<PAGE>


                                  UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                         --------------------------------

                                    FORM 10-Q


[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                                   Act of 1934
                  For the quarterly period ended September 30, 1996
                                                 ------------------

                                         or 

[ ] 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:  0-25526


                               C-ATS SOFTWARE INC.
                (Exact name of registrant as specified in its charter)



                 DELAWARE                                     77-0185283
     (State or other jurisdiction of                       (I.R.S. Employer
      incorporated or organization)                      Identification Number

  1870 EMBARCADERO ROAD, PALO ALTO, CA                          94303
(Address of principal executive offices)                      (Zip Code)

                                   415-321-3000
                 (Registrant's telephone number, including area code)


     Indicate by check mark whether the registrant (1) has filed all reports 
required 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.
[X (1)] Yes [X (2)] No

     Number of shares outstanding of the issuer's common stock, $0.001 par 
value as of  October 31, 1996:  6,638,410


<PAGE>

                               C-ATS SOFTWARE INC.

                                      INDEX


PART I.  FINANCIAL INFORMATION

Item 1.  Interim Financial Statements


         Condensed Consolidated Balance Sheets                                 3

         Condensed Consolidated Statements of Operations                       4

         Condensed Consolidated Statements of Cash Flows                       5

         Notes to Interim Condensed Consolidated Financial Statements        6-7


Item 2.  Management's Discussion and Analysis of Financial Condition        8-12
         and Results of Operations



PART II. OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders                  13


Item 6.  Exhibits and Reports on Form 8-K                                     13


SIGNATURES                                                                    14

         Index to Exhibits                                                    15

Exhibit 27  EDGAR Requirements for the Format and Input of                 16-17
            Financial Data Schedules





                                     -2-



<PAGE>


                               C-ATS SOFTWARE INC.
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (in thousands)

                                           September 30,            December 31,
                                               1996                      1995
                                           -------------            ------------
                                            (unaudited)
                 ASSETS

Current assets:
     Cash and cash equivalents                $  1,469                 $  4,199
     Short-term investments                     20,086                   22,502
     Accounts receivable, net                    3,890                    7,153
     Prepaid expenses                            1,680                      430
     Deferred taxes                              2,690                    2,888
                                              --------                 --------
          Total current assets                  29,815                   37,172

Property and equipment, at cost
     Equipment                                   2,974                    2,472
     Leasehold improvements                        307                      306
     Furniture and fixtures                        449                      470
                                              --------                 --------
                                                 3,730                    3,248
     Accumulated depreciation                   (2,651)                  (2,293)
                                              --------                 --------
          Net property and equipment             1,079                      955
Purchased software, at cost                      1,447                      376
     Accumulated amortization                     (596)                    (321)
                                              --------                 --------
          Net purchased software                   851                       55
Other assets                                       297                      318
                                              --------                 --------
                                              $ 32,042                 $ 38,500
                                              --------                 --------


          LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                         $    122                 $  1,093
     Accrued liabilities                           773                    1,159
     Accrued compensation                        1,568                    1,019
     Accrued taxes payable                          53                    1,058
     Deferred revenue                            7,791                   11,279
                                              --------                 --------
          Total current liabilities             10,307                   15,608


Shareholders' equity:
     Common stock                                    7                        6
     Additional paid in capital                 22,756                   18,205
     Cumulative translation adjustment             301                      319
     Retained earnings (accumulated deficit)    (1,329)                   4,362
                                              --------                 --------
          Total shareholders' equity            21,735                   22,892
                                              --------                 --------
                                              $ 32,042                $  38,500
                                              --------                 --------
                                              --------                 --------


                                     -3-

<PAGE>


                               C-ATS SOFTWARE INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands, except per share data)
                                           
<TABLE>
<CAPTION>

                                Quarter ended September 30,    Nine months ended September 30,
                                    1996          1995              1996              1995
                                ------------   -----------     -------------      ------------
                                 (unaudited)   (unaudited)      (unaudited)        (unaudited)
<S>                               <C>            <C>              <C>               <C>
Revenues:
  License revenue                  $  4,599      $  5,114         $  14,924          $ 14,852
  Service and other revenue             304           661               746             1,572
                                   --------      --------         ---------         ---------
     Total revenues                   4,903         5,775            15,670            16,424
                    
