Verint Systems Inc – ‘10-K’ for 1/31/03

On:  Thursday, 5/1/03, at 12:33pm ET   ·   For:  1/31/03   ·   Accession #:  1157523-3-1569   ·   File #:  0-49790

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Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Verint Systems 10-K                                   78    400K 
 2: EX-10       Verint Systems Exhibit 10.9                           13     54K 
 3: EX-23       Verint Systems Exhibit 23.1                            1      5K 

10-K   —   Verint Systems 10-K
Document Table of Contents

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

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

 FORM 10-K

 Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 for the Year ended January 31, 2003

Commission File Number 000-49790

 VERINT SYSTEMS INC.
(Exact name of registrant as specified in its charter)

Delaware                              11-3200514
(State or other jurisdiction of                (I.R.S. Employer       
incorporation or organization)               Identification No.)    

330 South Service Road
Melville, New York 11747
(Address of principal executive offices)

Registrant's telephone number, including area code: 631-962-9600

 Securities registered pursuant to Section 12(b) of the Act:

                                       Name of each exchange
   Title of each class               on which registered
    -------------------               --------------------

  Not applicable                    Not applicable

 Securities registered pursuant to Section 12(g) of the Act:

 Common Stock, $.001 par value per share
(Title of Class)

 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for such shorter period that the        
registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days.                                       

        Yes: |X| No: |_|

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

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.                                                                      
|X| 

   Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of The Act).                                              

        Yes: |_| No: |X|

  The aggregate market value of Common Stock held by non-affiliates of the
registrant, based on the closing price for the Common Stock on The Nasdaq       
National Market on the last business day of the registrant's most recently      
completed fiscal second quarter (July 31, 2002) was approximately $30,059,980   
million.                                                                        

   There were 23,800,332 shares of the registrant's common stock outstanding
on April 28, 2003.                                                              

 DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's Proxy Statement for the 2003 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Form 10-K      
Report, which Proxy Statement is to be filed within 120 days after the end of   
the Registrant's fiscal year ended January 31, 2003.                            

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

LORONIX(R) is a registered trademark, and Intelligent Recording, OpenStorage    
Portal, RELIANT, STAR-GATE, ULTRA, cctvware, vCRM, Building the Customer        
Intelligent Enterprise, Intelligent Recording, Universal Database, Verint       
Systems and Verint's logos are trademarks, of Verint Systems Inc.               

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PART I

ITEM 1.    BUSINESS.                                                            

Overview                                                                        

     Verint Systems Inc. (including its subsidiaries, "Verint" or the "Company")
is a leading provider of analytic software-based solutions for communications   
interception, digital video security and surveillance, and enterprise business  
intelligence. Verint's software generates actionable intelligence through the   
collection, retention and analysis of voice, fax, video, email, Internet and    
data transmissions from multiple types of networks.                             

     Heightened awareness surrounding homeland defense and security, both in the
United States and globally, has increased the demand for solutions such as those
provided by Verint. Recent legislative and regulatory actions have provided     
greater surveillance powers to law enforcement agencies, imposed strict         
requirements on communications service providers to facilitate interception of  
communications over public networks, and increased the security measures being  
implemented at airports and other public facilities.                            

  Verint was incorporated in Delaware on February 23, 1994 as "Interactive
Information Systems Corporation." On January 30, 1996, the Company changed its  
name to "Comverse Information Systems Corporation." Effective January 31, 1999, 
Comverse Infomedia Systems Corp. merged with and into Comverse Information      
Systems Corporation, and changed the name of the Company to "Comverse Infosys,  
Inc." On February 1, 2002, the Company changed its name to "Verint Systems Inc."
Verint's principal executive offices are located at 330 South Service Road,     
Melville, New York 11747 and its telephone number at that address is (631)      
962-9600. Verint has over 1,000 customers in 50 countries, and has operations in
13 countries. Approximately 79% of Verint's common stock is owned by Comverse   
Technology, Inc.                                                                

The Company makes available through Verint's website at               
WWW.VERINTSYSTEMS.COM its Quarterly Reports on Form 10-Q and Current Reports on 
Form 8-K, and will make available this Annual Report on Form 10-K, as well as   
amendments to these and other reports filed or furnished by the Company pursuant
to Section 13 (a) or Section 15 (d) of the Securities Exchange Act of 1934 free 
of charge, as soon as reasonably practicable after the Company files such       
materials with the Securities and Exchange Commission.                          

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Industry Background                                                             

Overview                                                                        

   Verint provides its analytic software-based solutions to enable customers
to generate actionable intelligence from voice, video and data transmissions.   
The two markets to which the Company applies actionable intelligence solutions  
are digital security and surveillance and enterprise business intelligence. The 
process of generating actionable intelligence is comprised of the following five
components: collection, retention, analysis, decision and distribution.         

--   Collection of raw multimedia information is achieved through an  
 interface with wireline and wireless communications networks,
          including the Internet and closed circuit television, or CCTV cameras,
as well as cameras with direct connection to IP networks.   

     --   Retention consists of storage of the collected multimedia information.
         Collected information can be processed concurrently with its storage.

