ULTICOM INC, 424B4, 2000-10-17

ULTICOM INC
424B4, 2000-10-17
TELEPHONE & TELEGRAPH APPARATUS

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FILED PURSUANT TO RULE NO. 424(b)(4)
REGISTRATION NO. 333-45366

PROSPECTUS

4,250,000 Shares

[LOGO ULTICOM](TM)

Common Stock

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This is an offering of shares of common stock of Ulticom, Inc. Of the 4,250,000
shares being sold in this offering, Ulticom is selling 2,843,375 shares and the
selling shareholders are selling 1,406,625 shares. We will not receive any of
the proceeds from the sale of shares by the selling shareholders.

Our common stock is traded on the Nasdaq National Market under the symbol ULCM.
On October 16, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $55.00 per share.

Investing in the shares involves risk. See "Risk Factors" beginning on page 6.

<TABLE>
<CAPTION>
Per Share Total
--------- ------------
<S> <C> <C>
Public Offering Price................................... $50.00 $212,500,000
Underwriting Discounts and Commissions.................. $ 1.50 $ 6,375,000
Proceeds to Ulticom..................................... $48.50 $137,903,688
Proceeds to Selling Shareholders........................ $48.50 $ 68,221,313
</TABLE>

We have granted the underwriters a 30-day option to purchase up to 637,500
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 October 20, 2000.

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Lehman Brothers
Chase H&Q
Bear, Stearns & Co. Inc.
U.S. Bancorp Piper Jaffray

October 17, 2000

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[LOGO]

[PHOTO]
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TABLE OF CONTENTS

<TABLE>
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Special Note Regarding Forward-Looking Statements......................... 12
Use Of Proceeds........................................................... 13
Dividend Policy........................................................... 13
Market Price For Our Common Stock......................................... 13
Capitalization............................................................ 14
Selected Financial Data................................................... 15
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations............................................................... 16
</TABLE>
<TABLE>
<S> <C>
Business................................................................... 22
Management................................................................. 33
Related Party Transactions................................................. 42
Principal And Selling Shareholders......................................... 45
Description Of Securities.................................................. 47
United States Federal Tax Considerations For Non-United States Holders..... 50
Shares Eligible For Future Sale............................................ 52
Underwriting............................................................... 53
Legal Matters.............................................................. 56
Experts.................................................................... 56
Available Information...................................................... 56
</TABLE>
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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.

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[This page is intentionally left blank.]

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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 provide 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, 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
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 the need to provide these mission-critical performance and reliability
requirements.

We have over 45 customers throughout North America, Europe and the Pacific
Rim and our products are deployed globally by major service providers in more
than 75 countries. Our products are used by equipment manufacturers,
application developers and service providers. Our customers include
communication industry leaders such as Ericsson, Siemens and Comverse Network
Systems, each of which accounted for at least 10% of our revenues in fiscal
1999, and for the six months ended July 31, 2000.

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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The Offering

<TABLE>
<S> <C>
Common Stock offered by us................................... 2,843,375 shares

Common Stock offered by selling shareholders................. 1,406,625 shares

Common Stock to be outstanding after this offering........... 40,510,965 shares

Over-allotment option........................................ 637,500 shares

Nasdaq National Market symbol................................ "ULCM"
</TABLE>

The Common Stock outstanding after this offering:

. excludes 3,659,472 shares of common stock issuable upon the exercise of
stock options outstanding as of July 31, 2000 under our stock incentive
compensation plan, with a weighted average exercise price of $4.56 per
share; and

. includes 40,000 shares of common stock issuable upon the exercise of
stock options outstanding as of July 31, 2000 under our stock incentive
compensation plan, which options will be exercised prior to the
completion of this offering.

About This Prospectus

Unless otherwise indicated, the information in this prospectus assumes no
exercise of the underwriters' over-allotment option.

References in this prospectus to Comverse refer to our controlling
shareholder, Comverse Technology, Inc., and its subsidiaries excluding Ulticom.
References in this prospectus to Comverse Network Systems refer to our
affiliate, Comverse Network Systems, Inc. and its subsidiaries. Comverse
Network Systems 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. References in this prospectus
to fiscal 1999 refer to our fiscal year ended January 31, 2000.

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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."

The following table summarizes our balance sheet as of July 31, 2000:

. on an actual basis; and

. on an as adjusted basis to give effect to:

. the sale by us of 2,843,375 shares in this offering, after deducting
the underwriting discounts and commissions and estimated offering
expenses, and our anticipated application of the net proceeds of the
offering; and

. the exercise of options to purchase 40,000 shares of our common stock
under our stock incentive compensation plan, which options will be
exercised prior to the completion of this offering.

<TABLE>
<CAPTION>
As of
July 31, 2000
-----------------
As
Actual Adjusted
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(In thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................... $67,460 $ 204,884
Working capital.............................................. 57,223 194,647
Total assets................................................. 79,456 216,880
Long-term debt............................................... -- --
Stockholders' equity......................................... 61,885 199,309
</TABLE>

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RISK FACTORS

Investing in our common stock involves risk. You should carefully consider
the risks described below and other information in this prospectus before
deciding to invest in our common stock.

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. As a result, our stock price may be volatile. The
following factors, many of which are outside our control, can cause
fluctuations in our operating results and volatility in our stock price:

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

. customer order deferrals in anticipation of enhancements or new products

. unanticipated delays or problems in releasing new products

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

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

. our timing of and investments in research and development activities

Since our products have long sales cycles which typically range from six to
twelve months, 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.

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. As
a result, we are more likely to be adversely affected by a reduction in demand
for our Signalware products than companies who sell multiple products. This
risk will continue if we are not successful in marketing our Nexworx products
because the markets they are meant to address may not develop or they may not
be accepted by the market. We may also not be successful in taking any other
steps to reduce the risk associated with any slowdown in demand for our
Signalware products. As a result, we are dependent on sales of our Signalware
products and any decline or slow down in sales of our Signalware products could
adversely effect our operating results.

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,
which include Comverse Network Systems, accounted for approximately 64% of our
revenues for fiscal 1999 and 69% for the six months ended July 31, 2000. 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.
The loss of any of these customers could have a material adverse effect on our
business. In order to increase our revenues, we will need to attract additional
significant customers on an ongoing basis.

Our significant international sales subject us to currency exchange risks.

Revenues from customers located outside the U.S. represented approximately
50%, 51%, 63% and 67% of our revenues in fiscal 1997, fiscal 1998, fiscal 1999,
and the six months ended July 31, 2000, respectively. To date, international
sales have been denominated solely in U.S. dollars. As a result, our sales may
be adversely affected by a strengthening U.S. dollar in general or a weakening
of other currencies in the countries in which

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we have sales. 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.

Our failure to hire and retain the personnel we need could limit our ability to
grow.

We depend on the continued services of our executive officers and other key
personnel. In addition, we need to attract and retain a substantial number of
new employees, particularly sales and marketing personnel and technical
personnel, with signaling system #7 knowledge and experience. If we are unable
to attract and retain qualified employees, our ability to continue our growth
could be impaired. Competition for new hires is intense, and we have
experienced difficulty in recruiting qualified personnel due to the market
demand for their services. 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.

We may decide to make acquisitions or investments in the future which could
turn out to be unsuccessful.

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. In addition, we
may fail to successfully integrate acquired businesses with our operations or
successfully realize the intended benefits of any acquisition.

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 purchase relatively small amounts of
components from these suppliers and do not have any long term supply
agreements. If there is a shortage of supply for these components, we may be
more likely to have our supply interrupted because we are a relatively small
purchaser. In this case, alternate sourcing would be required. This sourcing
may not be available on reasonable terms, if at all, and could delay or prevent
customer deliveries.

Our reliance on a limited number of independent manufacturers to manufacture
boards for our products could lead to a disruption in supply of these boards.

We do not subcontract to manufacture a large number of boards and do not have
any manufacturing agreements. If our manufacturers experience financial,
operational, manufacturing capacity or other difficulties, we are more likely
to have our supply disrupted because their volume of business with us is
relatively small. In this case, we will be required to seek alternate
manufacturers. We may not be able to find alternate manufacturers that meet our
requirements and existing or alternative sources for boards may not 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. In addition, we have reduced
control over product quality and delivery schedules because we rely on
independent manufacturers.

Our products may become inoperable if we cannot adapt them to conform with new
computer hardware and/or 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

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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 delay or prevent product shipments.

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. We may not
be able to detect all defects or errors in our products prior to their release.
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. Any proceeding alleging infringement
could be time consuming and expensive to defend or resolve, result in
substantial diversion of management resources, cause product shipment delays,
or force us to enter into royalty or license agreements rather than dispute the
merits of any such proceeding initiated against us. We may not be able to
procure such royalty or license agreements on terms acceptable to us, if at
all. 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. Patent holders or other
holders of intellectual property may initiate legal proceedings against us and
we may not be successful in defending against such proceedings.

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. We do
not generally make our proprietary software 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, it is possible that our proprietary
software code has in the past and will 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

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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. We do not know if we will always be successful in protecting
our proprietary technology.

Certain provisions of our certificate of incorporation and New Jersey law may
make it more difficult for you to get a change in control premium.

Our board's ability to designate and issue up to 10,000,000 shares of
undesignated stock and to change the designations, numbers, relative rights,
preferences and limitations of any authorized but unissued shares of preferred
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.
If this occurred you could lose the opportunity to get a premium on the sale of
your shares in a change of control transaction.

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.
Interested shareholders include, among others, any person that after this
offering becomes a beneficial owner of 10% or more of our outstanding common
stock. These provisions could also limit your ability to obtain a premium in a
change of control transaction.

Because a significant portion of our sales are made to customers in Israel,
political, military and economic conditions in that country may adversely
affect our business and operating results.

Political, economic and military conditions in Israel may affect our sales.
Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors and a state of
hostility, varying in degree and intensity, has led to security and economic
problems for Israel. Our sales could be adversely affected by any major
hostilities involving Israel, the interruption or curtailment of trade between
Israel and its trading partners, a significant increase in inflation, or a
significant downturn in the economic or financial condition of Israel.

Risks Related To The Market For Our Products

If the convergence of different types of communications switching networks does
not occur, or takes longer than anticipated, sales of our network software
products, and our profitability, would be adversely affected.

We expect a substantial portion of any increases in our future sales of
network software products may result from the interconnection, or convergence,
of the two types of switching networks, circuit based networks and packet based
networks. See "Business--Industry Background" on page 22 for an explanation of
these types of networks. If the convergence of these two types of networks does
not occur or occurs at a slower pace than we expect, the growth opportunities
for our business could be limited. Factors that could prevent or delay this
convergence include:

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

. delays in the formulation of standards for the transmission of voice
conversations over a packet network, which may cause service providers to
delay their purchasing plans; and

. the imposition on packet network operators of access fees, would reduce the
economic advantages of using packet networks.

If signaling system #7 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 signaling system #7. If future
networks do not utilize signaling system #7 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. In that event our future
sales will be

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adversely affected and we will have to expend significant resources to develop
new products, thereby increasing our costs. We do not know if signaling system
#7 or our products will play a key role as network architecture designs for
converged circuit and packet networks evolve. In addition, signaling system #7
may be modified substantially for the architecture of converged networks. Any
of these changes or adaptations may be costly. Moreover, we may not be able to
respond to this modification in a timely manner, or at all.

If we are not successful in continuing to develop our Nexworx products or if
these products are not accepted in the market, our growth opportunities could
be limited.

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 primarily upon the
development of a market for these types of products and customer acceptance of
our products. If a market for these or other new products does not develop or
development takes longer than anticipated, or if our Nexworx products are not
accepted by our customers, our continued growth could be adversely affected and
our investment in these products may be lost.

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 could suffer.

The market for communication network signaling software is intensely
competitive, both in the U.S. and internationally. Increased competition could
make it more difficult for us to sustain our growth or increase our
profitability. Our competitors may be able to develop more quickly or adapt
faster to new or emerging technologies and changes in customer requirements, or
devote greater resources to the development, promotion and sale of their
products. 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. 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.