Costs and expenses:
  Cost of revenues                       78           422               206               901
  Research and development            1,692           933             4,484             2,677
  Sales & marketing                   2,959         2,662             8,388             7,541
  General & administrative              645           703             2,005             2,105
  In-Process R&D expense                  -             -             7,066                 -
                                   --------      --------         ---------         ---------
     Total costs & expenses           5,374         4,720            22,149            13,224
                                   --------      --------         ---------         ---------

Operating income (loss)                (471)        1,055            (6,479)            3,200
Interest income                         198           273               669               674
                                   --------      --------         ---------         ---------
Income (loss) before provision 
  for income taxes                     (273)        1,328            (5,810)            3,874
Provision (benefit) for income
  taxes                                (101)          465               465             1,356
                                   --------      --------         ---------         ---------
Net income  (loss)                 $   (172)     $    863         $  (6,275)        $   2,518
                                   --------      --------         ---------         ---------
                                   --------      --------         ---------         ---------

Net income  (loss) per share       $  (0.03)     $   0.14         $   (0.97)        $    0.42
                                   --------      --------         ---------         ---------
                                   --------      --------         ---------         ---------
Weighted average common
  shares outstanding                  6,623*        6,387             6,491*            5,989
     
  *excludes anti-dilutive
   common share equivalents.
</TABLE>


                                     -4-

<PAGE>



                                 C-ATS SOFTWARE INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (In thousands)
                                           
  
                                                     Nine Months Ended
                                                     ------------------
                                                September 30,     September 30,
                                                    1996              1995
                                                -------------     ------------
                                                 (unaudited)       (unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                               $  (6,275)          $  2,518
  Adjustments to reconcile net 
  income (loss) to net cash
  provided by (used in) operating activities:
    Depreciation and amortization                       674                393
    Acquired in-process research and development      7,066                 --
    Changes in operating assets and liabilities:
       (Increase) decrease in accounts receivable     3,263              2,600
       (Increase) in prepaid expenses                  (681)               (36)
       (Increase) decrease in other assets               21               (136)
       (Increase) decrease in deferred tax asset        198                118
       Increase (decrease) in accounts payable         (971)               117
       (Decrease) in accrued liabilities               (386)              (246)
       Increase (decrease) in accrued compensation      549                (83)
       (Decrease) in accrued taxes payable           (1,004)              (881)
       Increase (decrease) in deferred revenue       (3,488)            (1,094)
                                                  ---------           --------
    Net cash provided by (used in) operating 
    activities                                       (1,034)             3,270
                                                  ---------           --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Sale (purchase) of short-term investments, net      2,417            (20,020)
  Investment in acquisition of LORGB                 (8,084)               --
  Purchase of property and equipment                   (641)              (519)
                                                  ---------           --------
    Net cash used in investing activities            (6,308)           (20,539)
                                                  ---------           --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock              4,606             14,172
                                                  ---------           --------
     Net cash provided by financing activities        4,606             14,172
                                                  ---------           --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH
  AND CASH EQUIVALENTS                                    6                170
                                                  ---------           --------
NET DECREASE IN CASH AND CASH EQUIVALENTS            (2,730)            (2,927)
CASH AND CASH EQUIVALENTS AT BEGINNING OF      
  PERIOD                                              4,199              7,689
                                                  ---------           --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD        $   1,469           $  4,762
                                                  ---------           --------
                                                  ---------           --------



                                     -5-

<PAGE>
     


                             C-ATS SOFTWARE INC.

           NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (unaudited)

1.    NATURE OF OPERATIONS:

     C-ATS Software Inc. (the "Company") was organized in 1988 as a successor 
to a partnership formed in 1986. The Company develops and markets 
client/server software for financial risk management. The majority of the 
Company's current clients are domestic and international financial 
institutions.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     The accompanying condensed consolidated financial statements have been 
prepared pursuant to the rules and regulations of the Securities and Exchange 
Commission.  Certain information and footnote disclosures normally included 
in annual financial statements prepared in accordance with generally accepted 
accounting principles have been condensed or omitted pursuant to those rules 
and regulations, although the Company believes that the disclosures made are 
adequate to make the information presented not misleading.  The interim 
financial statements are unaudited, but reflect all adjustments (consisting 
of only normal recurring adjustments) which are, in the opinion of 
management, necessary for a fair presentation.  The financial statements 
should be read in conjunction with the Company's financial statements and 
footnotes as presented in the Company's Annual Report filed under SEC Form 
10-K.