 --   Analysis of stored information is performed through various voice,
        video and data mining techniques. These analytical tools convert raw
multimedia information into organized useful data.          

  --   Decision criteria are established by users to filter and prioritize
     processed data. By applying decision criteria, the processed data
becomes actionable intelligence.                            

  --   Distribution of actionable intelligence to the appropriate decision
     makers is the last component of the multimedia analytic solution.
          Through notification techniques, the decision makers are made aware of
the existence of actionable intelligence in a timely manner.

The Digital Security and Surveillance Market                                    

    The digital security and surveillance market consists primarily of digital
video security utilized by government agencies and public and private           
organizations for use in airports, public buildings, correctional facilities and
corporate sites and communications interception by law enforcement agencies.    

Digital Video Security                                                          

 Organizations are increasingly recognizing the need for surveillance of
their facilities and operations to ensure the proper level of security. In      
addition, there is heightened public awareness to the security needs of public  
facilities, including airports and government buildings, as well as other       
organizations and institutions. Digital video security solutions coupled with   
intelligent video analysis tools address some of these security needs by        
providing a proactive approach to surveillance and security. A proactive        
approach to surveillance and security is achieved through the instantaneous     
processing of collected data and, in contrast to a passive approach, may help   
prevent or contain a security breach in real time.                              

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    Traditionally, video security consisted of connecting surveillance cameras
to analog monitors and VCR recording equipment that archived video images on    
tape. Today, digital video technology offers many advantages over analog        
equipment while allowing for the continued use of the existing infrastructure of
installed cameras. These advantages include more efficient storage of video for 
faster search and retrieval, either locally or remotely through IP networks, and
the capability to interface with other digital systems, such as access control. 
Additionally, as video data is digitized and compressed, a variety of           
intelligent video analysis tools can be applied, including advanced motion      
detection technologies and analysis of the behavior of individuals and objects. 
The combination of digital recording and intelligent video analysis technologies
provides users with a more effective integrated security and surveillance       
solution.                                                                       

Digital video security systems are marketed primarily to government   
agencies and public and private organizations for use in airports, public       
buildings, correctional facilities and corporate sites that require the capture,
retention and analysis of video information for crime prevention and            
investigation, asset protection and other related purposes.                     

Communications Interception                                                     

Lawful communications interception, historically referred to as       
wiretapping, is the monitoring and recording of voice and data transmissions to 
and from a specified target over communications networks in order to obtain     
intelligence and gather evidence. Law enforcement agencies are typically granted
the authority from national and regional government authorities to monitor,     
record, process and store intercepted transmissions to and from specified       
targets. Laws governing electronic surveillance vary significantly by country,  
and within many countries at the state or provincial levels. Verint provides    
governmental entities turnkey solutions intended to enable them to operate      
within the legal limits of information monitoring and collection.               

 In 1994, the U.S. Congress passed the Communications Assistance for Law
Enforcement Act, or CALEA, and subsequently, the European Telecommunications    
Standards Institute, or ETSI, adopted similar standards for communications      
interception. These two developments have prompted an increase in the demand for
communications interception solutions. The purpose of CALEA and the ETSI        
standards is to ensure that communications service providers are able to fulfill
the technical requirements of channeling intercepted transmissions to law       
enforcement agencies. Although CALEA was introduced approximately eight years   
ago, communications service providers were not required to comply with CALEA's  
standards until June 30, 2000, and were allowed to individually seek further    
exemptions. Following the September 11 terrorist attacks, the Federal           
Communications Commission issued an order stating that no further unilateral    
exemptions would be granted after December 31, 2001. Since then, communications 
service providers seeking to comply with CALEA and the ETSI standards and       
communications equipment vendors seeking to provide compliant products have     
driven the demand for CALEA and ETSI compliant solutions. By outsourcing their  
need for a compliant communications interception solution to companies such as  
Verint, communications service providers and equipment vendors are able to focus
on their core business activities.                                              

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     Traditionally, lawful communications interception activities consisted of a
law enforcement or other authorized official eavesdropping on the telephone     
conversation of a suspected target. On November 19, 2001, the President of the  
United States signed into law the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,     
known as the "USA Patriot Act." This legislation significantly expanded federal 
wiretap capability and eased the process for acquiring wiretapping warrants for 
intelligence gathering purposes by granting law enforcement agencies the        
authority to intercept multiple methods of communications, such as cellular     
calls and emails with a single warrant and by extending the duration and scope  
of such warrants in certain circumstances. In addition, the USA Patriot Act     
encourages collaboration between law enforcement agencies by easing the         
restrictions on the sharing of recorded communications.                         

