##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    September 30, 2007o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   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
    incorporation or organization)

(I.R.S. Employer
    Identification Number)   160 South Whisman Road, Mountain View, California 94041
 (Address of principal executive
    offices, including zip code)
  Registrants telephone number, including area code:
 (650) 960-1025
  Securities
    Registered Pursuant to Section 12(b) of the Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $0.001 par value

The NASDAQ Stock Market LLC   Securities
    Registered Pursuant to Section 12(g) of the Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 



TABLE OF
    CONTENTS
   
 PART IITEM 1.


BUSINESS


3ITEM 1A.


RISK FACTORS


12ITEM 1B.


UNRESOLVED STAFF COMMENTS


19ITEM 2.


PROPERTIES


19ITEM 3.


LEGAL PROCEEDINGS


20ITEM 4.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


20PART IIITEM 5.


MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES


20ITEM 6.


SELECTED FINANCIAL DATA


22ITEM 7.


MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATION


23ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISKS


34ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


35ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


35ITEM 9A.


CONTROLS AND PROCEDURES


35ITEM 9B.


OTHER INFORMATION


38PART IIIITEM 10.


DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


38ITEM 11.


EXECUTIVE COMPENSATION


38ITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


38ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


38ITEM 14.


PRINCIPAL ACCOUNTING FEES AND SERVICES


38PART IVITEM 15.


EXHIBITS, FINANCIAL STATEMENT SCHEDULES


39EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32   1




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FORWARD-LOOKING
    STATEMENTS
  FORM 10-K FORM 10-K,
   2




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##### Table of Contents



PART I
  Item 1.
    Business  The
    Company
  ® ®
  
    design and feature verification;
    conformance testing;
    interoperability testing;
    load and stress testing; and
    monitoring and analysis.      1-800-SEC-0330 202-551-8090. (http://www.sec.gov)
  Form 10-K, Form 10-Q, Form 8-K
  Our DCT
    and MGTS Products
   3




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##### Table of Contents




    Long-Term Evolution (LTE);
    WiMAX;
    IP Multimedia Subsystem (IMS);
    Third Generation Cellular (3G), including UMTS, cdma2000, and
    TD-SCDMA;
    General Packet Radio Service (GPRS);
    Global Systems for Mobile Communications (GSM);
    Code Division Multiple Access (CDMA);
    IP Telephony (Voice over IP or VoIP);
    Asynchronous Transfer Mode (ATM); and
    Signaling System #7 (SS7).      Applications
    Feature Verification.
  Conformance Testing.
  Interoperability Testing.
 4




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Load and Stress Testing.
  Monitoring and Analysis.
  DCT
    and MGTS Software
  tm tm tm
    Hardware
    Products
  ® and/or
  Customers
       5




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Sales and
    Marketing
      on-site
      International
    Sales
      Product
    Support
   6




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Product
    Development
          Manufacturing
      Competition
     7




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Intellectual
    Property
       8




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Employees
    Our
    Executive Officers
    Name

Age

PositionsRichard A. Karp


63


Chief Executive Officer and Chairman of the BoardDavid Mayfield


58


President and Chief Operating OfficerGlenn Stewart


57


Vice President and Chief Technology OfficerChris Stephenson


56


Vice President, Chief Financial Officer and SecretarySean Kelly


56


Vice President, SalesAdam Fowler


45


Vice President, Product ManagementGuy R. Simpson


49


Vice President, Applications EngineeringBarbara J. Fairhurst


59


Vice President, OperationsTerry Eastham


60


Vice President, MarketingKathy T. Omaye-Sosnow


51


Vice President, Human ResourcesKalyan Sundhar


38


Vice President, Engineering   Dr. Richard A. Karp
  Mr. David Mayfield
 9




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Mr. Glenn Stewart
  Mr. Chris Stephenson
  Mr. Sean Kelly
  Mr. Adam Fowler
  Mr. Guy R. Simpson
  Ms. Barbara J. Fairhurst
  Mr. Terry Eastham
  Ms. Kathy T. Omaye-Sosnow
  Mr. Kalyan Sundhar
 10




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##### Table of Contents



GLOSSARY
  3G
    
    Third generation digital cellular telecommunication.Asynchronous Transfer Mode (ATM)
    
    A cell-based network technology protocol that supports
    simultaneous transmission of data, voice and video typically at
    T-1 or higher speeds.cdma2000
    
    A third generation digital high-speed wireless technology for
    packet-based transmission of text, digitized voice, video, and
    multimedia that is the successor to CDMA.Code Division Multiple Access (CDMA)
    
    A digital wireless technology that uses a modulation technique
    in which many channels are independently coded for transmission
    over a single wideband channel.General Packet Radio Service (GPRS)
    
    A packet-based digital intermediate speed wireless technology
    based on GSM.Global System for Mobile Communications (GSM)
    
    A digital wireless technology that is widely deployed in Europe
    and, increasingly, in other parts of the world.IP Multimedia Subsystem (IMS)
    
    An internationally recognized standard defining a generic
    architecture for offering Voice over IP and multimedia services
    to multiple access technologies.Long-Term Evolution (LTE)
    
    A project to improve the UMTS mobile phone standard to cope with
    future requirements.Protocol
    
    A specific set of rules, procedures or conventions governing the
    format, means and timing of transmissions between two devices.Signaling System 7 (SS7)
    
    A message-based protocol for exchanging signaling and control
    information between telephony network entities.Time Division-Synchronous Code Multiple Access (TD-SCDMA)
    
    A 3G mobile telecommunications standard, being pursued in the
    Peoples Republic of China.Variant
    
    A specific implementation of a protocol, typically unique to a
    company, region or manufacturer.Universal Mobile Telecommunications System (UMTS)
    
    A third generation digital high speed wireless technology for
    packet-based transmission of text, digitized voice, video, and
    multimedia that is the successor to GSM and GPRS.Voice over IP (VoIP)
    
    The transmission of voice signals over IP networks, primarily
    the Internet.WiMAX
    
    A standards-based technology enabling the delivery of
    last-mile
    wireless broadband access as an alternative to cable and DSL. 11




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Item 1A.
    Risk
    Factors  Factors
    That May Affect Future Results
    Risks
    Related to Our Business
  Our
    quarterly operating results may fluctuate significantly, and
    this may result in volatility in the market price of our common
    stock.
    
