  within existing  customers) at
the  longer  end of this  range.  Because  of the  lengthy  sales  cycle and the
relatively  small  number  and large  size of  customers'  orders,  if  revenues
forecast from a specific  customer for a particular  quarter are not realized in
that  quarter,  the  Company's  operating  results  for  that  quarter  could be
materially adversely affected.

         The Company's  expectations  for future revenues are  predicated,  to a
large  extent,  on  the  recruitment  and  hiring  of a  significant  number  of
employees,  particularly experienced sales and technical.  personnel. Failure to
hire, or delays in hiring, sufficient sales and technical personnel could have a
material adverse effect on the Company's results of operations for any period.

         Due to the  relatively  fixed  nature of most of the  Company's  costs,
including  personnel and facilities  costs, and because  operating  expenses are
based on anticipated revenue, a decline in revenue from even a limited number of
transactions,  failure to  achieve  expected  revenue  in any fiscal  quarter or
unanticipated  variations in the timing of recognition of specific  revenues can
cause  significant  variations in operating  results from quarter to quarter and
may in some future quarter result in losses or have a material adverse effect on
the  Company's  business,  financial  condition and results of  operations.  The
Company believes,  therefore, that period-to-period comparisons of its operating
results should not be relied upon as an indication of future performance.

         For  all of the  foregoing  factors,  as well  as  other  unanticipated
factors,  it is possible that in some future  quarter the  Company's  results of
operations  could fail to meet the  expectations  of public  market  analysts or
investors. In such event, or in the event that adverse conditions prevail or are
perceived to prevail  generally or with respect to the Company's  business,  the
price  of the  Company's  Common  Stock  will  likely  be  materially  adversely
affected.

Dependence on Limited Number of Customers

         The Company's  customer base is highly  concentrated,  and a relatively
small number of companies have accounted for  substantially all of the Company's
revenues to date. In the nine months ended June 30, 2000, the Company's top four
customers represented  approximately 75% 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.

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                                       14

<PAGE>

Risks Associated with International Sales and Operations; Foreign Exchange Risk

         Company revenues from  international  customers were  approximately 66%
during  the  nine  months  ended  June  30,  2000.  The  Company   expects  that
international  sales will continue to account for a  significant  portion of its
revenues in future  periods.* The Company sells its products  worldwide  through
its direct sales force.  The Company has offices located in Japan,  Canada,  the
United Kingdom,  Germany,  France and Sweden and plans to add offices, staff and
resources  worldwide from time to time.  International  sales and operations are
subject to inherent  risks,  including  difficulties  in staffing  and  managing
foreign  operations,  longer  customer  payment  cycles,  greater  difficulty in
accounts  receivable  collection,  changes  in  regulatory  requirements  or  in
economic or trade  policy,  costs  related to  localizing  products  for foreign
countries,  potentially  weaker protection for intellectual  property in certain
foreign  countries,  the burden of complying with a wide variety of foreign laws
and practices,  tariffs and other trade barriers,  and  potentially  adverse tax
consequences,  including  restrictions on  repatriation of earnings.  During the
last  two  fiscal  years  and  during  the nine  months  ended  June 30,  2000 a
significant  portion of the Company's  sales has been to customers in Japan.  If
economic  conditions in Japan deteriorate to a significant extent, the Company's
business,  financial  condition  and results of  operations  could be materially
adversely  affected.  In  addition,  although  the  Company  cannot  predict the
potential  consequences to the Company's business of the adoption of the Euro as
a common  currency in Europe,  the  transition  to the Euro presents a number of
risks,  including  increased  competition  from  European  firms as a result  of
increased  pricing  transparency.  An inability to obtain  necessary  regulatory
approvals  in  foreign  markets  on a timely  basis  could  also have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

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

Rapid Technological Change;  Uncertainty of Acceptance of the Company's Products
and Services

         The market for telecommunications  test systems and services is subject
to rapid technological  change,  evolving industry  standards,  rapid changes in
customer  requirements  and  frequent  product  and  service  introductions  and
enhancements.  The Company's  future  success will depend in part on its ability
toanticipate and respond to these changes by enhancing its existing products and
services  and by  developing  and  introducing,  on a timely and  cost-effective
basis,  new  products,  features  and  services  that  address  the needs of its
customer base.  There can be no assurance that the Company will be successful in
identifying,  developing and marketing new products,  product  enhancements  and
related  services  that  respond to  technological  change or evolving  industry
standards or that adequately meet new market demands.