Altogether, the recent legislative, regulatory and technological      
developments surrounding communications interception activities have led to an  
increased interest in sophisticated communications interception solutions.      
Today, utilizing advanced communications interception technologies, voice and   
data transmissions of a target can be intercepted through multiple              
communications channels.                                                        

The Enterprise Business Intelligence Market                                     

     The enterprise business intelligence market consists primarily of solutions
targeting enterprises that rely on contact centers for voice, email and Internet
interactions with their customers. Additionally, an emerging segment of         
enterprise business intelligence utilizes digital video information to allow    
enterprises and institutions to enhance their operations, processes and         
performance.                                                                    

Contact Center Business Intelligence                                            

    Developing and maintaining long-term customer relationships is critical to
the success of an enterprise operating in the competitive global marketplace.   
However, to understand and enhance customer relations, an enterprise must first 
improve its business processes that involve a high degree of direct customer    
interaction. Today, many organizations interact with their customers or clients 
primarily through contact centers. Increasingly, the contact center is the      
primary "hub" within an organization for processing inbound or outbound         
communications with customers that relate to the organization's products and    
services. Contact centers generally consist of supervisor and agent workstations
that are staffed with customer service representatives and are linked to a      
central telephone switch as well as computer systems linking all functions of   
database management to capture, store and report relevant customer information. 
The Company believes that solutions that automate and evaluate key sales,       
marketing and customer service processes, improve the effectiveness of customer 
interactions, and aid in the retention of contact center agents will become     
increasingly important.                                                         

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 As customers continue to interact with customer service representatives
through multiple communication channels including the Internet, the role and    
importance of recording and quality assurance for contact centers is increasing.
Additionally, the rapid growth of the Internet and electronic commerce has also 
increased the importance companies place on their customer relationships since  
the Internet enables consumers to easily evaluate products and prices from a    
wide range of geographically dispersed vendors and quickly change vendors at a  
relatively low cost. Enterprises across industries are being driven to purchase 
quality assurance software primarily to improve customer care, as well as to    
comply with industry-specific regulations. In addition, due to the high cost of 
agent training and the high turnover of contact center agents, the retention of 
contact center agents has become a high priority for many enterprises.          

     Contact center business intelligence solutions target enterprises that rely
on contact centers for voice, email and Internet interactions with their        
customers. Actionable intelligence generated from such interactions helps these 
enterprises to better service and retain customers, improve business processes  
and optimize contact center agent performance and retention. Companies          
possessing a better understanding of the characteristics and preferences of     
their customers are better positioned to customize product and service offerings
resulting in increased sales and enhanced customer retention. In addition, these
companies will also be able to better identify opportunities to sell            
complementary or higher-end products and to more accurately forecast customer   
demand. For example, major financial institutions generally and credit card     
issuers particularly, need to monitor contact center activity in real time to   
ensure that contact center representatives are responsive to customer needs, and
assure that customers do not cancel accounts or transfer balances based on poor 
service. Additionally, increased intelligence allows these companies to identify
new business opportunities with customers, such as cross-selling other financial
services and products, including investments, insurance and mortgages, to       
existing credit card customers.                                                 

Video Business Intelligence                                                     

  An emerging segment of enterprise business intelligence utilizes digital
video information to allow enterprises and institutions to enhance their        
operations, processes and performance. Traditional video security and           
surveillance systems allow enterprises to view and record actions and behaviors 
associated with security-related or criminal activity; however, information on  
the actions, behaviors and interactions of personnel or customers of an         
enterprise is also valuable. The existing infrastructure of closed circuit      
television cameras often already captures much of this valuable operational     
information, but utilizing information recorded by analog recording systems is  
impractical. The expansion of digital recording and the introduction of         
intelligent video analysis tools allow an enterprise to easily access and       
utilize this valuable operational information.                                  

Implementing video business intelligence applications offers valuable 
information and process improvements to businesses in many vertical markets,    
such as the retail, gaming and corporate markets. Some of the applications for  
video business intelligence include the automatic counting, categorizing,       
monitoring and assessment of customers and personnel. Improved service is       
realized by real-time identification and notification of business opportunities 
and customer service requirements.                                              

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Verint's Solution                                                               

    Verint's solution enables the intelligent recording and analysis of voice,
video and data transmissions for digital security and surveillance and          
enterprise business intelligence. Verint's products are utilized by government  
agencies, leading corporations, financial institutions and telecommunications   
service and equipment providers.                                                

   Verint's solutions provide its customers with the following key benefits:

--   Robust functionality with advanced features. Verint's solutions  
   address the needs of its customers by providing a wide range of
 functions. In addition, the Company has developed a number of
   applications that enhance the functionality of its base product
      offerings. For example, Verint's digital video systems incorporate
       object-tracking software that analyzes real-time video for specific
          motion, such as an individual walking in the wrong direction through a
monitored checkpoint at an airport. In addition, Verint's   
      communications interception products feature a cell-phone tracking
program that can identify the location of a wireless caller.

     --   End-to-end systems. Verint's products are designed to deliver complete
          solutions for both access to and delivery from communications networks
        and the collection, storage, management and processing of multimedia
communications by Verint's end users.                       

   --   Turnkey solutions. Verint's solutions can be quickly and efficiently
         deployed by its customers. The Company offers integrated hardware and
    software as well as training and project management services. In
          addition, the Company offers comprehensive documentation, installation
and maintenance services.                                   