REVENUE RECOGNITION

     The Company licenses its products to end users under annual license 
agreements which include rights to maintenance support services and product 
upgrades. Accordingly, license revenues are recognized ratably over twelve 
months. 

     In addition, the Company provides training and consulting services to 
its clients.  Revenue from such services is generally recognized as the 
services are performed.  When performing long-term systems integration 
projects for its clients,  revenues are recognized based on the 
percentage-of-completion method. and any anticipated losses would be recorded 
in the earliest period in which such loss may become evident.  The Company 
completed its most recent systems project in the fourth quarter of 1995 and 
does not currently have a long-term project in process.


                                     -6-

<PAGE>


EARNINGS PER SHARE

     Earnings per share is computed using the weighted average number of 
shares of common stock and dilutive common share equivalents from stock 
options (using the treasury stock method).  Pursuant to the Securities and 
Exchange Commission Staff Accounting Bulletin No. 83, common and common share 
equivalents issued during the twelve-month period prior to the Company's 
March 1995 public offering are included in the calculation of common and 
common share equivalents as if they were outstanding for all periods prior to 
the initial public offering. Furthermore, common share equivalents from 
convertible stock that converted upon the Company's initial public offering 
were included in the calculation as if they had been converted on March 28, 
1995.  

     In the first quarter and the first nine months of 1996, common share 
equivalents, if included, would have an anti-dilutive effect on the net loss 
per share calculation, and therefore are excluded from the calculation for 
these periods. The Financial Accounting Standards Board is currently 
considering a proposal to eliminate common share equivalents from all future 
earnings per share calculations beginning in 1997.

STOCK EXCHANGE; COMMON STOCK

    The Company was reincorporated in Delaware, effective March 1995.  
Pursuant to the reorganization, the Delaware successor Company issued one 
share of stock for each share of outstanding Common Stock and Preferred 
Stock.  During March 1995, the Company completed its initial public offering 
of stock and sold an aggregate of 1.3 million shares of Common Stock 
generating net proceeds to the Company, after underwriting and other costs, 
of approximately $13.8 million.













                                     -7-





                                 C-ATS SOFTWARE INC.
                                           
                        MANAGEMENT'S DISCUSSION AND ANALYSIS 
                   OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                           
     This report contains forward-looking statements within the meaning of 
Section 27A of the Securities Act of 1933 and Section 21E of the Securities 
Exchange Act of 1934.  Actual results could differ materially from those 
projected in the forward looking statements as a result of factors set forth 
in the section titled "Future Operating Results" and elsewhere.

RESULTS OF OPERATIONS:

     The following table sets forth for the periods indicated the percentage 
of revenues represented by certain line items in the Company's Consolidated 
Statements of Operations:

<TABLE>
<CAPTION>

                                 Three Months Ended             Nine Months Ended
                             ----------------------------  ----------------------------
                             September 30,  September 30,  September 30,  September 30,
                                 1996           1995           1996           1995
                              -----------    -----------    -----------    -----------
                              (unaudited)    (unaudited)    (unaudited)    (unaudited)
<S>                               <C>            <C>            <C>            <C>
Revenues:                                                                
  License revenue                  94%            89%            95%            90% 
  Service and other revenue         6             11              5             10  
                                  ---            ---            ---            ---  
    Total revenues                100            100            100            100  
Costs and expenses:                                                                
  Cost of revenues                  2              7              1              6  
  Research and development         35             16             29             16  
  Sales and marketing              60             47             53             46  
  General and administrative       13             12             13             13  
  In process R&D expense           --             --             45             --  
                                  ---            ---            ---            ---  
Total costs and expenses          110             82            141             81  
                                  ---            ---            ---            ---  
Operating income (loss)           (10)            18            (41)            19  
Interest income                     4              5              4              4  
                                  ---            ---            ---            ---  
Income (loss) before provision                                                     
 for income taxes                  (6)            23            (37)            23  
Provision (benefit) for income                                                     
 taxes                             (2)             8              3              8  
                                  ---            ---            ---            ---  
  Net income (loss)                (4)%           15%           (40)%           15% 