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 our prospective customers continue to
consolidate.

We sell our products to the communications industry. The communications
industry has been undergoing a period of rapid consolidation during the past
few years. Further consolidations of our prospective customers may delay or
cause cancellations of significant sales of our products.

Risks Related To Our Relationship With Comverse

Comverse will control our business and affairs and its interests may not be
aligned with your interests.

Upon completion of the offering, Comverse, which is not a selling shareholder
in this offering, will beneficially own approximately 77% of the outstanding
shares of common stock. Consequently, Comverse

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effectively controls 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 has a controlling influence on our management, direction
and policies, including the ability to appoint and remove our officers. As a
result Comverse may cause us to take actions which may not be aligned with your
interests. For example, 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.

We may lose business opportunities to Comverse 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 matters that, absent
such allocation, could constitute corporate opportunities of both companies. As
a result, we may lose business opportunities that could be valuable to us. In
general, we are precluded from pursuing opportunities offered to directors,
officers or employees of Comverse who may also be our directors, officers or
employees, unless Comverse fails to pursue these opportunities. See "Related
Party Transactions--Conflicts of Interest."

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 Comverse Network Systems.
Although our products would likely be included in Comverse Network Systems'
products, because Comverse Network Systems has a non-exclusive royalty-free
license to use our products we would not earn any license revenues.

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. These directors have fiduciary duties to
both companies and may have conflicts of interest on matters affecting both us
and Comverse and in some circumstances may have interests adverse to our
interests.

Our Chairman and director, Mr. Kobi Alexander, will continue to be Chairman,
President and Chief Executive Officer 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. These positions 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 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 to our interests.

We are potentially liable for taxes not our own which taxes arise during the
period in which we were included in Comverse's consolidated group for tax
purposes.

After this offering is completed we will cease to be included in the Comverse
consolidated group for federal income tax purposes. Prior to the completion of
this offering we were included in the Comverse consolidated group for federal
income tax purposes and we did not file our own federal income tax returns. 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. In addition, by virtue of its controlling
ownership and our tax sharing agreement with Comverse, Comverse effectively
controls all our tax decisions for periods prior to the completion of this
offering. For periods during

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which we are included in the Comverse consolidated group for federal income tax
purposes, Comverse has sole authority to respond to and conduct all tax
proceedings and 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. Despite this agreement,
federal law provides that each member of a consolidated group is liable for the
group's entire tax obligation and we could, under certain circumstances be
liable for taxes of other members of the Comverse consolidated group.

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

Risks Related To This Offering

The stock prices of technology companies such as ours are highly volatile and
could drop unexpectedly.

The market price of our common stock is subject to significant fluctuations.
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.

Because we do not have specific uses for a significant portion of the proceeds
of this offering, investors are relying on management's judgment as to the use
of these proceeds.

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. If our management is not successful in
utilizing these proceeds, the value of your investment may decline.

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.

12
<PAGE>

USE OF PROCEEDS

We estimate that the net proceeds we will receive from this offering will be
approximately $136.9 million, or approximately $167.8 million if the
underwriters exercise their over-allotment option in full, in each case after
deducting the underwriting discounts and commissions and estimated expenses of
this offering. We will not receive any of the proceeds from the sale of shares
by the selling shareholders.

We expect to use the net proceeds that we receive from this offering 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. 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.

MARKET PRICE FOR OUR COMMON STOCK

Our common stock has traded on the Nasdaq National Market under the symbol
ULCM since April 5, 2000. The following table sets forth the per share range of
high and low closing sales prices of our common stock for the periods
indicated:

<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Year ended January 31, 2001:
First Quarter (April 5-30 only)............................... $33.00 $14.81
Second Quarter................................................ 53.44 22.06
Third Quarter (through October 16, 2000)...................... 60.98 29.19
</TABLE>

On October 16, 2000, the last reported sale price for our common stock on the
Nasdaq National Market was $55.00 per share.

13
<PAGE>

CAPITALIZATION

The following table sets forth, as of July 31, 2000, our capitalization:

(1) on an actual basis, and

(2) on an as adjusted basis to give effect to:

. the sale of the 2,843,375 shares offered by us in this offering,
after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us, and the application of
the net proceeds therefrom; and

. the exercise of options to purchase 40,000 shares of our common
stock under our stock incentive compensation plan, which options
will be exercised prior to the completion of this offering.

The table excludes 3,659,472 shares of common stock issuable upon the
exercise of stock options outstanding as of July 31, 2000 under our stock
incentive compensation plan, with a weighted average exercise price of $4.56
per share.

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 July 31, 2000
-------------------
Actual As Adjusted
------- -----------
(in thousands)
<S> <C> <C>
Cash and cash equivalents.................................. $67,460 $204,884
======= ========
Long-term debt............................................. $ -- $ --
------- --------
Stockholders' equity:
Undesignated Stock, no par value, 10,000,000 shares
authorized; no shares issued and outstanding.............. -- --
Common Stock, no par value, 200,000,000 shares authorized;
37,627,590 shares issued and outstanding on an actual
basis; and 40,510,964 shares issued and outstanding on an
as adjusted basis......................................... -- --
Additional paid-in capital................................. 58,098 195,522
Retained earnings.......................................... 3,787 3,787
------- --------
Total stockholders' equity................................. 61,885 199,309
------- --------
Total capitalization....................................... $61,885 $199,309
======= ========
</TABLE>

14
<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 year ended December 31, 1997, the one
month ended January 31, 1998 and the years ended January 31, 1999 and 2000, and
the balance sheet data at January 31, 1999 and 2000 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, 1996
and balance sheet data at January 31, 1998 have been derived from audited
financial statements not included herein. Statement 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 six months ended July 31, 1999 and 2000
and the balance sheet data as of July 31, 2000 have been derived from our
unaudited interim financial statements included elsewhere in this prospectus.
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 six months ended July 31, 2000 are not necessarily
indicative of the results that may be expected for the fiscal year ended
January 31, 2001.

<TABLE>
<CAPTION>
One Month Year Ended Six Months
Year Ended December 31, Ended January 31, Ended July 31,
------------------------- January 31, ---------------- ----------------
1995 1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ----------- ------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales................... $15,355 $ 6,450 $14,559 $ 212 $18,629 $25,831 $11,432 $19,417
Cost of sales........... 7,238 2,853 4,495 294 6,131 8,883 3,964 6,443
------- ------- ------- ------ ------- ------- ------- -------
Gross profit............ 8,117 3,597 10,064 (82) 12,498 16,948 7,468 12,974
Research and
development............ 2,644 1,905 2,398 205 4,706 6,015 2,704 4,285
Selling, general and
administrative......... 4,920 3,875 3,891 348 4,948 8,124 3,662 5,636
------- ------- ------- ------ ------- ------- ------- -------
Income (loss) from
operations............. 553 (2,183) 3,775 (635) 2,844 2,809 1,102 3,053
Interest income
(expense), net......... (328) (342) (507) (45) (350) (271) (109) 1,263
------- ------- ------- ------ ------- ------- ------- -------
Income (loss) before
income taxes........... 225 (2,525) 3,268 (680) 2,494 2,538 993 4,316
Income tax provision
(benefit).............. 438 (948) 1,213 (249) 927 964 381 1,639
------- ------- ------- ------ ------- ------- ------- -------
Net income (loss)....... $ (213) $(1,577) $ 2,055 $ (431) $ 1,567 $ 1,574 $ 612 $ 2,677
======= ======= ======= ====== ======= ======= ======= =======
Earnings (loss) per
share--
Basic................... ($0.01) ($0.05) $ 0.06 ($0.01) $ 0.05 $ 0.05 $ 0.02 $ 0.07
Diluted................. ($0.01) ($0.05) $ 0.06 ($0.01) $ 0.05 $ 0.05 $ 0.02 $ 0.07
Shares used in computing
basic
earnings per share..... 32,727 32,727 32,727 32,727 32,727 32,727 32,727 35,886
Shares used in computing
diluted
earnings per share..... 32,727 32,727 32,727 32,727 33,087 33,759 33,579 38,743
</TABLE>

<TABLE>
<CAPTION>
As of
As of December 31, As of January 31, July
------------------------- ------------------------- 31,
1995 1996 1997 1998 1999 2000 2000
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 206 $ 315 $ 1,030 $ 584 $ 2,544 $ 6,299 $67,460
Working capital
(deficit).............. (3,080) (4,699) (2,999) (3,513) (2,236) 742 57,223
Total assets............ 6,317 4,858 7,319 6,878 8,883 17,364 79,456
Long-term debt.......... -- -- -- -- -- 3,800 --
Stockholders' equity
(deficit).............. (858) (3,389) (1,333) (2,021) (454) 1,120 61,885
Dividend to parent...... -- 953 -- 256 -- -- --
</TABLE>

15
<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.

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.

Our cost of sales include material costs, subcontractor costs, salary and
related benefits for the operations and service departments, depreciation and
amortization of equipment used in the operations and service departments,
amortization of capitalized software costs and an overhead allocation. Our
research and development costs include salaries and related benefits as well as
travel, depreciation and amortization of research and development equipment, an
overhead allocation, as well as other costs associated with our research and
development activities. Our selling, general and administrative costs include
salary and related benefits, travel, depreciation and amortization, marketing
and promotional materials, recruiting expenses, professional fees, corporate
services provided by Comverse, facility costs, as well as other costs
associated with our sales, marketing, finance and administrative departments.

16
<PAGE>

Results of Operations

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

<TABLE>
<CAPTION>
Six Months
Year One Month Year Ended Ended July
Ended Ended January 31, 31,
December 31, January 31, ------------- -------------
1997 1998 1999 2000 1999 2000
------------ ----------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Sales................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0%
Cost of sales........... 30.9 138.7 32.9 34.4 34.7 33.2
----- ------ ----- ----- ----- -----
Gross profit............ 69.1 (38.7) 67.1 65.6 65.3 66.8
Research and
development............ 16.5 96.7 25.3 23.3 23.6 22.1
Selling, general and
administrative......... 26.7 164.2 26.6 31.5 32.0 29.0
Interest income
(expense), net......... (3.5) (21.2) (1.9) (1.0) (1.0) 6.5
----- ------ ----- ----- ----- -----
Income (loss) before
taxes.................. 22.4 (320.8) 13.3 9.8 8.7 22.2
Income tax provision
(benefit).............. 8.3 (117.5) 4.9 3.7 3.3 8.4
----- ------ ----- ----- ----- -----
Net income (loss)....... 14.1 % (203.3)% 8.4 % 6.1 % 5.4 % 13.8%
===== ====== ===== ===== ===== =====
</TABLE>

Six Months Ended July 31, 2000 Compared to Six Months Ended July 31, 1999

Sales. Sales for the six-month period ended July 31, 2000 increased by
approximately $8.0 million, or 70%, over the comparable period in 1999. The
increase is attributable primarily to a higher volume of sales and deployments
of our Signalware products worldwide, especially to customers who provide
wireless communication services or who sell products enabling the convergence
of voice data networks. Sales to international customers represented 67% of our
sales in the each of the six-month periods ended July 31, 2000 and 1999.

Cost of Sales. Cost of sales for the six-month period ended July 31, 2000
increased by approximately $2.5 million, or 63%, compared to the corresponding
period in 1999. Material costs increased by approximately $0.9 million,
personnel-related costs increased by approximately $0.9 million and
depreciation and amortization costs increased by approximately $0.6 million for
the six-month period ended July 31, 2000. Gross margins (expressed as a
percentage of sales) for the six-month period ended July 31, 2000 increased to
approximately 67% from approximately 65% in the corresponding period in 1999.

