ULTICOM INC, S-1, 2000-01-18

ULTICOM INC
S-1, 2000-01-18

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 18, 2000
REGISTRATION NO. 333-_________

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

ULTICOM, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
NEW JERSEY 3661 22-2050748
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>

1020 BRIGGS ROAD
MT. LAUREL, NEW JERSEY 08054
(856) 787-2700
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)

MR. SHAWN OSBORNE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ULTICOM, INC.
1020 BRIGGS ROAD
MT. LAUREL, NEW JERSEY 08054
(856) 787-2700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)

<TABLE>
<S> <C> <C>
Copies to:
STEPHEN M. BESEN, ESQ. IRA ROSENBERG, ESQ. BARBARA L. BECKER, ESQ.
WEIL, GOTSHAL & MANGES LLP SILLS CUMMIS RADIN TISCHMAN EPSTEIN & GROSS, P.A. CHADBOURNE & PARKE LLP
767 FIFTH AVENUE 1 RIVERFRONT PLAZA 30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10153 NEWARK, NEW JERSEY 07102 NEW YORK, NEW YORK 10112
(212) 310-8000 (973) 643-7000 (212) 408-5100
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================ ======================== =======================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE(1)
- ------------------------------------------------------------ ------------------------ -----------------------
<S> <C> <C>
Common stock, no par value........................ $50,000,000 $13,200
============================================================ ======================== =======================
</TABLE>

(1) Estimated pursuant to Rule 457(a) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the
registration fee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.

================================================================================

#408102.13
<PAGE>
The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

Subject to Completion, dated January __, 2000

PROSPECTUS

_____________ SHARES

[LOGO]

ULTICOM, INC.

COMMON STOCK
- --------------------------------------------------------------------------------

This is our initial public offering of shares of common stock. We are offering
_________ shares. No public market currently exists for our shares.

We intend to apply to have our common stock listed for
quotation on the Nasdaq National Market under the symbol "ULCM."

We estimate that the initial public offering price
will be between $_____ and $_____ per share.

INVESTING IN THE SHARES INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE __.

<TABLE>
<S> <C> <C>
Per Share Total
--------- -----
Public Offering Price............................... $ $
Underwriting Discounts and Commissions.............. $ $
Proceeds to Ulticom................................. $ $

</TABLE>

We have granted the underwriters a 30-day option to purchase up to _____
additional shares to cover any over-allotments.
- --------------------------------------------------------------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Lehman Brothers expects to deliver the shares on or about ___________, 2000.

LEHMAN BROTHERS
CHASE H&Q
U.S. BANCORP PIPER JAFFRAY
FIDELITY CAPITAL MARKETS
a division of National
Financial Services
Corporation

__________, 2000

<PAGE>

[Artwork to be provided]

<PAGE>
TABLE OF CONTENTS

PAGE

PROSPECTUS SUMMARY...............................................3

The Offering.....................................................5

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS................7

RISK FACTORS.....................................................8

USE OF PROCEEDS.................................................20

DIVIDEND POLICY.................................................20

CAPITALIZATION..................................................21

DILUTION........................................................22

SELECTED FINANCIAL DATA.........................................23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................24

BUSINESS........................................................30

MANAGEMENT......................................................41

RELATED PARTY TRANSACTIONS......................................50

PRINCIPAL SHAREHOLDERS..........................................53

DESCRIPTION OF SECURITIES.......................................54

UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-UNITED STATES HOLDERS.......................................57

SHARES ELIGIBLE FOR FUTURE SALE.................................59

UNDERWRITING....................................................61

LEGAL MATTERS...................................................64

EXPERTS.........................................................64

AVAILABLE INFORMATION...........................................64

REPORTS TO SHAREHOLDERS.........................................65

INDEX TO FINANCIAL STATEMENTS..................................F-1

----------

You should only rely on the information contained in this prospectus.
We and the underwriters have not authorized anyone to provide you with any
different or additional information. This prospectus is not an offer to sell or
a solicitation of an offer to buy common stock in any jurisdiction where it is
unlawful. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.

This preliminary prospectus is subject to completion prior to this
offering. Among other things, this preliminary prospectus describes our company
as we currently expect it to exist at the time of this offering.

Until __________, 2000, all dealers that buy, sell or trade our
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

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<PAGE>

[This page is intentionally left blank.]

ii
<PAGE>
PROSPECTUS SUMMARY

This summary highlights some information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including the
section entitled "Risk Factors" and our financial statements and related notes,
before deciding to invest in our common stock.

ULTICOM

We are a leading provider of mission-critical network signaling
software for wireless, wireline and Internet communication services. Our
Signalware call control products interconnect the complex switching, database
and messaging systems and manage the vital number, routing and billing
information that form the backbone of today's communication networks. These
products incorporate "Signaling System #7", or "SS7", a widely used set of
signaling standards and protocols for communication networks worldwide.
Signalware enables communication service providers to offer "Intelligent
Network" services, such as voice-activated dialing, prepaid calling, caller ID
and text messaging. These products also enable voice and data networks to
interoperate, or converge, allowing service providers to offer such "converged
network" services as voice over the Internet and Internet call waiting. Our new
Nexworx product line is designed to move service control into the hands of
subscribers, so that businesses or consumers can access network resources to
create, manage and personalize their communication services.

Demand for enhanced voice and data communication services has grown
rapidly over recent years due to the emergence of the Internet, the growth in
wireless subscribers, and the proliferation of competitive service providers.
Network equipment manufacturers, application developers and service providers
increasingly require enabling products that allow the rapid development and
delivery of these enhanced services. Our products offer the following key
benefits:

Accelerated Time to Market. We believe our comprehensive solutions
allow customers to deploy services more rapidly than internally developed or
third party alternatives. In addition, our products allow our customers to
concentrate their efforts on application development, significantly reducing the
time it takes for them to bring communication services to market.

Network and Platform Interoperability. Our products are designed for
deployment on disparate network environments and multiple computer platforms.
Signaling networks around the world vary based on different country standards
and infrastructures. Our products overcome these differences and provide our
customers with the ability to create applications that are marketable around the
world. Our products also provide our customers with the flexibility to develop
applications on one computing platform and then migrate to another as market
demands or industry standards change.

High Performance and Reliability. Service providers consider it
critical that their networks provide high quality, uninterrupted service. As a
result, they will only purchase solutions that are stable, fast and scalable.
Our products meet this need to provide "mission-critical" performance and
reliability.

We have over 40 customers throughout North America, Europe and the
Pacific Rim and our products are deployed globally by major service providers in
more than 50 countries. Our products are used by equipment manufacturers,
application developers and service providers, including communication industry
leaders such as Alcatel, Compaq, Comverse Network Systems, Ericsson, Level (3)
Communications, Lucent, MCI WorldCom, Nokia, Qualcomm, Siemens and Sun
Microsystems. In addition, as a founding member of The Parlay Group and the JAIN
initiative, two industry consortia, we are at the forefront of defining industry
standards that we believe are critical to foster continued growth for us and our
industry.

3
<PAGE>
We are a subsidiary of Comverse Technology, Inc. Our company was
incorporated in New Jersey on December 18, 1974 as "Dale Gesek, McWilliams &
Sheridan, Inc.," and we were formerly known as "DGM&S Telecom, Inc." In May 1999
we changed our name to "Ulticom, Inc." Our principal executive offices are
located at 1020 Briggs Road, Mount Laurel, New Jersey 08054. Our telephone
number is (856) 787-2700.

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<PAGE>
THE OFFERING

Common Stock offered by us..................... _______ shares

Common Stock to be outstanding after this
offering..................................... _______ shares

Over-allotment option ......................... _______ shares

Use of proceeds................................ We will use approximately $3.8
million of the net proceeds to
repay bank debt. We expect to
use the remaining net proceeds
to finance the continued growth
of our business and for other
general corporate purposes. See
"Use of Proceeds."

Proposed Nasdaq National Market symbol......... "ULCM"

ABOUT THIS PROSPECTUS

Unless otherwise indicated, the information in this prospectus:

o reflects a ____ for ____ stock split which was effected
immediately prior to this offering; and

o assumes no exercise of the underwriters' over-allotment
option.

References in this prospectus to "Ulticom," "the Company," "our
company," "we," "our," and "us" refer to Ulticom, Inc. Our website is located at
www.ulticom.com. INFORMATION CONTAINED ON OUR WEBSITE IS NOT INTENDED TO
CONSTITUTE PART OF THIS PROSPECTUS.

References in this prospectus to "Comverse" refer to our controlling
shareholder, Comverse Technology, Inc., a New York corporation (Nasdaq: CMVT),
and its subsidiaries (other than Ulticom). References in this prospectus to
"CNS" refer to our affiliate, Comverse Network Systems, Inc. and its
subsidiaries. CNS is a wholly-owned subsidiary of Comverse.

In 1998, we changed our fiscal year from the calendar year to the
fiscal year ending January 31. References in this prospectus to "Fiscal 1997"
refer to the year ended December 31, 1997. References in this prospectus to
"Fiscal 1998" refer to our fiscal year ended January 31, 1999.

The names Ulticom(TM), Signalware(R), Nexworx(TM), Ultimate Call
Control(TM), Programmable Network(TM) and Softservice(TM) and our logos are our
trademarks. Each trademark, trade name or service mark of any other company
appearing in this prospectus belongs to its holder.

5
<PAGE>
SUMMARY FINANCIAL DATA

The following table summarizes the financial data for our business.
You should read this information together with the financial statements and the
notes to those statements appearing elsewhere in this prospectus. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

<TABLE>
<CAPTION>
ONE MONTH
YEAR ENDED ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31,
------------------------------- ----------- ------------- -------------------------
1995 1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Sales............................... $15,355 $6,450 $14,559 $212 $18,629 $13,536 $18,224
Income (loss) from
operations...................... 553 (2,183) 3,775 (635) 2,844 2,079 1,829
Net income (loss)................... (213) (1,577) 2,055 (431) 1,567 1,120 1,022

Earnings (loss) per share:
Basic........................... (0.21) (0.16) 0.21 (0.04) 0.16 0.11 0.10
Diluted.......................... (0.21) (0.16) 0.21 (0.04) 0.16 0.11 0.10
Shares used in computing
basic earnings per share........ 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Shares used in computing
diluted earnings per share ...... 10,000 10,000 10,000 10,000 10,110 10,110 10,229

</TABLE>

The following table summarizes our balance sheet as of October 31,
1999 (1) on an actual basis and (2) on an as adjusted basis to give effect to
the sale of the ________ shares in this offering, after deducting the
underwriting discounts and estimated offering expenses, and our anticipated
application of the net proceeds of the offering.

AS OF OCTOBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
------ -----------
BALANCE SHEET DATA: (IN THOUSANDS)

Cash and cash equivalents................ $ 2,575
Working capital.......................... 89
Total assets............................. 13,430
Long-term debt........................... 3,800
Stockholders' equity..................... 568

THIS SUMMARY HIGHLIGHTS SOME OF THE INFORMATION FROM THIS PROSPECTUS AND
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU.

6
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements based on our
current expectations, assumptions, estimates and projections about us and our
industry. These statements may be found in the sections of this prospectus
entitled, "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," and in this prospectus generally. These statements may be identified
by the use of words such as "expect," "estimate," "anticipate," "intend," "plan"
and "will" and similar expressions. These forward-looking statements involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of many factors, as
more fully described in the "Risk Factors" section and elsewhere in this
prospectus. We undertake no obligation to update in this prospectus any
forward-looking statements after the date of this prospectus.

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<PAGE>
RISK FACTORS

You should carefully consider the risks described below and other
information in this prospectus before deciding to invest in our common stock.
The risks and uncertainties described below are the principal known risks
facing our company but not the only ones we face.

If we do not successfully address the risks described below, our
business and operating results could be materially and adversely affected. In
that case, the trading price of our common stock may decline and you may lose
all or part of your investment. We cannot assure you that we will successfully
address these risks.

RISKS RELATED TO OUR BUSINESS

BECAUSE OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND MAY BE
BELOW THE EXPECTATIONS OF ANALYSTS AND INVESTORS, THE MARKET PRICE FOR OUR STOCK
MAY BE VOLATILE.

Our quarterly operating results are difficult to predict and may
fluctuate significantly in the future. A number of factors, many of which are
outside our control, can cause these fluctuations, including among others:

o the size, timing, terms and conditions of orders and shipments

o customer order deferrals in anticipation of enhancements or new
products

o unanticipated delays or problems in releasing new products

o acceptance of new products by our customers

o the timing and success of our customers' deployment of network
services and products

o defects and product quality problems

o the relative mix of products and services we sell through our direct
and indirect sales channels

o our timing of and investments in research and development activities

o the progress and timing of the privatization of communications
markets and the worldwide deregulation of the international
communications industry

o the progress and timing of the convergence of voice and data
networks and other convergence-related risks described below

In addition, our products have long sales cycles which typically
range from six to twelve months. Accordingly, our ability to forecast the timing
and amount of specific sales is limited. The deferral or loss of one or more
significant sales could materially adversely affect our operating results in any
fiscal quarter, especially if there are significant sales and marketing expenses
associated with the deferred or lost sales. We base our current and future
expense levels on our internal operating plans and sales forecasts, and our
operating costs are to a large extent fixed. As a result, we may not be able to
sufficiently reduce our costs in any quarter to compensate for an unexpected
near-term shortfall in revenues. If our operating results are below
expectations, the market price of our common stock may decline.

WE ARE DEPENDENT UPON SALES OF OUR SIGNALWARE PRODUCTS AND ANY REDUCTION IN
DEMAND FOR THESE PRODUCTS COULD ADVERSELY AFFECT OUR BUSINESS AND OPERATING
RESULTS.

Our Signalware products generated substantially all of our product
sales during the last two years. We expect sales of these products to continue
to account for a substantial amount of our revenues for the foreseeable future.
Any downturn in the demand for these products could have a material adverse
effect on our business and operating results. We can not assure you that we will
be successful in marketing other products or taking any other steps to reduce
the risk associated with any slowdown in demand for our Signalware products.

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<PAGE>
WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS, AND THE LOSS OF ANY OF THESE
CUSTOMERS COULD ADVERSELY AFFECT OUR BUSINESS AND OPERATING RESULTS.

Historically, a limited number of customers have accounted for a
significant percentage of our revenues in each fiscal quarter. Our five largest
customers (one of which is CNS) accounted for approximately 64% of our revenues
for the nine months ended October 31, 1999. We anticipate that our operating
results in any given period will continue to depend to a significant extent upon
revenues from a small number of customers. In order to increase our revenues, we
will need to attract additional significant customers on an ongoing basis. The
loss of any of our significant customers could adversely affect our business and
operating results.

WE HAVE SIGNIFICANT INTERNATIONAL SALES, WHICH SUBJECT US TO RISKS INHERENT IN
FOREIGN OPERATIONS.

International sales are subject to inherent risks, including
unexpected changes in regulatory requirements and tariffs, difficulties in
staffing and managing foreign operations and distributors, longer payment
cycles, greater difficulty in accounts receivable collection and potentially
adverse tax consequences. Doing business overseas is generally more costly than
doing business in the U.S. We sell our products worldwide through our direct
sales forces. Revenues from customers located outside the U.S. represented
approximately 50%, 51% and 65% of our revenues in Fiscal 1997, Fiscal 1998 and
the nine months ended October 31, 1999, respectively.

To date, international sales have been denominated solely in U.S.
dollars, and accordingly we have not been exposed to fluctuations in non-U.S.
currency exchange rates. Still, our sales in international markets may be
adversely affected by a strengthening U.S. dollar. In future periods we expect a
portion of international sales may be denominated in currencies other than U.S.
dollars, which could expose us to gains and losses on non-U.S. currency
transactions. We may choose to limit such exposure by entering into various
hedging strategies. These strategies may entail costs and there can be no
assurance that any hedging strategies we undertake would be successful in
avoiding exchange-related losses.

Finally, there can be no assurance that laws or administrative
practices relating to taxation, foreign exchange or other matters of countries
in which we operate or will operate will not change. Any such change could
adversely affect our business and operating results.

WE MAY NOT BE SUCCESSFUL IN IMPLEMENTING OUR STRATEGY TO FURTHER EXPAND INTO
INTERNATIONAL MARKETS.

Further expansion of our business into international markets may
require significant management attention and financial resources. Moreover, in
order to continue to expand internationally, we may be required to establish
relationships with additional marketing channels and third-party integrators.
There can be no assurance that we will effectively establish such relationships.
If international revenues are not adequate to offset the additional expense we
may incur in attempting to expand our international operations, our business and
operating results could suffer.

IF WE ARE NOT ABLE TO MANAGE OUR EXPANSION EFFECTIVELY, OUR BUSINESS AND
OPERATING RESULTS COULD SUFFER.

We are experiencing rapid and significant growth that has placed, and
is expected to continue to place, a significant strain on our management,
information systems and operations. Our ability to effectively manage
significant additional growth will require us to improve our financial,
operational and management information and control systems and procedures and to
effectively expand, train, motivate and manage our employees. Our failure to
manage growth effectively could have a material adverse effect on our business
and operating results.

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<PAGE>
WE DEPEND ON SKILLED EMPLOYEES AND MAY HAVE DIFFICULTY ATTRACTING AND RETAINING
THE SKILLED EMPLOYEES WE NEED TO EXECUTE OUR GROWTH PLANS.

We anticipate that continued growth, if any, will require us to
recruit and hire a substantial number of new employees, particularly sales and
marketing personnel and technical personnel with SS7 knowledge and experience,
both in the U.S. and internationally. Competition for such personnel is intense,
and we have at times in the past experienced difficulty in recruiting qualified
personnel. We historically have filled a portion of our new personnel needs with
non-U.S. citizens holding temporary work visas that allow such persons to work
in the U.S. for only a limited period of time. Accordingly, any change in U.S.
immigration policy limiting the issuance of temporary work visas could adversely
affect our ability to recruit new personnel.

Furthermore, the addition of significant numbers of new personnel
requires us to incur significant start-up expenses, including procurement of
office space and equipment, initial training costs and low utilization rates of
new personnel. There can be no assurance that we will successfully recruit
additional personnel as needed or that the start-up expenses incurred in
connection with the hiring of additional personnel would not materially
adversely affect our business and operating results.

OUR FUTURE SUCCESS DEPENDS ON OUR EXISTING KEY PERSONNEL, THE LOSS OF WHOM COULD
ADVERSELY IMPACT OUR BUSINESS AND OPERATING RESULTS.

Our future success will depend to a significant extent upon the
continued service and performance of a relatively small number of key senior
management, technical, sales and marketing personnel. The loss of any existing
key personnel could have a material adverse effect on our business and operating
results. In addition, we share the services of our Chief Financial Officer with
Comverse.

WE MAY DECIDE TO MAKE ACQUISITIONS OR INVESTMENTS IN THE FUTURE WHICH COULD TURN
OUT TO BE UNSUCCESSFUL.

Although we do not have any immediate plans to do so, we may in the
future pursue acquisitions of businesses, products and technologies, or the
establishment of joint venture arrangements, that could expand our business. The
negotiation of potential acquisitions or joint ventures as well as the
integration of an acquired or jointly developed business, technology or product
could cause diversion of management's time and resources. Our future
acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt and contingent liabilities, amortization of
goodwill and other intangibles, research and development write-offs and other
acquisition-related expenses. We cannot assure you that any acquired business or
joint venture will be successfully integrated with our operations or that we
will successfully realize the intended benefits of the acquisition or joint
venture.

WE RELY ON A LIMITED NUMBER OF SUPPLIERS FOR OUR BOARD COMPONENTS AND WE MAY NOT
BE ABLE TO OBTAIN SUBSTITUTE SUPPLIERS ON TERMS THAT ARE AS FAVORABLE IF OUR
SUPPLIES ARE INTERRUPTED.

The components included in our printed circuit interface boards are
acquired from a limited number of suppliers. We do not have any long term supply
agreements with our suppliers. If these components become unavailable from a
current supplier, alternate sourcing would be required. This sourcing may not be
available on reasonable terms, if at all, and could delay customer deliveries,
which could adversely affect our business and operating results.

SINCE WE RELY ON A LIMITED NUMBER OF INDEPENDENT MANUFACTURERS TO MANUFACTURE
BOARDS FOR OUR PRODUCTS, ANY DISRUPTION IN THEIR OPERATIONS COULD ADVERSELY
IMPACT OUR BUSINESS AND OPERATING RESULTS.

Our reliance on these manufacturers involves a number of risks,
including the potential absence of adequate capacity and reduced control over
product quality and delivery schedules. In addition, we do not have any long
term manufacturing agreements with any of our manufacturers. If these

10
<PAGE>
manufacturers experience financial, operational or quality assurance
difficulties, or if there is any other disruption in our relationships, our
business and operating results could suffer until alternate manufacturers are
found. We cannot assure you that alternate manufacturers that meet our
requirements could be found or that existing or alternative sources for boards
will continue to be available at favorable prices. Our inability to develop
alternative sources if and as required in the future could result in delays or
reductions in product shipments or increases in product costs.

BECAUSE OUR PRODUCTS OPERATE ON THE COMPUTER HARDWARE AND OPERATING SYSTEMS OF
OTHER COMPANIES, OUR PRODUCTS MUST BE ADAPTED PERIODICALLY TO CONFORM WITH THEIR
NEW COMPUTER HARDWARE AND/OR THEIR NEW VERSIONS OF, AND OTHER CHANGES IN,
OPERATING SYSTEMS.

We have no control over the producers of computer hardware or
operating systems on which our products operate, or the timing or nature of
changes that such producers may make to such hardware or operating systems. For
example, in response to the release of a new version of an operating system, we
may need to make changes to our products or substantially modify our product
design. Any such change or modification may be costly, may take a significant
amount of time and may not prove successful. Any delay in integrating our
products with new hardware or new releases of operating systems could cause
product shipment delays and may have a material adverse effect on our business
and operating results.

BECAUSE WE RELY UPON SOFTWARE THAT WE LICENSE FROM OTHERS, WE MAY EXPERIENCE
DELAYS IN SELLING OUR PRODUCTS IF WE ARE UNABLE TO PROCURE SOFTWARE LICENSES ON
COMMERCIALLY REASONABLE TERMS.

Our products currently include software that we license from others
and we may rely on software developed by others for our future products. We
cannot assure you that we will be able to procure licenses for such software on
commercially reasonable terms. If we are unable to procure or maintain software
licenses on commercially reasonable terms we could experience delays until
equivalent software could be developed or licensed and integrated into our
products. In addition, in response to certain changes in integrated software
that we license from others, we may need to make changes to our products or
substantially modify our product design.

OUR PRODUCTS MAY CONTAIN UNDETECTED DEFECTS, WHICH COULD IMPAIR MARKET
ACCEPTANCE OF THESE PRODUCTS.

Software products as complex as those we offer may contain undetected
defects or errors, particularly when first introduced or as new versions are
released. Despite our testing we may not discover such defects or errors until
after our product has been released and used by the customer. These defects or
errors could result in delayed acceptance of our product or in lost sales.
Although to date we have not been materially adversely affected by products
containing defects or errors, we cannot assure you that in the future we will be
able to detect all defects or errors in our products prior to their release.
Such undetected defects or errors in future releases of our products would force
us to prepare corrective releases. In addition, defects or errors in our
products may result in product liability claims brought against us, which could
cause adverse publicity and impair market acceptance of our products.

OUR PRODUCTS MAY INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
COULD LEAD TO COSTLY DISPUTES OR DISRUPTIONS.

The communications industry is characterized by the existence of a
large number of patents and frequent allegations of patent infringement. We may
receive in the future notices from holders of patents that raise issues as to
possible infringement by our products. As the number of communications network
products increases and the functionality of these products further overlaps, we
believe that we may become increasingly subject to allegations of infringement.
There can be no assurance that any such patent holders or others will not in the
future initiate legal proceedings against us or that, if any such proceedings
were initiated, we would be successful in defending against such proceedings.
Any such proceeding could be time consuming and expensive to defend or resolve,
result in substantial diversion of management resources, cause product shipment

11
<PAGE>
delays, or force us to enter into royalty or license agreements rather than
dispute the merits of any such proceeding initiated against us. There can be no
assurance that any such royalty or license agreements would be available on
terms acceptable to us, if at all.

IF OUR PRODUCTS INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WE MAY
BE REQUIRED TO INDEMNIFY OUR CUSTOMERS FOR ANY DAMAGES THEY SUFFER.

We have agreed to indemnify some of our customers with respect to
infringement by our products of the proprietary rights of third parties. Third
parties may assert infringement claims against our customers. These claims may
require us to incur protracted and costly litigation on behalf of our customers,
regardless of the merits of these claims. If any of these claims succeed, we may
be forced to pay damages on behalf of our customers or may be required to obtain
licenses for the products they sell. If we cannot obtain all necessary licenses
on commercially reasonable terms, our customers may be forced to stop selling
and/or using our products.