</TABLE>

REVENUES

     Total revenues during the third quarter of 1996 decreased to $4.9 
million, a 15% decline versus third quarter of 1995 revenues of $5.8 million. 
Primary contributors to the decline were the loss of several renewal 
customers who converted to internally developed systems and the reduction in 
service and other revenues described below.  Revenues for the first nine 
months of 1996 decreased by 

                                      -8-

<PAGE>

5% to $15.7 million from $16.4 million in 1995.  International revenues 
accounted for 81% of total revenues in the third quarter and 80% in the first 
nine months of 1996, compared to 79% during the same periods in 1995.  
Domestic revenues decreased by 21% and 14% in the third quarter and first 
nine months, respectively versus 1995, while international revenues decreased 
by 11% in the third quarter and decreased by 1% year-to-date over the same 
period of 1995.

     LICENSE.  License revenue was reduced  by 10% to $4.6 million in the 
third quarter of 1996 from $5.1 million in the third quarter of 1995. For the 
first nine months of 1996, license revenue remained level at $14.9 million 
with the first nine months revenue of 1995. The decline in the third quarter 
was due primarily to the loss of several renewal clients who converted to 
internally developed systems.

     SERVICE AND OTHER. Service and other revenues declined to $0.3 million 
and $0.7 million in the third quarter and the first nine months of 1996 
versus year earlier service revenues of $0.7 million and $1.6 million, 
respectively. Service and other revenues decreased  primarily due to the 
completion of a systems integration project that was undertaken and 
subcontracted by the Company in the middle of 1994 and concluded in the 
fourth quarter of 1995.

COSTS AND EXPENSES

     COST OF REVENUES.  Cost of revenues includes the cost of documentation 
materials, royalties and the cost of subcontracted services.  Cost of 
revenues decreased to $0.1 million in the third quarter of 1996, from $0.4 
million in the third quarter of 1995.  Cost of revenues decreased to $0.2 
million in the first nine months of 1996 from $0.9 million in the first nine 
months of 1995.  These decreases were due primarily to the reduction in 
subcontracted services related to the systems integration project, referred 
to above.

     RESEARCH AND DEVELOPMENT.  Most of research and development expenditures 
are personnel related.  Total expenditures for research and development 
increased to $1.7 million in the third quarter of 1996 and $4.5 million in 
the first nine months of 1996, from $0.9 million and $2.7 million in the 
third quarter and first nine months of 1995, respectively.  The increase in 
research and development expenditures was due primarily to increases in 
expenditures for continuation and completion of in-process research and 
development ($0.6 million and $1.4 million in the third quarter and first 
nine months of 1996, respectively) and new product development. The increase  
includes the addition of research staff from the acquired firm of Lor/Geske 
Bock Associates, Inc. ("LORGB") during the first quarter of 1996.  In 
connection with the LORGB acquisition, the Company recognized a one-time 
expense amounting to $7.1 million of in process research and development. The 
amounts of ongoing software development costs which could have been 
capitalized were immaterial and, therefore, no internal software development 
costs have been capitalized by the Company to date. The Company believes that 
significant investment for product research and development is essential to 
product and technical leadership, and the Company anticipates that it will 
continue to commit substantial resources to research and development in the 
future.  The focus of this increased research and development spending will 
be to expand the platforms upon which the Company's products operate; to 
integrate the acquired products from LORGB; and to continue to enhance the 
features and functionality of the 

                                      -9-

<PAGE>

company's core capital and treasury market products.  The Company anticipates 
that research and development expenditures will continue to increase in 
dollar amount during the remainder of 1996.

     SALES AND MARKETING.  Sales and marketing expenses consist principally 
of salary, commissions and facilities-related costs.  Sales and marketing 
expenditures increased to $3.0 million in the third quarter and $8.4 million 
in the first nine months of 1996, up from $2.7 million and $7.5 million in 
the third quarter and first nine months of 1995, respectively.  The increase 
in sales and marketing expenditures was due primarily to increases in 
personnel-related costs. The Company anticipates that sales and marketing 
expenses will continue to increase in dollar amount in 1996 as the Company 
expands its sales and service organization.