--   Intuitive user interface. Verint's products utilize standard user
   interfaces, such as web-browser and email software, which allow
        customers to operate Verint's software in a familiar and easy to use
framework.                                                  

 --   Scalable network-based solution with centralized control. Verint's
      solutions are network-based, so that customers can access recorded
        information from any network connection. By allowing for centralized
        monitoring, the Company believes that its solutions enable customers
      to more efficiently manage their security and business information
       located at dispersed sites. Verint's products can also be scaled to
   support thousands of inputs, both locally and across a customer
networked site.                                             

--   Open, extendable platform. Verint's software runs on standard    
   platforms and integrates with standard storage, compression and
     database technologies. The Company integrates with communications
          switches and customer relationship management software, as applicable,
     from multiple vendors across both traditional and next-generation
   communications networks. In addition, the Company has developed
          application programming interfaces, which enable Verint's customers to
      easily incorporate their proprietary database information into its
solutions.                                                  

--   Global support and service. The Company is a global company with 
      systems installed in more than 50 countries around the world and a
        service infrastructure able to quickly and efficiently meet customer
needs.                                                      

   --   Expertise in national and international standards and laws. Verint's
      products are designed to comply with intricate local, national and
international standards regarding the lawful interception of
communications.                                             

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Digital Security and Surveillance Solutions                                     

   The following table summarizes Verint's digital security and surveillance
product lines:                                                                  

                                                        [Enlarge/Download Table]


--------------------- -------------------------- ---------------------------- ----------------------------- -----------------------
      Product Line          Market Served              Type of Customer            Purpose/Description         Location of Product 
--------------------- -------------------------- ---------------------------- ----------------------------- -----------------------
--------------------- -------------------------- ---------------------------- ----------------------------- -----------------------
                                                                                                                                   
STAR-GATE             Communications             -- Communications             Access, delivery and          Embedded in circuit or
                      interception                  service providers          administrative functions of   packet-based switch   
                                                 -- Internet                   communications interception   infrastructure        
                                                    service providers                                                              
                                                 -- Switch                                                                         
                                                    manufacturers                                                                  
--------------------- -------------------------- ---------------------------- ----------------------------- -----------------------
--------------------- -------------------------- ---------------------------- ----------------------------- -----------------------
RELIANT               Communications             -- Law enforcement            Collection, delivery,         Law enforcement or    
                      interception                  agencies                   storage, and analysis of      intelligence agency   
                                                 -- Intelligence               data from communications      monitoring center     
                                                    agencies                   interception                                        
--------------------- -------------------------- ---------------------------- ----------------------------- -----------------------
--------------------- -------------------------- ---------------------------- ----------------------------- -----------------------
LORONIX               Digital video              -- Government                 Intelligent recording of      Networked to customer 
digital video         security                      agencies                   video from CCTV               CCTV or IP cameras    
security                                         -- Public agencies            camera transmissions                                
                                                 -- Transportation                                                                 
                                                    agencies                                                                       
                                                 -- Corporations                                                                   
--------------------- -------------------------- ---------------------------- ----------------------------- -----------------------

STAR-GATE                                                                       

   Verint's STAR-GATE product line enables communications service providers,
Internet service providers, and communications equipment manufacturers to       
overcome the complexities posed by global digital communications and comply with
governmental requirements. STAR-GATE enables communications service providers in
receipt of proper legal authorization to intercept simultaneous communications  
over a variety of wireline, wireless and IP networks for delivery to law        
enforcement and other government agencies. STAR-GATE's flexibility supports     
multi-network, multi-vendor switch environments for a common interface across   
communications networks and supports switches from communications equipment     
manufacturers, such as Alcatel, Ericsson, Lucent, Nokia, Nortel and Siemens.    
STAR-GATE also supports interfaces to packet data networks, such as the Internet
and general packet radio services.                                              

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Verint's STAR-GATE product line performs two primary functions:       

     --   Administration. STAR-GATE automates the implementation of proper legal
        authorization for communications interception. This process includes
      assigning surveillance targets, defining recipients of intercepted
     data and setting time and security parameters conforming with the
court order.                                                
--   Mediation. STAR-GATE routes the intercepted data from the        
communications switch, converts data into the required legal
interception standard format, and delivers the intercepted  
communications to the appropriate law enforcement agency.   

     STAR-GATE is designed to be compliant with CALEA and the ETSI standards for
both circuit switched and IP networks.                                          

RELIANT                                                                         

   Verint's RELIANT product line provides intelligent recording and analysis
solutions for communications interception activities to law enforcement         
organizations and intelligence agencies. Verint's RELIANT software equips law   
enforcement agencies with an end-to-end solution for live monitoring of         
intercepted target communications and evidence collection management, regardless
of the type of communication or network used. Applications can scale from a     
small center for a local police force to a country-wide center for national law 
enforcement agencies. RELIANT products are designed to comply with legal        
regulations and can be integrated with communications networks in the country   
where the system is utilized.                                                   

The RELIANT monitoring center is comprised of a system administration 
workstation, an operator workstation, and collection and storage databases and  
servers. RELIANT collects intercepted communications from multiple channels and 
stores them for immediate access, further analysis and use as evidence. The     
system enables the review of intercepted voice, fax and data transmissions in   
their original forms through an easy to use interface.                          