Research and Development Expenses. Research and development expenses for the
six-month period ended July 31, 2000 increased by approximately $1.6 million,
or 58%, compared to the corresponding period in 1999 due to the overall growth
of research and development operations. The increase was primarily attributable
to an increase in personnel-related costs of approximately $0.8 million due to
the increased compensation and the hiring of additional personnel. In addition,
materials costs related to research and development activities increased by
approximately $0.7 million.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six- month period ended July 31, 2000 increased
by approximately $2.0 million, or 54%, compared to the corresponding period in
1999. The increase is due primarily to the growth and expansion of activities
in sales, marketing and administration. Personnel-related costs increased by
approximately $0.9 million which primarily was due to the expansion of our
marketing and sales department. Legal and consulting fees increased by
approximately $0.2 million due to matters related to the expansion of our
international operations. Marketing costs increased by approximately $0.1
million due to the increased activity in advertising and tradeshows.

Interest and other income (expense), net. Interest and other income
(expense), net, for the six-month period ended July 31, 2000 increased by
approximately $1.4 million compared to the corresponding period in 1999. The
increase was primarily a result of increased interest income of approximately
$1.4 million for the six-month period ended July 31, 2000 resulting from the
additional funds raised in the Company's initial public offering.

17
<PAGE>

Income Tax Provision. Provision for income taxes for the six-month period
ended July 31, 2000 increased by $1.3 million, or 330%, compared to the
corresponding period in 1999 due to increased pre-tax income. The overall
effective tax rate was approximately 38% in each of the six month periods ended
July 31, 2000 and 1999.

Net Income. Net income for the six-month period ended July 31, 2000 increased
by approximately $2.1 million, or 337%, compared to the corresponding period in
1999, primarily as a result of the factors described above. Net income as a
percentage of sales increased to approximately 14% in the six-month period
ended July 31, 2000 from approximately 5% in corresponding period in 1999.

Year Ended January 31, 2000 Compared to Year Ended January 31, 1999

Sales. Sales for our fiscal year ended January 31, 2000, or fiscal 1999,
increased by approximately $7.2 million, or 39%, compared to our fiscal year
ended January 31, 1999, or fiscal 1998. This increase is primarily attributable
to higher volume of sales of our Signalware products to international
customers. Sales to international customers represented 63% of our total sales
in fiscal 1999, compared to 51% of our total sales in fiscal 1998. We believe
that sales of our Signalware product to international customers will continue
to represent a significant portion of our future sales.

Cost of Sales. Cost of sales for fiscal 1999 increased by approximately $2.8
million, or 45%, compared to fiscal 1998. The increase in cost of sales is
attributable to an increase in personnel-related costs of approximately $1.7
million, due to hiring of additional personnel and increased compensation and
benefits for existing personnel. In addition, materials and production costs
increased by approximately $1.5 million due to the increase in sales. Gross
margins decreased from approximately 67% in fiscal 1998 to approximately 66% in
fiscal 1999. We believe that cost of sales in the next fiscal year should not
vary significantly as a percentage of sales from fiscal 1999.

Research and Development Expenses. Research and development expenses for
fiscal 1999 increased by approximately $1.3 million, or 28%, compared to fiscal
1998 due to overall growth of research and development operations and the
initiation of significant new research and development projects. The increase
primarily resulted from an increase in personnel-related costs of approximately
$0.9 million, due to hiring of additional personnel and increased compensation
and benefits for existing personnel. We expect that research and development
expenses in future periods will increase further as these investments are
crucial for our ability to develop our technologies and expand our product
offerings to meet our customers' needs.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 1999 increased by approximately $3.2
million, or 64%, compared to fiscal 1998, and as a percentage of sales
increased from approximately 27% for fiscal 1998 to approximately 31% for
fiscal 1999. The increase was primarily a result of an increase in personnel-
related costs of approximately $1.7 million, due to hiring of additional
personnel and increased compensation and benefits for existing personnel. In
addition, expenses related to marketing and promotional materials increased by
approximately $200,000 and rent expense increased by approximately $150,000. We
anticipate that selling, general and administrative expenses will continue to
increase in the future as we accommodate our growth, add to our infrastructure,
and incur expenses related to being a public company.

Income Tax Provision. Provision for income taxes increased by approximately
$37,000, or 4%, due to increased pre-tax income. Our overall effective tax rate
increased from approximately 37% for fiscal 1998 to approximately 38% for
fiscal 1999.

Net Income. Net income increased by approximately $7,000 in fiscal 1999
compared to fiscal 1998, while net income as a percentage of sales decreased
from approximately 8% for fiscal 1998 to approximately 6% for fiscal 1999. The
changes resulted primarily from the factors described above.

18
<PAGE>

Year Ended January 31, 1999 Compared to Year Ended December 31, 1997

Sales. Sales increased in fiscal 1998 by approximately $4.1 million, or 28%,
compared to our fiscal year ended December 31, 1997, or 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 approximately $0.6 million 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 and
the initiation of significant new research and development projects. The
increase primarily resulted from an increase in personnel-related costs of
approximately $1.9 million due to hiring of additional personnel and increased
compensation and benefits for existing personnel and increases in 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 was primarily a result of an
increase in personnel-related costs of approximately $1.0 million, due to
hiring of additional personnel and increased compensation and benefits for
existing personnel.

Income Tax Provision. Provision for income taxes decreased in fiscal 1998 by
approximately $0.3 million, 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 $0.5 million, 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.

One Month Ended January 31, 1998 Compared to One Month Ended January 31, 1997

Sales. Sales decreased in January 1998 by approximately $0.5 million, or 71%,
compared to January 1997. The decrease was a result of decreased shipments of
our Signalware product during the January 1998 period.

Cost of Sales. Cost of sales increased in January 1998 by approximately
$66,000, or 29%, compared to January 1997. The increase was primarily a result
of increased personnel-related costs during the 1998 period due to hiring of
additional personnel in the operations and services departments as well as
increased compensation for existing personnel in those departments.

Research and Development Expenses. Research and development expenses
increased in January 1998 by approximately $80,000, or 64%, compared to January
1997. The increase was primarily a result of increased personnel-related costs
during the 1998 period due to hiring of additional personnel as well as
increased compensation for existing personnel.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased in January 1998 by $152,000, or 78%, compared
to January 1997. The increase was primarily a result of increased personnel-
related costs during the 1998 period due to hiring of additional personnel as
well as increased compensation for existing personnel.

Income Tax Provision. In January 1998 we had an income tax benefit of $0.2
million, compared to an income tax expense of $53,000 in January 1997. Our
effective tax rate was approximately 37% in both periods.

19
<PAGE>

Net Income (Loss). There was a net loss of approximately $0.4 million in
January 1998 compared to net income of $91,000 in January 1997, as a result of
the factors described above.

Selected Quarterly Results of Operations

The following tables set forth statement of operations data for each of the
ten consecutive quarters ended July 31, 2000. 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, Jan. 31, Apr. 30, July 31,
1998 1998 1998 1999 1999 1999 1999 2000 2000 2000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................... $4,261 $4,554 $4,721 $5,093 $5,363 $6,069 $6,792 $7,607 $8,826 $10,591
Cost of sales........... 1,527 1,517 1,460 1,627 1,888 2,076 2,347 2,572 2,947 3,496
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Gross profit............ 2,734 3,037 3,261 3,466 3,475 3,993 4,445 5,035 5,879 7,095
Research and
development............ 1,079 1,194 1,178 1,255 1,299 1,405 1,559 1,752 1,960 2,325
Selling, general and
administrative......... 998 1,168 1,336 1,446 1,703 1,959 2,159 2,303 2,586 3,050
Interest income
(expense), net......... (107) (83) (103) (57) (66) (43) (70) (92) 216 1,047
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income before income
taxes.................. 550 592 644 708 407 586 657 888 1,549 2,767
Income tax provision.... 204 219 243 261 156 225 247 336 588 1,051
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net income.............. $ 346 $ 373 $ 401 $ 447 $ 251 $ 361 $ 410 $ 552 $ 961 $ 1,716
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------------------------
Apr. 30, July 31, Oct. 31, Jan. 31, Apr. 30, July 31, Oct. 31, Jan. 31, Apr. 30, July 31,
1998 1998 1998 1999 1999 1999 1999 2000 2000 2000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As a percentage of
sales:
Sales................... 100.0% 100.0% 100.0% 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 33.8 33.4 33.0
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Gross profit............ 64.2 66.7 69.0 68.1 64.8 65.8 65.4 66.2 66.6 67.0
Research and
development............ 25.3 26.2 25.0 24.6 24.2 23.2 23.0 23.0 22.2 22.0
Selling, general and
administrative......... 23.4 25.7 28.3 28.4 31.8 32.3 31.8 30.3 29.3 28.8
Interest income
(expense), net......... (2.6) (1.8) (2.2) (1.2) (1.2) (0.7) (1.0) (1.2) 2.5 9.9
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income before income
taxes.................. 12.9 13.0 13.5 13.9 7.6 9.6 9.6 11.7 17.6 26.1
Income tax provision.... 4.8 4.8 5.0 5.2 2.9 3.7 3.6 4.4 6.7 9.9
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net income.............. 8.1% 8.2% 8.5% 8.7% 4.7% 5.9% 6.0% 7.3% 10.9% 16.2%
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
</TABLE>

Our quarterly sales increased throughout fiscal 1998, 1999 and the six months
ended July 31, 2000 primarily as a result of increased sales to international
customers. Cost of sales as a percentage of sales varied in each quarter
depending on the mix of sales between customers. Operating expenses increased
in each quarter primarily as a result of the increase in the number of
employees in research and development, sales and marketing, as well as finance
and administrative functions. The increased headcount resulted from our need to
support our sales growth. A large portion of our expenses, including rent and
salaries, are set based upon expected future sales. Accordingly, if sales are
below expectations, operating results may be adversely affected.

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<PAGE>

Liquidity and Capital Resources

We have funded our operations and met our capital expenditure requirements
primarily through cash flows from operations and from the proceeds of our
initial public offering, as well as prior to the offering through borrowings
from Comverse. As of July 31, 2000, we had cash and cash equivalents of
approximately $67.5 million and working capital of approximately $57.2 million.

Cash provided by operating activities were approximately $3.7 million, $4.0
million and $7.1 million for fiscal 1997, fiscal 1998 and fiscal 1999,
respectively, and approximately $8.1 million for the six months ended July 31,
2000. Operating cash flows in fiscal 1997 resulted primarily from income from
operations, increases in deferred revenues and accounts payable and accrued
expenses and a decrease in prepaid expenses and other current assets, partially
offset by increases in amounts due from related parties and inventories.
Operating cash flows in fiscal 1998 resulted primarily from income from
operations, and an increase in accounts payable and accrued expenses. Operating
cash flows in fiscal 1999 resulted primarily from income from operations,
increases in deferred revenue and accounts payable and accrued expenses and a
decrease in amounts due from related parties, partially offset by increases in
accounts receivable, inventories, prepaid expenses and other current assets,
and other assets. Operating cash flows to date in fiscal 2000 resulted
primarily from income from operations and increases in deferred revenue and
accounts payable and accrued expenses, and decreases in amounts due from
related parties, inventories and prepaid expenses and other current assets,
partially offset by increases in accounts receivable and other assets.

Cash used in investing activities was primarily for purchases of property and
equipment and investments in software development costs and were approximately
$0.9 million, $1.8 million, and $3.5 million for fiscal 1997, fiscal 1998, and
fiscal 1999, respectively, and approximately $1.6 million for the six months
ended July 31, 2000.

Cash used in financing activities in fiscal 1997 and fiscal 1998 was
primarily for borrowings and repayments of borrowings and was $2.1 million and
$0.2 million, respectively. Financing activities for fiscal 1999 included $3.8
million in borrowing under a term loan from a bank and $3.7 million in
repayments of amounts due to related parties. Financing activities for the six
months ended July 31, 2000 provided cash of approximately $54.6 million. These
amounts included: (i) approximately $58.1 million of net proceeds from the
issuance of common stock in connection with our initial public offering; (ii)
proceeds from the exercise of stock options in the amount of $26,000; (iii)
proceeds from related parties of approximately $0.3 million and (iv) the
repayment of bank debt of $3.8 million.