    the variable size and timing of individual purchases by our
    customers, including delays in customer purchasing decisions or
    orders due to customer consolidation;
    the absence of long-term customer purchase contracts;
    seasonal factors that may affect capital spending by customers,
    such as the varying fiscal year ends of customers and the
    reduction in business during the summer months, particularly in
    Europe;
    the relatively long sales cycles for our products;
    competitive conditions in our markets;
    exchange rate fluctuations;
    the timing of the introduction and market acceptance of new
    products or product enhancements by us and by our customers,
    competitors and suppliers;
    costs associated with developing and introducing new products;
    product life cycles;
    changes in the level of operating expenses relative to revenues;
    product defects and other quality problems;
    customer order deferrals in anticipation of new products;
    supply interruptions;
    changes in global or regional economic conditions or in the
    telecommunications industry;
    asset impairment, valuation allowance and restructuring charges;
    changes in our tax rate;
    changes in the mix of products sold;
    changes in the regulatory environment; and
    adverse results from litigation.   12




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Our
    ability to deliver products that meet customer demand is
    dependent on our ability to meet new and changing requirements
    for telecommunications test systems and services.
      tm tm tm tm
    Our
    business is dependent on our customers outsourcing their
    telecommunications testing needs, and our business could be
    harmed if the market for outsourced testing solutions declines
    or fails to grow.
   13




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Historically,
    our revenues have been dependent upon a few significant
    customers, the loss of one or more of which could significantly
    reduce our revenues.
    Our
    success depends on the timely development and introduction of
    new products.
    We
    face foreign business, political and economic risks because a
    significant portion of our sales is to customers outside the
    United States.
    
    longer customer payment cycles;
    greater difficulty in accounts receivable collection;
    difficulties in staffing and managing foreign operations;
    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.    We
    face intense competition in our markets from more established
    test solutions providers, and if we are unable to compete
    successfully we may not be able to maintain or grow our
    business.
   14




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Our
    success depends on the continued growth of the
    telecommunications industry and increased use of our test
    solutions, and lack of growth in this industry could harm our
    business.
      Our
    business could be harmed if we were to lose the services of one
    or more members of our senior management team, or if we are
    unable to attract and retain qualified personnel.
      We may
    not be able to achieve the anticipated benefits of any
    acquisitions we may make of other companies, products or
    technologies.
    
    difficulties associated with assimilating the personnel and
    operations of acquired companies;
    potential disruption of our ongoing business;
    distraction of management and other resources;
    integration of personnel and technology of an acquired company; 15




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
    difficulties in evaluating the technology of a potential target;
    inability to motivate and retain new personnel;
    maintenance of uniform standards, controls, procedures and
    policies;
    impairment of goodwill or other long-lived assets acquired due
    to a failure to generate the levels of cash flow anticipated at
    the acquisition date; and
    impairment of relationships with employees and clients as a
    result of the integration of new management personnel.    The
    inability to successfully defend claims from taxing authorities
    could adversely affect our operating results and financial
    position.
    Many
    of our suppliers are sole source or single source suppliers, and
    our inability to obtain adequate amounts of components from
    these suppliers could harm our business.
    We
    depend on a limited number of independent manufacturers, which
    reduces our ability to control our manufacturing
    process.
   16




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The
    high level of complexity and integration of our products
    increases the risk of latent defects, which could damage
    customer relationships and increase our costs.
    We
    face exposure to product liability claims, which if successful
    could harm our business.
    Our
    success is dependent on our ability to protect our intellectual
    property, and our failure to protect our intellectual property
    could have a significant adverse impact on our
    business.
    We
    could become subject to litigation regarding intellectual
    property, which could divert management attention, be costly to
    defend and prevent us from using or selling the challenged
    technology.
   17




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Environmental
    laws and regulations subject us to a number of risks and could
    result in significant liabilities and costs.
    and/or
  Risks
    Related to Our Stock
  Our
    stock has been, and likely will continue to be, subject to
    substantial price and volume fluctuations due to a number of
    factors, many of which will be beyond our control.
    
    quarterly variations in our operating results;
    changes in our revenue growth rates as a whole or for specific
    geographic areas or products;
    changes in earning estimates by market analysts;
    the announcements of new products or product enhancements by us
    or our competitors;
    speculation in the press or analyst community; and
    general market conditions or market conditions specific to
    particular industries.   18




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If we
    are unable to determine and demonstrate that we maintain
    effective internal control over financial reporting, this may
    cause investors to lose confidence in our reported financial
    information and the price of our stock could drop
    significantly.
  Form 10-K Form 10-K Form 10-K Form 10-K,
  Sales
    of substantial amounts of our common stock by our major
    stockholders and others could adversely affect the market price
    of our common stock.
    Our
    principal stockholders could prevent or delay a change in
    control.
    Provisions
    in our charter documents and Nevada law could prevent or delay a
    change in the control of our company and may reduce the market
    price of our common stock.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties   19




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Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders    PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    2007


2006High


Low


High


LowFirst fiscal quarter

$
9.31


$
8.20


$
18.34


$
14.79Second fiscal quarter

$
10.20


$
8.63


$
15.42


$
11.79Third fiscal quarter

$
10.74


$
9.03


$
13.45


$
8.85Fourth fiscal quarter

$
10.14


$
6.44


$
12.15


$
8.36   Dividend
    Policy
    Stock
    Repurchase Program
    Repurchases of Common StockTotal Number of


Maximum NumberTotal





Shares Purchased


of Shares that MayNumber


Average


as Part of Publicly


Yet be Purchasedof Shares


Price Paid


Announced


Under the PlansPurchased


per Share(1)


Plans or Programs


or ProgramsJuly 1, 2007  July 31, 2007


17,643


$
9.93



17,643



1,518,785August 1, 2007  August 31, 2007














September 1, 2007  September 30, 2007


200,000


$
7.28



200,000



1,318,785Total for the Quarter


217,643


$
7.49



217,643



1,318,785     (1)
    
    Average price paid per share includes brokerage commission 20




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Performance
    Comparison of Stockholder Return
  Notwithstanding any statement to the contrary in any of our
    previous or future filings with the Securities and Exchange
    Commission, the information set forth below under this heading,
    Performance Comparison of Stockholder Return shall
    not be deemed to be soliciting material or
    filed with the Securities and Exchange Commission,
    nor shall such information be incorporated by reference into any
    future filing under the Securities Act of 1933, as amended, or
    the Securities Exchange Act of 1934, as amended.
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN(1)
    Among Catapult Communications Corporation, The NASDAQ Composite
    Index
    And The NASDAQ Telecommunications Index
  
    (1)
    