RELIANT offers the following key features:                            

    --   Open database architecture, which enables the application of external
   analysis tools, with advanced security measures to maintain the
integrity of intercepted information against penetration and
unauthorized access;                                        
   --   Long-term session archiving for use in court playback and submission
of evidence;                                                
    --   Location tracking capabilities for wireless network interception; and
--   Maintenance and fault management.                                

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LORONIX Digital Video Security                                                  

   Verint's LORONIX digital video security product line provides intelligent
recording and analysis of video for security and surveillance applications to   
government agencies, public organizations and corporations. Verint's LORONIX    
software digitizes, compresses, stores and retrieves video imaging. In addition,
LORONIX products provide live video streaming and camera control over local and 
wide area computer networks and the Internet.                                   

Verint's LORONIX product line may be configured to allow customers to 
perform complete monitoring for security and management of local and remote     
sites from a central investigative unit. The use of digital storage and         
compression technology makes the LORONIX product line a more efficient          
alternative to analog tape storage. The technology interfaces with access       
control, facial recognition, activity and intrusion detection and other         
technologies for enhanced security and surveillance.                            

The LORONIX solution offers the following features:                   

   --   Activity scan functionality that enables users to detect activity in
   recorded video by analyzing frames of a video segment to detect
      changes from image to image. As a scan progresses, images of video
        frames containing activity are highlighted and set aside for further
analysis;                                                   
  --   Camera management software that displays all cameras connected to a
      given system with a graphic user interface. Intuitive camera icons
     denote whether cameras are black and white, color, fixed, or have
pan/tilt/zoom functionality;                                
  --   An image toolkit that allows users to enhance, annotate, print, and
    save images in a variety of formats from live or recorded video;
     --   Video authentication technology that utilizes a mathematical algorithm
        to confirm the authenticity of digital video and to produce an image
   "fingerprint." This fingerprint is compared to others that were
    created and stored when the video was originally captured by the
recorder;                                                   
   --   A video export application that can send live and recorded video for
review at any time;                                         
     --   Scalability allowing for the monitoring of thousands of cameras at the
same moment;                                                
  --   Open architecture allowing for the application of intelligent video
tools such as biometric identification and motion detection 
technologies;                                               
  --   Operation capabilities whereby users can conduct diversified tasks,
   such as playback, archiving and live review simultaneously; and
--   Advanced compression technologies.                               

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Enterprise Business Intelligence Solutions                                      

  The following table summarizes Verint's enterprise business intelligence
product lines:                                                                  

                                                        [Enlarge/Download Table]


-------------------------- ---------------------- ------------------------- ------------------------------ -------------------------
      Product Line             Market Served             Type of Customer        Purpose/Description         Location of Product    
-------------------------- ---------------------- ------------------------- ------------------------------ -------------------------
-------------------------- ---------------------- ------------------------- ------------------------------ -------------------------
                                                                                                                                    
ULTRA                      Contact centers        -- Internal contact       Recording and analysis of      Interface through        
                                                     centers of large       customer interactions with     customer relations       
                                                     organizations and      contact centers agents         management application   
                                                     enterprises, including                                server                   
                                                     utilities and financia                                                         
                                                     institutions                                                                   

                                                  -- Outsourced contact                                                             
                                                     centers                                                                        
-------------------------- ---------------------- ------------------------- ------------------------------ -------------------------
-------------------------- ---------------------- ------------------------- ------------------------------ -------------------------
LORONIX video business     Business intelligence  -- Large organizations    Analysis of digital video to   Networked to customer    
intelligence                                         and enterprises        improve business processes     CCTV or IP cameras       
                                                                            and performance                                         
-------------------------- ---------------------- ------------------------- ------------------------------ -------------------------

ULTRA                                                                           

     Verint's ULTRA products record and analyze customer interactions to provide
enterprises with business intelligence about their customers and help monitor   
and improve the performance of their contact centers. ULTRA's intelligent       
recording platform uses an innovative architecture that leverages voice and data
processing technologies to offer customers multiple methods of recording contact
center interactions while providing a flexible framework for expansions and     
changes in technologies.                                                        

ULTRA products capture customer interactions from multiple sources,   
including telephone, email, Internet or voice over Internet protocol. Utilizing 
ULTRA's OpenStorage Portal and Universal Database, Verint's customers can       
leverage their existing storage infrastructure to store and access recorded     
customer interactions using standard file formats. ULTRA's software tools       
analyze customer interactions and distribute the resulting actionable           
intelligence to specified individuals based on predetermined parameters via     
private computer networks or the Internet.                                      

    ULTRA products integrate with leading customer relationship management, or
CRM, applications, allowing the delivery of information directly to the user's  
desktop within Siebel, PeopleSoft and other CRM solutions. ULTRA also interfaces
with popular desktop software tools, including Microsoft Outlook, Lotus Notes   
and web browsers, to enable the user to easily access the data in a familiar    
computing environment.                                                          

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The ULTRA product line offers the following key features:             

  --   Advanced analytical tools for efficient data mining of call content
for customer intelligence;                                  
     --   Proprietary user-defined customer satisfaction analysis features. Such
          features include a call flow analysis (which monitors information such
        as call length, number of holds, hold times, and transfers), as well
          as stress analysis (which defines customer stress level during calls),
       allowing for either on-line assistance from a supervisor or offline
analysis for improved agent performance;                    
--   Open architecture, allowing for quick and easy integration with  
leading CRM applications; and                               
    --   Advanced storage systems which convert calls to standard file format,
        allowing for the integration of voice to CRM applications as well as
     the enterprise wide distribution via local or wide area networks.