THIRD PARTIES MIGHT INFRINGE UPON OUR PROPRIETARY TECHNOLOGY CAUSING A DIVERSION
OF OUR MANAGEMENT AND OTHER RESOURCES.

Our continued success depends in part upon our proprietary
technology. Currently, we have no patents and we have one application pending.
To protect our proprietary technology, we currently rely on a combination of
technical innovation, trade secret, copyright and trademark laws, restricted
licensing arrangements and non-disclosure agreements, each of which affords only
limited protection.

Our products are primarily licensed to customers based on object code
royalties. We do not generally make source code available to our customers.
Exceptions to this principle were made in the past in limited circumstances for
large customers where adequate controls were in place to protect our
intellectual property rights. However, we cannot assure you that our source code
has not in the past and will not in the future be copied or used
inappropriately.

Despite the measures taken by us, it may be possible for a third
party to copy or otherwise use our proprietary technology and information
without authorization. Policing unauthorized use of our products is difficult,
and litigation may be necessary in the future to enforce our intellectual
property rights. This litigation could be time consuming and expensive to
prosecute or resolve and result in substantial diversion of management
resources. In addition, the laws of some foreign countries do not protect our
proprietary rights in our products to the same extent as do the laws of the U.S.
There can be no assurance that we will be successful in protecting our
proprietary technology.

OUR FAILURE OR THE FAILURE OF OUR KEY SUPPLIERS AND CUSTOMERS TO BE YEAR 2000
COMPLIANT MAY NEGATIVELY IMPACT OUR BUSINESS.

The "year 2000 issue" is the result of computer systems and programs
using two digits (rather than four) to identify a given year. Computer systems
that have time sensitive software may interpret the date code "00" as the year
1900 rather than the year 2000. This could result in major system failure or
miscalculations or other computer errors causing disruptions of operations. The
year 2000 issue creates significant risks for us including:

o potential warranty or other claims arising from our products;

o non-compliance of the components manufactured by our suppliers; and

o impairment of the systems used by our suppliers and customers.

Although we believe that our current products generally are year 2000
compliant, we cannot assure you that our year 2000 compliance efforts will prove
to be fully successful or that unanticipated costs and problems will not arise.
To date we have not experienced any material year 2000 compliance problems with

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<PAGE>
our products. Nevertheless, we may in the future receive warranty and other
claims as a result of year 2000 issues arising from undetected defects in our
products or the non-compliance of components or technologies we acquire from
others.

Our agreements with customers typically contain provisions designed
to limit generally our liability for customer claims. It is possible, however,
that these measures will not provide adequate protection from year 2000
liability claims, as a result of existing or future laws or unfavorable judicial
decisions. Any such claims could result in a material adverse affect on our
business and operating results, including increased warranty costs, customer
satisfaction issues and potential legal damages.

We have communicated with our significant customers and suppliers and
financial institutions to determine the extent to which we are vulnerable to the
failure of their internal systems to be year 2000 compliant. We have received
assurances of year 2000 compliance from a number of those contacted. Most of our
customers and suppliers under existing contracts were under no contractual
obligation to provide us with such information. Although to date we have not
experienced any significant operational problems with our significant customers
and suppliers as a result of the year 2000 issue, we cannot assure you that such
problems will not arise in the future.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND IT MAY NOT BE AVAILABLE ON
ACCEPTABLE TERMS.

The development of our business may require significant additional
capital in the future to, among other things, fund our operations, expand our
research and development programs, develop new products, expand the range of
services we offer and finance future acquisitions and investments. There is no
assurance that additional financing will be available on terms favorable to us,
or at all. The effect of any such financing on our financial condition or
operating results is also uncertain. Any additional financing, particularly
financing that involves the issuance of additional equity securities, could
result in the dilution of the interests of the shareholders and a decrease in
the market price of our common stock.

CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND NEW JERSEY LAW MAY
HAVE THE EFFECT OF DISCOURAGING, DELAYING OR PREVENTING A CHANGE IN CONTROL.

Our certificate of incorporation authorizes our board of directors to
amend our certificate of incorporation to divide the 10,000,000 shares of our
undesignated stock into one or more classes of common or preferred stock and to
change the designations, numbers, relative rights, preferences and limitations
of any authorized but unissued shares of undesignated stock. Our board's ability
to designate and issue such shares of undesignated stock and to change the
designations, numbers, relative rights, preferences and limitations of any
authorized but unissued shares of undesignated stock could adversely effect the
voting power of the holders of common stock, and could have the effect of making
it more difficult for a person to acquire, or could discourage a person from
seeking to acquire, control of our company.

The New Jersey Business Corporation Act contains provisions which
would permit our board of directors, in determining whether a proposal or offer
to acquire our company is in its best interest, to consider, among other things,
the effects of the proposed action on our employees, suppliers, creditors,
customers and the community in which we operate. These provisions may make it
more difficult for a shareholder to challenge our board of directors' rejection
of, and may facilitate the rejection of, an offer to acquire our company.

In addition, the New Jersey Shareholders Protection Act contains
provisions that would have the effect of restricting, delaying and/or preventing
altogether certain business combinations with "interested shareholders" (which
includes, among others, any person that after this offering becomes a beneficial
owner of 10% or more of our outstanding common stock). Such provisions would not
be applicable to Comverse, our controlling shareholder.

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<PAGE>
RISKS RELATED TO THE MARKET FOR OUR PRODUCTS

IF THE CONVERGENCE OF CIRCUIT AND PACKET NETWORKS DOES NOT OCCUR, OR TAKES
LONGER THAN ANTICIPATED, SALES OF OUR NETWORK SOFTWARE PRODUCTS, AND OUR
PROFITABILITY, WOULD BE ADVERSELY AFFECTED.

Currently, voice conversations are carried primarily over circuit
switched networks. Another type of network, packet switched networks, carries
primarily data. Circuit and packet networks use fundamentally different
technologies. We expect a substantial portion of any increases in our future
sales of network software products may result from the interconnection, or
"convergence," of circuit and packet networks. Any factor which might prevent or
slow the convergence of circuit and packet networks could materially and
adversely affect our operating results and the growth opportunities for our
business. Such factors include:

o the failure to solve or difficulty in solving certain technical
obstacles to the transmission of voice conversations over a packet
network;

o delays in the formulation of standards for the transmission of voice
conversations over a packet network; and

o the imposition on packet network operators of access fees, which
they currently do not pay.

It may be difficult or impossible to solve certain technical
obstacles to the transmission of voice conversations over a packet network with
the same quality and reliability of a circuit network. For example, delays or
gaps in the timing of a message are typically not as critical to data
transmissions as they are to voice conversations. The nature of packet switching
makes it difficult to prevent such delays or gaps as well as to repair such
defects in a way that does not degrade the quality of a voice conversation. If
this problem is not solved, the convergence of circuit and packet networks may
never fully occur or may occur at a much slower rate than we anticipate.

There are currently no uniform governing standards with respect to
the architecture of the converged circuit switched and packet switched networks.
It may be difficult or time-consuming for the industry to agree to standards
incorporating any one solution to such technical issues if such a solution does
exist. If the standards we adopt are not generally accepted or are accepted in a
different form, we may need to substantially modify our product design. Such
modifications may be costly, may take a significant amount of time and may not
prove successful. Without uniform standards, convergence of circuit and packet
networks may not occur. Uncertainty regarding the technology or standards
employed in converged networks may cause service providers to delay their
purchasing plans.

The imposition of access fees on packet networks might slow the
convergence of circuit and packet networks. Today, federal regulation requires
an operator of a long distance circuit network to pay an access fee to the local
phone company serving the recipient of a long distance call. Packet network
operators do not currently pay such access fees. In the future, access fees may
be imposed on carriers using packet networks to transmit voice calls. These
access fees might also be imposed on the termination of "pure" data messages by
operators of packet networks. The imposition of these access fees would reduce
the economic advantages of using packet networks for voice and other
transmissions, which may slow the convergence of circuit and packet networks.

IF SS7 DOES NOT PLAY AN INTEGRAL ROLE IN THE ARCHITECTURE FOR CONVERGED CIRCUIT
AND PACKET NETWORKS, OUR BUSINESS AND OPERATING RESULTS COULD SUFFER.

All of our products are designed to support SS7. If future networks
do not utilize SS7 and we are unable to adapt our products to work with the
appropriate converged network signaling protocols, our products will become less
competitive or obsolete. We cannot assure you that SS7 or our products will play
a key role as network architecture designs for converged circuit and packet
networks evolve. In addition, SS7 may be modified substantially for the
architecture of converged networks. Any of these changes or adaptations may be

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<PAGE>
costly. Moreover, we may not be able to respond to this modification in a timely
manner, or at all.

WE CANNOT ASSURE YOU THAT OUR NEXWORX PRODUCTS WILL BE SUCCESSFUL.

We are developing our Nexworx service control products. We have
recently introduced our first Nexworx product, from which we have derived
limited revenues. The success of this product line is dependent upon a number of
factors, including the development of a market for these types of products and
customer acceptance of our products. If a market for these products does not
develop or development takes longer than anticipated, or if our Nexworx products
are not accepted by our customers, our business and operating results could be
adversely affected.

BECAUSE THE MARKET FOR OUR PRODUCTS IS CHARACTERIZED BY RAPIDLY CHANGING
TECHNOLOGY, OUR SUCCESS DEPENDS ON OUR ABILITY TO ANTICIPATE CHANGES IN PRODUCTS
AND TECHNOLOGIES.

The market for our products is characterized by rapidly changing
technology, frequent new product introductions and enhancements and evolving
industry standards. Our success will depend to a significant extent upon our
ability to accurately anticipate the evolution of new products and technologies
and to enhance our existing products. It will also depend on our ability to
develop and introduce innovative new products that gain market acceptance. We
cannot assure you that we will be successful in selecting, developing,
manufacturing and marketing new products or enhancing our existing products on a
timely or cost-effective basis. Products or technologies developed by others may
render our products noncompetitive or obsolete. In addition, because of the
rapid technological changes in the communications industry, we may be required
to support legacy software versions used by our customers. Supporting such
legacy software versions may place additional demands on our personnel and other
resources.

COMPLIANCE WITH COMMUNICATIONS REGULATIONS AND STANDARDS MAY BE DIFFICULT AND
COSTLY, AND IF WE FAIL TO COMPLY, OUR PRODUCT SALES COULD DECREASE.

In order to maintain market acceptance, the boards included in our
products must continue to meet a significant number of regulations and
standards. In the United States, these boards must comply with various
regulations defined by the Federal Communications Commission and Underwriters
Laboratories. The failure of these boards to comply, or delays in compliance,
with the various existing and evolving industry standards could delay
introduction of our products, which could harm our business and operating
results.

THE MARKET FOR OUR PRODUCTS IS HIGHLY COMPETITIVE.

The market for communication network signaling software is intensely
competitive, both in the U.S. and internationally. We expect competition to
persist, intensify and increase in the future, especially with the anticipated
convergence of voice and data networks.

Some of our competitors have, in relation to us, longer operating
histories, larger customer bases, longer-standing relationships with customers,
greater name recognition and significantly greater financial, technical,
marketing, customer service, public relations, distribution and other resources.
New competitors or alliances among competitors could emerge and rapidly acquire
significant market share. As a result, our competitors may be able to more
quickly develop or adapt to new or emerging technologies and changes in customer
requirements, or devote greater resources to the development, promotion and sale
of their products. In addition, some of our customers may in the future decide
to develop internally their own signaling software platforms and other
software-based solutions instead of purchasing them from us. Increased
competition could force us to lower our prices or take other actions to
differentiate our products. If we are unable to compete successfully against our
competitors or if our customers opt to develop internal substitutes for our
products, our business and operating results would be materially adversely
affected.

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<PAGE>
BECAUSE OUR SOFTWARE PRODUCTS ARE INTEGRATED INTO PRODUCTS OF EQUIPMENT
MANUFACTURERS AND APPLICATION DEVELOPERS, WE DEPEND ON OUR RELATIONSHIPS WITH
THESE CUSTOMERS AND WE ARE POTENTIALLY VULNERABLE TO THE PERFORMANCE OF THEIR
PRODUCTS.

Our products are primarily sold to equipment manufacturers and
application developers, who integrate our products with their products and sell
them to service providers. Equipment manufacturers and application developers
who make their product design compatible with ours and choose to purchase our
products may not develop or deliver their products on a timely basis, or may not
develop products which perform as expected or are priced competitively. If they
are not successful in the development and deployment of their products, our
business and operating results may suffer. In addition, if we cannot
successfully establish channel and marketing relationships with leading
equipment manufacturers and application developers or maintain these
relationships on favorable terms, our business and operating results may suffer.

DEMAND FOR OUR PRODUCTS MIGHT DECREASE IF THE GROWTH OF THE COMMUNICATIONS
INDUSTRY SLOWS DOWN OR PROSPECTIVE CUSTOMERS CONSOLIDATE.

We sell our products to the communications industry. The
communications industry has undergone a period of rapid growth and consolidation
during the past few years. A significant slowdown in the growth of this industry
could materially adversely affect our business and operating results. Further,
consolidations of prospective customers may delay or cause cancellations of
significant sales of our products, which could also materially adversely affect
our business and operating results.

FUTURE GROWTH IN THE MARKETS FOR OUR PRODUCTS WILL DEPEND IN PART ON
PRIVATIZATION AND/OR DEREGULATION OF CERTAIN COMMUNICATIONS MARKETS WORLDWIDE.

Any reversal or slowdown in the pace of this privatization and/or
deregulation could have a material adverse effect on the markets for our
products. Moreover, the consequences of privatization and/or deregulation are
subject to many uncertainties, including judicial and administrative proceedings
that affect the pace at which changes occur, and other regulatory, economic and
political factors. Furthermore, uncertainties associated with privatization
and/or deregulation have in the past and could in the future cause our customers
to delay their purchasing decisions.

RISKS RELATED TO OUR RELATIONSHIP WITH COMVERSE

COMVERSE WILL CONTROL ALL MATTERS SUBMITTED TO A SHAREHOLDER VOTE AND OTHERWISE
HAVE A CONTROLLING INFLUENCE OVER OUR BUSINESS AND AFFAIRS.

Upon completion of the offering, Comverse will beneficially own
approximately ___% of the outstanding shares of common stock. Consequently,
Comverse will effectively control the outcome of all matters submitted for
shareholder action, including the composition of our board of directors and the
approval of significant corporate transactions. Through its representation on
our board of directors, Comverse will have a controlling influence on our
management, direction and policies, including the ability to appoint and remove
our officers. Accordingly, Comverse may prevent or delay any transaction
involving a change in control or in which shareholders might receive a premium
over the prevailing market price for their shares. In addition, following the
offering, only four of our nine directors will be individuals who are not
currently directors or employees of Comverse. As a result, investors acquiring
shares in this offering will have very limited ability, if any at all, to
influence the management of our company.

OUR AFFILIATION WITH COMVERSE MAY PRECLUDE US FROM TAKING ADVANTAGE OF
OPPORTUNITIES THAT MIGHT OTHERWISE BE AVAILABLE TO US.

We have entered into an agreement with Comverse which addresses
potential conflicts of interest between Comverse and us. This agreement
allocates between Comverse and us opportunities to pursue transactions or

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matters that, absent such allocation, could constitute corporate opportunities
of both companies. We are precluded from pursuing an opportunity offered to any
person who is a director of our company but not an officer or employee of our
company and who is also an officer or employee of Comverse, unless Comverse
fails to pursue such opportunity diligently. Comverse is precluded from pursuing
an opportunity offered to any person who is a director of Comverse but not an
officer or employee of Comverse and who is also an officer or employee of our
company, unless we fail to pursue such opportunity diligently. We are also
precluded from pursuing an opportunity offered to any person who is an employee
or officer of both companies or a director of both companies, unless Comverse
fails to pursue such opportunity diligently. See "Related Party Transactions -
Conflicts of Interest."

A SIGNIFICANT REDUCTION IN THE AMOUNT OF PRODUCTS OR SERVICES THAT WE SELL TO
CNS IN THE FUTURE COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND
OPERATING RESULTS.

Revenues from CNS and its affiliates represented approximately 19%,
20% and 17% of our total revenues for Fiscal 1997, Fiscal 1998, and the nine
months ended October 31, 1999, respectively. During these periods CNS and its
affiliates have purchased our Signalware boards and development services. CNS is
currently contractually committed to purchase a limited number of Signalware
boards from us.

COMVERSE MAY COMPETE WITH US AND COMPETES WITH SOME OF OUR CUSTOMERS.

Comverse may engage in any business that is similar to ours, do
business with a potential or actual customer of ours or employ, solicit or
engage any of our officers, directors or employees. If Comverse competes with us
or our customers, our business may suffer. For example, we may from time to time
lose a revenue-earning opportunity to supply a customer with our products if
that customer is not awarded a project that was awarded to CNS. Although our
products would likely be included in CNS' products, because CNS has a
non-exclusive royalty-free license to use our products for that purpose we would
not earn any revenues for such use.

OUR DIRECTORS AND EMPLOYEES THAT ALSO HOLD POSITIONS WITH COMVERSE MAY HAVE
CONFLICTS OF INTEREST WITH RESPECT TO MATTERS INVOLVING BOTH COMPANIES.

Five of our nine directors are officers and/or directors of Comverse,
or otherwise affiliated with Comverse. Our directors who are also directors or
officers of Comverse will have fiduciary duties, including duties of loyalty, to
both companies and may have conflicts of interest with respect to matters
potentially involving or affecting both us and Comverse. Some of these
individuals and a number of our executive officers and employees own shares of
Comverse capital stock and/or options to purchase shares of Comverse capital
stock. Although we believe that these directors and officers will be able to
fulfill their fiduciary duties to our shareholders despite their positions with
Comverse and/or their ownership of Comverse capital stock and options, there
could be potential conflicts of interest when these directors and officers face
decisions that could have different implications for us and Comverse.

Our Chairman and director, Mr. Kobi Alexander, will continue to be
Chairman, President, Chief Executive Officer and a director of Comverse
following the offering. In addition, our Chief Financial Officer and director,
Mr. David Kreinberg, will continue to be Vice-President of Finance and Chief
Financial Officer of Comverse following the offering. The positions of Messrs.
Alexander and Kreinberg with Comverse will continue to impose significant
demands on their time and present potential conflicts of interest following the
offering. Messrs. Alexander and Kreinberg will be employed by Comverse, rather
than by us. They will spend a substantial amount of their professional time and
effort on behalf of Comverse. In many instances, their efforts for Comverse will
relate to activities which are related (and in some circumstances may be
adverse) to our interests. In addition, Messrs. Alexander, and Kreinberg will
continue to be shareholders of Comverse and/or participate in Comverse's stock
option plan and other benefit plans.

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WE DEPEND ON COMVERSE FOR SEVERAL KEY SERVICES.

We currently depend on Comverse for various financial, tax, human
resource, legal and other functions that typically are performed by in-house
personnel of public companies. These services are made available pursuant to a
servicing agreement between us and Comverse. Following the offering, we will
continue to rely on Comverse for these services. Except as expressly required by
the terms of such agreement, Comverse could choose not to provide these
services. See "Related Party Transactions - Services Agreement."

SO LONG AS WE ARE INCLUDED IN COMVERSE'S CONSOLIDATED GROUP FOR TAX PURPOSES, WE
ARE POTENTIALLY LIABLE FOR TAXES NOT OUR OWN.

Until this offering is completed we will be included in the Comverse
consolidated group for federal income tax purposes. After this offering is
completed we will no longer be included in this group and we will file our own
federal income tax returns. Under our tax sharing agreement with Comverse, we
pay Comverse an amount equal to our separate tax liability, computed by
Comverse, for those periods in which we are included in the Comverse
consolidated group for federal income tax purposes. Our separate tax liability
is that amount of federal income tax that we would owe if we filed a tax return
independent of the Comverse group. If the calculation of our separate tax
liability for any year results in a net operating loss, we are not entitled to
receive any payment from Comverse with respect to such loss in such year or as a
result of carrying such loss back to any prior year or forward to any future
year.

By virtue of its controlling ownership and the tax sharing agreement,
Comverse effectively controls all our tax decisions for those years in which we
are included in the Comverse consolidated group for federal income tax purposes.
In addition, for those years, Comverse has sole authority to respond to and
conduct all tax proceedings (including tax audits) relating to us, to file all
income tax returns on our behalf and to determine the amount of our liability to
(or entitlement to payment from) Comverse under our tax sharing agreement.
Moreover, notwithstanding such agreement, federal law provides that each member
of a consolidated group is liable for the group's entire tax obligation. To the
extent Comverse or other members of the group fail to make any federal income
tax payments required of them by law in respect of years for which Comverse
files consolidated federal income tax returns which include us, we would be
liable for the shortfall. Similar principles apply for state income tax purposes
in many states.

For a discussion of our relationships with Comverse, see "Related
Party Transactions - Relationship with Comverse."

RISKS RELATED TO THIS OFFERING

THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK; OUR STOCK PRICE IS LIKELY
TO BE HIGHLY VOLATILE.

Prior to the offering, there has been no public market for our common
stock and there can be no assurance that an active trading market will develop
or be sustained after the offering. The initial public offering price for our
common stock was determined by negotiations between us and the representatives
of the underwriters, and may not be representative of the price that will
prevail in the open market. Factors that may cause the market price of the
common stock to fluctuate significantly after the offerings include:

o variations in our results of operations;

o future sales of common stock;

o our announcement or that of our competitors and others of
technological innovations or new products;

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o market analysts' estimates of our performance; and

o general market conditions.

The public markets have experienced volatility that has particularly affected
the market prices of securities of many technology companies for reasons that
have often been unrelated to operating results. This volatility may adversely
affect the market price of our common stock and our visibility and credibility
in the markets.

FUTURE SALES OF OUR COMMON STOCK MAY HURT OUR MARKET PRICE.

A substantial number of shares of our common stock will be available
for resale within a short period of time after the offering. If our shareholders
sell substantial amounts of our common stock in the public market following the
offering, the market price of our common stock could fall. These sales also
might make it more difficult for us to sell equity securities in the future at
times and prices that we deem appropriate.

We have agreed that, without the prior written consent of Lehman
Brothers Inc., we will not, directly or indirectly, offer, sell or otherwise
dispose of any shares of capital stock or any securities which may be converted
into or exchanged for any shares of capital stock for a period of 180 days from
the date of this prospectus. We, Comverse and all of our officers, directors and
existing shareholders have agreed under lock-up agreements that, without the
prior written consent of Lehman Brothers Inc., we and they will not, directly or
indirectly, offer, sell or otherwise dispose of any shares of capital stock or
any securities which may be converted into or exchanged for any shares of
capital stock for a period of 180 days from the date of this prospectus, except
that Comverse may sell shares of our common stock to a purchaser or purchasers
of such shares who agree to be bound by the same restrictions that bind
Comverse. Shares of capital stock subject to these lock-up agreements will
become eligible for sale in the public market upon expiration of these lock-up
agreements, subject to limitations imposed by Rule 144 under the Securities Act.

WE WILL HAVE BROAD DISCRETION IN USING A SIGNIFICANT PORTION OF THE PROCEEDS OF
THIS OFFERING.

Our management will have broad discretion over the allocation of a
significant portion of the net proceeds from the offering as well as over the
timing of their expenditure. As a result, investors will be relying upon
management's judgement with only limited information about its specific
intentions for the use of such proceeds.

YOU WILL EXPERIENCE IMMEDIATE AND SIGNIFICANT DILUTION OF BOOK VALUE PER SHARE.

The initial public offering price of our common stock is
substantially higher than the net tangible book value per share of the
outstanding common stock immediately after this offering. If you purchase our
common stock in this offering, you will incur immediate dilution of
approximately $_______ in the net tangible book value per share of common stock
from the price you pay for our common stock in this offering. See "Dilution."

WE DO NOT ANTICIPATE DECLARING OR PAYING ANY DIVIDENDS.

We intend to retain all our future earnings to fund the development
of our business. Accordingly, we do not anticipate paying any cash dividends in
the foreseeable future.

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USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of
the _____________ shares in this offering will be approximately $__________
million (approximately $__________ million if the underwriters exercise their
over-allotment option in full) after deducting the underwriting discounts and
estimated expenses of this offering.

We expect to use $3.8 million of the net proceeds of this offering to
repay outstanding bank debt which was incurred by us to repay indebtedness owed
to Comverse. This bank debt bears interest at a rate of LIBOR plus 0.35%,
matures in July 2001 and may be prepaid without penalty on each six-month
anniversary of the loan.