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. We
used a portion of the proceeds of our initial public 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.

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BUSINESS

Overview

We provide 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.

Our products are used by equipment manufacturers, application developers and
service providers. In addition, as a founding member of The Parlay Group and
the Java API Integrated Networks 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.

Industry Background

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

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

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

. 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." In circuit switched networks, a
dedicated line or circuit is established for each telephone call and maintained
for the duration of the call. At the conclusion of the call the dedicated line
or circuit is disconnected. While circuit switching has offered reliable and
high quality voice communications, an emerging technology called "packet
switching" is inherently more efficient and cost effective. In packet switched
networks, the voice or data information being transmitted is formatted into a
series of shorter digital messages called "packets." These packets of voice or
data information travel over a shared line or circuit. 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. Signaling system #7 has
been implemented by service providers worldwide, including traditional,
emerging, Internet and wireless service providers. Signaling system #7 provides
the speed and reliability required for processing increasingly complex call
control information. Because signaling system #7 is the industry-wide standard
signaling protocol, industry experts believe that signaling for converged
circuit and packet networks will be based upon signaling system #7 as well.

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<PAGE>

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:

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

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

. 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

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:

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<PAGE>

Our Strategy

Our objective is to be the leading provider of 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 signaling
system #7 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:

. products that enable the creation of new intelligent network services on
existing wireless and wireline networks;

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

. 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
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:

. open standards--running applications on multiple software platforms;

. fault resilience--building systems with no single point of failure;

. high performance--processing transactions at very high rates;

. scalability--increasing computing capacity to run various applications;
and

. global operability--creating applications that could run on various
communications networks around the world.

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<PAGE>

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 Internet Redirect Services
Prepaid Calling Service Wireless Internet Services
Virtual Private Networks Voice over the Internet Services
Wireless Authentication Internet Call Waiting
Wireless Roaming Service Internet Call Forwarding
Caller ID Wireless Email Service
Number Portability Internet Fax Delivery
Wireless 911 Service Unified Messaging
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 works with multiple signaling system #7 networks,
supports a wide variety of signaling system #7 protocol elements and enables
analog or digital wireless transmission. Signalware provides the functionality
needed for call set-up/call termination and call routing/call billing.
Signalware product packages run on a range of operating systems, including Sun
Solaris, Unixware, IBM AIX 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 reliability. Our signalware
product also 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.

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

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<PAGE>

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 in
demonstration enable subscribers to remotely forward calls using wireless
application protocol, WAP, and click-to-talk via the Internet using extensible
markup language, XML.

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.

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.

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<PAGE>

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 45 customers and are deployed in more
than 75 countries. We market our products and services through a direct sales
organization and through key relationships with our customers. Customers that
have accounted for at least five percent of our sales during fiscal 1997,
fiscal 1998, fiscal 1999 or the six months ended July 31, 2000 are:

. equipment manufacturers: Alcatel, Ericsson, Lucent, Qualcomm, Siemens,
Sonus and Sun Microsystems;

. application developers: Comverse Network Systems and Logica; and

. service providers: MCI Worldcom.

For fiscal 1997, Sun Microsystems, Qualcomm, Siemens and Comverse Network
Systems and its affiliates accounted for approximately 10%, 13%, 13% and 19%
respectively, of our sales. For fiscal 1998, Siemens and Comverse Network
Systems and its affiliates accounted for approximately 13% and 20%,
respectively, of our sales. For fiscal 1999, Ericsson, Siemens and Comverse
Network Systems and its affiliates accounted for approximately 20%, 12% and
18%, respectively, of our sales. For the six months ended July 31, 2000,
Ericsson, Siemens and Comverse Network Systems and its affiliates accounted for
approximately 24%, 10% and 19%, respectively, of our sales.

Sales to international customers accounted for 50% of our sales in fiscal
1997, 51% of our sales in fiscal 1998, 63% of our sales for fiscal 1999, and
67% of our sales in the six months ended July 31, 2000.

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.

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<PAGE>

The Parlay Group, an industry consortium now with 21 members, seeks to
specify an interface 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 interface enables service providers and application developers to
integrate communications capabilities into generic information technology
software. Implementation of this interface will allow service providers to
offer mass-customization of services that meet the specific needs of their
subscribers. Two specifications of this interface have been published to date.
The Parlay interface 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 September 30, 2000 are set forth in the table below.

The Parlay Group

<TABLE>
<S> <C>
Active Founding Members Other Members
Ulticom Alcatel
British Telecom AePONA
Microsoft AT&T
Siemens Cisco
Ericsson
France Telecom
Fujitsu
High Definition Systems
IBM
Lucent
NEC
Net4Call
Nokia
SBC-TRI
SS8 Networks
Tundo Communications
Westwave Communications
</TABLE>

JAVA API Integrated Networks Initiative

In June 1998, we became a founding member of the JAVA API Integrated Networks
industry initiative. This industry initiative was established to define common
interfaces between intelligent network and signaling system #7 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 this industry initiative is to make intelligent
network application development, including computer telephony integration,
faster, simpler and less expensive through platform-independent JAVA
technology. Members of this industry initiative as of July 31, 2000 are set
forth in the table below.

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<PAGE>

Java API Integrated Networks Initiative

<TABLE>
<S> <C>
Founding Members
Sun Microsystems
Ulticom
ADC NewNet
Ericsson InfoTech
ApiON (now part of Phone.com)
--------------------------------------------------------
Other Members
AePONA Natural Microsystems
Alcatel NEC
AT&T Nokia
British Telecom Nortel
BroadSoft NTT
CISCO Object Wave Corporation
CMG OKI Electric Industry
Datakinetics Open Cloud
DynamicSoft Periphonics Corporation
Eurescom (representing 26 European Samsung
service providers) Saraide.com
France Telecom Siemens
Fujitsu Sylantro
Huawei Technology SymSoft
Hughs Software Telcordia
IBM Telesoft Design
Incomit Telesys Software
KPN Trillium
Lara Technology Ubiquity
Lucent U|force
Mahindra Westwave Communications
Motorola Xybridge
</TABLE>

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 140 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 advancement of application
development for evolving Internet protocol networks which support both voice
and multimedia communications. We participate in two Softswitch working groups:

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

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<PAGE>

. 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:

. identify and respond to emerging technological trends in our target
markets;

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

. 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, $6.0 million for fiscal 1999 and
$4.3 million for the six months ended July 31, 2000. Our research and
development activities are located in Mount Laurel, New Jersey, Dallas, Texas
and in France. As of July 31, 2000, we had 80 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 certified by the International Standards Organization.
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 International
Standards Organization 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.

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Intellectual Property Rights

We have accumulated a significant amount of proprietary know-how and
expertise over the years in developing network signaling software and signaling
system #7 protocol technology for communication services. Our continued success
is dependent, in part, upon our ability to protect our proprietary rights to
the 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. As of July 31, 2000, 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.

The names UlticomTM, Signalware(R), NexworxTM, Ultimate Call Control(R),
Ultimate Service ControlTM, Programmable NetworkTM and SoftserviceTM 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.

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.

Due to the value of our intellectual property rights, we do not generally
make our proprietary software 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 Comverse Network Systems, our affiliate, a perpetual,
royalty-free, non-exclusive license to use and operate software products for
incorporation into any of Comverse Network Systems' products. See "Related
Party Transactions--Computer Software License Agreement."

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

Competition

The market for 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.

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 signaling system #7 software solution providers, such as
ADC NewNet and

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<PAGE>

Trillium Digital Systems, to vendors of communication and network
infrastructure equipment, such as Hewlett Packard and Compaq. We believe we
compete principally on the basis of:

. product performance and functionality;

. product quality and reliability;

. customer service and support; and

. price.

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.

Employees

As of July 31, 2000, we had approximately 224 employees. We consider our
relationship with our employees to be good. Our employees are not covered by
any collective bargaining agreement.

Facilities

We have headquarters and development facilities in Mount Laurel, New Jersey
where we lease approximately 36,000 square feet of office space. Due to our
growth, we have entered into a lease for additional office space to expand our
Mount Laurel facility. This additional office space consists of 18,000 square
feet directly across from our headquarters. Both leases for our Mount Laurel
facilities will expire in May 2006.

We recently began relocating our development, support and sales facility in
Dallas, Texas to a new leased facility of approximately 13,000 square feet. The
lease for this new facility in Dallas, Texas, expires in August 2005. The lease
for our old facility in Dallas, Texas, expires in October 2000.

In France, we lease two floors comprising an aggregate of 7,200 square feet
for a development, support and sales facility. The lease on the first-floor
runs until January 2009 and the second floor until April 2009.

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.

32
<PAGE>

MANAGEMENT

Directors, Executive Officers and Key Employees

The following table sets forth certain information concerning our directors,
executive officers and key employees.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Executive Officers and
Directors:
Kobi Alexander (1)(3)... 48 Chairman of the Board of Directors and Director
Shawn Osborne (1)....... 40 President and Chief Executive Officer and Director
David Kreinberg (1)..... 35 Chief Financial Officer and Director
William F. Sorin
(1)(3)................. 51 Secretary and Director
Paul D. Baker........... 42 Director
Yaacov Koren............ 46 Director
Zvi Bar-On (2).......... 48 Director
Ron Hiram (2)(3)........ 47 Director
Rex McWilliams (2)...... 65 Director

Key Employees:
Alan P. David........... 46 Vice President of Engineering
Steven C. Davis......... 50 Vice President of Research and Development
James H. Grim........... 39 Vice President of Sales and Marketing
James Johnston.......... 44 Vice President of Operations
Lisa Roberts............ 35 Vice President of Finance
</TABLE>
--------
(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.

Shawn K. Osborne was named our President and Chief Executive Officer in
September 1997 and 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

33
<PAGE>

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 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 was named 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 was named 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 private 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 is also a director of Lanoptics Ltd. Mr. Koren received
his LL.B. from the Tel-Aviv University, Law School in 1982.

Zvi Bar-On was named a director in April 2000. 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. After the merger, Mr.
Bar-On served as a consultant to Kellstrom until September 1998. 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 was named a director in April 2000. 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 private companies in
which Soros Fund Management has investments 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 is also a director of Outboard Marine
Corporation. Mr. Hiram received an M.B.A. from Columbia University in 1981.

34
<PAGE>

Rex A. McWilliams was named a director in April 2000. Mr. McWilliams is the
Chairman of ODI Diagnostics, a position he has held since April 1999. Mr.
McWilliams, also serves as the Chairman of Newvent Management, a position he
has held since January 1997. 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 Engineering in April 2000.
Prior to that, he served as our Vice President of Quality and Information since
joining our Company in October 1999. Before 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, and is President 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 Sales and Marketing in April
2000. Prior to that, he served as our Vice President of Engineering from
October 1999 until April 2000. He also served as our Vice President of
Engineering and Operations from October 1998 until October 1999. He joined our
Company in June 1998 and served as Vice President of Operations from June 1998
until October 1998. 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 been our Vice President of Finance since June 1998. From
January 1997 to June 1998, she served as our Director of Finance. Prior to
that, she served as our Controller since 1995. She is a Certified Public
Accountant, and prior to joining Ulticom 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.

35
<PAGE>

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
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 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

Our board of directors has four committees; an executive committee, a
compensation committee, an audit committee and a stock option committee.
Members serve on these committees for one-year terms.

Our executive committee consists of Messrs. Alexander, Osborne, Kreinberg and
Sorin. The executive committee has all the authority of the board, except with
respect to items requiring shareholder approval or submission and except as
otherwise required by law.

Our compensation committee consists of Messrs. Alexander, Sorin and Hiram.
The compensation committee makes 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.

Our audit committee consists of Messrs. Bar-On, Hiram and McWilliams. The
audit committee makes recommendations to the board of directors regarding the
selection of independent public accountants, reviews the results and scope of
the audit and other services provided by our independent public accountants and
reviews and evaluates our control functions.