     GENERAL AND ADMINISTRATIVE.  General and administrative expenses consist 
of personnel costs for finance, contract administration, human resources and 
general management and administration, as well as legal, accounting and 
auditing expenses.  General and administrative expenses in the third quarter 
and first nine months dropped to $0.6 million in the third quarter and $2.0 
million in the first nine months of 1996, down from $0.7 million and $2.1 
million, respectively, in 1995.  The Company anticipates that general and 
administrative expenses will remain level in dollar amount during the 
remainder of 1996.

INTEREST INCOME

     Interest income is comprised primarily of interest earned on the 
Company's excess cash and short term investment balances, net of interest 
expense. Interest income was reduced to $198,000 in the third quarter of 1996 
from $273,000 in the third quarter of 1995.  Interest income decreased as a 
result of lower cash and short term investment balances, and lower effective 
yields available on short-term investments. Interest income remained level at 
$0.7 million first nine months of 1996 versus the first nine months of 1995.  
Cash balances available for investment were lower in the first quarter of 
1995 prior to the company's initial public offering on March 27, 1995.

PROVISION FOR INCOME TAXES

     The Company accounts for income taxes in accordance with Statement of 
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which 
provides for a liability approach under which deferred income taxes are 
provided based upon enacted laws and rates applicable to the periods in which 
the taxes become payable.  The provision for income taxes was 37% and 35% in 
the third quarter of 1996 and 1995, respectively.  The provision for income 
taxes takes into account the effects of foreign income taxes and state income 
taxes, offset by utilization of research and development credits in 1995 and 
foreign tax credits in both years. 

     As of September 30, 1996, the Company had $4.4 million of deferred tax 
assets, primarily associated with its deferred revenue liability, for 
application against future income.  Due to certain limitations of benefits 
related to tax carrybacks, the Company has provided a valuation allowance of 
$1.8 million related to the deferred tax asset.  Accrued taxes payable 
include reserves for tax liabilities.  The Company's tax returns for 1990 
through 1994 are currently being examined by the Internal 

                                     -10-

<PAGE>

Revenue Service.  Such examination may result in adjustments to previously 
filed tax returns.  While the Company has sufficient financial resources to 
cover such adjustment and the Company believes that it has reserves 
sufficient to cover any actual tax liabilities as a result of this 
examination, no assurance can be given that the reserves will be adequate.

FUTURE OPERATING RESULTS

     The Company has derived substantially all of its revenues from the sale 
of software products and services for derivatives risk management, and its 
future growth is critically dependent on increased revenues from products for 
this use. The market for derivative risk management products is highly 
competitive.  There is no assurance that competition will not cause the 
Company to lose market share or will not affect pricing and margins. In 
addition, the Company offer other products to facilitate firm-wide 
risk.management  The market for firm-wide risk management products is at a 
very early stage of development. Failure of a significant market for 
firm-wide risk management products to develop or, if it does, failure of the 
Company's products to achieve broad market acceptance could have a material 
adverse affect on the Company's business, operating results and financial 
condition.

     The Company's revenues are derived primarily from annual renewable 
license fees, and although the Company has been successful to date in 
negotiating renewable licenses rather than perpetual licenses, the Company 
may in the future encounter resistance to such renewable licenses.  A 
significant decline in the percentage of clients who renew their license or 
the failure of the Company to enter into renewable licenses would have a 
material adverse effect on the business, operating results and financial 
condition of the Company.

     A significant portion of the Company's revenues are derived from sales 
to international clients.  International sales and operations may be limited 
or disrupted by the imposition of government controls, export license 
requirements, political instability, trade restrictions, changes in tariffs 
and exchange rates, difficulties in staffing, coordinating communications, 
managing international operations and other factors.  The Company prices its 
products in U.S. dollars, but it incurs expenses in local currencies for its 
overseas operations.  The Company attempts to reduce its exposure to exchange 
rate fluctuations by purchasing foreign currencies every nine to twelve 
months in amounts equal to the operating expenses estimated to be payable in 
such currencies during the next nine to twelve months.  Regulatory compliance 
requirements differ among foreign countries and are also different from those 
established in the United States, and any inability to obtain necessary 
foreign regulatory approvals on a timely basis could have an adverse effect 
on the Company's international sales, and thereby on its business, financial 
condition and results of operations.  Additionally, the Company's business, 
financial condition and international operating results may be adversely 
affected by fluctuations in currency exchange rates as well as increases in 
duty rates, difficulties in obtaining export licenses, ability to maintain or 
increase prices and competition.