We expect to use the remaining net proceeds to finance the continued
growth of our business and for general corporate purposes. We may also use a
portion of the proceeds for acquisitions or other investments. However, we have
no present understanding or agreement relating to any specific acquisition or
investment.

We have not yet determined the amount of net proceeds to be used
specifically for each of the foregoing purposes, other than the repayment of the
bank debt described above. Accordingly, management will have significant
flexibility in applying the net proceeds of the offering remaining after
repayment of such debt. Pending their use as described above, we intend to
invest the net proceeds of this offering in interest-bearing instruments.

DIVIDEND POLICY

We do not expect to pay any cash dividends for the foreseeable
future. We currently intend to retain future earnings, if any, to finance
operations and the expansion of our business.

Any future determination to pay cash dividends will be at the
discretion of the board of directors and will depend upon our financial
condition, operating results, capital requirements and such other factors as the
board of directors deems relevant.

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CAPITALIZATION

The following table sets forth, as of October 31, 1999, our
capitalization:

(1) on an actual basis, and

(2) on an as adjusted basis to give effect to the sale of the
_____ shares offered by us in this offering, after
deducting the underwriting discounts and estimated offering
expenses payable by us, and the application of the net
proceeds therefrom.

The table excludes:

o _________ shares of common stock issuable upon the exercise of
stock options outstanding as of _________, 1999 under our 1998
Stock Incentive Compensation Plan, with a weighted average
exercise price of $____ per share; and

o _______ shares of common stock issuable upon the exercise of
stock options granted under such plan upon completion of this
offering at an exercise price equal to the initial public
offering price.

Please read this table together with the sections of this prospectus
entitled "Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
related notes included in this prospectus.

<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................................................... $2,575 $
========== =========
Long-term debt(1)................................................................... $3,800 $ -
---------- ---------
Stockholders' equity:
Undesignated Stock, no par value, 10,000,000 shares authorized; no shares
issued and outstanding....................................................... - -
Common Stock, no par value, 100,000,000 shares authorized; 10,000,000 shares
issued and outstanding on an actual basis; and _____ shares issued and
outstanding on an as adjusted basis.......................................... - -
Additional paid-in capital.......................................................... 10
Retained Earnings................................................................... 558 558
---------- ---------
Total stockholders' equity..................................................... 568
---------- ---------
Total capitalization........................................................... $4,368 $
========== =========
</TABLE>

- -----------------------
(1) The long-term debt reflects outstanding debt due to Comverse which was
subsequently refinanced with bank debt. We expect to repay this bank debt in
July 2000.

21
<PAGE>
DILUTION

Our net tangible book value as of October 31, 1999 was $568,000, or
$____ per share. Net tangible book value per share represents the total amount
of our tangible assets reduced by the total amount of our liabilities and
divided by the number of shares of common stock outstanding as of October 31,
1999. After giving effect to our sale of the ____ shares in this offering and
receipt of the net proceeds from this offering, after deducting the underwriting
discounts and estimated offering expenses, and the application of the estimated
net proceeds therefrom, our net tangible book value as of October 31, 1999 would
have been $____, or $____ per share. This represents an immediate increase in
pro forma net tangible book value of $____ per share to existing shareholders
and an immediate dilution in pro forma net tangible book value of $____ per
share to new investors.

Dilution per share represents the difference between the price per
share to be paid by new investors and the net tangible book value per share
immediately after this offering. The following table illustrates this per share
dilution:

<TABLE>
<CAPTION>
PER SHARE PER SHARE
--------- ---------
<S> <C> <C>
Assumed initial public offering price per share................................ $
Net tangible book value per share before this offering......................... $
---------

Increase per share attributable to new investors...............................
Net tangible book value per share after this offering..........................
--------
Dilution per share to new investors............................................ $
========
</TABLE>

The following table sets forth, as of October 31, 1999, the
differences between the total consideration paid and the average price per share
paid by existing investors and by new investors purchasing shares in this
offering.

<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders................ % % $
New investors........................ % % $
-------- ------- -------- -------
Total............................ 100% $ 100%
======== ======= ======== =======
</TABLE>

The foregoing table does not reflect:

o __________ shares of common stock issuable upon exercise of
options outstanding as of _______ __, 1999 under our 1998
Stock Incentive Compensation Plan at a weighted average
exercise price of $____ per share; and

o _______ shares of common stock issuable upon the exercise of
stock options granted under such plan upon completion of this
offering at an exercise price equal to the initial offering
price.

22
<PAGE>
SELECTED FINANCIAL DATA

We derived the selected financial data presented below from our
financial statements and related notes included in this prospectus. You should
read the selected financial data together with our financial statements and
related notes and the section of this prospectus entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Statements of operations data for the years ended December 31, 1996
and 1997, the one month ended January 31, 1998, and the balance sheet data at
January 31, 1998 and 1999 have been derived from our financial statements which
have been audited and reported on by Deloitte & Touche LLP, independent
auditors, and are included elsewhere in this prospectus. Statements of
operations data for the year ended December 31, 1995 and the balance sheet data
at December 31, 1995, 1996 and 1997 are derived from our unaudited financial
statements not included herein.

Statements of operations data for the nine months ended October 31,
1998 and 1999 and the balance sheet data as of October 31, 1998 and 1999 have
been derived from our unaudited interim financial statements. Our unaudited
interim financial statements reflect all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of our management, are necessary
for a fair presentation of the results for these periods. Operating results for
the nine months ended October 31, 1999 are not necessarily indicative of the
results that may be expected for the fiscal year ended January 31, 2000.

<TABLE>
<CAPTION>
ONE MONTH
ENDED YEAR ENDED NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31,
----------------------- ----------- ----------- -----------
1995 1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................. $ 15,355 $ 6,450 $ 14,559 $212 $ 18,629 $ 13,536 $ 18,224
Cost of sales......................... 7,238 2,853 4,495 294 6,131 4,504 6,311
Gross profit.......................... 8,117 3,597 10,064 (82) 12,498 9,032 11,913
Research and development ............. 2,644 1,905 2,398 205 4,706 3,451 4,263
Selling, general and administrative... 4,920 3,875 3,891 348 4,948 3,502 5,821
Income (loss) from operations......... 553 (2,183) 3,775 (635) 2,844 2,079 1,829
Interest income (expense), net........ (328) (342) (507) (45) (350) (293) (179)
Income (loss) before income taxes..... 225 (2,525) 3,268 (680) 2,494 1,786 1,650
Income tax provision (benefit)........ 438 (948) 1,213 (249) 927 666 628
Net income (loss)..................... $ (213) $ (1,577) $ 2,055 $ (431) $ 1,567 $ 1,120 $ 1,022
Earnings (loss) per share -
basic ............................. ($0.21) ($0.16) $0.21 ($0.04) $0.16 $0.11 $0.10
diluted............................ ($0.21) ($0.16) $0.21 ($0.04) $0.16 $0.11 $0.10
Shares used in computing basic
earnings per share................ 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Shares used in computing diluted
earnings per share................ 10,000 10,000 10,000 10,000 10,110 10,110 10,229

AS OF DECEMBER 31, AS OF JANUARY 31, AS OF OCTOBER 31,
------------------ ----------------- -----------------
1995 1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 206 $ 315 $ 1,030 $ 584 $ 2,544 $ 2,025 $ 2,575
Working capital (deficit)............. (3,080) (4,699) (2,999) (3,513) (2,236) (2,753) 89
Total assets.......................... 6,317 4,858 7,319 6,878 8,883 8,015 13,430
Long-term debt........................ - - - - - - 3,800
Stockholders' equity (deficit)........ (858) (3,389) (1,333) (2,021) (454) (901) 568
Dividend to parent.................... - 953 - 256 - - -
</TABLE>

23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results
should be read in conjunction with our financial statements and the related
notes thereto which appear elsewhere in this prospectus. The following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and elsewhere in this prospectus,
particularly in "Risk Factors."

OVERVIEW

Substantially all of our product revenues have been generated by our
Signalware product line. Signalware product sales consist of software licenses,
printed circuit interface boards, training, and support revenues. In certain
limited circumstances, we sell Signalware development services typically under
fixed fee arrangements with our customers. New customers begin development of
applications and services by purchasing the appropriate Signalware development
kit, which includes a development site license, an interface board, and a
one-year maintenance plan. At deployment, the customer generally purchases one
or more deployment licenses, additional interface boards and a deployment
maintenance and support plan.

In accordance with Statement of Position 97-2, "Software Revenue
Recognition," product revenues are generally recognized in the period in which
the products are delivered and accepted by the customer, the fee is fixed and
determinable and collection is considered probable. When we have significant
obligations subsequent to shipment, revenues are not recognized until the
obligations are fulfilled. Revenues from arrangements that include significant
acceptance terms are not recognized until acceptance has occurred. Revenues from
product support services, including those included in initial licensing fees,
are recognized ratably over the contract period. Post-contract support services
included in the initial licensing fee are allocated from the total contract
amount based on the relative fair value determined using vendor-specific
objective evidence.

During the last three years, a growing proportion of our total
revenues were derived from customers located outside the U.S. To date
international sales have been denominated in U.S. dollars. Accordingly, we have
not been exposed to fluctuations in non-U.S. currency exchange rates. However,
we expect that in future periods, a portion of international sales may be
denominated in currencies other than U.S. dollars, which could expose us to
gains and losses on non-U.S. currency transactions. We may choose to limit our
exposure by utilizing hedging strategies. There can be no assurance that any
such hedging strategies that we undertake would be successful in avoiding
exchange rate losses.

24
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
financial data expressed as a percentage of sales:

<TABLE>
<CAPTION>
ONE MONTH
ENDED YEAR ENDED
YEAR ENDED ----------------- ---------------- NINE MONTHS ENDED
DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31,
1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sales.............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................... 44.2% 30.9% 138.7% 32.9% 33.3% 34.6%
----- ----- ------ ----- ----- -----
Gross profit....................... 55.8% 69.1% (38.7%) 67.1% 66.7% 65.4%
Research and development........... 29.5% 16.5% 96.7% 25.3% 25.5% 23.4%
Selling, general and
administrative................. 60.1% 26.7% 164.2% 26.6% 25.9% 31.9%
Interest income
(expense), net.................. (5.3%) (3.5%) (21.2%) (1.9%) (2.2%) (1.0%)
------ ------ ------- ------ ------ ------
Income (loss) before taxes......... (39.1%) 22.4% (320.8%) 13.3% 13.1% 9.1%
Income tax provision
(benefit)....................... (14.7%) 8.3% (117.5%) 4.9% 4.9% 3.4%
------- ---- -------- ---- ---- ----
Net income (loss).................. (24.4%) 14.1% (203.3%) 8.4% 8.2% 5.7%
======= ===== ======== ==== ==== ====
</TABLE>

NINE MONTHS ENDED OCTOBER 31, 1999, COMPARED TO NINE MONTHS ENDED OCTOBER 31,
1998

Sales. Sales for the nine months ended October 31, 1999 increased by
approximately $4.7 million, or 35%, compared to the nine months ended October
31, 1998. This increase is primarily attributable to higher volume of sales of
our Signalware products to international customers.

Cost of Sales. Cost of sales for the nine months ended October 31,
1999 increased by approximately $1.8 million, or 40%, compared to the nine
months ended October 31, 1998. This increase is primarily attributable to the
increase in sales. Gross margins decreased from approximately 67% in the nine
months ended October 31, 1998 to approximately 65% in the nine months ended
October 31, 1999. This decrease was attributable primarily to the increased
sales of boards, which have lower margins, during this period.

Research and Development Expenses. Research and development expenses
for the nine months ended October 31, 1999 increased by approximately $812,000,
or 24%, compared to the nine months ended October 31, 1998 due to overall growth
of research and development operations, the initiation of significant new
research and development projects and increases in salaries and other costs
associated with research and development operations.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended October 31, 1999 increased by
approximately $2.3 million, or 66%, compared to the nine months ended October
31, 1998, and as a percentage of sales increased from approximately 26% for the
nine months ended October 31, 1998 to approximately 32% for the nine months
ended October 31, 1999. The increase was a result of increased sales, marketing
and administrative activities associated with the overall growth of our
operations, and particularly with the expansion of direct sales and marketing
activities.

Income Tax Provision. Provision for income taxes decreased by
approximately $38,000, or 6%, due to decreased pre-tax income. Our overall
effective tax rate increased from approximately 37% for the nine months ended
October 31, 1998 to approximately 38% for the nine months ended October 31,
1999.

Net Income. Net income decreased by approximately $98,000, or 9%, in
the nine months ended October 31, 1999 compared to the nine months ended October
31, 1998, while net income as a percentage of sales decreased from approximately

25
<PAGE>
8% for the nine months ended October 31, 1998 to approximately 6% for the nine
months ended October 31, 1999. The decreases resulted primarily from the factors
described above.

FISCAL 1998 COMPARED TO FISCAL 1997

Sales. Sales increased in Fiscal 1998 by approximately $4.1 million,
or 28%, compared to Fiscal 1997, primarily resulting from an increase in the
number of customers deploying our Signalware products.

Cost of Sales. Cost of sales increased in Fiscal 1998 by
approximately $1.6 million, or 36%, compared to Fiscal 1997 primarily as a
result of the increase in sales. Gross margins decreased from approximately 69%
in Fiscal 1997 to approximately 67% in Fiscal 1998. This decrease was primarily
caused by the recording of an impairment loss of $619,000 to reduce software
development costs to their net realizable value.

Research and Development Expenses. Research and development expenses
increased in Fiscal 1998 by approximately $2.3 million, or 96%, compared to
Fiscal 1997 due to overall growth of research and development operations, the
initiation of significant new research and development projects and increases in
salaries and other costs associated with research and development operations.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased in Fiscal 1998 by approximately $1.1 million,
or 27%, compared to Fiscal 1997, and as a percentage of sales remained at
approximately 27% in both periods. The increase in these expenses was a result
of increased sales, marketing and administrative activities associated with the
overall growth of our operations, and particularly with the expansion of direct
sales and marketing activities.

Income Tax Provision. Provision for income taxes decreased in Fiscal
1998 by approximately $286,000, or 24%, compared to Fiscal 1997 due to decreased
pre-tax income. Our overall effective tax rate remained at approximately 37% for
both periods.

Net Income. Net income decreased by approximately $488,000, or 24%,
in Fiscal 1998 compared to Fiscal 1997. Net income as a percentage of sales
decreased from approximately 14% in Fiscal 1997 to approximately 8% in Fiscal
1998. The decreases resulted primarily from the factors described above.

FISCAL 1997 COMPARED TO FISCAL 1996

Sales. Sales increased for the year ended December 31, 1997 by
approximately $8.1 million, or 126%, compared to the year ended December 31,
1996, primarily resulting from increased sales of our Signalware products to
international customers.

Cost of Sales. Cost of sales increased by approximately $1.6 million,
or 58%, for the year ended December 31, 1997 compared to the year ended December
31, 1996 primarily as a result of the increase in sales. Gross margins increased
from approximately 56% in the year ended December 31, 1996 to approximately 69%
in the year ended December 31, 1997. In 1996, a large proportion of our
development services were under fixed fee arrangements, which contained lower
margins.

Research and Development Expenses. Research and development expenses
during the year ended December 31, 1997 increased by approximately $493,000, or
26%, compared to the year ended December 31, 1996 due to overall growth of
research and development operations, the initiation of significant new research
and development projects and increases in salaries and other costs associated
with research and development operations.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased in the year ended December 31, 1997 by
approximately $16,000 compared to the year ended December 31, 1996, and as a

26
<PAGE>
percentage of sales decreased to approximately 27% in the year ended December
31, 1997 from approximately 60% in the year ended December 31, 1996. The
decrease in the percentage of sales was a result of our ability to leverage our
expenses over more sales.

Income Tax Provision. Provision for income taxes increased in the
year ended December 31, 1997 by approximately $2.2 million compared to the year
ended December 31, 1996, due to increased pre-tax income. Our overall effective
tax rate was approximately 38% in the year ended December 31, 1996 and 37% in
the year ended December 31, 1997.

Net Income. Net income increased in the year ended December 31, 1997
by approximately $3.6 million compared to the year ended December 31, 1996. The
increase resulted primarily from the factors described above.

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following tables set forth statement of operations data for each
of the seven consecutive quarters ended October 31, 1999. This information has
been derived from our unaudited financial statements. The unaudited financial
statements have been prepared substantially on the same basis as the audited
financial statements appearing elsewhere in this prospectus and include all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for a fair presentation of such information. You should read this
information in conjunction with our financial statements and the related notes
elsewhere in this prospectus. The operating results for any quarter are not
necessarily indicative of the operating results of any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------------
APR. 30, JULY 31, OCT. 31, JAN. 31, APR. 30, JULY 31, OCT. 31,
1998 1998 1998 1999 1999 1999 1999
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales..................... $4,261 $4,554 $4,721 $5,093 $5,363 $6,069 $6,792
Cost of sales............. 1,527 1,517 1,460 1,627 1,888 2,076 2,347
------- ------- ------- ------- ------- ------- -------
Gross profit.............. 2,734 3,037 3,261 3,466 3,475 3,993 4,445
Research and
development............ 1,079 1,194 1,178 1,255 1,299 1,405 1,559
Selling, general and
administrative......... 998 1,168 1,336 1,446 1,703 1,959 2,159
Interest income
(expense), net......... (107) (83) (103) (57) (66) (43) (70)
------- ------- ------- ------- ------- ------- -------
Income before
income taxes........... 550 592 644 708 407 586 657
Income tax provision...... 204 219 243 261 156 225 247
------- ------- ------- ------- ------- ------- -------
Net income................ $346 $373 $401 $447 $251 $361 $410
======= ======= ======= ======= ======= ======= =======

27
<PAGE>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------------
APR. 30, JULY 31, OCT. 31, JAN. 31, APR. 30, JULY 31, OCT. 31,
1998 1998 1998 1999 1999 1999 1999
---- ---- ---- ---- ---- ---- ----
AS A PERCENTAGE OF SALES:
Sales....................... 100.0 % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............... 35.8 33.3 31.0 31.9 35.2 34.2 34.6
Gross profit................ 64.2 66.7 69.0 68.1 64.8 65.8 65.4
Research and
development.............. 25.3 26.2 25.0 24.6 24.2 23.2 23.0
Selling, general and
administrative........... 23.4 25.7 28.3 28.4 31.8 32.3 31.8
Interest income
(expense), net........... (2.6) (1.8) (2.2) (1.2) (1.2) (.7) (1.0)
Income before income
taxes.................... 12.9 13.0 13.5 13.9 7.6 9.6 9.6
Income tax provision........ 4.8 4.8 5.0 5.2 2.9 3.7 3.6
------- ------- ------- ------- ------- ------- -------
Net income.................. 8.1% 8.2% 8.5% 8.7% 4.7% 5.9% 6.0%
======= ======= ======= ======= ======= ======= =======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations and met our capital expenditure
requirements primarily through cash flows from operations and borrowings from
Comverse. As of October 31, 1999, we had cash and cash equivalents of
approximately $2.6 million and working capital of approximately $89,000.

In January 2000, we borrowed $3.8 million under a term loan from a
bank. We used the loan proceeds to repay outstanding indebtedness owed to
Comverse. The term loan is due in July 2001, bears interest at a rate of LIBOR
plus 0.35% and may be prepaid without penalty on each six-month anniversary of
the loan. The term loan is secured by a deposit of Comverse at that bank. As of
January 18, 2000, the interest rate on the loan was 6.565%. We expect to use the
proceeds of this offering to prepay the loan in July 2000.

We may in the future pursue acquisitions of businesses, products or
technologies that could expand our business and the products we offer. Any
material acquisition could result in a decrease of the working capital depending
upon the amount, timing and nature of the consideration paid.

We believe that the net proceeds from this offering, together with
our current cash balances and potential cash flow from operations, will be
sufficient to meet the anticipated cash needs for working capital, capital
expenditures and other activities for at least the next 12 months. Thereafter,
if current sources are not sufficient to meet our needs, we may seek additional
debt or equity financing. In addition, although there are no present
understandings, commitments or agreements with respect to any acquisitions of
other businesses, products, or technologies, we may in the future consider such
transactions which may require additional debt or equity financing. There can be
no assurance that such additional financing would be available on acceptable
terms, if at all.

YEAR 2000 COMPLIANCE

Our Products. We have completed a comprehensive program designed to
address year 2000 readiness of our current products and have made enquiries
regarding the year 2000 compliance of components or technologies we acquire from
others and incorporate into our products. Although we believe that our current
products generally are year 2000 compliant, we cannot assure you that our year
2000 compliance efforts will prove to be fully successful or that unanticipated
costs and problems will not arise. In addition, we have determined that older
generations of a number of our products are not and cannot, without unreasonable
effort and expense, be made year 2000 compliant.

To date we have not experienced any material year 2000 compliance
problems with our products. Nevertheless, we may in the future receive warranty
and other claims as a result of year 2000 issues arising from undetected defects

28
<PAGE>
in our products or the non-compliance of components or technologies we acquire
from others. Our agreements with customers typically contain provisions designed
to limit generally our liability for customer claims. It is possible, however,
that these measures will not provide adequate protection from year 2000
liability claims, as a result of existing or future laws or unfavorable judicial
decisions. Any such claims could result in a material adverse affect on our
business, financial condition and results of operations, including increased
warranty costs, customer satisfaction issues and potential legal damages.

Our Internal Systems. We have completed a comprehensive program
designed to address year 2000 readiness of our most critical internal systems.
Based on this program and on our experience to date, we believe that our
critical internal systems are year 2000 compliant.

Significant Customers and Suppliers. We have communicated with our
significant customers and suppliers and financial institutions to determine the
extent to which we are vulnerable to the failure of their internal systems to be
year 2000 compliant. We have received assurances of year 2000 compliance from a
number of those contacted. Most of our customers and suppliers under existing
contracts were under no contractual obligation to provide us with such
information. Although to date we have not experienced any significant
operational problems with our significant customers and suppliers as a result of
the year 2000 issue, we cannot assure you that such problems will not arise in
the future.

Costs. We currently expect that the total cost of our year 2000
readiness programs for the fiscal year ended January 31, 2000 will not exceed $1
million. This total cost estimate does not include potential costs related to
any customer or other claims or the costs of internal software or hardware
replaced in the normal course of business.

29
<PAGE>
BUSINESS

OVERVIEW

We are a leading provider of mission-critical network signaling
software for wireless, wireline and Internet communication services. Our
Signalware call control products interconnect the complex switching, database
and messaging systems and manage the vital number, routing and billing
information that form the backbone of today's communication networks. Signalware
enables communication service providers to offer "Intelligent Network" services,
such as voice-activated dialing, prepaid calling, caller ID and text messaging.
These products also enable voice and data networks to interoperate, or converge,
allowing service providers to offer such "converged network" services as voice
over the Internet and Internet call waiting. Our new Nexworx product line is
designed to move service control into the hands of subscribers, so that
businesses or consumers can access network resources to create, manage and
personalize their communication services.

INDUSTRY BACKGROUND

Demand for enhanced voice and data communication services has grown
rapidly in recent years due to the following trends:

o the growth of the Internet as a global communications medium
enabling millions of people to share information and conduct
business electronically;

o the growth in wireless communications as cellular and other
wireless services have become more widely available and
affordable; and

o the introduction of new services by traditional service
providers and an increasing number of new competitive service
providers, including Internet and wireless service providers.

In response to these trends, service providers are building
increasingly complex communication networks. Traditionally, voice networks were
based on a technology called "circuit switching." While circuit switching has
offered reliable and high quality voice communications, an emerging technology
called "packet switching" is inherently more efficient and cost effective. The
cost and performance superiority of packet switching has led many traditional
and new service providers to build packet networks to handle data traffic. It
has also led service providers to explore the interoperability or convergence of
voice and data networks and the transmission of voice communications over packet
networks.

The circuit switched network provides its high voice quality and
reliability by separating the voice and signaling portions of a call. The
signaling infrastructure processes in real time the information needed to
set-up, connect, route, terminate and bill a call, and also provides a
foundation to develop and offer enhanced network services. The signaling portion
of a telephone network that controls each call is based on a complex set of
standards and protocols called "Signaling System #7" or SS7. SS7 has been
implemented by service providers worldwide, including traditional, emerging,
Internet and wireless service providers. SS7 provides the speed and reliability
required for processing increasingly complex call control information. Because

30
<PAGE>
SS7 is the industry-wide standard signaling protocol, industry experts believe
that signaling for converged circuit and packet networks will be based upon SS7
as well.