    $100 invested on 9/30/20 in stock or index-including
    reinvestment of dividends. Fiscal year ending September 30.   21




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Item 6.
    Selected
    Financial Data  Form 10-K.
  Fiscal Year Ended September 30,2007


2006


2005


2004


2003(In thousands, except per share amounts)Consolidated Statements of Operations Data:Revenues:Products

$
25,090


$
32,372


$
50,441


$
45,703


$
35,344Services


14,251



15,012



14,507



12,315



9,880Total revenues


39,341



47,384



64,948



58,018



45,224Cost of revenues:Products


5,311



5,513



5,766



5,192



5,652Services


3,101



3,811



3,434



3,570



2,825Amortization and impairment of purchased Technology


49



2,543



686



686



686Total cost of revenues


8,461



11,867



9,886



9,448



9,163Gross profit


30,880



35,517



55,062



48,570



36,061Operating expenses:Research and development


13,349



13,652



12,445



11,740



13,519Sales and marketing


16,701



17,341



18,401



17,075



14,506General and administrative


9,102



10,647



9,008



6,885



6,679Restructuring costs






359











730Total operating expenses


39,152



41,999



39,854



35,700



35,434Operating income (loss)


(8,272
)


(6,482
)


15,208



12,870



627Interest income


3,268



2,817



1,364



801



786Interest expense














(321
)


(350
)Other income (expense), net (Note 13)


1,795



(11
)


(148
)


148



1,216Income (loss) before income taxes


(3,209
)


(3,676
)


16,424



13,498



2,279Provision for (benefit from) income taxes


1,212



6,990



2,276



(413
)


(2,086
)Net income (loss)

$
(4,421
)

$
(10,666
)

$
14,148


$
13,911


$
4,365Net income (loss) per share  basic

$
(0.32
)

$
(0.72
)

$
0.96


$
1.06


$
0.34Net income (loss) per share  diluted

$
(0.32
)

$
(0.72
)

$
0.94


$
0.95


$
0.33Shares used in per share calculation:Basic


13,849



14,736



14,677



13,100



12,948Diluted


13,849



14,736



15,019



14,556



13,113   22




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September 30,2007


2006


2005


2004


2003(In thousands)Consolidated Balance Sheets Data:Cash, cash equivalents and short-term investments

$
62,242


$
70,134


$
68,807


$
52,670


$
30,671Working capital


61,826



72,696



73,887



55,347



16,629Total assets


126,970



136,807



147,760



128,271



107,089Convertible notes payable


















17,674Total stockholders equity

$
111,776


$
121,732


$
132,523


$
115,765


$
76,621   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
    when-and-if-available on-site
  Conditions
    and Trends in Our Industry
    Summary
    of Our Financial Performance in Fiscal 2007 compared to Fiscal
    2006
       23




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
    $1.3 million in non-cash amortization charges as a result
    of the impairment charge for intangible assets recorded in
    fiscal 2006;
    $0.5 million in accounting expenses;
    $0.4 million in restructuring charges;
    $0.4 million in contractor and consultant expenses;
    $0.3 million in expenses associated with new product
    introductions;
    $0.3 million in distributor commissions; and
    $0.1 million in employee compensation, net of increases in
    variable compensation and exchange rate effects, due to a
    reduction in headcount of 9%, or 18 employees, in the
    number of employees engaged in research and development, sales
    and marketing and administration.      
    an increase of $0.5 million in interest income from the
    fiscal 2006 level;
    other income of $1.8 million in fiscal 2007, representing
    the value of shares received in a legal settlement; and
    a $5.8 million reduction in our provision for income taxes
    due primarily to the absence of the $7.4 million increase
    in the non-cash valuation allowance against our
    U.S. deferred tax assets that we recorded in fiscal 2006.    Critical
    Accounting Policies and Estimates
    Revenue
    Recognition
  97-2, Software Revenue Recognition
 24




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##### Table of Contents




    We examine the customer agreement
    and/or
    purchase order to determine that persuasive evidence of an
    arrangement exists and there is no basis for considering that
    the transaction forms a single arrangement with one or more
    other transactions.
    We assess that the fee is fixed or determinable by verifying
    that it is not subject to an agreement to provide additional
    products or services at a later date or to renegotiation or
    contingencies including refund, right of return or third-party
    financing or transactions, and that the payment terms do not
    extend significantly beyond our customary range.
    We assess that collection is probable based on customer credit
    information and payment history.        Income
    Taxes
         25




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##### Table of Contents



cross-jurisdictional Accounting for
    Contingencies
    Foreign
    Exchange Risk and Derivative Financial Instruments
    Allowance
    for Doubtful Accounts and Excess or Obsolete
    Inventory
    first-in,
  Goodwill
    and Long-Lived Assets
  Goodwill and Other
    Intangible Assets
 26




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Accounting for Impairment or
    Disposal of Long-Lived Assets.
  Stock-Based
    Compensation
  Share-Based Payment
 27




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Results
    of Operations
    Percentage of Total Revenues Year EndedSeptember 30,2007


2006


2005Revenues:Products


63.8
%


68.3
%


77.7
%Services


36.2



31.7



22.3Total revenues


100.0



100.0



100.0Cost of revenues:Products


13.5



11.6



8.9Services


7.9



8.0



5.3Amortization and impairment of purchased technology


0.1



5.4



1.0Total cost of revenues


21.5



25.0



15.2Gross profit(1)


78.5



75.0



84.8Operating expenses:Research and development


33.9



28.8



19.2Sales and marketing


42.5



36.6



28.3General and administrative


23.1



22.5



13.9Restructuring costs






0.8



Total operating expenses


99.5



88.7



61.4Operating income (loss)


(21.0
)


(13.7
)


23.4Interest income


8.3



5.9



2.1Other income (expense), net


4.5







(0.2
)Income (loss) before income taxes


(8.2
)


(7.8
)


25.3Provision for income taxes


3.0



14.7



3.5Net income (loss)


(11.2
)%


(22.5
)%


21.8
%Gross profit margin on products


78.8
%


83.0
%


88.6
%Gross profit margin on services


78.2
%


74.6
%


76.3
%     (1)
    
    Gross profit margin on products and services excludes
    amortization of purchased technology.  Fiscal
    Years Ended September 30, 2007 and 2006
  Revenues
   28