Our stock option committee consists of Messrs. Bar-On, Hiram and McWilliams.
The stock option committee administers the issuance of stock options under our
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 received options
to purchase 15,000 shares of common stock under our stock incentive
compensation plan upon completion of our initial public offering in April 2000.
Each such director will also receive on an annual basis options to purchase
5,000 shares of common stock under our stock incentive compensation plan with
an exercise price equal to the fair market value on the date of grant. These
options will vest incrementally based on the number of board meetings and
committee meetings attended by such director over the year.

Compensation Committee Interlocks and Insider Participation

Executive compensation decisions in fiscal 1999 were made exclusively by our
Chairman, Kobi Alexander. 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 or accrued 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 $200,000 $60,000 $13,988
</TABLE>

36
<PAGE>

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. As of July 31, 2000, 678,223 options had
been granted in fiscal 2000 with an average exercise price of $14.25 of which
50,000 had been granted to our executive officers.

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. These options will vest in four
equal annual increments commencing in April 2001. The value of the unexercised
options set forth below has been calculated by subtracting the exercise price
from the initial offering price of $13.00 per share and multiplying that amount
by the number of shares underlying the option.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at January 31, 2000 at January 31, 2000
------------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------ --------------- ----------- -------------
<S> <C> <C> <C> <C>
Shawn K. Osborne........ -- 490,905 -- $5,406,765
David Kreinberg(1)...... -- -- -- --
</TABLE>
--------
(1) Mr. Kreinberg currently does not have any options granted by us. Comverse
has granted to Mr. Kreinberg options to purchase 98,181 shares of our
common stock from Comverse. These options will vest in four equal annual
increments commencing in April 2001. The value of such options as of
January 31, 2000 was $1,081,353, based on the initial public offering price
of $13.00 per share.

Employment Agreement

We have entered into an employment agreement with Mr. Osborne, our President
and Chief Executive Officer, which has the following principal terms:

. The agreement will terminate on January 31, 2003, but will be
automatically extended for an additional two years, unless either party
notifies the other of its intention not to extend the employment period.

. Mr. Osborne will receive an annual base salary of $210,000. Mr. Osborne
will also be entitled to receive an annual bonus of up to $75,000 per
year. Our board of directors will review Mr. Osborne's base salary
annually and may, at its discretion, increase his base salary.

. Upon completion of our initial public offering, Mr. Osborne was granted
options to purchase from us 50,000 shares of our common stock under our
stock incentive plan at an exercise price per share equal to $13.00 per
share, the initial public offering price. These options will vest six
months following the date of grant.

. If during the one-year period following a change in control Mr.
Osborne's employment is terminated either

. by us for any reason other than cause, or

. by Mr. Osborne, should we fail to continue his employment on
substantially equivalent compensation terms,

37
<PAGE>

Mr. Osborne will be entitled to receive a payment equal to his annual
base salary and, for the purpose of determining the exercisability of
his stock options, he will be deemed to have concluded an additional
period of 24 months of employment with us.

. We or Mr. Osborne may terminate his employment at any time during the
employment term upon giving 90 days' notice, except that no notice is
required if we terminate Mr. Osborne's employment for cause. If we
terminate Mr. Osborne's employment for reasons other than cause, he will
be entitled to receive his earned but unpaid salary and bonus pro rated
through the date of termination and, for the purpose of determining the
exercisability of his stock options, he will be deemed to have concluded
an additional period of 12 months of employment with us.

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.

General. The plan provides for the grant of deferred stock, restricted stock,
options and stock appreciation rights. We have reserved 6,500,000 shares of our
common stock for issuance upon exercise of awards under the plan.

Administration. The plan is administered by our stock option committee.

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 Ulticom 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 awards, other than deferred stock awards intended to qualify
for the performance-based compensation exception to Section 162(m) of the
Internal Revenue Code.

Restricted Stock. An award of restricted stock to an employee is a grant by
Ulticom 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 Ulticom, 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

38
<PAGE>

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, other than restricted stock intended to qualify for the
performance-based compensation exception to Section 162(m) of the Code.

Options. Options give an employee the right to purchase a specified number of
shares of common stock, deferred stock or restricted stock from us 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.

Option terms may not be greater than 10 years, or 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, excluding 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:

. 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

. 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.

39
<PAGE>

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:

. increasing the total number of shares available for issuance under the
plan;

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

. 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;

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

. 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

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 Code. The plan allows 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 are limited
by the Code to a maximum of $25,000 deducted from their compensation under the
plan during any calendar year.

Administration. The plan is administered by our compensation committee, which
is 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 are binding. The expenses of
administering the plan are borne by us.

Shares Available Under the Plan. We have reserved 600,000 shares of our
company's common stock for issuance under the plan. The maximum number of
shares issuable under the plan is 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
is voluntary, and we cannot determine the number of shares to be purchased
under the plan.

Operation of the Stock Purchase Plan. Our common stock is purchased under the
plan through semi-annual offering periods. Offering periods will begin on March
1 and September 1 of each year.

During each offering period, the maximum number of shares which may be
purchased by a participant is 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 is 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:

. 85% of the last sale price of our common stock on the Nasdaq National
Market on the first day of the offering period; and

. 85% of such price on the last day of the offering period.

40
<PAGE>

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:

. Section 423 of the Code;

. Rule 16b-3 of the Exchange Act or any successor provisions; or

. under any applicable listing requirement of Nasdaq.

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.

41
<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:

. consulting services with respect to financial planning and reporting;

. routine legal services;

. administration of employee benefit plans;

. maintaining in effect a policy of directors' and officers' liability
insurance covering our directors and officers; and

. 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. During fiscal 1999, no amounts were paid to Comverse for
reimbursement of out-of-pocket expenses. 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. This
agreement currently covers the services of Mr. Kreinberg who was paid aggregate
salary and bonus of $260,000 by Comverse in fiscal 1999. We believe that the
terms of this agreement are as favorable as could have been obtained from an
unaffiliated third party.

Sales to Subsidiaries of Comverse

We sell products and services to other subsidiaries of Comverse in the
ordinary course of our business. Sales to these subsidiaries were approximately
$2.7 million, $3.8 million and $4.7 million for fiscal 1997, fiscal 1998 and
fiscal 1999, respectively, and approximately $3.7 million for the six months
ended July 31, 2000.

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 for which Comverse files
consolidated federal income tax returns. After this offering is completed we
will cease to be included in the Comverse consolidated group for federal income
tax purposes. However, prior to the completion of this offering we were
included in the Comverse consolidated group for federal income tax purposes and
we did not 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 such 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, Comverse Patent Holding, granted Lucent GRL a non-exclusive
license to those patents now owned by Comverse Patent Holding or which Comverse
Patent Holding has a right to license and to those patents granted to Comverse
Patent Holding or which Comverse Patent Holding obtains the right to license
during the term of that arrangement. In return, Comverse Patent Holding was
granted a non-exclusive license to

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<PAGE>

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, Comverse Patent Holding 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 Comverse Patent Holding under which we
have granted a non-exclusive royalty-free license to Comverse Patent Holding
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, Comverse Patent Holding granted to us a non-exclusive
royalty-free sublicense to all patents that are licensed by Lucent GRL to
Comverse Patent Holding. We believe that the value of our sublicense from
Comverse Patent Holding is greater than the value of our license to Comverse
Patent Holding.

License Agreement

We have a license agreement with Comverse Network Systems. Under this
agreement, we granted Comverse Network Systems an irrevocable, perpetual,
royalty-free, non-exclusive license to use certain elements of the Signalware
software for incorporation into Comverse Network Systems' products.
Specifically, the license granted to Comverse Network Systems includes the
following rights:

. the right to install and use our software products at any of Comverse
Network Systems' sites and locations;

. the right to install and use our software products on or in connection
with any Comverse Network Systems' product;

. the right to use and execute the software products on any platform;

. the right to create, add to, enhance or modify our software products;
and

. the right to sublicense and/or otherwise provide our software products
to others provided that our products cannot be licensed as a stand-alone
interface.

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

The term of this agreement is ten years, commencing on February 1, 2000.
Thereafter, the agreement will automatically renew for one-year periods unless
terminated by either Comverse Network Systems or us. The license granted by us
under the agreement, and any sublicenses granted by Comverse Network Systems,
survive termination or expiration of the agreement.

Since Comverse's acquisition of Ulticom in August 1995, Comverse Network
Systems has been using our Signalware software on a royalty-free basis. We
entered into this agreement with Comverse Network Systems in order to formalize
this existing arrangement with Comverse Network Systems. Although we did not
receive any consideration from Comverse Network Systems for entering into this
agreement, we believe that this agreement will lead to revenues from sales of
our interface boards to Comverse Network Systems upon its deployment of its
products which include our Signalware software.

Development and Production Agreement

We have a development and production agreement with Comverse Network Systems.
Under this agreement, we agreed to design and develop for Comverse Network
Systems a signaling system #7 signaling link module board. Comverse Network
Systems agreed to purchase from us minimum quantities of this and other types
of boards at prices which we believe are competitive given the committed
quantities. Comverse Network Systems may also purchase from us additional
boards over the minimum quantities at its sole discretion. If requested by
Comverse Network Systems, for an additional fee we will furnish repair and/or
replacement services to Comverse Network Systems for boards purchased under
this agreement.

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Registration Rights Agreement

We have entered into a registration rights agreement with Comverse. Under
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 90-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.

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 was secured by a deposit of Comverse at the bank. We repaid the bank
loan with a portion of the proceeds of our initial public offering. During
fiscal 1997, fiscal 1998 and fiscal 1999, we were charged with interest on our
indebtedness to Comverse in an amount equal to approximately $532,000, $419,000
and $362,000, respectively. The interest rate on our indebtedness to Comverse
was the prime rate during fiscal 1997, fiscal 1998 and fiscal 1999.

Guarantee of the Lease for Our Dallas Facility

Comverse has guaranteed the payment of rent and the performance of all
obligations under the lease for our old facility in Dallas, Texas. This lease
expires in October 2000.

Charges to Affiliates of Comverse

During fiscal 1997, fiscal 1998 and fiscal 1999, affiliates of Comverse paid
us approximately $1.1 million, $0.6 million and $42,000, respectively, for rent
and other shared facility charges.

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PRINCIPAL AND SELLING SHAREHOLDERS

The following table contains information with respect to the beneficial
ownership of our common stock as of July 31, 2000, and as adjusted to reflect
the sale of common stock in this offering by:

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

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

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

. each shareholder who is selling shares in this offering.

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. 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>
Number of
Shares of Number of Shares of Options Not
Common Stock Shares to Common Stock Exercisable
Beneficially Owned be Sold in Beneficially Owned Within
Before the Offering the Offering After the Offering 60 days
--------------------------- ------------ -------------------------- -----------
Number Percentage Number Percentage
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Principal Shareholders:
Comverse Technology,
Inc.................... 31,499,738(/1/) 83.7% -- 31,360,375(/2/) 77.4% --

Directors and Executive
Officers:
Kobi Alexander.......... 1,237,263 3.3% 40,000 1,197,263 3.0% --
Shawn Osborne........... 55,000(/3/) * 25,000(/11/) 30,000 * 490,905
David Kreinberg......... 42,727 * 21,500 21,227 * 98,181
William F. Sorin........ 42,727(/4/) * 21,500(/12/) 21,227 * 32,727
Paul D. Baker........... 6,000 * -- 6,000 * 32,727
Yaacov Koren............ -- -- -- -- -- 16,364
Zvi Bar-On.............. 19,500(/5/) * 5,000(/13/) 14,500 * --
Ron Hiram............... 16,000(/5/) * 5,000(/13/) 11,000 * --
Rex McWilliams.......... 15,000(/5/) * 5,000(/13/) 10,000 * --
All executive officers
and directors as a
group (nine persons)... 1,434,217(/6/) 3.8% 123,000 1,311,217 3.2% 670,904

Other Selling
Shareholders:
Livre Holdings
Inc.(/7/).............. 1,227,262 3.3% 1,227,262 -- -- --
Carmel Vernia(/8/)...... 40,000(/10/) * 40,000(/12/) -- -- --
Sachi Gerlitz(/9/)...... 32,727(/10/) * 16,363(/12/) 16,364 * 49,091
</TABLE>
--------
* Less than 1%
(1) Includes 1,259,990 shares of our common stock owned by Messrs. Alexander
and Kreinberg which Comverse has the right to vote. Also includes 647,995
shares of our common stock subject to options to purchase from Comverse
that were granted by Comverse to certain of its directors and employees,
including options for 165,454 shares which are currently exercisable.
(2) Includes 1,198,490 shares of our common stock owned by Messrs. Alexander
and Kreinberg which Comverse has the right to vote. Also includes 570,132
shares of our common stock subject to options to purchase from Comverse
that were granted by Comverse to certain of its directors and employees,
including options for 87,591 shares which are currently exercisable.
(3) Includes 50,000 shares of our common stock subject to options granted by
us.