THE MARKET OPPORTUNITY

There is increasing demand for innovative enabling products that
allow the rapid creation and delivery of new services on intelligent and
converged networks. Some of the key challenges that service providers face
include:

o expanding and/or upgrading their network infrastructure to
support enhanced services;

o building and managing networks that can cost-effectively
support circuit and packet technologies; and

o enabling subscribers to access network resources to create,
manage and personalize their voice and data communication
services.

Service providers are seeking high performance network signaling
software products that can facilitate the convergence of circuit and packet
networks without compromising functionality, reliability and scalability. We
also believe that most equipment manufacturers and service providers would
prefer purchasing network signaling software products which they can easily
bundle and sell with their own products rather than develop these software
products internally.

We believe that an emerging opportunity exists to develop the next
generation of communication networks, which we believe will be accessible to
subscribers and provide programmability when subscribers need it. Our vision of
this programmable network is a network which places service control in the hands
of subscribers, enabling them to manage communication network resources from a
desktop or hand-held computer.

THE ULTICOM SOLUTION

We are a leading provider of mission-critical network signaling
software products for wireless, wireline and Internet communication services.
Our products enable service providers to expand and/or upgrade their networks to
support new and enhanced services and facilitate the convergence of circuit and
packet networks. We are developing additional products to address the need for
an emerging programmable network. These products will help separate
communications services from the network infrastructure, allowing subscribers to
have more control over their voice and data communications.

Our products provide our customers with the following key benefits:

31
<PAGE>
OUR STRATEGY

Our objective is to be the leading provider of mission-critical
network signaling software for wireless, wireline and Internet communication
services. Key elements of our strategy to achieve this objective include:

Enhance Technology Leadership. We believe that one of our core
competitive strengths is the breadth of our knowledge and expertise in
communication technologies, particularly in voice and data call control, such as
SS7 and other related signaling technologies. We intend to enhance our existing
products and to develop new products by continuing to make significant
investments in research and development.

Target High Growth Market Opportunities. We are leveraging our core
technologies and market leadership position to develop solutions targeted at
high growth opportunities in our market, including:

o products that enable the creation of new Intelligent Network
services on existing wireless and wireline networks;

o products that enable the convergence of circuit and packet
networks and the development of new services on these
converged networks; and

o products for the programmable network of the future that will
enable subscribers - business and consumer - to create, manage
and personalize their voice and data communication services.

Set Industry Standards. We believe that active participation in
setting industry standards is critical to maintain our position as a market
leader and foster continued growth. We are a founding member of two industry
consortia, the Parlay Group and the JAIN initiative, both of which are driving
standards to facilitate the rapid development and deployment of communication
services. We also play a leadership role in the Softswitch Consortium, an
industry organization created for global cooperation and coordination in the
development of open standards and interoperability for packet networks.

Develop Channel Relationships with Industry Leaders. Establishing
strong relationships with leading equipment manufacturers, application
developers, systems integrators and service providers is important to the
successful worldwide deployment of our solutions. We have developed and will
continue to develop these relationships to enhance the marketing and
distribution of our solutions.

Expand Our International Presence. Our customers are located
throughout the world and our products are deployed globally. We have a
development, support and sales office in France and we anticipate further
expansion in Europe to better serve our existing customers and develop new
customer relationships. We may also seek to expand into the Pacific Rim, either
through establishment of new sales offices, or through one or more channel
relationships.

PRODUCTS AND SERVICES

We currently offer two product lines, Signalware and Nexworx:

Signalware

Our Signalware call control products work within wireless, wireline and Internet
networks to interconnect and interoperate voice and data communication systems
and services. Signalware provides our customers with many of the features that
are crucial to the global connectivity of communication networks, including the
ability to:

o run applications on multiple software platforms (open
standards);

32
<PAGE>
o build systems with no single point of failure (fault
resilience);

o process transactions at very high rates (high performance);

o increase computing capacity to run various applications
(scalability); and

o create applications that could run on various communications
networks around the world (global operability).

Signalware plays a key role in the convergence of disparate networks
by providing a means to bridge circuit and packet technology. Signalware also
enables carriers to offer Intelligent Network services, which include services
other than the call or data transmission itself. Signalware is used to build a
wide range of Intelligent Network services and services for converged networks,
including:

- --------------------------------------------------------------------------------
SIGNALWARE
- --------------------------------------------------------------------------------

INTELLIGENT NETWORK SERVICES: CONVERGED NETWORK SERVICES:
- ----------------------------- ---------------------------

Satellite Services Wireless Internet Services
Prepaid Calling Service Voice over the Internet Services
Virtual Private Networks Internet Call Waiting
Wireless Authentication Internet Call Forwarding
Wireless Roaming Service Wireless Email Service
Caller ID Internet Fax Delivery
Number Portability Unified Messaging
Wireless 911 Service
Wireless Text Messaging
800 Number Service
Voice Messaging Service
Personal Number Service
411/Operator Assistance
Voice Activated Dialing
Taxi Dispatch Service
Enhanced 611 Service
Electronic Banking Service
Televoting
Airport Information Service

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

Signalware is sold in packages that offer specific features and
functionality. Signalware includes application programming interfaces which work
with multiple SS7 networks (for example, North American ANSI, European ITU,
Chinese TTC, and Japanese NTT), support a wide variety of SS7 protocol elements
and enable analog or digital wireless transmission. Signalware provides the
functionality needed for network connection processing (call set-up/call
termination), and transaction management (call routing/call billing). Signalware
product packages are offered for a range of operating systems, including Sun
Solaris, Unixware, and Windows NT, and for a broad range of hardware platforms.
Signalware packages can be configured for use in single or multiple computing
configurations for fault resiliency and mission-critical reliability. Our
Signalware Gateway package provides a means to separate the signaling function
from the application development environment which provides greater flexibility
in configuring services.

Our Signalware product includes interface boards which are necessary
to provide the physical connection to the signaling network. Signalware boards
are configured to support a wide range of hardware platforms and network links.
The bundling of our interface boards with our Signalware software allows us to
control product performance, capacity and compliance with standards.

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<PAGE>
New customers begin development of applications and services by
purchasing the appropriate Signalware development kit, which includes a
development site license. Each kit includes software, an interface board, cables
and documentation, along with registration for two training classes. A
development maintenance plan for one year is also included with each development
kit. The maintenance plan provides access to customer support services,
including our help desk, along with service packs and scheduled release upgrades
of the software. After the initial year the maintenance plan must be renewed for
a fee in order to continue to receive support and upgrades.

When the application is ready for installation, the customer
purchases one or more deployment licenses per installation, in addition to
continuing the development site license and maintenance. In addition, in order
to deploy our systems, a customer generally must purchase one or more interface
boards and a deployment system maintenance and support plan.

Nexworx

In June 1999, we announced our Nexworx service control product line.
Currently, this product combines the key attributes of Signalware with an
object-oriented database and additional network management capabilities creating
a platform for new programmable network services. Our Nexworx product line is
designed to move service control into the hands of subscribers, so that
businesses and consumers can access network resources to create, manage and
personalize their communication services. Our first Nexworx product is a
software-based server that enables subscribers to maintain their telephone
number, regardless of location or service provider. The product is highly
scalable to give the service provider the capacity for growth as demand for this
and future Nexworx services increase. Other Nexworx products currently under
development may enable subscribers to create a virtual call center on a desktop
through a programming interface and schedule time-of-day routing through a
browser interface over the Internet.

Support Services

We believe that customer support, training and custom development
services are key to building and maintaining strong customer relationships. We
offer customer support to our customers as part of their maintenance agreements:

Customer Support. We provide comprehensive technical support to help
our customers develop and deploy new services. Our support organization provides
continuous support and interfaces with customers' technical staff through a
24-hour-a-day, 7-day-a-week help desk to answer questions, resolve problems and
provide assistance. Our support organization is managed through our corporate
headquarters in Mount Laurel, New Jersey with remote service locations in Texas
and France to provide extended geographic and same-time-zone coverage.

Training Services. We offer our customers a comprehensive training
program with courses in application development and operations and
troubleshooting. Courses are scheduled throughout the year. We also provide
customized and/or on-site training programs to meet the specific needs of our
customers for an additional fee.

Custom Development Services. We offer fee-based custom development
services to create customer-specific enhancements to our products. Such services
are provided by our experienced engineering staff. This service assists
customers by accelerating their time-to-market, and also hastens the point in
the development cycle when we begin to receive recurring license deployment
royalties.

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<PAGE>
SALES AND MARKETING

Sales Operations

Our sales organization operates from the U.S. and Europe. Account
teams comprised of dedicated account managers and pre-sales engineers work
closely with our product management and development organizations to provide
customers a consultative sales approach. The consultative approach facilitates
the sale of development kits to enable our customers to immediately begin to
build prototypes of their products.

Marketing

We actively work to further enhance market awareness and acceptance
of our company and our products. To this end our efforts are focused on
identifying market opportunities in cooperation with our customers and
developing and enhancing our products to seize these opportunities in a timely
fashion. Based on market considerations, we may port our software products to
additional operating systems, develop new features and functionality and engage
in new strategic alliances and partnerships.

Our market strategy includes enhancing brand awareness for our
Signalware and Nexworx product lines with a web site, promotional literature,
direct marketing to current and prospective customers using an e-services
approach, advertising, continued participation in industry relevant trade shows
and conferences, and a public relations program that includes public
demonstrations of products and prototypes. Our representatives also are called
upon to address industry symposia and conferences, are frequently quoted in
industry publications and may from time to time author articles about
developments in communications technology.

Channel Relationships

Our products are sold primarily to equipment manufacturers and
application developers, who include our products within their products and sell
them as an integrated solution to service providers. Service providers will
install the solution in their communication networks and offer the service
enabled by such solution to their subscribers. Since we and our customers have a
mutual interest in developing solutions that are widely accepted by subscribers
and profitable to service providers, we work closely with our customers to
support their development efforts and produce solutions that are unique,
reliable, scalable and cost effective. For example, we engage in joint
promotion, sales efforts, training, testing, design, integration and
installation with Sun Microsystems and other computer integrators who use Sun
Microsystems' components.

CUSTOMERS

Our products are currently used by over 40 customers and are deployed
in more than 50 countries. We market our products and services through a direct
sales organization and through key relationships with our customers. Our
customers include:

o equipment manufacturers, such as Alcatel, Compaq, Convergent
Networks, Ericsson, Lucent, Nokia, Qualcomm, Siemens, Sonus
Networks and Sun Microsystems;

o application developers, such as Clarent, CNS, Hughes Network
Systems, Logica, Targus, telecom technologies, inc., USAN and
UTStarcomm; and

o service providers, such as Frontier Communications, Level (3)
Communications and MCI WorldCom.

For Fiscal 1997, Sun Microsystems, Qualcomm, Siemens and CNS and its
affiliates accounted for approximately 10%, 13%, 13% and 19% respectively, of
our sales. For Fiscal 1998, Siemens and CNS and its affiliates accounted for

35
<PAGE>
approximately 13% and 20%, respectively, of our sales. For the nine months ended
October 31, 1999, Ericsson, Siemens and CNS and its affiliates accounted for
approximately 26%, 11% and 17%, respectively, of our sales.

Sales to international customers accounted for 50% of our revenues in
Fiscal 1997, 51% of our revenues in Fiscal 1998 and 65% of our revenues for the
nine months ended October 31, 1999.

ALLIANCES AND CONSORTIA

The Parlay Group

We are leaders in defining the technology that facilitates the
convergence of telephone networks with the Internet. We introduced the concept
of the "programmable network" in a 1997 white paper. Following our white paper,
we were approached by British Telecom, Microsoft, Nortel and Siemens to further
explore this concept. These discussions resulted in the founding of the Parlay
Group in March 1998.

The Parlay Group, an industry consortium now with 11 members, seeks
to specify an application programming interface ("Parlay API") to enable secure,
public access to core capabilities of voice and data networks. The goal of The
Parlay Group is to open up communications capabilities in the same manner that
the architecture of the personal computer permitted software developers to be
creative and to innovate. The Parlay API enables service providers and
application developers to integrate communications capabilities into generic
information technology software. Implementation of the Parlay API will allow
service providers to offer "mass-customization" of services that meet the
specific needs of their subscribers. Two specifications of the Parlay API have
been published to date. The Parlay API is platform-vendor-independent and
technology-independent, allowing it to be implemented on multiple operating
systems (including Windows NT, JAVA and UNIX) and work easily with other
industry initiatives. Members of The Parlay Group as of January 1, 2000 are set
forth in the table below.

- --------------------------------------------------------------------------------
THE PARLAY GROUP
- --------------------------------------------------------------------------------
FOUNDING MEMBERS OTHER MEMBERS
- ---------------- -------------

Ulticom AT&T
British Telecom Cegetel
Microsoft Cisco
Nortel Ericsson
Siemens IBM
Lucent
- --------------------------------------------------------------------------------

JAIN Initiative

In June 1998, we became a founding member of the "JAVA API Integrated
Networks" ("JAIN") industry initiative to define common interfaces between
Intelligent Network and SS7 environments so that services and protocols can run
anywhere in the network. This initiative, lead by Sun Microsystems, will help
service providers, most of whom have a variety of hardware and software
environments within their networks, by eliminating the need to program many
different devices to provide one new service. The objective of the JAIN
initiative is to make Intelligent Network application development, including
computer telephony integration, faster, simpler and less expensive through
platform-independent JAVA technology. Members of the JAIN industry initiative as
of January 1, 2000 are set forth in the table below.

36
<PAGE>
- --------------------------------------------------------------------------------
JAIN (JAVA API INTEGRATED NETWORKS) INITIATIVE
- --------------------------------------------------------------------------------
FOUNDING MEMBERS
- ----------------

Sun Microsystems
Ulticom
ADC NewNet
Ericsson InfoTech
ApiON (now part of Phone.com)

- --------------------------------------------------------------------------------
OTHER MEMBERS
- -------------

Andersen Consulting Natural Microsystems
British Telecom Nokia
Broadsoft Nortel
Cisco NTT
CMG Object Wave Corporation
Datakinetics Oracle
DynamicSoft Periphonics Corporation
Eurescom (representing 26 European service Siemens
providers) Solentro
France Telecom Symsoft
INP/MTL Telcordia
KPN Telesoft Design
Lucent Telesys Software
Mahindra Trillium
Motorola Westwave Communications
- --------------------------------------------------------------------------------

International Softswitch Consortium

In August 1999, we joined the International Softswitch Consortium, an
organization founded in May 1999 for international cooperation and coordination
of internetworking technologies in the field of Internet-based real-time
interactive communications and related applications. Many applications emulate
circuit switching software, hence the name "softswitch." The Softswitch
Consortium is a non-profit corporation with open membership committed to
advancing Internet protocol distributed network architecture standards that
enable and expedite application development. More than 50 companies from around
the world participate as members of the organization.

Work of the Softswitch Consortium focuses on the compatibility and
interoperability of multimedia Internet protocol networks and their
interconnection to other networks such as the voice telephone networks. The
purpose of the Softswitch Consortium is to support rapid advancement of
application development for evolving Internet protocol networks which support
both voice and multimedia communications. We participate in two Softswitch
working groups:

o the architecture working group, which will create and document
the reference architecture for the softswitch; and

o the applications working group, which will focus on a means to
build applications in the softswitch environment.

RESEARCH AND DEVELOPMENT

We continue to enhance the features and performance of our existing
products and introduce new products. We believe that our future success depends
on a number of factors, which include our ability to:

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<PAGE>
o identify and respond to emerging technological trends in our
target markets;

o develop and maintain competitive solutions that meet our
customers' changing needs; and

o enhance our existing products by adding features and
functionality that differentiate our products from those of
our competitors.

As a result, we have made and intend to continue to make significant
investments in research and development. We allocate our research and
development resources in response to market research and customer demands for
additional features and products. Our development strategy involves rolling out
initial releases of our products and adding features over time. We continuously
incorporate product feedback we receive from our customers into our product
development process. While we expect that new products will continue to be
developed internally, we may, based on timing and cost considerations, acquire
or license technologies, products or applications from third parties.

Our research and development expenses were approximately $2.4 million
for Fiscal 1997, $4.7 million for Fiscal 1998 and $4.3 million for the nine
months ended October 31, 1999. Our research and development activities are
located in Mount Laurel, New Jersey, Dallas, Texas and in France. As of January
1, 2000, we had 47 employees engaged in our research and development activities.
We believe that recruiting and retaining highly skilled engineering personnel is
essential to our success.

MANUFACTURING

Our Signalware products have two components: software and interface
boards. Our software is duplicated in house and provided to customers on several
media, primarily CD-ROM, and digital audio tape. Each software shipment is
configured to provide the specific operating system version and features
requested by the customer. Each order is tracked by purchase order number and
documented according to internal quality standards.

Assembly of our printed circuit interface boards is performed by
subcontractors who are ISO certified. Periodic audits are performed to ensure
adherence to quality standards. Subcontractors are responsible for purchasing,
inspecting, installing and assembling components of our interface boards.
Completed assemblies are burned-in, inspected, tested and packaged in our
facility according to ISO standards. All inspection, test, repair, revision and
shipping information is tracked by product type and serial number and maintained
in our tracking database.

We work closely with our interface board component suppliers to
monitor component changes and availability. However, we do not have any long
term supply agreements with these suppliers to ensure uninterrupted supply of
components. Under certain circumstances, we may place blanket orders to ensure
availability of discontinued components. In the event of a reduction or an
interruption in the supply of components, a significant amount of time could be
required to qualify alternate suppliers and receive an adequate supply of
replacement components.

We do not have any long term agreements with any of our
manufacturers, some of whom are small, privately held companies. In the event
that these manufacturers experience financial, operational or quality assurance
difficulties, our business could be adversely affected until an alternate
manufacturer could be found. There is no assurance that an alternate
manufacturer will be able to meet our requirements or that existing or alternate
sources for interface boards will continue to be available at favorable prices.

INTELLECTUAL PROPERTY RIGHTS

We have accumulated a significant amount of proprietary know-how and
expertise over the years in developing network signaling software and SS7
protocol technology for communication services. Our continued success is
dependent, in part, upon our ability to protect our proprietary rights to the

38
<PAGE>
technologies used in our products. If we are not adequately protected, our
competitors could use the intellectual property that we have developed to
enhance their products and services, which could harm our business. To safeguard
our proprietary technology, we rely on a combination of technical innovation,
trade secret, copyright and trademark laws, restricted licensing arrangements
and non-disclosure agreements, each of which affords only limited protection,
and in the future we may rely on patents. There can be no assurance that these
measures will adequately protect us from disclosure or misappropriation of our
proprietary information. In addition, the laws of some foreign countries do not
protect our proprietary rights in our products to the same extent as do U.S.
laws.

As of October 31, 1999, we had no registered patents and one patent
application pending. We occasionally review with our patent attorneys new areas
of technology to determine whether they are patentable. However, there can be no
assurance that we will receive any patents.

We license software from third parties that is incorporated into some
versions of Signalware for the Windows NT operating system. Our Nexworx products
also include licensed software from third parties.

Signalware technology is primarily licensed to customers based on
object code royalties. Due to the value of our intellectual property rights, we
do not generally make source code available to customers. Exceptions to this
principle were made in the past, in limited circumstances, for large customers
where adequate control mechanisms were in place to protect our intellectual
property rights.

We have granted CNS, our affiliate, a perpetual, royalty-free,
non-exclusive license to use and operate software products for incorporation
into any of CNS' products. See "Related Party Transactions- Computer Software
License Agreement."

Our affiliate, Comverse Patent Holding Company, Inc. ("CPH"), entered
into an agreement with Lucent Technologies GRL Corp. ("Lucent GRL") under which
CPH granted Lucent GRL a non-exclusive license to those patents now owned by CPH
or which CPH has a right to license and to those patents granted to CPH or which
CPH obtains the right to license during the term of the agreement. In return,
CPH was granted a non-exclusive license to certain patents now owned by Lucent
GRL or which Lucent GRL has a right to license and to those patents granted to
Lucent GRL or which Lucent GRL obtains the right to license during the term of
the agreement. The agreement provides that CPH has the right to grant a
sublicense to us. In connection with that agreement, we entered into a patent
license agreement with CPH pursuant to which we have granted a non-exclusive
royalty-free license to CPH with the right to sublicense to Lucent GRL our
patents and those patents granted to us or which we obtain the right to license
during the term of the agreement. In return, CPH granted to us a non-exclusive
royalty-free sublicense to all patents that are licensed by Lucent GRL to CPH.
See "Related Party Transactions - Patent License Agreement."

Despite the measures we have taken, it may be possible for a third
party to copy or otherwise obtain and use our proprietary technology and
information without authorization. Policing unauthorized use of our products is
difficult and litigation may be necessary in the future to enforce our
intellectual property rights. Any such litigation could be time consuming and
expensive to prosecute or resolve, result in substantial diversion of management
resources, and have a material adverse effect on our business and operating
results. We cannot assure you that we will be successful in protecting our
proprietary technology.

COMPETITION

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<PAGE>
We compete with a number of U.S. and international suppliers that
vary in size and in the scope and breadth of the products and services offered.
Competitors for our present and planned future products include a number of
companies ranging from SS7 software solution providers to vendors of
communication and network infrastructure equipment providers. We compete
principally on the basis of:

o product performance and functionality;

o product quality and reliability;

o customer service and support; and

o price.

Some of our competitors have greater financial, personnel and other
resources, offer a broader range of products and services than us, and may be
able to respond more quickly to new or emerging technologies or changes in
customer requirements, benefit from greater purchasing economies, offer more
aggressive pricing or devote greater resources to the promotion of their
products. We cannot assure you that our competitors will not develop superior
products that achieve greater market acceptance than our products. In addition,
some of our customers may in the future decide to develop internally their own
signaling software platforms and other software-based solutions instead of
purchasing them from us.

We believe our success will depend primarily on our ability to
provide technologically advanced and cost effective signaling solutions.
Additionally, we must provide our customers with prompt and responsive customer
support. However, we cannot assure you that the products and services we offer
will compete effectively with those of our competitors or that our customers
will not seek to develop their own substitutes for our products internally.
Furthermore, should competition intensify, we may have to reduce the prices of
our products. If we are unable to compete successfully against our competitors
or if our customers opt to develop internally substitutes for our products, our
business and operating results would be materially adversely affected.

EMPLOYEES

As of October 31, 1999, we had approximately 149 employees. We
consider our relationship with our employees to be good. Our employees are not
covered by any collective bargaining agreement.

Our success depends, in part, on our ability to continue to attract,
motivate and retain additional highly qualified employees, particularly
employees with SS7 signaling knowledge and experience. The process of locating
such employees with the combination of skills and attributes necessary to
implement our strategy is lengthy. The loss of any existing key employee or the
inability to attract, motivate and retain additional qualified employees could
have a material adverse effect on our business and operating results.

FACILITIES

We have headquarters and development facilities in Mount Laurel, New
Jersey where we lease approximately 36,000 square feet of office space. We also
lease approximately 9,000 square feet of office space for a development, support
and sales facility in Dallas, Texas. In addition, we lease a development,
support and sales office in France. Due to our growth, we anticipate leasing new
office space in Dallas and in France. We believe that the additional space will
be available when it is needed.

LEGAL PROCEEDINGS

We are subject to legal actions arising in the normal course of our
business. We do not believe that any pending legal action would, if adversely
determined, have a material adverse effect on our business or operating results.

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<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

We currently have two directors, Messrs. Alexander and Sorin. We will
add Messrs. Osborne, Kreinberg, Baker and Koren as directors prior to the
completion of the offering and, following the completion of this offering, we
will add three additional directors. Information about these directors and our
executive officers and key employees is as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Executive Officers and Directors:
Kobi Alexander (1)(3)............................ 47 Chairman of the Board of Directors and Director
Shawn Osborne (1)................................ 39 President and Chief Executive Officer and Proposed Director
David Kreinberg (1).............................. 35 Chief Financial Officer and Proposed Director
William F. Sorin (1)(3)......................... 51 Secretary and Director
Paul D. Baker .................................. 41 Proposed Director
Yaacov Koren ................................... 46 Proposed Director
Zvi Bar-On (2)................................... 48 Nominee Director*
Ron Hiram (2)(3)................................. 47 Nominee Director*
Rex McWilliams (2).............................. 64 Nominee Director*

Key Employees:
Alan P. David ................................... 45 Vice President of Quality and Information
Steven C. Davis.................................. 50 Vice President of Research and Development
James H. Grim ................................... 38 Vice President of Engineering
James Johnston .................................. 43 Vice President of Operations
Lisa Roberts .................................... 34 Vice President of Finance
Kannan Sreedhar ................................. 41 Vice President of Sales and Marketing

</TABLE>

- -----------------------------
* This nominee shall become a director upon closing of this offering.
(1) Member of the executive committee.
(2) Member of the audit committee and the stock option committee.
(3) Member of the compensation committee.