     The Company's acquisition of LORGB entails various risks.  Additional
development will be required before the LORGB products are broadly marketed.
There is no  assurance that the development work will be completed timely or
successfully.  There is also no assurance that the LORGB products will win broad
market acceptance.  The addition of the LORGB personnel and related overhead
also increases the Company's expenses.  If the Company is not successful in

                                     -11-

<PAGE>

developing and marketing the LORGB products, then the Company's earnings will 
be adversely affected. 

     The Company's quarterly operating results may fluctuate substantially as 
a result of a variety of factors including the volume and timing of license 
renewals by existing clients, license agreements with new clients, the timing 
and market acceptance of new products or technological advances by the 
Company or its competitors, price levels, and unexpected expenses. The 
Company's expense levels are based, in part, on expectations of future 
revenues. If revenues in a particular quarter do not meet expectations, 
operating results could be adversely affected. The Company expects that its 
operating results will fluctuate in the future as a result of these and other 
factors. Additionally, the Company has accrued a reserve for tax liabilities 
in connection with an Internal Revenue Service examination. There can be no 
assurance that such reserve will be adequate to cover any liabilities. 
Results of past quarters should not be relied on as an indication of future 
results.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has funded its operations to date through cash flow from 
operations and its initial public offering of stock effective March 20, 1995. 
As of September 30, 1996, the Company had $21.6 million in cash, cash 
equivalents and short-term investments, and no long term debt.

     Net cash used by operating activities during the first nine months of 
1996 totaled $1.0.  In the first nine months of 1995, operating activities 
provided $3.3 million to net cash.  During the first nine months of 1996 the 
Company utilized $6.3 million of net cash for investing activities including 
$8.1 million for acquisitions.  Other investing activities in the first nine 
months of 1996 provided cash of $2.4 million from the sale of short-term 
investments.  In the first nine months of 1995, the Company's investments in 
short-term investments increased by $20.0 million. The Company added $0.6 and 
$0.5 million of property and equipment in the first nine months of 1996 and 
1995, respectively.  The Company has no significant capital commitments and 
currently anticipates that additions to property and equipment for 1996 will 
be approximately $0.8 million. In April 1995, the Company's existing lease 
for its Palo Alto, California facilities expired and the Company signed a new 
lease for another facility in Palo Alto, California in close proximity to its 
previous office.  The facility lease is for approximately 30,000 square feet 
of space and expires in April 2001. 

     In financing its activities, the Company issued $4.6 million of common 
stock in connection with the acquisition of  LORGB and stock option 
exercises. This  compares to the $14.2 million provided by financing 
activities in the first nine months of 1995 which is primarily attributable 
to the completion of the Company's initial public offering of stock in March 
of 1995.

     The Company believes that the liquidity provided by existing cash, cash 
equivalents and short-term investment balances will be adequate to meet the 
Company's anticipated cash needs for working capital and capital expenditure 
requirements for at least the next twelve months.

                                     -12-

<PAGE>

                              C-ATS SOFTWARE INC.


Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          No items were submitted to a vote of security holders during the
          quarter ended September 30, 1996.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K
          
          No reports on Form 8-K were required to be filed by the Company during
          the quarter ended September 30, 1996.

                                     -13-

<PAGE>

                               C-ATS SOFTWARE INC.

                                    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.

                                       C-ATS Software Inc.
                                       (Registrant)


Date:  November 1, 1996                By: ______________________________
                                           Rod A. Beckstrom
                                           President, Chief
                                           Executive Officer and
                                           Chairman
                                           (Principal Executive
                                           Officer)





Date:  November 1, 1996                By: ______________________________
                                           G. Bradford Solso
                                           Vice President,
                                           Chief Financial Officer and
                                           Treasurer
                                           (Principal Financial and
                                           Principal Accounting Officer)

                                     -14-

<PAGE>

                               C-ATS SOFTWARE INC.

                                INDEX TO EXHIBITS



  EXHIBIT                                                               PAGE
  NUMBER                          EXHIBIT TITLE                        NUMBER

    27           Requirements for the Format and Input of
                 Financial Data Schedules                                16


                                     -15-