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##### Table of Contents




    North American revenues decreased by 3% to $12.2 million
    from $12.5 million;
    European revenues decreased by 24% to $12.1 million from
    $16.0 million;
    Japanese revenues decreased by 6% to $9.0 million from
    $9.6 million; and
    Rest of World revenues decreased by 35% to $6.0 million
    from $9.3 million.    Form 10-K.
  Cost
    of Revenues
          Research
    and Development
     29




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Sales
    and Marketing
      
    a decrease of 12%, or 12 employees, in the average number
    of employees engaged in sales and marketing; and
    a decrease of $0.3 million in distributor commissions.    General
    and Administrative
      Restructuring
    Costs
    Interest
    Income
    Other
    Income (Expense), Net
   30




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Income
    Taxes
    Fiscal
    Years Ended September 30, 2006 and 2005
  Revenues
      
    North American revenues decreased by 37% to $12.5 million
    from $19.8 million;
    European revenues decreased by 19% to $16.0 million from
    $19.7 million;
    Japanese revenues decreased by 48% to $9.6 million from
    $18.5 million; and
    Rest of World revenues increased by 33% to $9.3 million
    from $7.0 million.    Form 10-K.
  Cost
    of Revenues
  Share-Based Payment
       31




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Research
    and Development
      Sales
    and Marketing
      
    a decrease of $2.0 million in variable compensation due to
    below-target order levels;
    an exchange rate-driven decrease of $0.3 million due to
    average decreases of 8% in the Japanese yen, 3% in the British
    pound and 3% in the Euro against the dollar.    General
    and Administrative
      Restructuring
    Costs
   32




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Interest
    Income
    Other
    Expense, Net
    Income
    Taxes
    Impact
    of Inflation
    Liquidity
    and Capital Resources
         33




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##### Table of Contents



Payments Due by PeriodLess Than


1-3


3-5


More ThanContractual Obligations

Total


1 Year


Years


Years


5 Years(In millions)Operating leases

$
2.6


$
1.5


$
1.1


$



$
Unconditional purchase obligations

$
0.2


$
0.2











Total contractual cash obligations

$
2.8


$
1.7


$
1.1


$



$
     Off-Balance
    Sheet Arrangements
  Regulation S-K.
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risks  Foreign
    Exchange Risk and Derivative Financial Instruments
     34




---



##### Table of Contents



Interest
    Rate Risk
    Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures    Rule 13a-15(e) 15d-15(e) Form 10-K.
 35




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##### Table of Contents



Rules 13a-15(f) 15d-15(f)
  
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of the Company;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the Company are being made
    only in accordance with authorizations of management and
    directors of the Company; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Companys assets that could have a material effect on the
    financial statements.    Internal Control-Integrated
    Framework
  Form 10-K
        
    The Companys Chief Financial Officer performs a detailed
    quarterly review to confirm that the Companys accounting
    for its cash, cash equivalents and short-term investments is in
    accordance with the requirements of generally accepted
    accounting principles in the United States.   36




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Stockholders of Catapult
    Communications Corporation:
  Internal Control 
    Integrated Framework
        Internal Control  Integrated Framework
        37




---



##### Table of Contents



Item 9B.
    Other
    Information    PART III
  Form 10-K
  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K
  Code of
    Business Conduct and Code of Ethics for Officers
  Form 10-K
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   38




---



##### 



PART IV
  Item 15.
    Exhibits,
    Financial Statement Schedules  Form 10-K:
   
 Page(1)  Consolidated Financial Statements:Report of Independent Registered Public
    Accounting Firm

40Report of Independent Registered Public
    Accounting Firm

41Consolidated Balance Sheets at September 30, 2007
    and 2006

42Consolidated Statements of Operations for each of
    the three years in the period ended September 30, 2007

43Consolidated Statements of Stockholders
    Equity for each of the three years in the period ended
    September 30, 2007

44Consolidated Statements of Cash Flows for each of
    the three years in the period ended September 30, 2007

45Notes to Consolidated Financial Statements

46(2)  Financial Statement Schedules:All schedules are omitted because they are not applicable or the
    required information is shown in the consolidated financial
    statements or notes thereto.Supplementary Financial Data (Unaudited):Quarterly Financial Data for each of the years
    ended September 30, 2007 and 2006

67(3)  Exhibits:The exhibits listed in the accompanying Index to Exhibits are
    filed or incorporated by reference as part of this Annual Report
    on Form 10-K      39




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##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Stockholders of Catapult
    Communications Corporation:
        Share-Based Payment.
  Internal Control 
    Integrated Framework
  
    40




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##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Stockholders of Catapult
    Communications Corporation:
  Form 10-K)
  
     41




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
  September 30,2007


2006(In thousands, except share and par value data)ASSETSCurrent Assets:Cash and cash equivalents

$
23,351


$
22,462Short-term investments


38,891



47,672Accounts receivable, net of allowances of $61 and $15 as of
    September 30, 2007 and 2006, respectively


7,015



9,696Inventories


2,485



3,484Deferred tax assets


96



91Prepaid expenses


1,767



1,586Total current assets


73,605



84,991Property and equipment, net


1,585



1,912Goodwill


49,394



49,394Other intangibles, net


143



216Other assets


2,243



294Total assets

$
126,970


$
136,807LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
617


$
874Accrued liabilities


4,956



3,718Deferred revenue


6,206



7,703Total current liabilities


11,779



12,295Deferred revenue, long-term portion


406



256Deferred taxes and other liabilities, long term


3,009



2,524Total liabilities


15,194



15,075Commitments and contingencies (Note 11)Stockholders Equity:Preferred stock, $0.001 par value, 5,000,000 shares
    authorized; none issued and outstanding






Common stock, $0.001 par value, 40,000,000 shares
    authorized; 13,427,073 and 14,438,206 issued and outstanding as
    of September 30, 2007 and 2006, respectively


13



14Additional paid-in capital


48,661



50,450Accumulated other comprehensive income


1,026



687Retained earnings


62,076



70,581Total stockholders equity


111,776



121,732Total liabilities and stockholders equity

$
126,970


$
136,807    42




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended September 30,2007


2006


2005(In thousands, exceptper share amounts)Revenues:Products

$
25,090


$
32,372


$
50,441Services


14,251



15,012



14,507Total revenues


39,341



47,384



64,948Cost of revenues:Products


5,311



5,513



5,766Services


3,101



3,811



3,434Amortization and impairment of purchased technology


49



2,543



686Total cost of revenues


8,461



11,867



9,886Gross profit


30,880



35,517



55,062Operating expenses:Research and development


13,349



13,652



12,445Sales and marketing


16,701



17,341



18,401General and administrative


9,102



10,647



9,008Restructuring costs






359



Total operating expenses


39,152



41,999



39,854Operating income (loss)