Executive Officers and Directors

KOBI ALEXANDER has been a director since August, 1995. Mr. Alexander,
a founder of Comverse Technology, Inc., has served as Chairman of the Board of
Directors of Comverse since September 1986, as President and Chief Executive
Officer since April 1987 and as a director of Comverse since its formation in
October 1984. Mr. Alexander also served as Co-Managing Director of Comverse's
wholly-owned Israeli subsidiary, Comverse Network Systems Ltd. from its
formation in 1982 until October 1986. From October 1984 to September 1986, Mr.
Alexander served as Co-Chairman and Co-Chief Executive Officer of Comverse.
Prior to the formation of Comverse Network Systems, in 1980 and 1981, Mr.
Alexander served as an independent financial and business consultant to a number
of multinational corporations. Between 1978 and 1980, Mr. Alexander worked in
the Corporate Finance Department of Shearson Loeb Rhoades. Mr. Alexander
received a B.A., magna cum laude, in Economics from the Hebrew University of
Jerusalem in 1977, and an M.B.A. in finance from New York University in 1980. He
has served as the Chairman of the High-Tech Research and Development Section of
the Israeli Association of Industrialists.

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<PAGE>
SHAWN K. OSBORNE was named our President and Chief Executive Officer
in September 1997 and will be added as a director in January 2000. Mr. Osborne
joined our company in January 1997 as Vice President of Sales and Strategic
Planning. Mr. Osborne was President and Vice President of Sales and Marketing of
CellTel Data, a provider of wireless data systems and transaction services, from
October 1994 to January 1997. Prior to joining CellTel, Mr. Osborne held senior
level management positions with several high-technology communications
companies, including Vice President of Sales of EBS (now ADCNewNet), and Vice
President of Sales and Marketing of Cognitronics Corporation. Mr. Osborne
received a B.S. in computer science from the State University of New York. He
currently serves on the Board of Directors of the Telecommunications Industry
Association.

DAVID KREINBERG was named Chief Financial Officer in December 1999
and will be added as a director in January 2000. He also serves as Vice
President of Finance and Chief Financial Officer of Comverse Technology, Inc., a
position he has held since May 1999. He previously had served Comverse as Vice
President of Finance and Treasurer from April 1996, and Vice President of
Financial Planning from April 1994. Mr. Kreinberg is a Certified Public
Accountant, and prior to joining Comverse he was a senior manager at Deloitte &
Touche LLP. Mr. Kreinberg received a B.S., summa cum laude, in accounting from
Yeshiva University and an M.B.A. in finance and international business from
Columbia Business School in 1986 and 1990, respectively.

WILLIAM F. SORIN has served as a director since August 1995. He has
served as the Corporate Secretary and a director of Comverse Technology, Inc.
since its formation in October 1984. He is an attorney engaged in private
practice and is general counsel to Comverse. Mr. Sorin received a B.A. in
Economics from Trinity College in 1970 and a J.D., cum laude, from Harvard Law
School in 1973.

PAUL D. BAKER will be added as a director in January 2000. He also
serves as Vice President, Corporate and Marketing Communications of Comverse
Technology, Inc., a position he has held since joining Comverse in April 1991.
Mr. Baker held various positions in sales, marketing, and corporate
communications with Robotic Vision Systems, Inc. from 1984 to 1991. Mr. Baker
received a B.S. in Management from Babson College in 1980 and an M.B.A. in
marketing management from St. John's University in 1984.

YAACOV KOREN will be added as a director in January 2000. Mr. Koren
is the Managing Director of Comverse Investments Ltd., an investment division of
Comverse Technology, Inc., a position he has held since July 1994. Additionally,
Mr. Koren serves on the board of directors of several other companies, primarily
companies in which the Comverse group is invested. Mr. Koren has over 20 years
of experience in the investment and financial industries. Prior to joining
Comverse, Mr. Koren was the Chief Executive Officer of Batucha Securities and
Investments Ltd., one of the largest Israeli brokerage and portfolio management
companies. Mr. Koren received his LL.B. from the Tel-Aviv University, Law School
in 1982.

ZVI BAR-ON will become a director effective upon the completion of
this offering. Mr. Bar-On is the founder, President and Chief Executive Officer
of ComponentControl.Com, a business he founded in May 1998. In 1984 he also
founded and managed Aero Support USA Inc., which was merged during 1997 with
Kellstrom Industries. From 1981 to 1983, he was employed as a Sales Manager and
Marketing Director by Electro Methods Inc., becoming the company's President in
1983. He received an M.B.A. from New York University in 1981 and a B.S. in
Mechanical Engineering from Brooklyn Polytechnic in 1976.

RON HIRAM will become a director effective upon the closing of this
offering. Mr. Hiram joined Soros Fund Management L.L.C. in February 1995 and
became a Managing Director in January 1997. He also serves as a member of boards
of directors of portfolio companies of Soros Fund Management and as a member of
management committees of joint venture and investment partners. Prior to joining
Soros Fund Management, Mr. Hiram was at Lehman Brothers for 12 years, most
recently serving as Managing Director. Mr. Hiram received an M.B.A. from
Columbia University in 1981.

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<PAGE>
REX A. MCWILLIAMS will become a director of our company effective
upon the closing of this offering. Mr. McWilliams is the Chairman of ODI
Diagnostics, a position he has held since April 1999. Between 1974 and September
1997, Mr. McWilliams served as our Chairman and CEO. Previously, he was a
partner in Technology Management Group. He also was the Co-Founder of National
Computer Analysts and served as its President from 1965 through 1970. Between
1957 and 1962, he was involved with computer development with RCA Computer
Division. Mr. McWilliams has a B.S. in Mathematics/Physics from Morningside
College, which he earned in 1958.

Key Employees

ALAN P. DAVID was named our Vice President of Quality and Information
in October 1999. Prior to joining our company, from December 1995 to October
1999, Mr. David was Director of Operations at Computer Sciences Corporation.
From April 1990 to December 1995, he held senior level management positions at
Computer Sciences Corporation in the areas of enterprise systems, program
management, systems engineering, and software engineering. From January 1985 to
April 1990, Mr. David served as a program manager and systems engineer at Sperry
(now Unisys Corporation). From 1979 to 1985, Mr. David worked for the Department
of Defense in communications engineering and protocol design. Prior to 1979, Mr.
David served on active duty in the U.S. Air Force for four years as a systems
programmer/analyst.

STEVEN C. DAVIS was named our Vice President of Research and
Development in February 1999. Mr. Davis also serves on the board of The Parlay
Group. Mr. Davis joined our company in July 1997, but was previously associated
with our company for over 20 years in various contracting relationships
beginning in 1979. From February 1988 to July 1997, Mr. Davis served as
President and Chief Executive Officer of Finite State. Mr. Davis was a
shareholder and officer of Tenis Software, Inc. from 1982 to 1987, and was
employed with the Burroughs Corporation as manager for software engineering for
Great Valley Laboratories from 1974 to 1979. He has a B.S. in Mathematics from
the South Dakota School of Mines and Technology, which he earned in 1971.

JAMES H. GRIM was named our Vice President of Engineering in October
1999. He joined our Company in June 1998 as Vice President of Operations. From
February 1996 to June 1998, Mr. Grim served as Vice President of Programs and as
Vice President of Engineering and Engineering Program Manager for InterDigital
Communications Corporation. From April 1993 to February 1996, he held
engineering management positions at Lockheed Martin Corporation, Astro Space
Division. From 1985 to 1993, Mr. Grim held engineering, engineering management,
and program management positions with GE Aerospace. Mr. Grim received a B.S. in
electrical engineering from Capitol College in 1985 and an M.S. in engineering
from Pennsylvania State University in 1990.

JAMES JOHNSTON was named our Vice President of Operations in October
1999. From March 1999 to October 1999, Mr. Johnston served as our Vice President
of Quality and Information. Mr. Johnston joined our company in May 1998 as
Manager of Quality Assurance. From May 1997 to April 1998, Mr. Johnston provided
consulting services to the Vanguard Investment Group in the areas of operations
management, testing, and quality assurance. From January 1994 to April 1997, Mr.
Johnston was an operations manager at Computer Sciences Corporation. From 1984
to 1993, he held several positions at Pacer InfoTech, Inc., in program
management, operations, system testing, and quality assurance. Mr. Johnston also
served nine years in active duty in the U.S. Navy. He received a B.S. in
Business Administration from Rider University in 1989.

LISA ROBERTS has served as our Vice President of Finance since June
1998. Ms. Roberts had held the position of Director of Finance since January
1997 after serving as Controller for the company since 1995. She is a Certified
Public Accountant, and prior to joining our company she was a manager at
Simonson, Lipshutz & Fogel, PC, a public accounting firm, and an accountant at
Tait, Weller & Baker. Ms. Roberts received a B.S. in accounting with high honors
from Drexel University in 1988.

43
<PAGE>
KANNAN SREEDHAR has been our Vice President of Sales and Marketing
since February 1999. From January 1994 to February 1999, he served as a Regional
Sales Manager at Bell Atlantic Data Solutions Group, and, over his five-year
tenure, played a key role in establishing the company as a "top 10" network
integrator. From 1984 to December 1993, Mr. Sreedhar spent ten years at Northern
Telecom, where he participated in software design and product development, and
he advanced to managerial roles in product management, strategic planning, new
product introduction and account management. From 1982 to 1984, he was employed
at Ericsson Communications in the Public Switching Division. He received an M.S.
in computer science from the University of Oklahoma in 1982 and an M.B.A. from
Duke University in 1987.

BOARD COMPOSITION

Our by-laws currently authorize our board of directors to have not
less than three and not more than fifteen members. Our board of directors
currently has two members and upon completion of this offering will have nine
members. Members of the board of directors are elected each year at the annual
meeting of shareholders to serve until the following annual meeting of
shareholders or until their successors have been elected and qualified.
Directors may be removed, with or without cause, by the affirmative vote of the
holders of a majority of the shares entitled to vote at an election of
directors. There are no family relationships among any of our directors and
executive officers.

BOARD COMMITTEES

Prior to or upon completion of this offering, our board of directors
will create an executive committee, a compensation committee, an audit committee
and a stock option committee.

We expect that our executive committee will consist of Messrs.
Alexander, Osborne, Kreinberg and Sorin. The executive committee will have all
the authority of the board, except with respect to items requiring shareholder
approval or submission and except as otherwise required by law.

We expect that our compensation committee will consist of Messrs.
Alexander, Sorin and Hiram. The compensation committee will make recommendations
to the board of directors regarding the various incentive compensation and
benefit plans and determines salaries for the executive officers and incentive
compensation for employees.

We expect that our audit committee will consist of Messrs. Bar-On,
Hiram and McWilliams. The audit committee will make recommendations to the board
of directors regarding the selection of independent public accountants, review
the results and scope of the audit and other services provided by our
independent public accountants and review and evaluate our control functions.

We expect that our stock option committee will consist of Messrs.
Bar-On, Hiram and McWilliams. The stock option committee will administer the
issuance of stock options under our 1998 Stock Incentive Compensation Plan.

DIRECTOR COMPENSATION

Our directors do not currently receive any cash compensation for
serving on the board of directors or any committee of the board. Our directors
are reimbursed for the expenses they incur in attending meetings of the board or
board committees. Each of Messrs. Bar-On, Hiram and McWilliams will receive
options to purchase ____ shares of common stock under our 1998 Stock Incentive
Compensation Plan upon completion of this offering, with an exercise price equal
to the initial public offering price. Each such director will also receive on an
annual basis options to purchase ______ shares of common stock under our 1998
Stock Incentive Compensation Plan with an exercise price equal to the fair
market value on the date of grant. These options will vest based on the number
of board meetings attended over the year.

44
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No interlocking relationship exists between our board of directors
and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past.

EXECUTIVE COMPENSATION

The following table sets forth information for the fiscal year ended
January 31, 2000 concerning the compensation we paid to our executive officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
FISCAL OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Shawn K. Osborne,
President and Chief Executive Officer.................... 1999

</TABLE>

Mr. Kreinberg does not receive any compensation from us. Mr.
Kreinberg receives his compensation from Comverse. Mr. Kreinberg's services are
provided to us under our services agreement with Comverse. See "Related Party
Transactions - Services Agreement."

STOCK OPTION INFORMATION

No options were granted by Ulticom to our executive officers during
the fiscal year ended January 31, 2000.

YEAR-END OPTION VALUES

No options granted by Ulticom were exercised by the executive
officers during the fiscal year ended January 31, 2000. The following table
provides certain information concerning options granted by Ulticom as of January
31, 2000, with respect to each of the executive officers.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JANUARY 31, 2000(1) AT JANUARY 31, 2000(2)
------------------------------ ----------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shawn K. Osborne............. -- --
David Kreinberg.............. -- -- -- --

</TABLE>

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

(1) Upon the completion of this offering, the options will vest in four equal
annual increments commencing one year after this offering is completed.

(2) Based on an assumed initial public offering price of $__________ per
share, minus the exercise price, multiplied by the number of shares
underlying the option.

1998 STOCK INCENTIVE COMPENSATION PLAN

The purpose of this plan is to assist us, our subsidiaries and
affiliates in attracting and retaining valued employees by offering them a
greater stake in our success and a closer identity with us, and to encourage
these employees to own our stock.

45
<PAGE>

General. The plan provides for the grant of deferred stock,
restricted stock, options and stock appreciation rights. We have reserved
__________ shares of our common stock for issuance upon exercise of awards under
the plan.

Administration. The plan has been to date, and up to the closing of
this offering will be, administered by our board of directors. Following
completion of this offering, the plan will be administered by a stock option
committee consisting of Messrs. Bar-On, Hiram and McWilliams.

Eligibility and Extent of Participation. Any officer, director or
other key employee of our company, a subsidiary or an affiliate is eligible to
participate under the plan. The maximum number of shares of common stock that
may be awarded under the plan to any employee may not exceed 250,000 during any
calendar year. Transactions under the plan are intended to comply with all
applicable conditions of Rule 16b-3 under the Exchange Act for all employees
subject to Section 16 of that Act. Any provision of the plan or action by the
committee that fails to comply with Rule 16b-3 will be deemed null and void to
the extent permitted by law and deemed advisable by the committee.

Deferred Stock. An award of deferred stock is an agreement by the
Company to deliver to an employee, a specified number of shares of common stock
at the end of a specified deferral period or periods. Before the issuance and
delivery of the deferred stock, the awarded employee does not have any rights as
a stockholder with respect to any shares of deferred stock credited to his or
her account. Dividends declared during the deferral period on shares covered by
a deferred stock award will be paid to the awarded employee currently, or
deferred and deemed to be reinvested in additional deferred stock, or otherwise
reinstated on terms as the committee may determine at the time of the award. The
committee may condition the grant of the deferred stock award or the expiration
of the deferral period upon the employee's achievement of one or more
performance goals. Shares of deferred stock credited to the account of the
awarded employee are issued and delivered to the employee at the end of the
deferral period under the terms of the deferred stock agreement. The committee
may, in its sole discretion, accelerate the delivery of all or any part of a
deferred stock award or waive the deferral limitations for all or any part of
the deferred stock award.

Restricted Stock. An award of restricted stock to an employee is a
grant by the Company of a specified number of shares of common stock subject to
forfeiture upon the happening of specified events. The certificates representing
shares of restricted stock are legended as to sale, transfer, assignment, pledge
or other encumbrances during the restriction period and are deposited by the
employee, together with a stock power endorsed in blank, with the Company, to be
held in escrow during the restriction period. Unless the committee determines
otherwise, during the restriction period, the awarded employee has the right to
receive dividends from and to vote the shares of restricted stock. The committee
may condition the grant of an award of restricted stock or the expiration of the
restriction period upon the employee's achievement of one or more performance
goals. The committee may, in its sole discretion, modify or accelerate the
vesting and delivery of shares of restricted stock.

Options. Options give an employee the right to purchase a specified
number of shares of common stock, deferred stock or restricted stock (as
selected by the committee) from the company for a specified time period at a
fixed price. Options granted to employees may be either incentive stock options
or options not intended to be incentive stock options, called non-qualified
options. The price per share at which common stock may be purchased upon
exercise of an option is determined by the committee; however, in the case of
grants of incentive stock options, the price per share may not be less than the
fair market value of a share of common stock on the date of grant. In case of
any incentive stock option granted to a person who owns stock possessing more
than 10% of the total combined voting power of all classes of our capital stock,
the option price per share will not be less than 110% of the fair market value
of a share of common stock on the date of grant. The option price per share for
non-qualified options may be less than the fair market value of a share of
common stock on the date of grant.

46
<PAGE>

Option terms may not be greater than 10 years (five years in the case
of an incentive stock option granted to a holder of 10% or more of the voting
power of our capital stock). We may not grant incentive stock options to
employees of our affiliates. Except as provided in an option agreement, the
price upon exercise of an option will be paid in full at the time of the
exercise in cash, in shares of common stock at fair market value on the date of
exercise or a combination of cash and shares. The committee may permit other
methods of payment upon the exercise of options, including by delivery of a note
by the employee or by restricted stock. The committee or our board of directors
may in their discretion extend the period during which an option held by an
employee may be exercised to a period, not to exceed 3 years following the
termination of an employee's employment or service, as the committee or our
board of directors may determine to be appropriate in any particular instance.

Stock Appreciation Rights. Stock appreciation rights are rights to
receive payment in cash, common stock, restricted stock or deferred stock or any
combination of these equal to the increase in the fair market value of a
specified number of shares of common stock from the date of grant of the rights
to the date of exercise. Stock appreciation rights may be granted in tandem with
all or a portion of a related option under the plan, or may be granted
separately as a freestanding stock appreciation right. A tandem stock
appreciation right may be granted either at the time of the grant of the option
or at any time thereafter during the term of the option and may be exercisable
only to the extent that the related option is exercisable. No stock appreciation
right may be exercisable within the first six months of its grant. The base
price of a tandem stock appreciation right may only be the option price under
the related option. The base price of a freestanding stock appreciation right
may not be less than 100% of the fair market value of the common stock, as
determined by the committee, on the date of grant.

Adjustments Upon a Change in Control. Except as otherwise provided by
applicable agreement, upon the occurrence of a change in control (other than a
hostile change of control), the committee may elect to provide that all
outstanding options and stock appreciation rights will immediately vest and
become exercisable, each deferral period and restriction period will immediately
lapse, or all shares of deferred stock subject to outstanding awards will be
issued and delivered to the awarded employee. In the event of a hostile change
in control, each of the foregoing actions will occur automatically upon the
occurrence of the hostile change in control. At any time before a change in
control, the committee may, without the consent of any employee to whom an
option was granted:

o require the entity effecting the change in control or a parent or
subsidiary of the entity to assume each outstanding option or
substitute an equivalent option therefor, or

o terminate and cancel all outstanding options upon the change in
control and pay the employee to whom an option was granted cash
equal to the product of (x) the difference between the fair
market value of common stock on the date of the change in control
and the exercise price of the option and (y) the number of shares
of common stock subject to the option.

Effective Date, Termination and Amendment. The plan will remain
effective until the earlier of 10 years from the date of its adoption, or the
date it is terminated by our board of directors. Under the provisions of Section
12 of the plan, our board of directors has the power to amend, suspend or
terminate the plan at any time; however the board may not effect any of the
following amendments without stockholder approval:

o increasing the total number of shares available for issuance
pursuant to the plan;

o changing the class of individuals eligible to participate under
the plan;

o modifying the 250,000 share limit under awards during any
calendar year for any employee or the categories of performance
goals previously disclosed to shareholders;

o changing the provisions of Section 12 of the plan; or

47
<PAGE>

o any other change for which stockholder approval is required under
Section 16(b) or any successor provision of the Exchange Act.

2000 EMPLOYEE STOCK PURCHASE PLAN

We expect to adopt an employee stock purchase plan prior to the
completion of this offering. The purpose of this plan is to provide a method
whereby our employees and those of our eligible subsidiaries, if any, will have
an opportunity to acquire a proprietary interest in our company through the
purchase of shares of our common stock.

General. The plan is intended to comply with the provisions of
Section 423 of the Internal Revenue Code. The plan will allow eligible employees
who elect to participate in the plan to make purchases of our common stock
through payroll deductions at a price of 85% of the fair market value of our
common stock on the first day or last day of each offering period, whichever is
lower. Participants will be limited by the Code to a maximum of $25,000 deducted
from their compensation under the plan during any calendar year.

Administration. The plan will be administered by our compensation
committee, which will be authorized to decide questions of eligibility and to
make rules and regulations for the administration and interpretation of the
plan, subject to final authority of our board of directors. All determinations
of the compensation committee with respect to the plan will be binding. The
expenses of administering the plan will be borne by us.

Shares Available Under the Plan. Under the Plan, we will issue an
aggregate of not more than __________ shares of our company's common stock. The
maximum number of shares issuable under the plan will be subject to adjustment
for any dividend, stock split or other relevant change in our capitalization.

Eligibility. With certain exceptions, all full-time employees who
have been employed by us or an eligible subsidiary, if any, for at least three
months, are eligible to participate in the plan. The purchase of shares under
the plan will be voluntary, and we cannot determine the number of shares to be
purchased under the plan.

Operation of the Stock Purchase Plan. Our common stock will be
purchased under the plan through semi-annual offering periods. The first
offering period is expected to begin on the first business day on which price
quotations for our common stock are available on the Nasdaq National Market.
Offering periods will begin on March 1 and September 1 of each year. However,
because the first day on which price quotations for our common stock will be
available on the Nasdaq National Market may not be March 1 or September 1, the
length of the first offering period may be more or less than six months.

During each offering period, the maximum number of shares which may
be purchased by a participant will be determined on the first day of the
offering period under a formula whereby 85% of the market value of a share of
our common stock on the first day of the offering period will be divided into an
amount equal to 6% of that participant's annualized base pay (as defined in the
plan). A participant may elect to have up to 10% of his or her base pay withheld
from his or her pay for this purpose. The price at which the participant may
purchase shares will be the lower of (i) 85% of the last sale price of our
common stock on the Nasdaq National Market on the first day of the offering
period or (ii) 85% of such price on the last day of the offering period.

Amendment. Our board of directors may at any time, and from time to
time, modify, terminate or amend the plan in any respect without obtaining
shareholder approval, except where the approval of our shareholders is required
under (i) Section 423 of the Code, (ii) Rule 16b-3 of the Exchange Act or any
successor provisions or (iii) under any applicable listing requirement of
Nasdaq.

48
<PAGE>

The termination, modification or amendment of this plan shall not,
without the consent of a participant, affect his or her rights under a purchase
option previously selected by the participant. With the consent of the
participant affected, our board of directors may amend outstanding purchase
options in a manner not inconsistent with the terms of the plan. Our board of
directors shall also have the right to amend or modify the terms and provisions
of the plan and of any purchase options previously granted under the plan to the
extent necessary to ensure the continued qualification of the plan under Section
423 of the Code and Rule 16b-3. The plan also contains provisions relating to
the disposition of purchase options in the event of certain mergers or other
significant transactions in which we may be involved.

49
<PAGE>

RELATED PARTY TRANSACTIONS

RELATIONSHIP WITH COMVERSE

We are a subsidiary of Comverse. Set forth below is a brief
description of the existing relationships and agreements between us and
Comverse.

Services Agreement

We have a services agreement with Comverse. Under this agreement,
Comverse provides us with the following services:

o consulting services with respect to financial planning and
reporting;
o routine legal services;
o administration of employee benefit plans;
o maintaining in effect a policy of directors' and officers'
liability insurance covering our directors and officers; and
o consulting services with respect to our public relations.

We pay Comverse a quarterly fee of $150,000 for the services provided
by Comverse during each fiscal quarter. In addition, we agreed to reimburse
Comverse for any out-of-pocket expenses incurred by Comverse in providing the
services. The term of this agreement extends to January 31, 2003 and is
automatically extended for additional twelve-month periods unless terminated by
either Comverse or us. Since 1996, Comverse has been providing these services to
us for a quarterly fee of $150,000.

Federal Income Tax Sharing Agreement

We have a tax sharing agreement with Comverse. Comverse is the parent
company of a group of companies which includes us and files consolidated federal
income tax returns. Until this offering is completed we will be included in the
Comverse consolidated group for federal income tax purposes. After this offering
we will no longer be included in this group and we will file our own federal
income tax returns. Under the terms of the tax sharing agreement, during years
in which Comverse files a consolidated federal income tax return which includes
us, we pay Comverse an amount equal to our separate tax liability computed by
Comverse in its reasonable discretion. Our separate tax liability will be that
amount of federal income tax that we would owe if we filed a tax return
independent of the Comverse group. If the calculation of our separate tax
liability for any year results in a net operating loss, we are not entitled to
receive any payments from Comverse with respect to such net operating loss in
such year or as a result of carrying such net operating loss back to any prior
year or forward to any future year. The tax sharing agreement continues in
effect until sixty days after the expiration of the applicable statute of
limitations with respect to the final year of the Comverse group which includes
us.