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<PAGE>

(4) Includes options granted by Comverse to Mr. Sorin to purchase from Comverse
32,727 shares of our common stock.
(5) Includes 15,000 shares of our common stock subject to options granted by us
upon completion of our initial public offering.
(6) Includes options granted by us to purchase from us 95,000 shares of our
common stock and options granted by Comverse to purchase from Comverse
32,727 shares of our common stock.
(7) This corporation is owned by Mr. Zvi Alexander. Zvi Alexander is a director
of Comverse and the father of Kobi Alexander.
(8) Mr. Vernia is a former Chief Operating Officer of Comverse and a former
director of Comverse.
(9) Mr. Gerlitz is an employee of a subsidiary of Comverse.
(10) Represents options granted by Comverse to purchase from Comverse shares of
our common stock.
(11) Represents shares of our common stock issuable upon exercise of options
granted by us which will be exercised prior to the completion of this
offering.
(12) Represents options granted by Comverse to purchase from Comverse shares of
our common stock which will be exercised prior to the completion of this
offering.
(13) Represents options granted by us to purchase from us shares of our common
stock which will be exercised prior to the completion of this offering.

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<PAGE>

DESCRIPTION OF SECURITIES

Set forth below is a summary of the material provisions of our capital stock.
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 210,000,000
shares, with no par value, divided into 200,000,000 shares of common stock and
10,000,000 shares of undesignated stock. After giving effect to this offering,
we will have 40,510,964 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.

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, Comverse, our controlling shareholder, 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 Ulticom,
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 designated as
preferred 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,
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 preferred 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 affect 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 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.

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<PAGE>

Options

Options to purchase a total of 6,500,000 shares of common stock may be
granted under our stock incentive compensation plan. As of July 31, 2000, there
were outstanding options to purchase a total of 3,699,472 shares of common
stock at a weighted average exercise price of $4.65 per share.

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:

. the effects of the proposed action on the corporation's employees,
suppliers, creditors and customers;

. the effects on the community in which the corporation operates; and

. 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 Ulticom.

We are also subject to the New Jersey Shareholders 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 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. Interested shareholder is
defined to include, among others, any person that becomes a beneficial owner of
10% or more of the affected corporation's voting power. In addition, the
Protection Act prohibits any business combination at any time with an
interested shareholder other than a transaction that:

. is approved by the board of directors prior to the date that such
shareholder became an interested shareholder;

. is approved by the affirmative vote of the holders of two-thirds of the
voting stock not beneficially owned by the interested shareholder; or

. 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 under 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 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.

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<PAGE>

Our certificate of incorporation provides that every person who:

. 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

. 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 under 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. Under our services agreement,
Comverse has obtained directors' and officers' liability insurance which also
provides coverage for our officers and directors.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is 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:

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

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

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

. 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 are the
beneficial owners of our common stock 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.

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:

. 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;

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. 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;

. 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

. 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 and 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. holders 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 reporting 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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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have issued and outstanding an
aggregate of 40,510,965 shares of common stock, assuming no exercise of the
underwriters' over-allotment option. 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 our affiliates as that term
is defined in Rule 144 under the Securities Acts. 31,373,465 shares of our
common stock, being the number of shares of our common stock that will be
outstanding upon completion of this offering excluding the shares offered in
this offering or sold in our initial public 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. Of these restricted securities, 31,360,375 shares 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 90 day
lock-up period and 13,090 shares will not be subject to any lock-up
restriction.

Lock-up Agreements

Comverse will sign a lock-up agreement under which it will agree 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 90
days from the date of this prospectus. Transfers or dispositions can be made
sooner with the prior written consent of Lehman Brothers Inc. Our directors and
executive officers and the selling shareholders will enter into 90-day lock-up
agreements in connection with this offering. However, under those agreements
our directors and executive officers and the selling shareholders may sell up
to 50% of their remaining shares after 45 days from the date of this offering
if the market price of our common stock has increased by at least 20% from the
offering price in this offering.

Rule 144

In general, under Rule 144 as currently in effect a person who has
beneficially owned shares of common stock that are restricted securities 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:

. 1% of the number of shares of common stock then outstanding, which will
equal approximately 405,110 shares immediately after this offering; or

. 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.

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.

52
<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., Chase Securities Inc., Bear,
Stearns & Co. Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives, has agreed to purchase from us and the selling shareholders
the respective number of shares of common stock shown opposite its name below:

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Lehman Brothers Inc................................................... 2,100,000
Chase Securities Inc.................................................. 630,000
Bear, Stearns & Co. Inc. ............................................. 385,000
U.S. Bancorp Piper Jaffray Inc........................................ 385,000
George K. Baum & Company.............................................. 75,000
William Blair & Company, L.L.C. ...................................... 75,000
CIBC World Markets Corp. ............................................. 75,000
Morgan Stanley & Co. Incorporated..................................... 75,000
Salomon Smith Barney Inc. ............................................ 75,000
UBS Warburg LLC....................................................... 75,000
Arnhold and S. Bleichroeder, Inc. .................................... 37,500
Commerzbank Capital Markets Corp. .................................... 37,500
First Analysis Securities Corporation................................. 37,500
Gunnallen Financial, Inc. ............................................ 37,500
Ladenburg Thalmann & Co. Inc. ........................................ 37,500
Nutmeg Securities, Ltd. .............................................. 37,500
Tucker Anthony Incorporated........................................... 37,500
C.E. Unterberg, Towbin Fahenstock Inc. ............................... 37,500
---------
Total............................................................... 4,250,000
=========
</TABLE>

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:

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

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

. 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 $0.85 per share. The underwriters may allow, and the selected dealers
may reallow, a concession not in excess of $0.10 per share to brokers and
dealers. After the offering, the underwriters may change the offering price and
other selling terms.

53
<PAGE>

The following table summarizes the underwriting discounts and commissions we
and the selling shareholders 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 3% of
the public offering price.

<TABLE>
<CAPTION>
Total
-----------------------------
Without With
Per Share Over-allotment Over-allotment
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
to be paid by us and the selling
shareholders......................... $1.50 $6,375,000 $7,331,250
</TABLE>

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 $1
million. The Company has agreed to pay expenses incurred by the selling
stockholders in connection with the offering, other than the underwriting
discounts and commissions.

We have granted to the underwriters an option to purchase up to an aggregate
of 637,500 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 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 90 days from the date of this prospectus.
Comverse, the selling shareholders and all of our executive officers and
directors have agreed under lock-up agreements that, without the prior written
consent of Lehman Brothers Inc., it will not 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 90 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; and

. our directors and executive officers and the selling shareholders may
sell up to 50% of their remaining shares after 45 days from the date of
this offering, if the market price of our common stock has increased by
at least 20% from the offering price in this offering.

The restrictions described in the foregoing paragraph do not apply to:

. the sale of common stock to the underwriters;

. shares of common stock issued by us under employee benefit plans or upon
the exercise of options issued under employee benefit plans; or

. shares of common stock or other securities issued upon the exercise of
currently outstanding options, warrants or rights.

We and the selling shareholders 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 to contribute to
payments that the underwriters may be required to make for these liabilities.

54
<PAGE>

The underwriters may purchase and sell shares of common stock in the open
market. These transactions may include short sales, stabilizing transactions
and purchases to cover positions created by short sales. Short sales involve
the sale by the underwriters of a greater number of shares than they are
required to purchase in the offering. "Covered" short sales are sales made in
an amount not greater than the underwriters' option to purchase additional
shares from the issuer in the offering. The underwriters may close out any
covered short position by either exercising their option to purchase additional
shares or purchasing shares in the open market. In determining the source of
shares to close out the covered short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase shares through the
over-allotment option. "Naked" short sales are any sales in excess of such
option. The underwriters must close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on the
price of the common stock in the open market after pricing that could adversely
affect investors who purchase in the offering. Stabilizing transactions consist
of various bids for or purchases of common stock made by the underwriters in
the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short covering
transactions.

Similar to other purchase transactions, the underwriters' purchases to cover
the syndicate short sales may have the effect of raising or maintaining the
market price of the common stock or preventing or retarding a decline in the
market price of the common stock. As a result, the price of the common stock
may be higher than the price that might otherwise exist in the open market. The
transactions may be effected on the Nasdaq National Market, on the over-the-
counter market or otherwise and, if commenced, may be discontinued at any time.

Neither we, the selling shareholders 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, the selling shareholders 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.

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.

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.

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

55
<PAGE>

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 Ulticom 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 Ulticom by Weil, Gotshal & Manges LLP, New York,
New York. Attorneys at Weil, Gotshal & Manges LLP own 3,500 shares of our
common stock. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Gibson, Dunn & Crutcher LLP, New York, New
York.

EXPERTS

The financial statements as of January 31, 1999 and 2000, and for the year
ended December 31, 1997, the one month ended January 31, 1998 and the years
ended January 31, 1999 and 2000, included in this prospectus 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 upon 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 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.
With respect to any statement contained in this prospectus as to the contents
of any contract, agreement or other document referred to herein, we refer you
to 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.

We are subject to the informational requirements of the Securities Exchange
Act of 1934 and file reports, proxy statements and other information with the
Securities and Exchange Commission. Such reports, proxy statements and other
information, as well as the registration statement and the exhibits thereto,
may be inspected, without charge, at the public reference facility maintained
by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Seven World Trade Center, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Please call the Commission at 1-800-SEC-0330 for information regarding the
public reference rooms. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such materials can also be
inspected on the Commission's web site at http://www.sec.gov.

You should only rely on the information contained in this prospectus and the
registration statement. We have not authorized anyone to provide you with
information different from that contained in this prospectus. 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 of
our common stock.