(8,272
)


(6,482
)


15,208Interest income


3,268



2,817



1,364Other income (expense), net (Note 13)


1,795



(11
)


(148
)Income (loss) before income taxes


(3,209
)


(3,676
)


16,424Provision for income taxes


1,212



6,990



2,276Net income (loss)

$
(4,421
)

$
(10,666
)

$
14,148Net income (loss) per share  basic

$
(0.32
)

$
(0.72
)

$
0.96Net income (loss) per share  diluted

$
(0.32
)

$
(0.72
)

$
0.94Shares used in per share calculation:Basic


13,849



14,736



14,677Diluted


13,849



14,736



15,019    43




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##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  AccumulatedAdditional


Deferred


Other





TotalCommon Stock


Paid-in


Stock-based


Comprehensive


Retained


Stock-holders


ComprehensiveShares


Amount


Capital


Compensation


Income


Earnings


Equity


Income (Loss)(In thousands, except share data)Balances at October 1, 2004


14,545,546


$
15


$
46,297


$
(39
)

$
660


$
68,832


$
115,765


$
13,996Issuance of common stock from exercise of stock options


179,162







2,177















2,177Tax benefit from employee stock transactions










470















470Amortization of deferred stock-based compensation














36











36Currency translation adjustment


















(28
)






(28
)


(28
)Unrealized gains and (losses) on investments, net


















(45
)






(45
)


(45
)Net income






















14,148



14,148



14,148Balances at September 30, 2005


14,724,708



15



48,944



(3
)


587



82,980



132,523



14,075Issuance of common stock from exercise of stock options


102,449







614















614Repurchase and cancellation of common stock


(388,951
)


(1
)


(1,858
)










(1,733
)


(3,592
)Stock-based compensation










2,750















2,750Amortization of deferred stock-based compensation














3











3Currency translation adjustment


















50







50



50Unrealized gains and (losses) on investments, net


















50







50



50Net loss






















(10,666
)


(10,666
)


(10,666
)Balances at September 30, 2006


14,438,206



14



50,450







687



70,581



121,732



(10,566
)Issuance of common stock from exercise of stock options


23,731







132















132Repurchase and cancellation of common stock


(1,034,864
)


(1
)


(5,188
)










(4,084
)


(9,273
)Stock-based compensation










3,267















3,267Currency translation adjustment


















333







333



333Unrealized gains and (losses) on investments, net


















6







6



6Net loss






















(4,421
)


(4,421
)


(4,421
)Balances at September 30, 2007


13,427,073


$
13


$
48,661


$



$
1,026


$
62,076


$
111,776


$
(4,082
)    44




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##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended September 30,2007


2006


2005(In thousands)Cash flows from operating activities:Net income (loss)

$
(4,421
)

$
(10,666
)

$
14,148Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation and amortization of property and equipment


902



1,082



1,733Amortization and impairment of purchased technology


49



2,543



686Amortization and impairment of other acquisition related
    intangibles


24



1,292



335Amortization of deferred stock-based compensation






3



36Gain on disposal of fixed assets


(25
)






Provision for (recovery of) doubtful accounts


46



(256
)


(24
)Deferred income taxes


340



6,686



(259
)Stock-based compensation expense


3,267



2,750



Tax benefits from employee stock option plans










470Change in assets and liabilities:Accounts receivable


2,613



5,291



(4,588
)Inventories


1,000



(392
)


(731
)Prepaid expenses


(164
)


(190
)


228Other assets


(1,800
)


43



35Accounts payable


(280
)


(778
)


490Accrued liabilities


1,179



(1,812
)


(461
)Deferred revenue


(1,347
)


(223
)


2,724Net cash provided by operating activities


1,383



5,373



14,822Cash flows from investing activities:Sale and maturities of short-term investments


79,297



89,977



55,318Purchase of short-term investments


(70,509
)


(87,744
)


(72,656
)Purchase of property and equipment


(550
)


(1,179
)


(799
)Proceeds from sale of property & equipment


66







Net cash provided by (used in) investing activities


8,304



1,054



(18,137
)Cash flows from financing activities:Repurchase of common stock


(9,273
)


(3,592
)


Proceeds from exercise of stock options


132



614



2,177Net cash provided by (used in) financing activities


(9,141
)


(2,978
)


2,177Effect of exchange rate changes on cash and cash equivalents


343



61



(18
)Net increase (decrease) in cash and cash equivalents


889



3,510



(1,156
)Cash and cash equivalents, beginning of year


22,462



18,952



20,108Cash and cash equivalents, end of year

$
23,351


$
22,462


$
18,952Supplemental disclosure of cash flow information:Unrealized gain (loss) on investments

$
6


$
50


$
(45
)Cash paid for income taxes

$
497


$
1,305


$
2,690Non-cash investing and financing activities:Purchase of property and equipment on account tion

$
17


$
69


$
    45




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##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Note 1 
    The
    Company and Summary of Significant Accounting Policies  The
    Company
    Basis
    of Consolidation
    Use of
    Estimates
    Cash
    and Cash Equivalents
    Short-Term
    Investments
  Accounting for
    Certain Investments in Debt and Equity Securities.
   46




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Revenue
    Recognition
      
    We examine the customer agreement
    and/or
    purchase order to determine that persuasive evidence of an
    arrangement exists and there is no basis for considering that
    the transaction forms a single arrangement with one or more
    other transactions.
    We assess that the fee is fixed or determinable by verifying
    that it is not subject to an agreement to provide additional
    products or services at a later date or to renegotiation or
    contingencies including refund, right of return or third-party
    financing or transactions, and that the payment terms do not
    extend significantly beyond our customary range.
    We assess that collection is probable based on customer credit
    information and payment history.    97-2, Software Revenue Recognition
 47




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Foreign
    Currency Translation
    Derivative
    Financial Instruments
      Fair
    Value of Financial Instruments
    Concentration
    of Credit Risk and Major Customers
   48




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Percentage of Revenuesfor the FiscalPercentage of


Year EndedAccounts Receivable as of September 30,


September 30,2007


2006


2007


2006


2005Customer A






10
%










Customer B


22
%






12
%






14
%Customer C






38
%


11
%


21
%


13
%Customer D














11
%


11
%Customer E


33
%


11
%


14
%






10
%     Inventories
  first-in,
  Capitalized
    Software Development Costs
  Accounting for the
    Costs of Computer Software to Be Sold, Leased, or Otherwise
    Marketed
  Property
    and Equipment
    Research
    and Development
   49