Patent License Agreement

Our affiliate, CPH, granted Lucent GRL a non-exclusive license to
those patents now owned by CPH or which CPH has a right to license and to those
patents granted to CPH or which CPH obtains the right to license during the term
of that arrangement. In return, CPH was granted a non-exclusive license to
certain patents now owned by Lucent GRL or which Lucent GRL has right to license
and to those patents granted to Lucent GRL or which Lucent GRL obtains the right
to license during the term of that arrangement. Under that arrangement, CPH has
the right to grant a sublicense to us. In connection with that arrangement,
effective December 30, 1999, we entered into a patent license agreement with CPH
pursuant to which we have granted a non-exclusive royalty-free license to CPH
with the right to sublicense to Lucent GRL our patents and those patents granted
to us or which we obtain the right to license during the term of the agreement.
In return, CPH granted to us a non-exclusive royalty-free sublicense to all
patents that are licensed by Lucent GRL to CPH.

50
<PAGE>

License Agreement

We have a license agreement with CNS. Under this agreement, we
granted CNS an irrevocable, perpetual, royalty-free, non-exclusive license to
use certain elements of the Signalware software for incorporation into CNS'
products. The license also covers all modifications and enhancements made by us
to these software products, including their source codes and object codes,
documentation and all intellectual property associated with those products.
Specifically, the license granted to CNS includes the following rights:

o the right to install and use our software products at any of CNS'
sites and locations;
o the right to install and use our software products on or in
connection with any CNS' product;
o the right to use and execute the software products on any
platform;
o the right to create, add to, enhance or modify our software
products; and
o the right to sublicense and/or otherwise provide our software
products to others provided that our products cannot be licensed
as an application programming interface.

CNS may not use or sublicense to others any of our software products
except on or as an element of a CNS product. Any additions, enhancements or
other modifications made by CNS to our software products shall be the property
of CNS.

The term of this agreement is ten years, commencing on February 1,
1999. Thereafter, the agreement will automatically renew for one-year periods
unless terminated by either CNS or us. The license granted by us under the
agreement, and any sublicenses granted by CNS, survive termination or expiration
of the agreement.

Development and Production Agreement

We intend to enter into a development and production agreement with
CNS. Under this agreement, we will agree to design and develop for CNS an SS7
signaling link module board. CNS will agree to purchase from us minimum
quantities of this and other types of boards. CNS may also purchase from us
additional boards over the minimum quantities at its sole discretion. If
requested by CNS, for an additional fee we will furnish repair and/or
replacement services to CNS for boards purchased under this agreement.

Registration Rights Agreement

We have entered into a registration rights agreement with Comverse.
Pursuant to this agreement, Comverse may require us on one occasion to register
our common stock for sale on Form S-1 under the Securities Act if we are not
eligible to use Form S-3 under that Act. After we become eligible to use Form
S-3, Comverse may require us on unlimited occasions to register our common stock
for sale on this form. In addition, we are required to file a registration
statement on this form to register for sale shares of our common stock that are
(or have been) acquired by directors, officers and employees of Comverse upon
the exercise of options granted to them by Comverse. Comverse will also have an
unlimited number of "piggyback" registration rights. This means that any time we
register our common stock for sale, Comverse may require us to include shares of
our common stock held by it or its directors, officers and employees in that
offering and sale. Comverse will not be allowed to exercise any registration
rights during the 180-day lock-up period.

We have agreed to pay all expenses that result from registration of
our common stock under the registration rights agreement (other than
underwriting commissions for such shares and taxes). We have also agreed to
indemnify Comverse, its directors, officers and employees against liabilities
that may result from their sale of our common stock, including Securities Act
liabilities.

51
<PAGE>

Business Opportunities Agreement

We have a business opportunities agreement with Comverse which
addresses potential conflicts of interest between Comverse and us. This
agreement allocates between Comverse and us opportunities to pursue transactions
or matters that, absent such allocation, could constitute corporate
opportunities of both companies. We are precluded from pursuing an opportunity
offered to any person who is a director of our company but not an officer or
employee of our company and who is also an officer or employee of Comverse,
unless Comverse fails to pursue such opportunity diligently. Comverse is
precluded from pursuing an opportunity offered to any person who is a director
of Comverse but not an officer or employee of Comverse and who is also an
officer or employee of our company, unless we fail to pursue such opportunity
diligently. We are also precluded from pursuing an opportunity offered to any
person who is an employee or officer of both companies or a director of both
companies, unless Comverse fails to pursue such opportunity diligently.
Accordingly, we may be precluded from pursuing transactions or opportunities
that we would otherwise be able to pursue if we were not affiliated with
Comverse. We have agreed to indemnify Comverse and its directors and officers
against any liabilities arising out of any claim that any provision of the
agreement or the failure to offer any business opportunity to us violates or
breaches any duty that may be owed to us by Comverse or any of its directors or
officers.

Intercompany Loan

In January 2000, we borrowed $3.8 million under a term loan from a
bank and we used the proceeds to pay our outstanding indebtedness owed to
Comverse. The bank loan is secured by a deposit of Comverse at the bank. During
Fiscal 1997, Fiscal 1998 and the nine months ended October 31, 1999, we were
charged with interest on our indebtedness to Comverse in an amount equal to
approximately $532,000, $419,000 and $239,000, respectively.

Guarantee of the Lease for Our Dallas Facility

Comverse has guaranteed the payment of rent and the performance of
all other obligations under the lease for our facility in Dallas, Texas. This
lease will expire in August 2000.

52
<PAGE>

PRINCIPAL SHAREHOLDERS

The following table contains information as of January 31, 2000 with
respect to the beneficial ownership of our common stock and the beneficial
ownership of Comverse common stock by:

o each person who we know beneficially owns more than 5% of our
common stock;

o each of our directors and each individual who serve as our named
executive officers individually; and

o all of our directors and executive officers as a group.

Unless otherwise indicated, to our knowledge, all persons listed
below have sole voting and investment power with respect to their shares of
common stock. Share ownership in each case includes shares issuable upon
exercise of outstanding options that are exercisable within 60 days of January
31, 2000. Each of our directors and executive officers who is also a director or
officer of Comverse disclaims ownership of the shares of our common stock owned
by Comverse.
<TABLE>
<CAPTION>
SHARES OF ULTICOM COMMON STOCK SHARES OF COMVERSE COMMON
BENEFICIALLY OWNED STOCK BENEFICIALLY OWNED
------------------------------ -------------------------
PERCENT
--------------------
BEFORE AFTER
NUMBER OFFERING OFFERING NUMBER PERCENT
------ -------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
PRINCIPAL SHAREHOLDERS:
Comverse Technology, Inc.(1) .......................

DIRECTORS AND EXECUTIVE OFFICERS:
Kobi Alexander......................................
Shawn Osborne(2)....................................
David Kreinberg(3)..................................
William F. Sorin(3) (4).............................
Paul D. Baker(3)....................................
Yaacov Koren(3).....................................
Zvi Bar-On..........................................
Ron Hiram...........................................
Rex McWilliams...................................... *

All executive officers and directors as
a group (nine persons)(5).........................

</TABLE>

- --------
(1) Includes __ shares of our common stock owned by Messrs. Alexander and
Kreinberg which Comverse has the right to vote. Also includes __ shares of
our common stock subject to options that were granted to certain directors
and employees of Comverse, including options for ___ shares which are
currently exercisable.

(2) Excludes ___ shares of our common stock subject to options issued by us
that are not exercisable within 60 days.

(3) Excludes ______, ____, ______ and _____ shares, respectively, of our common
stock subject to options issued by Comverse that are not exercisable within
60 days.

(4) Represents options to purchase from Comverse shares of our common stock.

(5) Includes options to purchase from Comverse ___ shares of our common stock.

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<PAGE>

DESCRIPTION OF SECURITIES

Set forth below is a summary of the material provisions of our
capital stock. This summary does not purport to be complete. For a more detailed
description, see our amended and restated certificate of incorporation and
by-laws, copies of which we have filed as exhibits to the registration
statement.

We are a New Jersey corporation, subject to the provisions of the New
Jersey Business Corporation Act. Our authorized capital stock consists of
110,000,000 shares, with no par value, divided into 100,000,000 shares of common
stock and 10,000,000 shares of undesignated stock. After giving effect to the
issuance of the ___ shares of common stock offered by this prospectus, we will
have ___ shares of common stock outstanding. Upon the closing of the offering,
we will not have designated any of the undesignated stock and none will be
outstanding.

COMMON STOCK

General. The rights, preferences and privileges of holders of common
stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that our board of directors
may designate and issue in the future. All outstanding shares of common stock
are, and the shares we are offering by this prospectus will be, when issued and
paid for, fully paid and nonassessable. Holders of the common stock have no
preemptive, subscription, redemption or conversion rights.

Voting Rights. Holders of common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of shareholders.
Holders of common stock do not have cumulative voting rights in the election of
directors. Accordingly, the holder or holders of a majority of the shares of
common stock (in our case, Comverse) may elect all of the directors standing for
election.

Dividends. Holders of common stock are entitled to receive ratably
such dividends, if any, as the board of directors may declare on the common
stock out of funds legally available for that purpose.

Liquidation. Upon the liquidation, dissolution or winding up of the
Company, holders of common stock are entitled to share ratably in all assets
remaining after the payment of all debts and other liabilities, subject to the
prior rights of any outstanding shares of preferred stock that our board of
directors may choose to designate.

UNDESIGNATED STOCK

Our board of directors is expressly authorized in our certificate of
incorporation, without further shareholder approval, to amend our certificate of
incorporation to divide the 10,000,000 shares of undesignated stock into one or
more classes of common or preferred stock. The board can further divide any of
those or any hereafter created classes of undesignated stock into series and to
determine their designations, numbers, relative, rights, preferences and
limitations, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including retirement or sinking fund
provisions), redemption price or prices, liquidation preferences and the number
of shares constituting any series or designations of these series. The relative
rights, preferences and limitations of each class or series of common or
preferred stock may differ from those of any and all other classes or series of
common or preferred stock, as the case may be. Our board of directors is
expressly authorized in our certificate of incorporation, without further
shareholder approval, to amend our certificate of incorporation to change the
designations, numbers, relative rights, preferences and limitations of any
authorized but unissued shares of undesignated stock.

Our ability to designate and issue additional shares of undesignated
stock in this manner, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could adversely effect the voting
power of the holders of common stock, and could have the effect of making it
more difficult for a person to acquire, or of discouraging a person from seeking
to acquire, control of our

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<PAGE>

company. The potential for issuance of shares of undesignated stock may have an
adverse impact on the market price of the common stock outstanding after the
offering. We have no present plans to issue any shares of common or preferred
stock from the shares of undesignated stock.

OPTIONS

Options to purchase a total of _________ shares of common stock may
be granted under the 1998 Stock Incentive Compensation Plan. As of _________,
2000, there were outstanding options to purchase a total of __________ shares of
common stock at a weighted average exercise price of $____ per share. In
addition, we plan to issue options to purchase ________ shares of common stock
under such plan upon completion of this offering at an exercise price equal to
the initial public offering price. Following completion of this offering, all
options will vest in four equal annual increments from the date that this
offering is completed.

CERTAIN PROVISIONS OF NEW JERSEY LAW

The New Jersey Business Corporation Act provides that in determining
whether a proposal or offer to acquire a corporation is in the best interest of
the corporation, the board of directors may, in addition to considering the
effects of any action on shareholders, consider any of the following: (a) the
effects of the proposed action on the corporation's employees, suppliers,
creditors and customers; (b) the effects on the community in which the
corporation operates; and (c) the long-term as well as short-term interests of
the corporation and its shareholders, including the possibility that these
interests may best be served by the continued independence of the corporation.
The statute further provides that if, based on these factors, the board of
directors determines that any such offer is not in the best interest of the
corporation, it may reject the offer. These provisions may make it more
difficult for a shareholder to challenge the board of directors' rejection of,
and may facilitate the rejection of, an offer to acquire the Company.

We are also subject to the New Jersey Shareholders Protection Act
(the "Protection Act") which prohibits certain New Jersey corporations, such as
our company, from engaging in a business combination (including mergers,
consolidations, significant asset dispositions and certain stock issuances) with
any "interested shareholder" (which is defined to include, among others, any
person that becomes a beneficial owner of 10% or more of the affected
corporation's voting power) for five years after such person becomes an
interested shareholder, unless the business combination is approved by the board
of directors prior to the date the shareholder became an interested shareholder.
In addition, the Protection Act prohibits any business combination at any time
with an interested shareholder other than a transaction that (i) is approved by
the board of directors prior to the date that such shareholder became an
interested shareholder, (ii) is approved by the affirmative vote of the holders
of two-thirds of the voting stock not beneficially owned by the interested
shareholder, or (iii) satisfies certain "fair price" and related criteria. The
Protection Act does not apply to certain business combinations, including those
with persons who acquired 10% or more of the voting power of the corporation
prior to the time the corporation was required to file periodic reports pursuant
to the Securities Exchange Act of 1934, as amended, or prior to the time the
corporation's securities began to trade on a national securities exchange.
Accordingly, the Protection Act does not apply to Comverse.

LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS

Our certificate of incorporation provides that our directors and
officers will not be personally liable to us or our shareholders for damages for
the breach of any duty owed to us or our shareholders except to the extent that
this exception is not permitted by the New Jersey Business Corporation Act.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The New Jersey Business Corporation Act provides for the power to
indemnify any directors, officers, employees and agents and to purchase and
maintain insurance with respect to liability arising out

55
<PAGE>

of their capacity or status as directors, officers, employees and agents. The
indemnification provisions are not exclusive of any other rights to which
directors and officers may be entitled under a corporation's certificate of
incorporation or bylaws, any agreement, a vote of stockholders or otherwise.

Our certificate of incorporation provides that every person who:

o is or was our director, officer, employee or agent or of any
constituent corporation absorbed by us in a consolidation or
merger, or the legal representative of any such director,
officer, employee or agent, or

o is or was a director, officer, trustee, employee or agent of any
other enterprise, serving as such at our request, or of any such
constituent corporation, or the legal representative of any such
director, officer, trustee, employee or agent.

shall be indemnified to the fullest extent permitted by law for all expenses and
liabilities in connection with any proceeding involving such person in this
capacity. Our certificate also provides that, during the pendency of any such
proceeding, we will advance to the fullest extent permitted by law expenses
incurred from time to time by an indemnified person in connection with the
proceeding, subject to our receipt of an undertaking as required by law. We
intend to enter into an indemnity agreement with each of our directors and
officers pursuant to which we will agree to provide indemnification and expense
reimbursement as outlined above.

Our bylaws also permit us to secure insurance on behalf of any
officer, director, employee or agent for any liability asserted against or
incurred by these individuals in their capacity, or arising out of their status,
as our officer, director or employee, regardless of whether the New Jersey
Business Corporation Act would permit indemnification. Pursuant to our services
agreement, Comverse has obtained directors' and officers' liability insurance
which also provides coverage for our officers and directors.

LISTING

We intend to apply to have our Common Stock quoted on the Nasdaq
National Market under the symbol "ULCM."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock will be
American Stock Transfer and Trust Company. Its address is 40 Wall Street, New
York, New York 10005 and its telephone number at this location is (212)
936-5100.

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<PAGE>

UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS

The following is a general discussion of some of the U.S. federal
income and estate tax consequences of the ownership and disposition of our
common stock applicable to Non-U.S. Holders.

A "Non-U.S. Holder" is generally an individual, corporation, estate
or trust other than:

o an individual who is a citizen or resident of the United States
for U.S. federal income tax purposes;

o a corporation created or organized in the United States or under
the laws of the United States or of any subdivision thereof;

o an estate whose income is includable in gross income for U.S.
federal income tax purposes regardless of source; and

o a trust subject to the primary supervision of a court within the
United States and the control of one or more U.S. persons.

The following discussion is based on provisions of the U.S. Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, and
administrative and judicial interpretations as of the date of this prospectus,
all of which are subject to change, possibly with retroactive effect. The
following summary is for general information and applies only to Non-U.S.
Holders that hold our common stock as a capital asset. In addition, this
discussion does not apply to persons holding our shares through a partnership or
other pass-through entity. If you are a Non-U.S. Holder, you should consult a
tax advisor on the U.S. federal tax consequences of holding and disposing of our
common stock with respect to your particular circumstances, for example, if you
are a former citizen or resident of the United States, as well as any tax
consequences under the laws of any U.S. state or local or non-U.S. taxing
jurisdiction.

DIVIDENDS

Dividends paid to a Non-U.S. Holder of common stock generally will be
subject to withholding of U.S. federal income tax at a 30% rate or a lower rate
that an applicable income tax treaty may specify. Non-U.S. Holders should
consult their tax advisors on their entitlement to benefits under a relevant
income tax treaty.

Dividends that are effectively connected with a Non-U.S. Holder's
conduct of a trade or business in the U.S. are generally subject to U.S. federal
income tax on a net income basis at regular graduated rates, but are not
generally subject to the 30% withholding tax if the Non-U.S. Holder files the
appropriate IRS form with the withholding agent. Any U.S. trade or business
income received by a Non-U.S. Holder that is a corporation may, under specific
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
a lower rate that an applicable income tax treaty may specify.

Dividends paid prior to January 1, 2001 to an address in a foreign
country are presumed, absent actual knowledge to the contrary, to be paid to a
resident of that country for purposes of the withholding discussed above and for
purposes of determining the applicability of an income tax treaty rate. For
dividends paid after December 31, 2000 a Non-U.S. Holder of common stock that
claims the benefit of an income tax treaty rate generally will be required to
satisfy applicable certification and other requirements.

A Non-U.S. Holder of common stock that is eligible for a reduced rate
of U.S. withholding tax under an income tax treaty may obtain a refund or credit
of any excess amounts withheld by filing an appropriate claim for a refund with
the IRS.

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<PAGE>

DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal
income tax in respect of gain recognized on a disposition of common stock
unless:

o the gain is effectively connected with a U.S. trade or business,
in which case the branch profits tax may also apply to a
corporate Non-U.S. Holder;

o the Non-U.S. Holder is an individual who is present in the United
States for 183 or more days in the taxable year of the
disposition and meets other requirements;

o the Non-U.S. Holder is subject to U.S. tax under provisions
applicable to certain U.S. expatriates (including certain former
citizens or residents of the United States); or

o we are or have been a "U.S. real property holding corporation"
for U.S. federal income tax purposes at any time during the
shorter of the five-year period ending on the date of disposition
and the Non-U.S. Holder's holding period for the common stock.

The tax relating to stock in a "U.S. real property holding
corporation" does not apply to a Non-U.S. Holder whose holdings, actual and
constructive, at all times during the applicable period, amount to 5% or less of
the common stock, provided that the common stock is regularly traded on an
established securities market. Generally, a corporation is a "U.S. real property
holding corporation" if the fair market value of its "U.S. real property
interests" equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests and its other assets used or held for use in a
trade or business. We believe that we have not been, are not, and do not
anticipate becoming, a "U.S. real property holding corporation" for U.S. federal
income tax purposes.

FEDERAL ESTATE TAXES

Common stock owned or treated as owned by an individual who is a
Non-U.S. Holder at the time of death will be included in the individual's gross
estate for U.S. federal estate tax purposes and may be subject to U.S. federal
estate tax, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

Under specific circumstances, the IRS requires information reporting
and backup withholding at a rate of 31% on specific payments on common stock.
Under currently applicable law, Non-U.S. Holders of common stock generally will
be exempt from information reporting and backup withholding on dividends paid
prior to January 1, 2001 to an address outside the U.S. For dividends paid after
December 31, 2000, however, a Non-U.S. Holder of common stock that fails to
certify its Non-U.S. Holder status under applicable Treasury regulations may be
subject to information reporting backup withholding at a rate of 31% on payments
of dividends.

With respect to the payment of proceeds upon the disposition of
common stock, under current law, Non-U.S. Holder's are not subject to backup
withholding and will generally not be subject to information reporting but may
be required to comply with certification or identification requirements to prove
their exemption.

Non-U.S. Holders should consult their own tax advisors on the
application of information withholding and backup withholding to them in their
particular circumstances (including, upon their disposition of common stock).

Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules from a payment to a Non-U.S. Holder will be
refunded or credited against the holder's U.S. federal income tax liability, if
any, if the holder provides the required information to the IRS.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices of our common stock.
Furthermore, since no shares will be available for sale shortly after this
offering because of contractual and legal restrictions on resale described
below, sales of substantial amounts of common stock in the public market after
these restrictions lapse could adversely affect the prevailing market price and
our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an
aggregate of ___ shares of common stock, assuming no exercise of the
underwriters' over-allotment option. Of these shares, (i) all of the shares sold
in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless such shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Acts, and
(ii) all of the shares outstanding prior to this offering will be "restricted
securities" (as defined in Rule 144 under the Securities Act) which may only be
sold in the public market if registered under the Securities Act or in
accordance with an exemption from the registration requirements of the
Securities Act or an exemption from registration under Rule 144 under the
Securities Act, which rules are summarized below. The restricted securities will
be available for sale in the public market, subject to the volume limitations
and other conditions of Rule 144, immediately upon the expiration of the 180-day
lock-up period.

The following table indicates approximately when the _____ shares of
common stock that are not being sold in this offering, but which will be
outstanding at the time this offering is complete, will be eligible for sale
into the public market.

ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN PUBLIC MARKET

90 days after the date of this prospectus.................... ______
180 days after the date of this prospectus................... ______

LOCK-UP AGREEMENTS

All of our officers and directors and Comverse have signed lock-up
agreements under which they agreed not to transfer, dispose of or hedge any
shares of common stock or any securities convertible into or exchangeable for
shares of common stock for a period of 180 days from the date of this
prospectus. Transfers or dispositions can be made sooner with the prior written
consent of Lehman Brothers Inc.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this prospectus, a person who has beneficially owned shares of
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

o 1% of the number of shares of common stock then outstanding,
which will equal approximately ___________________shares
immediately after this offering; or

o the average weekly trading volume of the common stock on the
Nasdaq National Market during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about us.

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<PAGE>

RULE 701

In general, under Rule 701, any of our employees, directors,
officers, consultants or advisors who purchases shares of our common stock from
us in connection with a compensatory stock or option plan or other written
agreement before the effective date of this offering is entitled to resell these
shares 90 days after the effective date of this offering in reliance on Rule
144, without having to comply with certain restrictions, including the holding
period, contained in Rule 144.

The Securities and Exchange Commission has indicated that Rule 701
will apply to typical stock options granted by an issuer before it becomes
subject to the reporting requirements of the Securities Exchange Act of 1934,
along with the shares acquired upon exercise of these options (including
exercises after the date of this prospectus). Securities issued in reliance on
Rule 701 are restricted securities and, subject to the contractual restrictions
described above, beginning 90 days after the date of this prospectus, may be
sold by persons other than affiliates subject only to the manner of sale
provisions of Rule 144 and by affiliates under Rule 144 without compliance with
its one year minimum holding period requirement.

SHARE OPTIONS

We intend to file a registration statement on Form S-8 under the
Securities Act covering shares of our common stock reserved for issuance under
our 1998 Stock Incentive Compensation Plan. The registration statement on Form
S-8 will become effective automatically upon filing. As of _______, options to
purchase _________ shares of common stock were issued and outstanding, of which
options to purchase ________ shares will vest one year after this offering is
completed. In addition, we plan to issue options to purchase ________ shares of
common stock under such plan upon completion of this offering, of which options
to purchase ________ shares will vest one year after this offering is completed.

REGISTRATION RIGHTS

We have entered into a registration rights agreement with Comverse.
See "Related Party Transactions - Relationship with Comverse - Registration
Rights Agreement." We do not have any other contractual obligations to register
our common stock.