         The Company's test systems currently operate only on the UNIX operating
system.  The  Company's  current and  prospective  customers  may require  other
operating systems to be used in their  telecommunications  test systems, such as
Windows 95,  Windows NT or Windows 98 or may require  the  integration  of other
industry standards.  There can be no assurance that the Company would be able to
successfully  adapt  its  products  to such  operating  systems  on a timely  or
cost-effective  basis,  if at all.  The  failure  of the  Company  to respond to
rapidly  changing  technologies  and to develop and  introduce  new products and
services  in a  timely  manner  would  have a  material  adverse  effect  on the
Company's business, financial condition and results of operations.

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                                       15

<PAGE>

         The Company's  success will depend in part on whether a large number of
telecommunications  equipment  manufacturers and network operators  purchase the
Company's  products  and  services.  Because  the  telecommunications  market is
rapidly evolving,  it is difficult to predict the future success of products and
services in this market. The customers in this market use products from a number
of competing  suppliers  for various  testing  purposes,  and there has not been
broad  adoption of the products of one company.  There can be no assurance  that
the Company's  current or future  products or services  will achieve  widespread
acceptance among network operators,  telecommunications  equipment manufacturers
or other potential customers or that solutions developed by competitors will not
render the Company's products obsolete or uncompetitive.

Foreign Exchange Risk

         The  Company's  foreign  subsidiaries  operate  and sell the  Company's
products  in various  global  markets.  As a result,  the  Company is exposed to
changes  in  interest  rates and  foreign  currency  exchange  rates on  foreign
currency  denominated sales made to foreign  subsidiaries.  The Company utilizes
foreign currency forward exchange  contracts and options to hedge against future
movements  in  foreign  exchange  rates that  affect  certain  foreign  currency
denominated intercompany receivables.  The Company attempts to match the forward
contracts  with the  underlying  receivables  being hedged in terms of currency,
amount and maturity.  The Company does not use derivative financial  instruments
for speculative or trading purposes. Because the impact of movements in currency
exchange rates on forward  contracts offsets the related impact on the exposures
hedged,  these  financial  instruments do not subject the Company to speculative
risk that would  otherwise  result  from  changes in  currency  exchange  rates.
Realized  gains and  losses on forward  exchange  contracts  may offset  foreign
exchange  transaction  gains or losses  from  revaluation  of  foreign  currency
denominated intercompany receivable balances which otherwise would be charged to
other  income  (expense).  To date,  the Company  has not fully  hedged all risk
associated with its sales denominated in foreign currencies, and there can be no
assurance that the Company's hedging activities, if any, will be successful.

         At June 30, 2000 the Company had forward exchange contracts maturing in
fiscal 2000 to sell  approximately  $1.2  million in Pounds  Sterling.  The fair
market  value of the  contracts at June 30, 2000 was  immaterial  As of June 30,
2000 the cost of the contracts have been included in other income (expense).

         The Company has  evaluated  the  potential  near-term  losses in future
earnings,  fair values and cash flows from reasonably possible near-term changes
in  market  rates or  prices  and  believes  that any such  losses  would not be
material.*

         Additional  factors that could affect future  operating  results or the
price of the Common Stock are set forth under the caption "Risk  Factors" in the
prospectus dated February 11, 1999 contained in the  Registration  Statement and
in Form 10-K.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

         The  Company  does  not use  derivative  financial  instruments  in its
investment  portfolio.   The  Company's  short-term  investments  are  generally
comprised of  investments  with original  maturities of less than one year.  The
investments  consist of investment quality commercial paper and corporate bonds,
collateralized  mortgage obligations U.S. government securities and money market
funds. These securities

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                                       16

<PAGE>

are subject to interest rate risk,  and could decline in value if interest rates
increase. Due to the short duration of the investment portfolio and conservative
nature of the  Company's  investment  policy,  the  Company  does not expect any
material loss with respect to its investment portfolio.*

Foreign Currency Exchange Rate Risk

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

Part II.  Other Information

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

         (a)      Exhibits.

                  27       Financial Data Schedule

         (b)      Reports on Form 8-K.

                  No reports on Form 8-K were filed during the quarter for which
                  this report on Form 10-Q is filed.

SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                           CATAPULT COMMUNICATIONS CORPORATION

Date:    August 11, 2000                   By: /s/  Richard A. Karp
                                           ------------------------
                                           Richard A. Karp
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)
                                           Acting Chief Financial Officer
                                           (Principal Financial Officer)