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Repairs
    and Maintenance
    Warranty
    Income
    Taxes
    Goodwill
  Goodwill and Other Intangible
    Assets
  
    Step 1:  We compare the fair value of our
    single reporting unit to the carrying value, including goodwill
    of the unit. If the carrying value of the reporting unit,
    including goodwill, exceeds the units fair value, we move
    on to step 2. If the fair value of the reporting unit exceeds
    the carrying value, no further work is performed and no
    impairment charge is necessary.
    Step 2:  We perform an allocation of the market
    value of the reporting unit to its identifiable tangible and
    non-goodwill intangible assets and liabilities. This derives an
    implied fair value for the reporting units goodwill. We
    then compare the implied fair value of the reporting units
    goodwill with the carrying amount of the reporting units
    goodwill. If the carrying amount of the reporting units
    goodwill is greater than the implied fair value of its goodwill,
    an impairment charge is recognized for the excess.    Other
    Intangible Assets
    Impairment
    of Long-Lived Assets
   50




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Other
    Assets
  03-1, The
    Meaning of Other-Than-Temporary Impairment and Its Application
    to Certain Investments.
  Advertising
    Costs
    Stock-Based
    Compensation
  Share-Based Payment. paid-in-capital
  Accounting for Stock Issued to
    Employees Accounting for Certain Transactions Involving
    Stock Compensation, an Interpretation of Opinion
    No. 25 Accounting for Stock-Based
    Compensation Accounting for
    Stock-Based Compensation, Transition and Disclosure
  Earnings
    per Share
  Earnings per
    Share
 51




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended September 30,2007


2006


2005(In thousands, except pershare amounts)Net income (loss), as reported for basic and diluted earningsper share

$
(4,421
)

$
(10,666
)

$
14,148Weighted average shares outstanding


13,849



14,736



14,677Dilutive options










342Weighted average shares assuming dilution


13,849



14,736



15,019Net income (loss) per share:Basic

$
(0.32
)

$
(0.72
)

$
0.96Diluted

$
(0.32
)

$
(0.72
)

$
0.94     Year Ended September 30,2007


2006


2005(In thousands)Common stock options


2,461



2,039



401   Comprehensive
    Income (loss)
    Recently
    Issued Accounting Standards
  Accounting for Uncertainty in
    Income Taxes, an interpretation of FASB Statement
    No. 109 Accounting for Income Taxes and/or
  Fair Value Measurements.
 52




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Financial Statements 
    Considering the Effects of Prior Year Misstatements when
    Quantifying Misstatements in Current Year Financial
    Statements
  The Fair Value Option for Financial Assets and Financial
    Liabilities-Including an amendment of FASB Statement
    No. 115 instrument-by-instrument
  Note 2 
    Goodwill
    and Intangible Assets     53




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    As of September 30, 2007


As of September 30, 2006Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingAmount


Amortization


Amount


Amount


Amortization


Amount(In thousands)Purchased technology

$
4,800


$
(4,706
)

$
94


$
4,800


$
(4,658
)

$
142Trade names


1,000



(980
)


20



1,000



(970
)


30Customer relationships


1,000



(980
)


20



1,000



(970
)


30Non-compete agreement


400



(391
)


9



400



(386
)


14System backlog


400



(400
)






400



(400
)


Total

$
7,600


$
(7,457
)

$
143


$
7,600


$
(7,384
)

$
216     EstimatedAmortizationExpense(In thousands)Fiscal Year2008

$
732009


672010


3Total

$
143   Note 3 
    Restructuring
    Costs    Note 4 
    Other
    Income (Expense), Net    Note 5 
    Balance
    Sheet Components   54




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    September 30,2007


2006(In thousands)Unrealized gains

$
6


$
50Cash and cash equivalents:Cash

$
8,287


$
7,324Corporate debt and money market securities


15,064



14,171U.S. government and agencies securities






901State and municipal securities






66$
23,351


$
22,462Short-term investments:Corporate debt securities

$
12,526


$
5,505U.S. government and agencies securities


5,295



10,302State and municipal securities


19,570



31,865Foreign securities


1,500



$
38,891


$
47,672   September 30,2007


2006(In thousands)Inventories:Raw materials

$
2,235


$
2,860Work-in-process


23



241Finished goods


227



383$
2,485


$
3,484Property and equipment, net:Equipment

$
8,511


$
7,959Leasehold improvements


2,086



1,97710,597



9,936Less accumulated depreciation and amortization


(9,012
)


(8,024
)$
1,585


$
1,912   September 30,2007


2006


2005(In thousands)Allowance for doubtful accounts:Balances at beginning of year

$
15


$
271


$
294Provision for doubtful accounts


46







1Write-off of doubtful accounts






(256
)


(24
)Balances at end of year

$
61


$
15


$
271   55




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  September 30,2007


2006(In thousands)Accrued liabilities:Payroll and related expenses

$
2,410


$
1,765Income taxes payable


1,341



558Other taxes payable


218



70Professional services fees payable


595



902Other


392



423$
4,956


$
3,718     2007


2006(In thousands)Balances at beginning of year

$



$
74Warranty accrual used during the year






(30
)Warranty accrual additions during the year






(44
)Balances at end of year

$



$
   Note 6 
    Related
    Party Transaction    Note 7 
    Income
    Taxes  non-U.S. income
    Year Ended September 30,2007


2006


2005(In thousands)Current:United States federal

$



$
47


$
(78
)Foreign


819



344



2,082State and local


1



31



59Total current


820



422



2,063Deferred:United States federal


519



5,700



172Foreign


(170
)


(154
)


State and local


43



1,022



41Total deferred


392



6,568



213Total income tax provision

$
1,212


$
6,990


$
2,276  56




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended September 30,2007


2006


2005Tax at federal rate


(34
)%


(34
)%


34
%State taxes, net of federal benefit


1



1



1Foreign tax differential


20



5



(13
)Research credit


(10
)


(6
)


(5
)Tax exempt interest


(2
)


(9
)


(1
)Non-deductible stock-based compensation


4



4



Other


2



2



(2
)Valuation allowance


57



227



Total


38
%


190
%


14
%   and/or Accounting for
    Contingencies
  and/or Accounting for
    Contingencies
   57