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<PAGE>
UNDERWRITING

Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to the prospectus, each of the underwriters
named below, for whom Lehman Brothers Inc., Hambrecht & Quist LLC, U.S. Bancorp
Piper Jaffray Inc., and Fidelity Capital Markets, a division of National
Financial Services Corporation, are acting as representatives, has agreed to
purchase from us the respective number of shares of common stock shown opposite
its name below:

UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
Lehman Brothers Inc...........................................
Hambrecht & Quist LLC.........................................
U.S. Bancorp Piper Jaffray Inc................................
Fidelity Capital Markets,
a division of National Financial Services Corporation......
________......................................................
________......................................................
________......................................................
________......................................................
________......................................................
----------------
Total......................................................
================

The underwriting agreement provides that the underwriters'
obligations to purchase shares of common stock depend on the satisfaction of the
conditions contained in the underwriting agreement, and that if any of the
shares of common stock are purchased by the underwriters under the underwriting
agreement, then all of the shares of common stock which the underwriters have
agreed to purchase under the underwriting agreement must be purchased. The
conditions contained in the underwriting agreement include that:

o the representations and warranties made by us to the underwriters
are true;

o there is no material change in the financial markets; and

o we deliver customary closing documents to the underwriters.

The representatives had advised us that the underwriters propose to
offer the shares of common stock directly to the public at the public price set
forth on the cover page of this prospectus, and to selected dealers, who may
include the underwriters, at such public offering price less a selling
concession not in excess of $____ per share. The underwriters may allow, and the
selected dealers may reallow, a concession not in excess of $____ per share to
brokers and dealers. After the offering, the underwriters may change the
offering price and other selling terms.

The following table summarizes the underwriting discounts and
commissions we will pay. The underwriting discounts and commissions are equal to
the public offer price per share less the amount paid to us per share. The
underwriting discounts and commissions are equal to ___% of the public offering
price.

<TABLE>
<CAPTION>
TOTAL
-------------------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
- ------------------------------------------------------------- ----------------- ------------------- -------------------
Underwriting discounts and commissions to be paid by us.. $ $ $
- -------------------------------------------------------------
<S> <C> <C> <C>

</TABLE>

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<PAGE>
We estimate that the total expenses of the offering, including
registration, filing and listing fees, printing fees and legal and accounting
expenses but excluding underwriting discounts and commissions, will be
approximately $____ million.

We have granted to the underwriters an option to purchase up to an
aggregate of ____ additional shares of common stock, exercisable solely to cover
over-allotments, if any, at the public offering price less the underwriting
discounts and commissions shown on the cover page of this prospectus. The
underwriters may exercise this option at any time, and from time to time, until
30 days after the date of the underwriting agreement. To the extent the
underwriters exercise this option, each underwriter will be committed, so long
as the conditions of the underwriting agreement are satisfied, to purchase a
number of additional shares of common stock proportionate to that underwriter's
initial commitment as indicated in the preceding table, and we will be
obligated, under the over-allotment option to sell the shares of common stock to
the underwriters.

We have agreed that, without the prior written consent of Lehman
Brothers, Inc., we will not, directly or indirectly, offer, sell or otherwise
dispose of any shares of capital stock or any securities which may be converted
into or exchanged for any shares of capital stock for a period of 180 days from
the date of this prospectus. Comverse and all of our officers, directors and
existing shareholders have agreed under lock-up agreements that, without the
prior written consent of Lehman Brothers Inc., they will not, directly or
indirectly, offer, sell or otherwise dispose of any shares of capital stock or
any securities which may be converted into or exchanged for any shares of
capital stock for a period of 180 days from the date of this prospectus, except
that Comverse may sell shares of our capital stock to a purchaser or purchasers
of the shares who agree to be bound by the same restrictions that bind Comverse.
Without the prior written consent of Lehman Brothers Inc., individuals
participating in the directed share program described below will be prohibited
from disposing of shares of common stock for a period of 90 days after the date
of this prospectus.

Prior to the offering, there has been no public market for the shares
of common stock. The initial public offering price was negotiated between the
representatives and us. In determining the initial public offering price of the
common stock, the representatives considered:

o prevailing market conditions;

o our historical performance;

o our capital structure;

o estimates of our business potential and earning prospects;

o an overall assessment of our management; and

o the consideration of the above factors in relation to market
valuation of companies in related businesses.

Fidelity Capital Markets, a division of National Financial Services
Corporation, is acting as an underwriter in this offering, and will be
facilitating electronic distribution of information through the
Internet/intranet and other proprietary electronic technology.

Fidelity utilizes proprietary Internet, intranet and pager
communications technology to inform its investors of the commencement of an
offering and the availability of the preliminary prospectus. It places
deal-specific information on its Rule 134-compliant "New Issue Equity Calendar"
Web page contained within the Fidelity.com Web site. This information is
presented in template format and directs interested and eligible Fidelity
customers either to contact a dedicated Fidelity representative or to go (via
hyperlink) to the Fidelity Electronic Notification Services section of the
Fidelity.com Web site to download an electronic version of the preliminary
prospectus.

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<PAGE>

Fidelity facilitates electronic delivery of preliminary prospectuses
by using a Web-based delivery platform. This Web platform is made available to
all Fidelity brokerage customers. These customers may sign-on to this Web site
by using the same "sign-on" password that allows them to access account,
portfolio and other types of client-specific information. The preliminary
prospectuses are made available for online viewing and downloading in the Adobe
Portable Document Format. In order to access the prospectuses, the customer is
presented with disclosure about the general risks relating to initial public
offerings and relevant regulatory requirements such as consent to electronic
delivery. The prospectus download/viewing screen is made available upon customer
acknowledgement of the information presented. Fidelity's internal systems
maintain a record of each downloading and viewing of a prospectus, in similar
fashion to the records that are maintained for traditional telephone and
mail-based events.

Eligible Fidelity investors are able to submit conditional
"offers-to-buy" using only dedicated telephone representatives. Customers cannot
place conditional offers online. Each investor that submits a conditional
offer-to-buy will receive a copy of the preliminary prospectus in electronic or
paper form. All eligible Fidelity customers who have placed conditional
offers-to-buy must confirm their original conditional offers-to-buy with a
dedicated fidelity representative on the expected pricing date.

We have agreed to indemnify the underwriters against liabilities
relating to the offering, including liabilities under the Securities Act,
liabilities arising from breaches of the representations and warranties
contained in the underwriting agreement, and liabilities incurred in connection
with the directed share program referred to below, and to contribute to payments
that the underwriters may be required to make for these liabilities.

Until the distribution of the common stock is completed, rules of the
Securities and Exchange commission may limit the ability of the underwriters and
selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the common stock.

The underwriters may create a short position in the common stock in
connection with the offering, which means that they may sell more shares of
common stock than are set forth on the cover page of this prospectus. If the
underwriters create a short position, then the representatives may reduce that
short position by purchasing common stock in the open market. The
representatives also may elect to reduce any short position by exercising all or
part of the over-allotment option described in this prospectus.

The representatives also may impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
common stock in the open market to reduce the underwriters' short position or to
stabilize the price of the common stock, they may reclaim the amount of the
selling concession from the underwriters and selling group members who sold
those shares as part of the offering.

In general, purchasers of a security for the purpose of stabilization
or to reduce a syndicate short position could cause the price of the security to
be higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid could have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.

Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters make any representation that the representatives
will engage in such transactions or that any such transaction, once commenced,
will not be discontinued without notice.

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<PAGE>

Purchasers of the shares of common stock offered in this prospectus
may be required to pay stamp taxes and other charges under the laws and
practices of the country of purchase, in addition to the offering price listed
on the cover of this prospectus.

At our request, Lehman Brothers Inc. has reserved up to __ shares of
the common stock, or ___% of the common stock offered by this prospectus, for
sale pursuant to a directed share program to officers, directors and employees
(and their family members) of Comverse and its affiliates (including us) and
friends of management of Comverse and us. All of the persons purchasing the
reserved shares must commit to purchase no later than the close of business on
the day following the date of this prospectus. The number of shares available
for sale to the general public will be reduced to the extent these persons
purchase the reserved shares.

The underwriters have informed us that they do not intend to confirm
sales to discretionary accounts that exceed 5% of the total number of shares of
common stock offered by them.

Lehman Brothers Inc. has served as underwriter and manager for five
security offerings for Comverse in the past and has received customary
compensation for these services.

LEGAL MATTERS

The validity of the shares of common stock being offered hereby and
certain other legal matters in connection with this offering with respect to New
Jersey law will be passed upon for the Company by Sills Cummis Radin Tischman
Epstein & Gross, P.A., Newark, New Jersey. Certain legal matters in connection
with this offering with respect to New York laws and the federal laws of the
United States will be passed upon for the Company by Weil, Gotshal & Manges LLP,
New York, New York. Certain legal matters in connection with this offering will
be passed upon for the underwriters by Chadbourne & Parke LLP, New York, New
York.

EXPERTS

The financial statements as of January 31, 1998 and 1999, and for the
years ended December 31, 1996 and 1997, the one month ended January 31, 1998,
and the year ended January 31, 1999, included in this prospectus and in the
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing in this prospectus, and have been
so included in reliance on the report of such firm given upon their authority as
experts in auditing and accounting.

AVAILABLE INFORMATION

We have filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 (including the exhibits, schedules and
amendments thereto) under the Securities Act of 1933, as amended, with respect
to the shares of common stock to be sold in the offering. This prospectus does
not contain all the information set forth in the Registration Statement. We
refer you to the Registration Statement for further information with respect to
us and the shares of common stock to be sold in the offering. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to herein are not necessarily complete, and in each
instance reference is made to the copy of the contract, agreement or other
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in all respects by reference to the exhibit.

You may read and copy all or any portion of the Registration
Statement or any other information we file at the Securities and Exchange
Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can request copies of these documents, upon payment of a duplicating
fee, by writing to the Securities and Exchange Commission. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. The Company's Securities and
Exchange Commission filings, including the Registration Statement, are also
available to you on the Securities and Exchange Commission's Web site
(http://www.sec.gov).

64
<PAGE>

As a result of the offering, we will become subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended, and, in accordance the Exchange Act, we will file periodic reports,
proxy statements and other information with the Securities and Exchange
Commission. Upon approval of the common stock for the quotation on the Nasdaq
National Market, any of these reports, proxy and information statements and
other information may also be inspected at the offices of Nasdaq Operations,
1735 K Street, N.W., Washington, D.C. 20006.

REPORTS TO SHAREHOLDERS

We intend to furnish our shareholders annual reports containing
audited financial statements and will make available copies of quarterly reports
for the first three quarters of each year containing unaudited interim financial
information.

65
<PAGE>

ULTICOM, INC.

INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Independent Auditors' Report ............................................................................... F-2

Balance Sheets as of January 31, 1998 and 1999 and October 31, 1999 (unaudited)............................. F-3

Statements of Operations for the years ended December 31, 1996 and 1997, the one month ended January 31, 1998,
the year ended January 31, 1999 and for the nine months ended October 31, 1998 and 1999 (unaudited)......... F-4

Statements of Stockholders' Equity (Deficit) for the years ended December 31,
1996 and 1997, the one month ended January 31, 1998, the year ended January 31,
1999 and for the nine months ended October 31, 1999 (unaudited) ............................................ F-5

Statements of Cash Flows for the years ended December 31, 1996 and 1997, the one
month ended January 31, 1998,
the year ended January 31, 1999 and for the nine months ended October 31, 1998 and 1999 (unaudited)......... F-6

Notes to the Financial Statements........................................................................... F-7

</TABLE>

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Stockholders of
Ulticom, Inc.
Mt. Laurel, New Jersey

We have audited the accompanying balance sheets of Ulticom, Inc. (the "Company")
as of January 31, 1998 and 1999, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years ended December 31,
1996 and 1997, the one-month ended January 31, 1998 and the year ended January
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of January 31, 1998 and 1999,
and the results of its operations and its cash flows for the years ended
December 31, 1996 and 1997, the one-month ended January 31, 1998 and the year
ended January 31, 1999 in conformity with generally accepted accounting
principles.

/s/ Deloitte & Touche LLP

New York, New York
January 18 , 2000

F-2
<PAGE>

ULTICOM, INC
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>

JANUARY 31, JANUARY 31, OCTOBER 31,
1998 1999 1999
---- ---- ----
ASSETS (UNAUDITED)
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents .......................................................... $ 584 $ 2,544 $ 2,575
Accounts receivable, net of allowance for doubtful accounts of
$250, $205 and $174 ............................................................ $ 1,385 1,525 2,890
Due from related parties ........................................................... 1,780 1,662 1,181
Inventories ........................................................................ 964 873 1,700
Prepaid expenses and other current assets .......................................... 129 73 173
Deferred tax asset ................................................................. 365 167 342
------- ------- -------
Total current assets ............................................................... 5,207 6,844 8,861
------- ------- -------

Property and equipment, net ........................................................ 1,140 1,739 3,297

Other assets ....................................................................... 531 300 1,272

TOTAL ASSETS ....................................................................... $ 6,878 $ 8,883 $13,430
======= ======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable and accrued expenses .............................................. $ 1,819 $ 2,154 $ 3,267
Deferred revenue ................................................................... 2,356 2,619 4,284
Due to related parties ............................................................. 4,545 4,307 1,221
------- ------- -------
Total current liabilities .......................................................... 8,720 9,080 8,772
------- ------- -------

LONG-TERM LIABILITIES:
Due to related parties ............................................................. -- -- 3,800
Deferred tax liability ............................................................. 179 257 290
------- ------- -------
Total long-term liabilities ........................................................ 179 257 4,090
------- ------- -------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT):
Undesignated stock, no par value, 10,000,000 shares authorized, no shares issued and
outstanding ........................................................................ -- -- --
Common stock, no par value, 100,000,000 authorized,
10,000,000 issued and outstanding .................................................. -- -- --
Additional paid-in capital ......................................................... 10 10 10
Retained earnings (deficit) ........................................................ (2,031) (464) 558
------- ------- -------
Total stockholders' equity (deficit) ............................................... (2,021) (454) 568
------- ------- -------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ............................... $ 6,878 $ 8,883 $13,430
======= ======= =======
</TABLE>

See Notes to financial statements

F-3
<PAGE>

ULTICOM, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR
YEAR ENDED ONE MONTH ENDED ENDED NINE MONTHS ENDED
DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31, OCTOBER 31,
1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Sales ............................. $ 6,450 $ 14,559 $ 212 $ 18,629 $ 13,536 $ 18,224

Cost of sales ..................... 2,853 4,495 294 6,131 4,504 6,311
-------- -------- -------- -------- -------- --------

Gross Profit ...................... 3,597 10,064 (82) 12,498 9,032 11,913
-------- -------- -------- -------- -------- --------

Operating Expenses:
Research and development .......... 1,905 2,398 205 4,706 3,451 4,263
Selling, general and administrative 3,875 3,891 348 4,948 3,502 5,821
-------- -------- -------- -------- -------- --------

Income (loss) from operations ..... (2,183) 3,775 (635) 2,844 2,079 1,829

Interest income (expense), net .... (342) (507) (45) (350) (293) (179)
-------- -------- -------- -------- -------- --------

Income (loss) before income taxes . (2,525) 3,268 (680) 2,494 1,786 1,650

Income tax provision (benefit) .... (948) 1,213 (249) 927 666 628
-------- -------- -------- -------- -------- --------

Net income (loss) ................. $ (1,577) $ 2,055 $ (431) $ 1,567 $ 1,120 $ 1,022
======== ======== ======== ======== ======== ========

Earnings (loss) per share:
Basic ............................. $ (0.16) $ 0.21 $ (0.04) $ 0.16 $ 0.11 $ 0.10
======== ======== ======== ======== ======== ========

Diluted ........................... $ (0.16) $ 0.21 $ (0.04) $ 0.16 $ 0.11 $ 0.10
======== ======== ======== ======== ======== ========

</TABLE>

See Notes to financial statements

F-4
<PAGE>

ULTICOM, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(In thousands)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
NUMBER OF PAID-IN EARNINGS
SHARES PAR VALUE CAPITAL (DEFICIT) TOTAL
------ --------- ------- --------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996 ............ 10,000 $ -- $ 10 $ (869) $ (859)

Net loss ............................ (1,577) (1,577)
Dividend to Parent .................. (953) (953)

------ --------- ------- --------- -----
BALANCE, December 31, 1996 .......... 10,000 -- 10 (3,399) (3,389)

Net income .......................... 2,055 2,055

------ --------- ------- --------- -----
BALANCE, December 31, 1997 .......... 10,000 -- 10 (1,344) (1,334)

Net loss ............................ (431) (431)
Dividend to Parent .................. (256) (256)

------ --------- ------- --------- -----
BALANCE, January 31, 1998 ........... 10,000 -- 10 (2,031) (2,021)

Net income .......................... 1,567 1,567

------ --------- ------- --------- -----
BALANCE, January 31, 1999 ........... 10,000 -- 10 (464) (454)

Net income (unaudited) .............. 1,022 1,022

------ --------- ------- --------- -----
BALANCE, October 31, 1999 (unaudited) 10,000 $ -- $ 10 $ 558 $ 568
====== ========= ======= ========= =====
</TABLE>

See Notes to financial statements

F-5
<PAGE>

ULTICOM, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31,
1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES: (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) ........................................... $(1,577) $ 2,055 $ (431) $ 1,567 $ 1,120 $ 1,022

Adjustments to reconcile net income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization ............................ 643 529 42 1,408 995 912
Deferred income taxes .................................... 5 136 8 276 143 (142)
Changes in assets and liabilities:
Accounts receivable ...................................... 418 (95) 319 (140) (44) (1,365)
Due from related parties ................................. (726) (1,025) (30) 118 48 481
Inventories .............................................. -- (873) (91) 91 128 (827)
Prepaid expenses and other current assets ................ 957 467 (30) 56 33 (100)
Other assets ............................................. 544 (3) 29 (14) (14) (533)
Accounts payable and accrued expenses .................... 60 680 (88) 335 155 1,113
Deferred revenue ......................................... 203 1,785 119 263 (501) 1,665
-------- ------- ----- ------- ------- -------
Net cash provided by (used in) operating activities ...... 527 3,656 (153) 3,960 2,063 2,226
-------- ------- ----- ------- ------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ....................... (173) (883) (72) (1,254) (802) (2,363)
Capitalization of software development costs ............. (100) -- -- (508) (361) (546)
-------- ------- ----- ------- ------- -------
Net cash provided by (used in) investing activities ...... (273) (883) (72) (1,762) (1,163) (2,909)
-------- ------- ----- ------- ------- -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend to parent ....................................... (953) -- (256) -- -- --
Due to related parties ................................... 808 (2,058) 35 (238) 541 714
-------- ------- ----- ------- ------- -------
Net cash provided by (used in) financing activities ...... (145) (2,058) (221) (238) 541 714
-------- ------- ----- ------- ------- -------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ 109 715 (446) 1,960 1,441 31
-------- ------- ----- ------- ------- -------

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .............. 206 315 1,030 584 584 2,544
-------- ------- ----- ------- ------- -------

CASH AND CASH EQUIVALENTS, END OF PERIOD .................... $ 315 $ 1,030 $ 584 $ 2,544 $ 2,025 $ 2,575
======= ======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid for interest: .................................. $ -- $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= ======= =======
Cash paid for taxes ...................................... $ 112 $ -- $ -- $ -- $ -- $ 59
======= ======= ======= ======= ======= =======
</TABLE>
See Notes to financial statements

F-6
<PAGE>

ULTICOM, INC.
YEARS ENDED DECEMBER 31, 1996 AND 1997, ONE MONTH ENDED JANUARY 31, 1998,
YEAR ENDED JANUARY 31, 1999 AND THE NINE MONTHS ENDED OCTOBER 31, 1998 AND 1999
(INFORMATION RELATING TO THE NINE MONTHS ENDED
OCTOBER 31, 1998 AND 1999 IS UNAUDITED)

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

COMPANY BUSINESS AND BACKGROUND - Ulticom, Inc., ("the Company"), formerly
DGM&S Telecom, Inc., a New Jersey corporation and subsidiary of Comverse
Technology, Inc. ("Comverse"), is engaged in the design, development,
manufacture, marketing and support of software and hardware for use in the
communications industry.

RECAPITALIZATION - In December 1998, the Company amended its certificate
of incorporation to increase its authorized capital stock to 110,000,000
shares without par of which 100,000,000 are denominated common stock and
10,000,000 shares are authorized without designation and are available for
issuance with such designations and relative rights, preferences and
limitations as may be specified from time to time by the Board of
Directors.

Effective as of December 31, 1998, the Board of Directors declared a stock
dividend on its outstanding common stock at the rate of 100,000 new common
shares for each outstanding share. All share and per share information has
been adjusted to reflect this stock dividend. In May 1999, the Company
further amended its Certificate of Incorporation to change its name from
DGM&S Telecom, Inc. to Ulticom, Inc.

BASIS OF PRESENTATION - In January 1998, in connection with the merger of
Comverse with another company, the Company along with Comverse changed its
fiscal year from a calendar year to the year ending January 31. This
report presents the financial statements of the Company for the years
ended December 31, 1996 and 1997, the one-month period ended January 31,
1998, the year ended January 31, 1999 and the nine months ended October
31, 1998 and 1999 (unaudited).

INTERIM RESULTS (UNAUDITED) - The accompanying balance sheet as of October
31, 1999 and the statements of operations and cash flows for the nine
months ended October 31, 1998 and 1999, and the statement of stockholders'
equity (deficit) for the nine months ended October 31, 1999 are unaudited.
In the opinion of management, the statements have been prepared on the
same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary
for the fair statement of the results of the interim periods. Operating
results for the nine months ended October 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending January
31, 2000.

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair value amounts
have been determined by the Company, using available market information
and appropriate valuation methodologies. However, considerable judgement
is necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts that the Company could realize
in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimate
fair value amounts.

F-7
<PAGE>

CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
expose the Company to a concentration of credit risk consist of cash and
cash equivalents and trade receivables. The Company places its cash
investments with high quality financial institutions. The Company sells
its products to customers who are dispersed across many geographic regions
and who are principally in the communications industry. The Company
believes no significant concentration of credit risk exists with respect
to these cash investments and accounts receivable. The carrying amount of
the financial instruments are reasonable estimates of their fair value.

INVENTORIES - Inventories are stated at the lower of cost or market. Cost
is determined by the first in, first out (FIFO) method.

PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost less
accumulated depreciation and amortization. The Company depreciates its
property and equipment using straight-line depreciation over periods
ranging from three to seven years. The cost of maintenance and repairs are
charged to operations as incurred. Significant renewals and betterments
are capitalized.

INCOME TAXES - The Company accounts for income taxes under the asset and
liability method. Under this method, deferred tax assets and liabilities
are determined based on differences between the financial reporting and
the tax bases of assets and liabilities, and are measured using the
enacted tax rates and laws that are expected to be in effect when the
differences are expected to reverse. For federal income tax purposes, the
Company's results will be included in the Comverse consolidated tax return
as long as Comverse retains beneficial ownership of at least 80% of the
total voting power and value of the outstanding common stock of the
Company. Income taxes are determined as if the Company was a separate
taxpayer. Income tax currently payable has been charged to the due to
related parties account in the period that the liability arose. Under the
tax sharing agreement between the Company and Comverse, the Company does
not receive any benefit for losses that it incurs. Accordingly, for the
year ended December 31, 1996 and the one month ended January 31, 1998, the
benefit attributable to the losses incurred by the Company, have been
reflected as a deemed dividend to Comverse.

REVENUE AND EXPENSE RECOGNITION - Effective January 1, 1998, the Company
adopted Statement of Position ("SOP") 97-2, "Software Revenue
Recognition," as amended by SOP 98-4, "Deferral of the Effective Date of
Certain Provisions of SOP 97-2," which did not require a significant
change to the Company's revenue recognition policies.

Revenues from product sales are generally recognized upon shipment. The
Company provides its customers with post-contract support services, which
generally consist of bug-fixing and telephone access to the Company's
technical personnel, but may also include the right to receive product
updates, upgrades and enhancements. Revenue from these services is
recognized ratably over the contract period. Post-contract support
services included in the initial licensing fee are allocated from the
total contract amount based on the relative fair value of vendor specific
objective evidence ("VSOE").

Deferred revenue consist primarily of amounts billed to customers pursuant
to terms specified in contracts but for which revenue has not been
recognized.

In December 1998, SOP 98-9, "Modification of SOP 97-2, "Software Revenue
Recognition," with Respect to Certain Transactions" was released. SOP 98-9
amends SOP 97-2 to require that an entity recognize revenue for multiple
element arrangements by means of the "residual method" when (1) there is
VSOE of the fair values of all of the undelivered elements that are not
accounted for by means of long-term contract accounting, (2) VSOE of fair
value does not exist for one or more of the

F-8
<PAGE>

delivered elements, and (3) all revenue recognition criteria of SOP 97-2
(other than the requirement for VSOE of the fair value of each undelivered
element) are satisfied.

The provisions of SOP 98-9 that extend the deferral of certain passages of
SOP 97-2 became effective December 31, 1998. All other provisions of SOP
98-9 will be effective for the fiscal year beginning February 1, 2000.
Retroactive application is prohibited. The Company is evaluating the
requirements of SOP 98-9 and the effects, if any, on the Company's current
revenue recognition policies.