LORONIX Video Business Intelligence                                             

     Verint's LORONIX video business intelligence products enable its enterprise
customers to monitor and improve their operations through the analysis of live  
and recorded digital video. Like the LORONIX digital video security product, the
LORONIX video business intelligence product digitizes, compresses, stores and   
retrieves video imaging. While leveraging the technology of Verint's digital    
security product, the LORONIX enterprise product line also contains unique      
software focused on maximizing operational effectiveness through video analysis.

By interfacing with customer databases and software systems, LORONIX  
facilitates the user's review of video imaging based on specific criteria such  
as employee ID, product barcodes and point of sale transaction history. The     
LORONIX solution also integrates intelligent software that allows for the       
detection of movement of people and objects at a customer's premises. These     
features can be used to improve the operational performance of businesses, such 
as retail chains and casinos, by providing real-time alerts to customer         
bottlenecks. Enterprises can combine Verint's software with other video analysis
technologies that actively monitor customer and employee behavior and responses.

Sales and Marketing                                                             

The Company sells its products primarily through a combination of its 
direct sales force and agents, distributors, value added resellers and systems  
integrators. As of January 31, 2003, the Company had several sales offices in   
the United States and offices in Australia, Canada, France, Germany, Hong Kong, 
India, Israel, Japan, the Netherlands, Singapore and the United Kingdom.        
Verint's direct sales force consists of account executives, solutions           
consultants, and regional sales directors, that possess industry-specific       
experience.                                                                     

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     Verint's sales force pursues potential sales leads identified internally or
provided by systems integrators. The Company develops strategic marketing       
alliances with leading companies in its industry to expand the coverage and     
support of its direct sales force. Verint's business development personnel are  
responsible for the initiation, negotiation and completion of these marketing   
alliances. The Company currently has such relationships with ADT, Avaya, British
Telecom, Nortel, and Siemens. In addition, the Company has established          
technological alliances with leading software and hardware companies including  
Genesys, Identix and Siebel, which enable it to offer complementary solutions to
their products.                                                                 

     Verint's direct sales cycle typically begins with its initiation of a sales
lead or the receipt of a request for a proposal from a prospective customer. The
sales lead, or request for a proposal, is followed by an assessment of the      
customer's requirements, a formal proposal, presentations and product           
demonstrations, site visits to an existing customer that utilizes Verint's      
products and contract negotiation and signing. The sales cycle can vary         
substantially from customer to customer but typically lasts six months to one   
year and is considered completed with the delivery of Verint's product to the   
customer.                                                                       

The Company uses a variety of marketing programs to build brand name  
awareness, as well as to attract potential customers. These programs include    
market research, product and strategy updates with industry analysts, direct    
marketing programs to current and prospective customers, advertising,           
participation in industry trade shows, conferences, seminars, and a public      
relations program that includes demonstrations of Verint's products. To support 
sales efforts, the Company also produces promotional materials that include     
brochures, video presentations, data sheets and other technical descriptions.   

Customers                                                                       

  Verint's products are currently used by over 1,000 organizations and are
deployed in over 50 countries, across many industries and markets. Many users of
Verint's products are large corporations or government agencies that operate    
from multiple locations and facilities across large geographic areas and        
sometimes across several countries. These organizations typically implement     
Verint's solutions in stages, with implementation in one or more sites and then 
gradually expanding to a full enterprise, networked-based solution. None of     
Verint's customers, including systems integrators and value added resellers,    
individually accounted for more than 10% of its revenues in fiscal 2002.        

The Company derived approximately 22%, 26% and 32% of its revenues in 
fiscal 2000, 2001 and 2002, respectively, from contracts with various local,    
regional and national governments worldwide. Verint's business generated from   
such government contracts may be adversely affected for various reasons         
including if levels of government expenditures and authorizations for law       
enforcement and security related programs decrease, remain constant or shift to 
programs in areas where it does not provide products and services or if changes 
in government procurement procedures preclude the Company from participating in 
such government procurement processes. See "Certain Trends and Uncertainties."  

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Research and Development                                                        

The Company continues to enhance the features and performance of its  
existing products and introduce new solutions by extensive research and         
development activities in its facilities in the United States, Israel and       
Germany. As of January 31, 2003, the Company had approximately 300 employees    
engaged in its research and development activities. The Company believes that   
its future success depends on a number of factors, which include its ability to:

  --   identify and respond to emerging technological trends in its target
markets;                                                    

  --   develop and maintain competitive solutions that meet its customers'
changing needs; and                                         

    --   enhance its existing products by adding features and functionality to
      meet specific customer's needs, or that differentiate its products
from those of its competitors.                              