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    September 30,2007


2006(In thousands)Deferred tax assets:Accrued expenses and reserves

$
2,597


$
1,693Net operating loss carryforwards


2,282



565Depreciation and amortization


1,844



1,973Foreign deferred tax assets(1)


266



112Research and other credits


3,099



2,585Net Foreign taxes


722



743Current and deferred state taxes and other


4



4Total deferred tax assets


10,814



7,675Valuation allowance


(10,548
)


(7,563
)Net deferred tax assets(1)


266



112Deferred tax liabilities:Tax deductible goodwill


(2,949
)


(2,386
)Foreign deferred tax liabilities


(9
)


(25
)Total deferred tax liabilities


(2,958
)


(2,411
)Net deferred tax assets (liabilities)

$
(2,692
)

$
(2,299
)Recognized as:Deferred tax asset, current

$
96


$
91Deferred tax asset (liabilities), non-current, net


(2,788
)


(2,390
)Total net deferred tax assets (liabilities)

$
(2,692
)

$
(2,299
)     (1)
    
    Remaining deferred tax assets as of September 30, 2007
    relate to foreign deferred tax assets.  non-U.S. subsidiaries
   58




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##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 8 
    Stockholders
    Equity  Stock
    Option Plans
    Employee
    Stock Purchase Plan
    Issuance
    of Common Stock
  Form S-3 No. 333-112610)
 59




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Repurchase
    of Common Stock
    Note 9 
    Stock-based
    Compensation  Share-Based Payment. paid-in-capital
    Year EndedSeptember 30,2007


2006(In thousands)Stock-Based Compensation Expense:Cost of sales  products

$
172


$
113Cost of sales  services


265



220Research and development expense


799



691Selling and marketing expense


694



633General and administrative expense


1,337



1,093Total stock-based compensation expense


3,267



2,750Tax effect on stock-based compensation expenses


(19
)


(20
)Net effect on net income

$
3,248


$
2,730  60




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##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Periods
    prior to the adoption of SFAS 123(R)
  Accounting for
    Stock Issued to Employees Accounting for Stock-Based Compensation
    Year EndedSeptember 30,2005(In thousands, exceptper share amount)Net income, as reported for basic and diluted earnings per share

$
14,148Add: Stock-based employee compensation expense included in
    reported income, net of related tax effects


22Deduct: Total stock-based employee compensation expense
    determined under fair-value based method for all awards, net of
    related tax effects


(5,063
)Pro forma net income, for basic and diluted earnings per share

$
9,107Net income per share:Basic net income per share as reported

$
0.96Basic net income per share pro forma

$
0.62Diluted net income per share as reported

$
0.94Diluted net income per share pro forma

$
0.61    61




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  General
    Option Information
    WeightedWeighted


AverageNumber of


Average


Remaining


AggregateOptions


Exercise


Contractual


IntrinsicOutstanding


Price


Term


Value(Years)


(In thousands)Balance at October 1, 2004


1,631,510


$
14.15Options granted


495,564


$
19.20Options exercised


(148,912
)

$
11.84Options canceled, forfeited or expired


(22,133
)

$
18.14Balance at September 30, 2005


1,956,029


$
15.56Options granted


559,585


$
12.85Options exercised


(86,405
)

$
4.80Options canceled, forfeited or expired


(94,342
)

$
19.79Balance at September 30, 2006


2,334,867


$
15.14Options granted


730,611


$
9.65Options exercised


(23,731
)

$
5.57Options canceled, forfeited or expired


(207,987
)

$
16.78Balance at September 30, 2007


2,833,760


$
13.68



6.75


$
361Vested or expected to vest, September 30, 2007


2,706,202


$
13.80



6.65


$
361Exercisable, September 30, 2007


1,729,621


$
15.38



5.26


$
361     Options OutstandingWeighted





Options ExercisableAverage


Weighted





WeightedRemaining


Average





AverageNumber of


Contractual


Exercise


Number of


ExerciseRange of Exercise Price

Shares


Life


Price


Shares


Price$ 5.80 - $ 8.88


339,423



7.1


$
7.03



221,028


$
6.13$ 8.89 - $ 9.88


585,978



9.6


$
9.88






$
$ 9.89 - $12.55


637,854



7.2


$
12.18



358,742


$
11.99$12.56 - $16.80


481,720



5.4


$
14.74



394,116


$
14.71$16.81 - $19.21


502,341



4.7


$
18.44



469,291


$
18.50$19.22 - $25.10


286,444



5.4


$
22.59



286,444


$
22.592,833,760











1,729,621  62




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended September 30, 2007Exercise price equal to market value

$
5.60Year Ended September 30, 2006Exercise price equal to market value

$
7.58Year Ended September 30, 2005Exercise price equal to market value

$
14.68     Valuation
    Assumptions
    Employee Stock Option Plans


Employee Stock Purchase PlanYear Ended September 30,


Year Ended September 30,2007


2006


2005


2007*


2006*


2005Dividend yield


0.0
%


0.0
%


0.0
%










0.0
%Expected life of option


5.2 years



5.2 years



5.7 years











0.5 yearsRisk-free interest rate


4.5
%


4.9
%


3.5
%










2.8
%Expected volatility


63.5
%


64.0
%


96.0
%










56.7
%     *
    
    The Company terminated its Employee Stock Purchase Plan
    effective October 31, 2005.  Expected life of option:
  Expected Volatility:
  Expected Dividend:
  Risk-Free Interest Rate:
  Note 10
    
    401-K
    Plan   63




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 11 
    Commitments
    and Contingencies  Operating
    Leases
        Year Ending September 30,

Future Payments(In thousands)2008

$
1,4602009


8332010


3022011


282012


5$
2,628   Unconditional
    purchase obligations
    Contingencies
    Accounting for Contingencies
 64




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Indemnifications
        Note 12 
    Geographic
    Information  Disclosures About Segments of an
    Enterprise and Related Information
   65




---



##### Table of Contents



CATAPULT
    COMMUNICATIONS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    North


UK, Europe








ConsolidatedAmerica


& Middle East


Japan


Other


Total(In thousands)Year ended September 30, 2007Revenues from unaffiliated customers