56
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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

Consolidated Balance Sheets as of January 31, 1999 and 2000, and July 31,
2000 (unaudited)......................................................... F-3

Consolidated Statements of Operations for the year ended December 31,
1997, the one month ended January 31, 1998, the years ended January 31,
1999 and 2000, and the six months ended July 31, 1999 and 2000
(unaudited).............................................................. F-4

Consolidated Statements of Stockholders' Equity (Deficit) for the year
ended December 31, 1997, the one month ended January 31, 1998, the years
ended January 31, 1999 and 2000, and the six months ended July 31, 2000
(unaudited).............................................................. F-5

Consolidated Statements of Cash Flows for the year ended December 31,
1997, the one month ended January 31, 1998, the years ended January 31,
1999 and 2000, and the six months ended July 31, 1999 and 2000
(unaudited).............................................................. F-6

Notes to the Consolidated Financial Statements............................ F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of Ulticom, Inc.
and subsidiary (the "Company") as of January 31, 1999 and 2000, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the year ended December 31, 1997, the one month ended January 31,
1998 and the years ended January 31, 1999 and 2000. 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 auditing standards generally
accepted in the United States of America. 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 consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of January 31, 1999
and 2000, and the results of its operations and its cash flows for the year
ended December 31, 1997, the one month ended January 31, 1998 and the years
ended January 31, 1999 and 2000 in conformity with accounting principles
generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York
February 25, 2000 (March 13, 2000 as to Note 1)

F-2
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

<TABLE>
<CAPTION>
January 31, January 31, July 31,
1999 2000 2000
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................ $2,544 $ 6,299 $67,460
Accounts receivable, net of allowance for
doubtful accounts of $205, $250 and
$300.................................... 1,525 3,162 5,027
Due from related parties................. 1,662 1,009 182
Inventories.............................. 873 1,812 1,563
Prepaid expenses and other current
assets.................................. 73 408 66
Deferred tax asset....................... 167 332 332
------ ------- -------
Total current assets................... 6,844 13,022 74,630
Property and equipment, net.............. 1,739 3,190 3,766
Other assets............................. 300 1,152 1,060
------ ------- -------
Total Assets........................... $8,883 $17,364 $79,456
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses.... $2,154 $ 4,225 $ 6,729
Deferred revenue......................... 2,619 7,438 9,715
Due to related parties................... 4,307 617 963
------ ------- -------
Total current liabilities.............. 9,080 12,280 17,407
------ ------- -------
Long-Term Liabilities:
Note payable, bank....................... -- 3,800 --
Deferred tax liability................... 257 164 164
------ ------- -------
Total long-term liabilities............ 257 3,964 164
------ ------- -------
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, 200,000,000
authorized, 32,727,000, 32,727,000 and
37,627,590 issued and outstanding....... -- -- --
Additional paid-in capital............... 10 10 58,098
Retained earnings (deficit).............. (464) 1,110 3,787
------ ------- -------
Total stockholders' equity (deficit)... (454) 1,120 61,885
------ ------- -------
Total liabilities and stockholders'
equity (deficit)...................... $8,883 $17,364 $79,456
====== ======= =======
</TABLE>

See notes to consolidated financial statements

F-3
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
Six Months
One Month Year Ended Ended
Year Ended Ended January 31, July 31,
December 31, January 31, ---------------- ----------------
1997 1998 1999 2000 1999 2000
------------ ----------- ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Sales................... $14,559 $ 212 $18,629 $25,831 $11,432 $19,417
Cost of sales........... 4,495 294 6,131 8,883 3,964 6,443
------- ------ ------- ------- ------- -------
Gross profit............ 10,064 (82) 12,498 16,948 7,468 12,974
Operating expenses:
Research and
development............ 2,398 205 4,706 6,015 2,704 4,285
Selling, general and
administrative......... 3,891 348 4,948 8,124 3,662 5,636
------- ------ ------- ------- ------- -------
Income (loss) from
operations............. 3,775 (635) 2,844 2,809 1,102 3,053
Interest income
(expense), net......... (507) (45) (350) (271) (109) 1,263
------- ------ ------- ------- ------- -------
Income (loss) before
income taxes........... 3,268 (680) 2,494 2,538 993 4,316
Income tax provision
(benefit).............. 1,213 (249) 927 964 381 1,639
------- ------ ------- ------- ------- -------
Net income (loss)....... $ 2,055 $ (431) $ 1,567 $ 1,574 $ 612 $ 2,677
======= ====== ======= ======= ======= =======
Earnings (loss) per
share:
Basic................... $ 0.06 $(0.01) $ 0.05 $ 0.05 $ 0.02 $ 0.07
======= ====== ======= ======= ======= =======
Diluted................. $ 0.06 $(0.01) $ 0.05 $ 0.05 $ 0.02 $ 0.07
======= ====== ======= ======= ======= =======
</TABLE>

See notes to consolidated financial statements

F-4
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

CONSOLIDATED 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, 1997.... 32,727 $-- $ 10 $(3,399) $(3,389)
Net income.................. 2,055 2,055
------ ---- ------- ------- -------
Balance, December 31, 1997.. 32,727 -- 10 (1,344) (1,334)
Net loss.................... (431) (431)
Dividend to Parent.......... (256) (256)
------ ---- ------- ------- -------
Balance, January 31, 1998... 32,727 -- 10 (2,031) (2,021)
Net income.................. 1,567 1,567
------ ---- ------- ------- -------
Balance, January 31, 1999... 32,727 -- 10 (464) (454)
Net income.................. 1,574 1,574
------ ---- ------- ------- -------
Balance, January 31, 2000... 32,727 -- 10 1,110 1,120
Net income (unaudited)...... 2,677 2,677
Proceeds from sale of stock
(unaudited)................ 4,901 58,088 58,088
------ ---- ------- ------- -------
Balance, July 31, 2000
(unaudited)................ 37,628 $-- $58,098 $ 3,787 $61,885
====== ==== ======= ======= =======
</TABLE>

See notes to consolidated financial statements

F-5
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
One Month Year Ended Six Months
Year Ended Ended January 31, Ended July 31,
December 31, January 31, ---------------- ---------------
1997 1998 1999 2000 1999 2000
------------ ----------- ------- ------- ------ -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)....... $ 2,055 $ (431) $ 1,567 $ 1,574 $ 612 $ 2,677
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization......... 529 42 1,408 1,689 577 1,160
Deferred income
taxes................ 136 8 276 (258) -- --
Changes in assets and
liabilities:
Accounts receivable... (95) 319 (140) (1,637) (652) (1,865)
Due from related
parties.............. (1,025) (30) 118 653 944 827
Inventories........... (873) (91) 91 (939) (799) 249
Prepaid expenses and
other current
assets............... 467 (30) 56 (335) (40) 342
Other assets.......... (3) 29 (14) (507) (3) (34)
Accounts payable and
accrued expenses..... 680 (88) 335 2,071 1,236 2,504
Deferred revenue...... 1,785 119 263 4,819 (358) 2,277
------- ------ ------- ------- ------ -------
Net cash provided by
(used in) operating
activities........... 3,656 (153) 3,960 7,130 1,517 8,137
------- ------ ------- ------- ------ -------
Cash flows from
investing activities:
Purchases of property
and equipment........ (883) (72) (1,254) (2,853) (2,141) (1,476)
Capitalization of
software development
costs................ -- -- (508) (632) (765) (134)
------- ------ ------- ------- ------ -------
Net cash used in
investing
activities........... (883) (72) (1,762) (3,485) (2,906) (1,610)
------- ------ ------- ------- ------ -------
Cash flows from
financing activities:
Dividend to parent.... -- (256) -- -- -- --
Net proceeds from the
sale of common
stock................ -- -- -- -- -- 58,088
Note payable, bank.... -- -- -- 3,800 -- (3,800)
Due to related
parties.............. (2,058) 35 (238) (3,690) 510 346
------- ------ ------- ------- ------ -------
Net cash provided by
(used in) financing
activities........... (2,058) (221) (238) 110 510 54,634
------- ------ ------- ------- ------ -------
Net increase (decrease)
in cash and cash
equivalents............ 715 (446) 1,960 3,755 (879) 61,161
Cash and cash
equivalents, beginning
of period.............. 315 1,030 584 2,544 2,544 6,299
------- ------ ------- ------- ------ -------
Cash and cash
equivalents, end of
period................. $ 1,030 $ 584 $ 2,544 $ 6,299 $1,665 $67,460
======= ====== ======= ======= ====== =======
Supplemental disclosures
of cash flow
information:
Cash paid for
interest............. $ -- $ -- $ -- $ -- $ -- $ 114
======= ====== ======= ======= ====== =======
Cash paid for taxes... $ -- $ -- $ -- $ 48 $ 33 $ 520
======= ====== ======= ======= ====== =======
</TABLE>

See notes to consolidated financial statements

F-6
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 1997,
One Month Ended January 31, 1998,
Years Ended January 31, 1999 and 2000, and
the Six Months Ended July 31, 1999 and 2000
(Information Relating to the six months ended July 31, 1999 and 2000 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. In May 1999, the Company amended its certificate of
incorporation to change its name from DGM&S Telecom, Inc. to Ulticom, Inc.

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 shares were designated as common stock and
10,000,000 shares were authorized without designation and 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. On
March 10, 2000, the Company amended its certificate of incorporation in
connection with its initial public offering to increase its authorized capital
stock to 210,000,000 shares without par, of which 200,000,000 have been
designated as common stock and 10,000,000 shares have been authorized without
designation and 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 the Company's outstanding common stock at the rate of 100,000
shares of common stock for each outstanding share of common stock. On March 13,
2000, the Board of Directors declared a stock dividend on the Company's
outstanding common stock at the rate of 2.2727 shares of common stock for each
outstanding share of common stock. All references to per share amounts and the
number of shares in these financial statements have been adjusted to reflect
the increase in authorized capital stock and the stock dividends referred to
above.

Initial Public Offering--On April 5, 2000, the Company issued 4,250,000
shares of common stock to the public at a price of $13.00 per share. The
underwriters exercised their option to purchase 637,500 additional shares to
cover over-allotments. The net proceeds of the offering were approximately
$58,062,000, a portion of which was used to repay outstanding bank debt and the
remainder will be used for general corporate purposes.

Interim Results (Unaudited)--The accompanying balance sheet as of July 31,
2000 and the statements of operations and cash flows for the six months ended
July 31, 1999 and 2000, and the statement of stockholders' equity (deficit) for
the six months ended July 31, 2000 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 six months ended July 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
January 31, 2001.

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 year ended December
31, 1997, the one-month period ended January 31, 1998, and the years ended
January 31, 1999 and 2000 and the

F-7
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

six months ended July 31, 1999 and 2000. Unaudited statement of operations data
for the one month ended January 31, 1997 is as follows (in thousands, except
per share data):

<TABLE>
<S> <C>
Sales............................................................ $734
Gross profit..................................................... $506
Income tax provision............................................. $ 53
Net income....................................................... $ 91
Net income per share (basic and diluted)......................... $ 0.00
</TABLE>

Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary. All material
intercompany balances and transactions have been eliminated.

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.

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
furniture and equipment using straight-line depreciation over periods ranging
from three to seven years. Leasehold improvements are amortized over the lesser
of the term of the respective lease or the estimated useful lives of the
improvements (7 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
one month ended January 31, 1998 the benefit attributable to the loss incurred
by the Company has been reflected as a deemed dividend to Comverse.

F-8
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue and Expense Recognition--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"). For multi-element arrangements, VSOE of fair value is determined
based on the price charged when the same element is sold separately or, for
elements not yet being sold separately, the price established by management
having the relevant authority. If VSOE of fair value does not exist for one or
more delivered elements of a multi-element arrangement and VSOE of fair value
exists for all undelivered elements, then revenue is recognized using the
"residual method."

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

Included in sales are license revenues amounting to approximately $6,651,000,
$74,000, $7,946,000 $5,270,000, $2,628,000 and $2,980,000 for the year ended
December 31, 1997, the one month ended January 31, 1998, the years ended
January 31, 1999 and 2000 and the six months ended July 31, 1999 and 2000. The
related costs of revenues associated with these license revenues were not
material in each of the periods presented.

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 $211,000, $18,000,
$134,000, $287,000 and $124,000 for the year ended December 31, 1997, the one-
month ended January 31, 1998, the years ended January 31, 1999 and 2000 and the
six months ended July 31, 2000, 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>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Recent Accounting Pronouncements--In December 1999, the SEC issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. Management does not expect the adoption of SAB 101 to have a
material effect on the Company's operations or financial position. The Company
is required to adopt SAB 101 in the fourth quarter of fiscal 2000.

Reclassifications--Certain prior year balances have been reclassified to
conform with the current year classifications.