Expenses incurred in connection with research and development activities,
other than certain software development costs that are capitalized, and
selling, general and administrative expenses are charged to operations as
incurred.

SOFTWARE DEVELOPMENT COSTS - Software development costs are capitalized
upon the establishment of technological feasibility and are amortized over
the estimated useful life of the software, which has been four years or
less. Amortization begins in the period when the product is available for
general release to customers. Amortization expenses amounted to $440,000,
$211,000, $18,000, $134,000, $102,000 and $50,000 for the years ended
December 31, 1996 and 1997, the one-month ended January 31, 1998 and the
year ended January 31, 1999, and the nine month periods ended October 31,
1998 and 1999, respectively. In the year ended January 31, 1999, the
Company recorded an impairment loss of $619,000 to reduce the carrying
value of the software development costs to their net realizable value.

COMPREHENSIVE INCOME - In 1997, the Financial Accounting Standards Board
("FASB") issued Statement No. 130, Reporting Comprehensive Income. The
statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The statement became effective for the Company
beginning January 1, 1998. For all periods presented, the Company had no
components of comprehensive income other than net income.

LONG LIVED ASSETS - The Company reviews for the impairment of long-lived
assets and certain identifiable intangibles whenever events change, or
changes in circumstance indicate that the carrying amount of an asset may
not be recoverable. An impairment loss would be recognized when estimated
future cash flows expected to result from the use of an asset and its
eventual disposition is less than its carrying amount. The Company has
identified no such impairment losses.

PERVASIVENESS OF ESTIMATES - The preparation of the financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

F-9
<PAGE>

2. INVENTORIES

Inventories consist of the following:
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1998 1999 1999
---- ---- ----
(UNAUDITED)
(IN THOUSANDS)

<S> <C> <C> <C>
Work in process...................... $ 626 $ 454 $ 532
Finished goods....................... 338 419 1,168
-------- -------- ---------
$ 964 $ 873 $ 1,700
======== ======== ==========

3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

JANUARY 31, OCTOBER 31,
1998 1999 1999
---- ---- ----
(UNAUDITED)
(IN THOUSANDS)

<S> <C> <C> <C>
Furniture & equipment........................ $ 4,600 $ 5,894 $ 4,517
Transportation equipment..................... 66 66 -
Leasehold improvements....................... 77 102 165
--------- --------- ---------
4,743 6,062 4,682

Less: accumulated depreciation............... (3,603) (4,323) (1,385)
--------- --------- ---------

$ 1,140 $ 1,739 $ 3,297
========= ========= =========

4. OTHER ASSETS

Other assets consist of the following:

JANUARY 31, OCTOBER 31,
1998 1999 1999
---- ---- ----
(UNAUDITED)
(IN THOUSANDS)

<S> <C> <C> <C>
Software development costs,
net of accumulated amortization
of $1,574, $2,327 and $2,377............... $ 375 $ 129 $ 569
Other assets................................. 156 171 703
-------- -------- ---------
$ 531 $ 300 $ 1,272
======== ======== =========

F-10
<PAGE>

5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

JANUARY 31, OCTOBER 31,
1998 1999 1999
---- ---- ----
(UNAUDITED)
(IN THOUSANDS)

<S> <C> <C> <C>
Accounts payable............................. $ 450 $ 296 $ 801
Accrued salaries and benefits................ 624 814 880
Other........................................ 745 1,044 1,586
--------- --------- ---------
$ 1,819 $ 2,154 $ 3,267
========= ========= =========
</TABLE>

6. RELATED PARTY TRANSACTIONS

The Company sells products and provides services to other subsidiaries of
Comverse. Sales to related parties were approximately $1,230,000,
$2,681,000, $42,000, $3,125,000, $3,789,000 and $3,016,000 for the years
ended December 31, 1996, 1997, the one-month ended January 31, 1998, the
nine months ended October 31, 1998, the year ended January 31, 1999 and
the nine months ended October 31, 1999, respectively. The amounts charged
to related parties for administrative services were approximately
$1,248,000, $1,106,000, $152,000, $490,000, $644,000 and $42,000, for the
years ended December 31, 1996, 1997, the one month ended January 31, 1998,
the nine months ended October 31, 1998, the year ended January 31, 1999
and the nine months ended October 31, 1999, respectively. The Company was
charged $600,000, for the years ended December 31, 1996, 1997 and January
31, 1999 and $450,000 for the nine months ended October 31, 1998 and 1999,
for consulting and other corporate services provided by Comverse. These
charges are included in their entirety in selling, general and
administrative expenses. The Company was charged interest on balances owed
to Comverse amounting to approximately $354,000, $532,000, $48,000,
$323,000, $419,000 and $239,000 for the years ended December 31, 1996,
1997, the one month ended January 31, 1998, the nine months ended October
31, 1998, the year ended January 31, 1999, and the nine months ended
October 31, 1999, respectively.

The Company has a services agreement with Comverse. Under this agreement,
Comverse provides the Company with various administrative and consulting
services. The Company has agreed to pay to Comverse a quarterly fee of
$150,000, payable in arrears at the end of each fiscal quarter, in
consideration for all services provided by Comverse during such fiscal
quarter. In addition, the Company has agreed to reimburse Comverse for any
out-of-pocket expenses incurred by Comverse in providing the services. The
term of the agreement extends to January 31, 2003 and is automatically
extended for additional twelve-month periods unless terminated by either
party.

F-11
<PAGE>

7. STOCK OPTIONS

EMPLOYEE STOCK OPTIONS - At January 31, 1999, 886,000 shares of common
stock were reserved for issuance upon exercise of options then outstanding
and 9,114,000 options were available for future grant under the Company's
stock option plan. Options under the plan may be granted to key employees,
directors, and other persons rendering services to the Company. Options
which are designated as "incentive stock options" under the option plans
may be granted with an exercise price not less than the fair market value
of the underlying shares at the date of grant and are subject to certain
quantity and other limitations specified in Section 422 of the Internal
Revenue Code. Options which are not intended to qualify as incentive stock
options may be granted at any price, but not less than the par value of
the underlying shares, and without restriction as to amount. The options
and the underlying shares are subject to adjustment in accordance with the
terms of the plans in the event of stock dividends, recapitalizations and
similar transactions.

The changes in the number of options were as follows:
<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH ENDED YEAR ENDED
DECEMBER 31, JANUARY 31, JANUARY 31,
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Outstanding at beginning of period.............. - - - -
Granted during the period....................... - - - 1,117,000
Exercise during the period...................... - - - -
Canceled, terminated and expired................ - - - (231,000)
---- ---- ---- ----------
Outstanding at end of period.................... - - - 886,000
==== ==== ==== ==========
</TABLE>

All of the options vest seven years from the date of grant. The options
contain acceleration provisions upon certain events (an "Acceleration
Event"), including a public offering of the Company's common stock
registered under the Securities Act of 1933. Upon the happening of an
Acceleration Event, the options vest in four equal annual increments from
the date of the Acceleration Event.

Weighted average option exercise price information were as follows:

YEAR ENDED ONE MONTH ENDED YEAR ENDED
DECEMBER 31, JANUARY 31, JANUARY 31,
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Outstanding at beginning of period.................... $ - $ - $ - $ -
Granted during the period............................. - - - 7.09
Exercise during the period............................ - - - -
Canceled, terminated and expired...................... - - - 6.50
---- ---- ---- ----
Outstanding at end of period.......................... $ - $ - $ - $ 7.24
==== ==== ==== ====
</TABLE>

F-12
<PAGE>

Significant option groups outstanding at January 31, 1999, and related
weighted average price and life information were as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
-------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$6.50 624,000 9.01 $ 6.50 - $ -
$9.00 262,000 9.83 9.00 - -
------- ---- -------- -------- ----------
886,000 9.25 $ 7.24 - $ -
======= ==== ======== ======== ==========
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its option plans. Accordingly, as all options have been
granted at exercise prices equal to fair market value on the date of
grant, no compensation expense has been recognized by the Company in
connection with its stock-based compensation plans. Had compensation cost
for the Company's stock plans been determined based upon the fair value at
the date of grant for awards under these plans consistent with the
methodology prescribed under Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation", the Company's
net income and earnings would be reduced by approximately $303,820 and
earnings per share would have been reduced by $.03 per diluted share for
the year ended January 31, 1999. The weighted average fair value of the
options granted during the year ended January 31, 1999 is estimated at
$1.95 on the date of grant (using the Black-Scholes option pricing model)
with the following weighted average assumptions for year ended January 31,
1999: volatility of 0%, risk free interest rate of 4.7 % and an expected
life of 7 years.

8. EARNINGS PER SHARE ("EPS")

Basic earnings per share is determined by using the weighted average
number of shares of common stock outstanding during each period. Diluted
earnings per share further assumes the issuance of common shares for all
dilutive potential shares outstanding. The calculation for earnings per
share for the years ended December 31, 1996 and 1997, the one month period
ended January 31, 1998, the year ended January 31, 1999 and for the nine
month periods ended October 31, 1998 and 1999 was as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997 JANUARY 31, 1998
-------------------------------- -------------------------------- ------------------------------
PER SHARE PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ ------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income (Loss) .... $(1,577) 10,000 $ (0.16) $ 2,055 10,000 $ 0.21 $ (431) 10,000 $ (0.04)

Effect of Dilutive
Securities-Options ... -- -- -- -- -- -- -- -- --
------ ------ -------- ------- ------ -------- ------ ------ -------

Diluted EPS .......... $(1,577) 10,000 $ (0.16) $ 2,055 10,000 $ 0.21 $ (431) 10,000 $ (0.04)
======= ====== ======== ======= ====== ======== ======= ====== ========

</TABLE>

F-13
<PAGE>

<TABLE>
<CAPTION>
JANUARY 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1999
-------------------------------- -------------------------------- ------------------------------
PER SHARE PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ ------ ------ ------ ------ ------ ------ ------
(UNAUDITED) (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS Net income
(loss) .................. $1,567 10,000 $ 0.16 $1,120 10,000 $ 0.11 $1,022 10,000 $ 0.10

Effect of dilutive
securities-options ...... -- 110 -- -- 110 -- -- 229 --
------ ------ -------- ------- ------ -------- ------ ------ -------

Diluted EPS ............. $1,567 10,110 $ 0.16 $1,120 10,110 $ 0.11 $1,022 $10,229 $ 0.10
======= ====== ======== ======= ====== ======== ====== ====== ========

</TABLE>

9. INTEREST INCOME (EXPENSE), NET

Interest income (expense), net consists of the following:
<TABLE>
<CAPTION>
ONE MONTH ENDED YEAR ENDED NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31,
----------------------- ----------- ----------- -------------------
1996 1997 1998 1999 1998 1999
(UNAUDITED)
(IN THOUSANDS)

Interest income.......... $ 12 $ 25 $ 3 $ 69 $ 30 $ 60
Interest expense......... (354) (532) (48) (419) (323) (239)
-------- -------- --------- ---------- -------- --------

Net...................... $ (342) $ (507) $ (45) $ (350) $ (293) $ (179)
======== ======== ========== ========== ======== ========

</TABLE>

F-14
<PAGE>

10. INCOME TAXES

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31,
1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ----
(UNAUDITED)

(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Current:
Federal................... $ - $ 958 $ (229) $ 578 $ 465 $ 698
State..................... - 119 (28) 73 58 72
--------- --------- --------- ---------- -------- --------

Total current................ - 1,077 (257) 651 523 770
--------- --------- --------- ---------- -------- --------

Deferred (benefit):
Federal................... (779) 122 7 249 129 (137)
State..................... (169) 14 1 27 14 (5)
---------- --------- --------- ---------- -------- ---------

Total deferred............... (948) 136 8 276 143 (142)
--------- --------- --------- ---------- -------- ---------

Total income tax
expense (benefit).......... $ (948) $ 1,213 $ (249) $ 927 $ 666 $ 628
========= ======== ========= ========= ======= =======
</TABLE>
The reconciliation of the U.S. Federal statutory tax rate to the Company's
effective rate is as follows:

<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31,
1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ----

(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
U.S. Federal
statutory rate:........ (34%) 34% (34%) 34% 34% 34%
State taxes, net......... (4) 3 (3) 3 3 4
----- ---- ---- ---- ---- ----

Company's
effective tax rate..... (38%) 37% (37%) 37% 37% 38%
===== ==== ==== ==== ==== ====
</TABLE>

F-15
<PAGE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
significant items comprising the Company's deferred tax asset and liability at
January 31, 1998 and 1999 and October 31, 1999 are as follows:

<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1998 1999 1999
---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax asset:
Accrued liabilities and other................... $ 264 $ 105 $ 250
Allowance for doubtful accounts................. 101 62 92
----------- ---------- -----------
Total deferred tax asset........................ 365 167 342
----------- ---------- -----------

Deferred tax liability:.........................
Depreciation.................................... (165) (257) (290)
Other........................................... (14) - -
------------ ---------- -----------
Total deferred tax liability.................... (179) (257) (290)
------------ ----------- ------------

Net deferred tax asset.......................... $ 186 $ (90) $ 52
=========== =========== ===========
</TABLE>

11. BUSINESS SEGMENT INFORMATION

The Company is engaged in one business segment: the design, development,
manufacture, marketing and support of special software and hardware for
the communications industry.

Sales by country, as a percentage of total sales is as follows:

ONE MONTH ENDED YEAR ENDED NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31,
1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
United States........ 66% 50% 78% 49% 47% 35%
Germany.............. 11% 13% - 13% 12% 11%
Israel............... 19% 19% 20% 20% 25% 17%
England.............. 4% 11% 1% 7% 6% 4%
Sweden............... - - - 3% 2% 22%
Other................ - 7% 1% 8% 8% 11%
---- ---- ---- ---- ---- ----
Total................ 100% 100% 100% 100% 100% 100%
==== ==== ==== ==== ==== ====

</TABLE>

F-16
<PAGE>
The Company has no significant long-lived assets deployed outside of the
United States. For the year ended December 31, 1996, subsidiaries of
Comverse, MCI Worldcom and Siemens accounted for approximately 19%, 15%
and 11%, respectively, of the Company's sales. For the year ended
December 31, 1997, subsidiaries of Comverse, Qualcomm, Siemens and Sun
Microsystems, accounted for approximately 19%, 13%, 13% and 10%,
respectively, of the Company's sales. For the one-month ended January 31,
1998, Amdahl, subsidiaries of Comverse and Compaq accounted for
approximately 50%, 20% and 14%, respectively, of the Company's sales. For
the year ended January 31, 1999, subsidiaries of Comverse and Siemens
accounted for approximately 20% and 13%, respectively, of the Company's
sales. For the nine months ended October 31, 1999, Ericsson, subsidiaries
of Comverse, and Siemens accounted for approximately 26%, 17% and 11%,
respectively, of the Company's sales.

12. COMMITMENTS AND CONTINGENCIES

LEASES - The Company leases office space under non-cancelable operating
leases. Rent expense for all leased premises approximated $512,000,
$443,000, $46,000, $399,000, $541,000 and $455,000 for the years ended
December 31, 1996, 1997, the one-month ended January 31, 1998, the nine
months ended October 31, 1998, the year ended January 31, 1999 and the
nine months ended October 31, 1999, respectively. A portion of this
expense has been charged to other subsidiaries of Comverse as discussed in
Note 6.

As of January 31, 1999, the minimum rent obligations of the Company were
approximately as follows:

YEARS ENDING
JANUARY 31, AMOUNT
----------- ------
(IN THOUSANDS)

2000 $ 158
2001 97
-----------

$ 255
===========

LITIGATION - The Company is subject to legal actions arising in the normal
course of business. After taking into consideration legal counsel's
evaluation of such actions, management is of the opinion that their final
resolution will not have a significant adverse effect on the Company's
business or its financial statements.

13. SUBSEQUENT EVENTS

In January 2000, the Board of Directors of the Company approved the filing
of a registration statement by the Company under the Securities Act of
1933, as amended, relating to an initial public offering of the Company's
common stock.

In January 2000, the Company took a bank loan in the amount of $3.8
million. Such loan bears interest at LIBOR plus 0.35%, matures in July
2001 and may be prepaid without penalty at six month intervals. The
proceeds of such loan were used to repay amounts owed to related parties.
The loan is secured by a deposit made by Comverse with the bank.

F-17
<PAGE>

[INSIDE BACK COVER]

<PAGE>

[ ] Shares

[LOGO]

Common Stock

PROSPECTUS

_____________, 2000

LEHMAN BROTHERS

CHASE H&Q

U.S. BANCORP PIPER JAFFRAY

FIDELITY CAPITAL MARKETS
a division of National Financing Services Corporation

<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses, other than underwriting commissions, expected to be
incurred by the Company in connection with the issuance and distribution of the
securities being registered under this Registration Statement are estimated to
be as follows:

AMOUNT TO
BE PAID
Securities and Exchange Commission Registration Fee............... $13,200
National Association of Securities Dealers, Inc. Filing Fee....... 5,500
Nasdaq National Market Filing Fee................................. *
Printing and Engraving............................................ *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Transfer Agent Fees............................................... *
Miscellaneous..................................................... *
Total................................................... $ *
======

- --------------------
* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The New Jersey Business Corporation Act provides for the power to
indemnify any directors, officers, employees and agents and to purchase and
maintain insurance with respect to liability arising out of their capacity or
status as directors, officers, employees and agents. The indemnification
provisions are not exclusive of any other rights to which directors and officers
may be entitled under a corporation's certificate of incorporation or bylaws,
any agreement, a vote of stockholders or otherwise.

Our certificate of incorporation provides that every person who:

o is or was a director, officer, employee or agent of ours or of
any constituent corporation absorbed by us in a consolidation
or merger, or the legal representative of any such director,
officer, employee or agent, or

o is or was a director, officer, trustee, employee or agent of
any other enterprise, serving as such at our request, or of
any such constituent corporation, or the legal representative
of any such director, officer, trustee, employee or agent.

shall be indemnified to the fullest extent permitted by law for all expenses and
liabilities in connection with any proceeding involving such person in this
capacity. Our certificate also provides that, during the pendency of any such
proceeding, we will advance to the fullest extent permitted by law expenses
incurred from time to time by an indemnified person in connection with the
proceeding, subject to our receipt of an undertaking as required by law. We
intend to enter into an indemnity agreement with each of our directors and
officers, pursuant to which we will agree to provide indemnification and expense
reimbursement as outlined above.

1
<PAGE>

their status, as our officer, director or employee, regardless of whether the
New Jersey Business Corporation Act would permit indemnification. Pursuant to
our services agreement, Comverse has obtained directors' and officers' liability
insurance which also provides coverage for our officers and directors.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Described below are unregistered securities sold by the Company
during the three years preceding the filing of this Registration Statement:

None

2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

INDEX TO EXHIBITS

NUMBER DESCRIPTION
------ -----------
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation.
3.2* Amended and Restated Bylaws.
4.1* Specimen Common Stock certificate.
4.2 See Exhibit 3.1 for provisions defining the rights of
holders of common stock of the Registrant.
5.1* Opinion of Sills, Cummis, Radin, Tischman, Epstein &
Gross, P.A.
10.1* Services Agreement, dated _______, between Comverse
Technology, Inc. and Ulticom, Inc.
10.2* Federal Income Tax Sharing Agreement, dated _______,
between Comverse Technology, Inc. and Ulticom, Inc.
10.3* Patent License Agreement, dated _______, between Comverse
Patent Holding Company, Inc. and Ulticom, Inc.
10.4* License Agreement, dated _______, between Comverse Network
Systems, Inc. and Ulticom, Inc.
10.5* Registration Rights Agreement, dated _______, between
Comverse Technology Inc. and Ulticom, Inc.
10.6* Business Opportunities Agreement, dated _______, between
Comverse Technology Inc. and Ulticom, Inc.
10.7* 1998 Stock Incentive Compensation Plan
11.1 Statement re: Computation of Basic and Diluted Earnings
(Loss) Per Share.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Sills Cummis Radin Tischman Epstein & Gross,
P.A.(included in Exhibit 5.1).
24.1 Powers of Attorney (See Signature Page).

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

* To be supplied by amendment.

(b) Financial Statement Schedules.

None

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such

3
<PAGE>

director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the
time it was declared effective.

(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and this offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 18th day of January, 2000.

ULTICOM, INC.

By: /s/ Shawn K. Osborne
--------------------------------------------
Name: Shawn K. Osborne
Title: President and Chief Executive Officer

POWER OF ATTORNEY

We, the undersigned directors and officers of Ulticom, Inc. (the
"Company") and each of us, do hereby constitute and appoint Shawn Osborne and
David Kreinberg, or either of them, our true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, to do any and
all acts and things in our names and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated above, which said attorneys or agents, or
either of them, may deem necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, and any and all
amendments (including post-effective amendments) to this Registration Statement,
in connection with the public offering of the common stock of the Company,
including specifically but without limitation, power and authority to sign for
us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) to such Registration Statement;
and we do hereby ratify and confirm all that the said attorneys and agents, or
their substitute or substitutes, or either of them, shall do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Shawn K. Osborne President and Chief Executive Officer January 18, 2000
- ---------------------------
Shawn K. Osborne

/s/ David Kreinberg Chief Financial Officer January 18, 2000
- --------------------------- (Principal Financial and Accounting Officer)
David Kreinberg

/s/ Kobi Alexander Chairman of the Board and Director January 18, 2000
- ---------------------------
Kobi Alexander

/s/ William F. Sorin Director January 18, 2000
- ---------------------------
William F. Sorin

</TABLE>

5
<PAGE>
INDEX TO EXHIBITS

NUMBER DESCRIPTION
------ -----------

1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation.
3.2* Amended and Restated Bylaws.
4.1* Specimen Common Stock certificate.
4.2 See Exhibit 3.1 for provisions defining the rights of
holders of common stock of the Registrant.
5.1* Opinion of Sills, Cummis, Radin, Tischman, Epstein &
Gross, P.A.
10.1* Services Agreement, dated _______, between Comverse
Technology, Inc. and Ulticom, Inc.
10.2* Federal Income Tax Sharing Agreement, dated _______,
between Comverse Technology, Inc. and Ulticom, Inc.
10.3* Patent License Agreement, dated _______, between Comverse
Patent Holding Company, Inc. and Ulticom, Inc.
10.4* License Agreement, dated _______, between Comverse Network
Systems, Inc. and Ulticom, Inc.
10.5* Registration Rights Agreement, dated _______, between
Comverse Technology Inc. and Ulticom, Inc.
10.6* Business Opportunities Agreement, dated _______, between
Comverse Technology Inc. and Ulticom, Inc.
10.7* 1998 Stock Incentive Compensation Plan
11.1 Statement re: Computation of Basic and Diluted Earnings
(Loss) Per Share.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Sills Cummis Radin Tischman Epstein & Gross,
P.A.(included in Exhibit 5.1).
24.1 Powers of Attorney (See Signature Page).

- -------------
* To be supplied by amendment.

ULTICOM, INC. EXHIBIT 11.1
SCHEDULE OF COMPUTAION OF EARNINGS PER SHARE

<TABLE>
<CAPTION>
ONE MONTH NINE MONTHS ENDED
YEAR ENDED ENDED YEAR ENDED --------------------------
DECEMBER 31, JANUARY 31, JANUARY 31, OCTOBER 31, OCTOBER 31,
-------------------------
1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS:

Net income (loss) $ (1,577) $ 2,055 $ (431) $ 1,567 $ 1,120 $ 1,022

Weighted average shares outstanding 10,000 10,000 10,000 10,000 10,000 10,000
---------------------------------------------------------------------------------------

Basic EPS $ (0.16) $ 0.21 $ (0.04) $ 0.16 $ 0.11 $ 0.10
=======================================================================================

DILUTED EPS:

Net income (loss) $ (1,577) $ 2,055 $ (431) $ 1,567 $ 1,120 $ 1,022
---------------------------------------------------------------------------------------

Weighted average shares outstanding 10,000 10,000 10,000 10,000 10,000 10,000

Effective of dilutive securities - options - - - 110 110 229
---------------------------------------------------------------------------------------

Weighted average common and common
equivalent shares outstanding 10,000 10,000 10,000 10,110 10,110 10,229
---------------------------------------------------------------------------------------

Diluted EPS $ (0.16) $ 0.21 $ (0.04) $ 0.16 $ 0.11 $ 0.10
=======================================================================================

</TABLE>

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Ulticom, Inc. on Form
S-1 of our report dated January 18, 2000, appearing in the Prospectus, which is
part of this Registration Statement. We also consent to the reference to us
under the headings "Selected Financial Data" and "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

New York, New York
January 18, 2000