   As a result, the Company has made significant investments in research and
development. The Company allocates its research and development resources in    
response to market research and customer demands for additional features and    
solutions. Verint's development strategy involves rolling out initial releases  
of its products and adding features over time. The Company incorporates product 
feedback it receives from its customers into its product development process.   
While the Company expects that new products will continue to be developed       
internally, it may, based on timing and cost considerations, acquire or license 
technologies, products or applications from third parties.                      

 As mentioned above, part of Verint's research and development occurs in
Israel. The Government of Israel, through the Office of the Chief Scientist,    
encourages research and development projects which result in products for       
export. Verint's gross research and development expenses were approximately     
$21.7 million for fiscal 2000, $21.0 million for fiscal 2001 and $22.6 million  
for fiscal 2002. In fiscal 2000, 2001 and 2002, the Company received from the   
Office of the Chief Scientist conditional grants totaling $7.5 million, $5.8    
million and $5.2 million, respectively, representing 34.5%, 27.6% and 23.1% of  
its total research and development expenditures in these periods.               

Manufacturing and Suppliers                                                     

Verint's manufacturing operations, which are performed in its U.S.,   
Israeli, and German facilities, consist primarily of installing its software on 
externally purchased hardware components and final assembly and testing, which  
involves the application of extensive quality control procedures to materials,  
components, subassemblies and systems. The Company relies on several            
unaffiliated subcontractors for the supply of specific proprietary components   
and assemblies that are incorporated in all of its products. Although the       
Company has experienced delays and shortages in the supply of proprietary       
components on more than one occasion in the past, to date, it has been able to  
obtain adequate supplies of all components in a timely manner, when necessary,  
from alternative sources. See "Certain Trends and Uncertainties."               

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The Company maintains organization-wide quality assurance procedures, 
coordinating the quality control activities of its research and development,    
manufacturing and service departments. Verint's primary manufacturing and       
research and development facilities in Israel, Germany, and Colorado have       
received certification to Quality Standard ISO 9001.                            

Intellectual Property Rights                                                    

  The Company has accumulated a significant amount of proprietary know-how
and expertise in developing multimedia analytic solutions for digital security  
and surveillance and enterprise business intelligence. The Company regularly    
reviews new areas of technology to determine whether they are patentable.       

  The Company licenses certain software, technology and related rights for
use in the manufacture and marketing of its products, and pay royalties to third
parties under such licenses and other agreements. The Company believes that its 
rights under such licenses and other agreements are sufficient for the          
manufacturing and marketing of its products and, in the case of licenses, extend
for periods at least equal to the estimated useful lives of the related         
technology and know-how.                                                        

    In January 2000, Comverse Technology and Lucent, acting through subsidiary
patent holding companies on behalf of themselves and their various subsidiaries 
and affiliates, entered into a non-exclusive cross-licensing arrangement        
covering current and certain future patents issued to Comverse Technology and   
its affiliates and a portfolio of current and certain future patents in the area
of communications technology issued to Lucent and its affiliates. Under that    
arrangement, and pursuant to a patent license agreement between Verint and      
Comverse Technology, Lucent is entitled to non-exclusive royalty-free licenses  
under any patents granted to Verint or which it obtains the right to license    
during the term of the agreement, while Verint is entitled to a non-exclusive   
royalty-free sublicense to all patents that are licensed by Lucent to Comverse  
Technology.                                                                     

Competition                                                                     

    The Company faces strong competition in the markets for its products, both
in the United States and internationally. The Company expects competition to    
persist and intensify in the digital security and surveillance market, primarily
due to increased demand for homeland defense and security solutions. Verint's   
primary competitors are suppliers of security and recording systems and         
software, and indirect competitors that supply certain components to systems    
integrators. In the enterprise business intelligence market, the Company faces  
competition from organizations emerging from the traditional call logging or    
call recording market as well as software companies that develop and sell       
products that perform specific functions for this market. Additionally, many of 
Verint's competitors specialize in a subset of its portfolio of products and    
services. Primary competitors include, among others, SS8 Networks, ECtel,       
e-talk, ETI, JSI Telecom, NICE-Systems, Pelco, Raytheon, Sensormatic and Witness
Systems. The Company believes it competes principally on the basis of:          

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--   product performance and functionality;                           
--   knowledge and experience in Verint's industry;                   
--   product quality and reliability;                                 
--   customer service and support; and                                
--   price.                                                           

   The Company believes that its success depends primarily on its ability to
provide technologically advanced and cost effective solutions. Verint's         
competitors that manufacture other security-related systems or other recording  
systems may derive a competitive advantage in selling to customers that are     
purchasing or have previously purchased other compatible equipment from such    
manufacturers. The Company expects that competition will increase as other      
established and emerging companies enter its market, and as new products,       
services and technologies are introduced.                                       