2. Inventories

Inventories consist of the following:
<TABLE>
<CAPTION>
January 31,
----------- July 31,
1999 2000 2000
---- ------ -----------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Work in process...................................... $454 $ 709 $ 557
Finished goods....................................... 419 1,103 1,006
---- ------ ------
$873 $1,812 $1,563
==== ====== ======
</TABLE>

3. Property and Equipment

Property and equipment consists of the following:
<TABLE>
<CAPTION>
January 31,
-------------- July 31,
1999 2000 2000
------ ------ -----------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Furniture and equipment.......................... $5,894 $4,407 $5,646
Transportation equipment......................... 66 -- --
Leasehold improvements........................... 102 158 464
------ ------ ------
6,062 4,565 6,110
Less: accumulated depreciation................... (4,323) (1,375) (2,344)
------ ------ ------
$1,739 $3,190 $3,766
====== ====== ======
</TABLE>

4. Other Assets

Other assets consist of the following:
<TABLE>
<CAPTION>
January 31,
----------- July 31,
1999 2000 2000
---- ------ -----------
(unaudited)
(In thousands)
<S> <C> <C> <C>
Software development costs, net of accumulated
amortization of $2,327, $2,431 and $2,555........ $129 $ 658 $ 669
Other assets...................................... 171 494 391
---- ------ ------
$300 $1,152 $1,060
==== ====== ======
</TABLE>

F-10
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

<TABLE>
<CAPTION>
January 31,
------------- July 31,
1999 2000 2000
------ ------ -----------
(unaudited)
(In thousands)
<S> <C> <C> <C>
Accounts payable................................... $ 559 $ 716 $ 355
Accrued salaries and benefits...................... 959 2,039 2,241
Other.............................................. 636 1,470 4,133
------ ------ ------
$2,154 $4,225 $6,729
====== ====== ======
</TABLE>

6. Related Party Transactions

The Company sells products and provides services to other subsidiaries of
Comverse. Sales to related parties were approximately $2,681,000, $42,000,
$3,789,000, $4,679,000, $1,979,000 and $3,728,000 for the year ended December
31, 1997, the one month ended January 31, 1998, the years ended January 31,
1999 and 2000 and the six months ended July 31, 1999 and 2000, respectively.
The amounts charged to related parties for administrative services were
approximately $1,106,000, $152,000, $644,000 and $42,000, for the year ended
December 31, 1997, the one month ended January 31, 1998, and the years ended
January 31, 1999 and 2000, respectively. 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
$532,000, $48,000, $419,000, $362,000, $153,000 and $0 for the year ended
December 31, 1997, the one month ended January 31, 1998, the years ended
January 31, 1999 and 2000 and the six months ended July 31, 1999 and 2000,
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.
The Company was charged $600,000 in each of the years ended December 31, 1997,
January 31, 1999 and January 31, 2000 and $300,000 for the six months ended
July 31, 1999 and 2000, for consulting and other corporate services provided by
Comverse. 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.

In January 2000, the Company secured a bank loan in the amount of $3.8
million. A portion of the proceeds from our initial public offering were used
to repay the bank loan in July 2000.

7. Stock Options

Employee Stock Options--At January 31, 2000, 3,272,700 shares of common stock
were reserved for issuance upon exercise of options then outstanding and
3,227,300 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

F-11
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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>
One Month Years Ended
Year Ended Ended January 31,
December 31, January 31, --------------------
1997 1998 1999 2000
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of
period.................... -- -- -- 2,899,612
Granted during the period.. -- -- 3,655,606 877,084
Exercised during the
period.................... -- -- -- --
Canceled, terminated and
expired................... -- -- (755,994) (503,996)
----- ----- --------- ---------
Outstanding at end of
period.................... -- -- 2,899,612 3,272,700
===== ===== ========= =========

All of the options outstanding as of January 31, 2000 vest in four equal
annual increments from the date on which the Company completed the initial
public offering of its common stock.

Weighted average option exercise price information were as follows:

<CAPTION>
One Month Years Ended
Year Ended Ended January 31,
December 31, January 31, --------------------
1997 1998 1999 2000
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of
period.................... $ -- $ -- $ -- $ 2.21
Granted during the period.. -- -- 2.17 3.71
Exercised during the
period.................... -- -- -- --
Canceled, terminated and
expired................... -- -- 1.99 2.51
----- ----- --------- ---------
Outstanding at end of
period.................... $ -- $ -- $ 2.21 $ 2.57
===== ===== ========= =========
</TABLE>

Significant option groups outstanding at January 31, 2000, 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>
$1.99 1,777,076 8.01 $1.99 -- $--
$2.75 703,631 8.83 2.75 -- --
$3.36 343,633 9.10 3.36 -- --
$3.97 448,360 9.50 3.97 -- --
--------- ---- ----- ---- ----
3,272,700 8.50 $2.57 -- $--
========= ==== ===== ==== ====
</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 per share would be reduced
by approximately $196,763 and $297,447 or $0.01 and $0.01 per diluted share for
the years ended January 31, 1999 and 2000, respectively. The weighted average
fair value of the

F-12
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

options granted during the years ended January 31, 1999 and 2000 is estimated
at $0.66 and $1.21, respectively, on the date of grant (using the Black-Scholes
option pricing model) assuming an expected life of seven years and assuming the
following weighted average assumptions: (i) volatility of 0% and risk free
interest rate of 5.4% for the year ended January 31, 1999, and (ii) volatility
of 0% and risk free interest rate of 5.8% for the year ended January 31, 2000.

Employee Stock Purchase Plan--Upon completion of our initial public offering,
the Company adopted the 2000 Employee Stock Purchase Plan. Under the terms of
this plan, a full time employee, who has been employed for at least three
months, may purchase up to 10% of his or her base pay to purchase shares of the
Company's common stock. The price of the stock is 85% of the last sale price on
NASDAQ on the first or last day of the offering period. There are 600,000
shares available under this plan and no shares have been issued as of July 31,
2000.

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 year ended
December 31, 1997, the one-month period ended January 31, 1998, and the years
ended January 31, 1999 and 2000 and the six months ended July 31, 2000 was as
follows:

<TABLE>
<CAPTION>
December 31, 1997 January 31, 1998
----------------------- ------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
------ ------ --------- ------ ------ ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income (Loss)......... $2,055 32,727 $0.06 $(431) 32,727 $(0.01)
Effect of Dilutive
Securities-Options....... -- -- -- -- -- --
------ ------ ----- ----- ------ ------
Diluted EPS............... $2,055 32,727 $0.06 $(431) 32,727 $(0.01)
====== ====== ===== ===== ====== ======
</TABLE>
<TABLE>

<CAPTION>
January 31, 1999 January 31, 2000 July 31, 1999 July 31, 2000
----------------------- ----------------------- ------------------- -------------------
Per Share Per Share Per Per
Income Shares Amount Income Shares Amount Income Shares Share Income Shares Share
------ ------ --------- ------ ------ --------- ------ ------ ----- ------ ------ -----
(unaudited) (unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Net income.............. $1,567 32,727 $0.05 $1,574 32,727 $0.05 $612 32,727 $0.02 $2,677 35,886 $0.07
Effect of dilutive
securities-options..... -- 360 -- -- 1,032 -- -- 852 -- -- 2,857 --
------ ------ ----- ------ ------ ----- ---- ------ ----- ------ ------ -----
Diluted EPS............. $1,567 33,087 $0.05 $1,574 33,759 $0.05 $612 33,579 $0.02 $2,677 38,743 $0.07
====== ====== ===== ====== ====== ===== ==== ====== ===== ====== ====== =====
</TABLE>

9. Interest Income (Expense), Net

Interest income (expense), net consists of the following:

<TABLE>
<CAPTION>
One Month Year Ended Six Months Ended
Year Ended Ended January 31, July 31,
December 31, January 31, ------------ ------------------
1997 1998 1999 2000 1999 2000
------------ ----------- ----- ----- -------- ---------
(unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $ 25 $ 3 $ 69 $ 103 $ 44 $1,377
Interest expense........ (532) (48) (419) (374) (153) (114)
----- ---- ----- ----- ------- ---------
Net..................... $(507) $(45) $(350) $(271) $ 109 $ 1,263
===== ==== ===== ===== ======= =========
</TABLE>

F-13
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10. Income Taxes

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
One Month Year Ended
Year Ended Ended January 31,
December 31, January 31, ------------
1997 1998 1999 2000
------------ ----------- ---- ------
(In thousands)
<S> <C> <C> <C> <C>
Current:
Federal............................. $ 958 $(229) $578 $1,075
State............................... 119 (28) 73 147
------ ----- ---- ------
Total current..................... 1,077 (257) 651 1,222
------ ----- ---- ------
Deferred (benefit):
Federal............................. 122 7 249 (246)
State............................... 14 1 27 (12)
------ ----- ---- ------
Total deferred.................... 136 8 276 (258)
------ ----- ---- ------
$1,213 $(249) $927 $ 964
====== ===== ==== ======

The reconciliation of the U.S. Federal statutory tax rate to the Company's
effective rate is as follows:

<CAPTION>
One Month Year Ended
Year Ended Ended January 31,
December 31, January 31, ------------
1997 1998 1999 2000
------------ ----------- ---- ------
<S> <C> <C> <C> <C>
U.S. Federal statutory rate........... 34% (34%) 34% 34%
State taxes, net...................... 3 (3) 3 4
------ ----- ---- ------
Company's effective tax rate.......... 37% (37%) 37% 38%
====== ===== ==== ======
</TABLE>

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, 1999 and 2000 are as follows:

<TABLE>
<CAPTION>
January 31,
----------------
1999 2000
------- -------
(In thousands)
<S> <C> <C>
Deferred tax asset:
Accrued liabilities and other............................ $ 105 $ 239
Allowance for doubtful accounts.......................... 62 93
------- -------
Total deferred tax asset............................... 167 332
------- -------
Deferred tax liability:
Depreciation............................................. (257) (164)
------- -------
Total deferred tax liability............................. (257) (164)
------- -------
Net deferred tax asset (liability)..................... $ (90) $ 168
======= =======
</TABLE>

F-14
<PAGE>

ULTICOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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:

<TABLE>
<CAPTION>
Year Ended Six Months Ended
Year Ended One Month January 31, July 31,
December 31, Ended January 31, ------------- -------------------
1997 1998 1999 2000 1999 2000
------------ ----------------- ----- ----- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
United States........... 50% 78% 49% 37% 33% 33%
Germany................. 13% -- 13% 12% 15% 10%
Israel.................. 19% 20% 20% 18% 17% 18%
England................. 11% 1% 7% 5% 4% 9%
Sweden.................. -- -- 3% 16% 19% 17%
Other................... 7% 1% 8% 12% 12% 13%
--- --- ----- ----- -------- --------
Total................. 100% 100% 100% 100% 100% 100%
=== === ===== ===== ======== ========
</TABLE>

The Company has no significant long-lived assets deployed outside of the
United States. 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 year
ended January 31, 2000, Ericsson, subsidiaries of Comverse, and Siemens
accounted for approximately 20%, 18% and 12%, 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 $443,000, $46,000,
$541,000, $593,000, $282,000 and $435,000 for the year ended December 31, 1997,
the one month ended January 31, 1998, the years ended January 31, 1999 and 2000
and the six months ended July 31, 1999 and 2000, respectively. For the year
ended December 31, 1997, the one month ended January 31, 1998 and the years
ended January 31, 1999 and 2000, the Company received rental income from other
subsidiaries of Comverse of $213,000, $18,000, $138,000, and $0, respectively,
for their proportionate share of the leased space. At January 31, 2000, the
Company does not share office space with any subsidiaries of Comverse.

As of January 31, 2000, the minimum rent obligations of the Company were
approximately as follows:

<TABLE>
<CAPTION>
Years Ending
January 31, Amount
------------ --------------
(In thousands)
<S> <C>
2001........................................................ $ 537
2002........................................................ 464
2003........................................................ 483
2004........................................................ 503
2005 and thereafter......................................... 1,212
------
$3,199
======
</TABLE>

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.

F-15
<PAGE>

[This page is intentionally left blank.]
<PAGE>

Ulticom's global customer base and worldwide product penetration.

[MAP]

. Customer locations by headquarters

[ ] Product by country
<PAGE>

[GRAPHIC OF SECTION OF WORLD MAP]
4,250,000 Shares

[LOGO OF ULTICOM/TM/]

Common Stock

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

PROSPECTUS

October 17, 2000

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

Lehman Brothers

Chase H&Q

Bear, Stearns & Co. Inc.

U.S. Bancorp Piper Jaffray