$
12,201


$
12,110


$
9,038


$
5,992


$
39,341Year ended September 30, 2006Revenues from unaffiliated customers

$
13,610


$
15,438


$
9,636


$
8,700


$
47,384Year ended September 30, 2005Revenues from unaffiliated customers

$
19,751


$
19,739


$
18,482


$
6,976


$
64,948As of September 30, 2007Goodwill

$
22,896


$
26,498


$



$



$
49,394Long-lived assets

$
937


$
323


$
223


$
102


$
1,585As of September 30, 2006Goodwill

$
22,896


$
26,498


$



$



$
49,394Long-lived assets

$
1,153


$
394


$
244


$
121


$
1,912As of September 30, 2005Goodwill

$
22,896


$
26,498


$



$



$
49,394Long-lived assets

$
950


$
479


$
264


$



$
1,693       Note 13 
    Legal
    Settlement   66




---



##### Table of Contents



Supplementary
    Financial Data
  Quarterly
    Financial Data (Unaudited)
  Consolidated
    Statements of Operations Data:
  Quarter EndedSept. 30,


June 30,


Mar. 31,


Dec. 31,2007


2007


2007


2006(In thousands, except per share amounts)Revenues

$
10,706


$
8,475


$
9,593


$
10,567Gross profit


8,467



6,297



7,543



8,573Operating loss


(1,769
)


(3,624
)


(1,862
)


(1,017
)Net income (loss)

$
(1,702
)

$
(2,339
)

$
64


$
(444
)Net income (loss) per share:Basic

$
(0.13
)

$
(0.17
)

$



$
(0.03
)Diluted

$
(0.13
)

$
(0.17
)

$



$
(0.03
)   Sept. 30,


June 30,


Mar. 31,


Dec. 31,2006


2006


2006


2005Revenues

$
13,830


$
10,789


$
10,663


$
12,102Gross profit


8,978



8,568



8,290



9,681Operating loss


(2,619
)


(1,789
)


(1,618
)


(456
)Net income (loss)

$
(11,076
)

$
1,056


$
(789
)

$
143Net income (loss) per share:Basic

$
(0.76
)

$
0.07


$
(0.05
)

$
0.01Diluted

$
(0.76
)

$
0.07


$
(0.05
)

$
0.01  67




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Richard
    A. Karp   Chief Executive Officer & Chairman of the Board
    POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  Richard
    A. Karp(Richard
    A. Karp)

Chief Executive Officer, Chairman of the Board (Principal
    Executive Officer)

December 13, 2007/s/  Christopher
    A. Stephenson(Christopher
    A. Stephenson)

Chief Financial Officer (Principal Financial and Principal
    Accounting Officer)

December 13, 2007/s/  R.
    Stephen Heinrichs(R.
    Stephen Heinrichs)

Director

December 13, 2007/s/  John
    M. Scandalios(John
    M. Scandalios)

Director

December 13, 2007/s/  Nancy
    H. Karp(Nancy
    H. Karp)

Director

December 13, 2007/s/  Henry
    P. Massey, Jr.(Henry
    P. Massey, Jr.)

Director

December 13, 2007/s/  Peter
    S. Cross(Peter
    S. Cross)

Director

December 13, 2007  68




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##### Table of Contents



INDEX TO
    EXHIBITS
  Regulation S-K):
  ExhibitNumber

Description3
.1

Articles of Incorporation of Registrant  incorporated
    by reference to Exhibit 3.1 to Registration Statement
    No. 333-56627.3
.2

Bylaws of the Registrant as amended on July 24,
    2007  incorporated by reference to Exhibit 3.1 to
    Registrants Quarterly Report on Form
    10-Q dated
    August 8, 2007.10
.1

Forms of Indemnification Agreement entered into by Registrant
    with each of its directors and executive officers 
    incorporated by reference to Exhibit 10.1 to Registration
    Statement
    No. 333-56627.10
.2*

1989 Stock Option Plan and related agreements 
    incorporated by reference to Exhibit 10.3 to our Annual
    Report on
    Form 10-K
    dated December 17, 2001.10
.3*

UK Executive Share Option Scheme and related
    agreements  incorporated by reference to
    Exhibit 10.4 to Registration Statement
    No. 333-56627.10
.4*

1998 Stock Plan, as amended through January 24, 2006 -
    incorporated by reference to Exhibit 10.2 to our Current
    Report on
    Form 8-K
    dated January 30, 2006.10
.4.1*

Form of Stock Option Agreement, 1998 Stock Plan 
    incorporated by reference to Exhibit 10.15 to our Quarterly
    Report on
    Form 10-Q
    dated May 14, 2003.10
.6

Lease for office space located at 160 and 190 South Whisman
    Road, Mountain View, CA  incorporated by reference to
    Exhibit 10.9 to our Annual Report on
    Form 10-K
    dated December 17, 2001.10
.7

Lease for office space located at 800 Perimeter Park Drive,
    Morrisville, NC 27560  incorporated by reference to
    Exhibit 10.9 to our Annual Report on
    Form 10-K
    dated December 20, 2002.10
.8

Form of Software Support Agreement  incorporated by
    reference to Exhibit 10.9 to Registration Statement
    No. 333-56627.10
.10

License Agreement dated July 15, 2002 between the Company
    and Tekelec incorporated by reference to
    Exhibit 2.2.3 to Registrants Quarterly Report on
    Form 10-Q
    dated August 14, 2002.10
.11

International Rights License Agreement dated July 15, 2002
    between the Company and Tekelec  incorporated by
    reference to Exhibit 2.2.4 to Registrants Quarterly
    Report on
    Form 10-Q
    dated August 14, 2002.10
.12

Lease for office space located at 190 South Whisman Road,
    building G, Mountain View, CA  incorporated by
    reference to Exhibit 10.8 to Registrants Annual
    Report on
    Form 10-K
    dated December 17, 2001.10
.13*

Executive Officer Fiscal Year 2008 Variable Compensation
    Plan  incorporated by reference to Exhibit 10.1
    to our Current Report on
    Form 8-K
    dated November 13, 2007.11
.1

Calculation of Earnings per Common Share (contained in
    Note 1 of the Notes to Financial Statements).14


Code of Ethics for Principal Executive and Senior Financial
    Officers  incorporated by reference to
    Exhibit 14 to Registrants Annual Report on
    Form 10-K
    dated December 5, 2003.21
.1

Subsidiaries of the Registrant.23
.1

Consent of Deloitte & Touche LLP, Independent
    Registered Public Accounting Firm.23
.2

Consent of PricewaterhouseCoopers LLP, Independent Registered
    Public Accounting Firm.24
.1

Power of Attorney (contained in the signature page of this
    Annual Report on
    Form 10-K).31
.1

Certification of Chief Executive Officer Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32


Certifications of Chief Executive Officer and Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Represents a management contract or compensatory plan, contract
    or arrangement in which any director or any of the named
    executives participates.