Employees                                                                       

As of January 31, 2003, the Company had approximately 900 employees. A
majority of its employees are scientists, engineers or technicians engaged in   
research and development, sales and marketing, and operations. The Company      
considers its relationship with its employees to be good. Verint's employees in 
the United States are not covered by any collective bargaining agreement.       
Verint's employees outside the United States are entitled to severance and other
benefits mandated under local laws.                                             

  Israeli law generally requires the payment by employers of severance pay
upon the death of an employee, retirement or upon termination of employment, and
the Company provides for such payment obligations through monthly contributions 
to an insurance fund. Additionally, Israeli employees and employers are required
to pay pre-determined sums to the National Insurance Institute, which covers    
medical and other benefits similar to the benefits provided by the United States
Social Security Administration.                                                 

Proxy Agreement with the Department of Defense                                  

     One of Verint's subsidiaries, Verint Technology Inc., or Verint Technology,
is engaged in the development, marketing and sale of Verint's communications    
interception solutions to various U.S. governmental agencies. In order to       
conduct its business, Verint Technology is required to maintain facility        
security clearances under the National Industrial Security Program, or the NISP.
The NISP requires companies maintaining facility security clearances to be      
insulated from foreign ownership, control or influence. In January 1999, the    
Company, Comverse Technology and the Department of Defense entered into a proxy 
agreement with respect to the ownership and operations of Verint Technology. The
proxy agreement has been approved by the Defense Security Service, which has    
oversight responsibilities on behalf of the Department of Defense.              

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   Under the proxy agreement, the Company appointed three U.S. citizens that
have the requisite personal security clearance as directors of Verint Technology
and as holders of proxies to vote the stock of Verint Technology. These         
individuals are responsible for the oversight of Verint Technology's security   
arrangements, including the separation of Verint Technology from the Company and
its affiliates. As proxy holders, these individuals have the power to exercise  
all prerogatives of ownership of Verint Technology, except that without         
obtaining Verint's express written approval they may not authorize any          
individual sale or disposal of capital assets constituting a material amount of 
Verint Technology's assets, the mortgaging of assets other than for working     
capital or capital improvement purposes, any merger, consolidation,             
reorganization or dissolution of Verint Technology and the filing of a petition 
under the federal bankruptcy laws.                                              

  Under the proxy agreement, the Company has also established a government
security committee, which consists of the three proxy holders. The government   
security committee is in charge of the development and implementation of a      
technology control plan, which prescribes measures and establishes procedures to
prevent unauthorized disclosure or export of controlled information by the      
Company, any of its affiliates or others. In addition, the proxy agreement      
establishes procedures regarding meetings, visits and communications between    
Verint Technology, the Company and its other affiliates. The Department of      
Defense continually reviews the technology control plan and receives an annual  
report from the proxy holders.                                                  

Export Regulations                                                              

 The Company is subject to export restrictions in Israel with respect to
certain components of its RELIANT products which are developed and manufactured 
in Israel. In order to export its RELIANT products from Israel, the Company is  
required to obtain export licenses from the Israeli Ministry of Defense prior to
marketing these products in foreign countries. The Company is also required to  
obtain an additional license prior to the completion of each sale. To date, the 
Company has been successful in obtaining necessary permits.                     

    The Company is also subject to export restrictions in Germany with respect
to components of its RELIANT products which are developed and manufactured in   
Germany. To date, the Company has been able to rely on the terms of a general   
export license in Germany to export these components to countries outside the   
European Union. Under the terms of this license, the Company is also required to
report to German authorities each shipment of these components outside of the   
European Union.                                                                 

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ITEM 2. PROPERTIES.                                                             

    The Company leases approximately 73,000 square feet of office space in the
United States. Through April 2003, the Company had approximately 32,000 square  
feet in Woodbury, New York, where its headquarters and some of its support and  
sales facilities were located. Beginning April 30, 2003, the Company            
relinquished its space in Woodbury, New York and moved its headquarters to      
approximately 25,000 square feet in Melville, New York. The lease of Verint's   
Melville, New York facilities expires in June 2013. The Company leases          
approximately 70,000 square feet of office and storage space for manufacturing, 
development, support and sales facilities in Tel Aviv, Israel. This lease       
expires in March 2004. Additionally, the Company leases approximately 10,000    
square feet of office space for sales, installation and support in the United   
Kingdom. The Company also leases small office facilities in Germany and The     
Netherlands.                                                                    

  The Company owns approximately 25 acres of land, including 40,000 square
feet of office space for the development, manufacturing, support and sales of   
its LORONIX product lines in Durango, Colorado. The Company also owns           
approximately 25,000 square feet of office and storage space for sales,         
manufacturing, support and development in Bexbach, Germany.                     

    The Company believes that its owned and leased facilities are adequate for
its current operations, and that additional facilities can be acquired or       
developed to provide for expansion of its operations in the foreseeable future. 

ITEM 3. LEGAL PROCEEDINGS.                                                      

  From time to time, the Company is subject to claims in legal proceedings
arising in the normal course of its business. The Company does not believe that 
it is party to any pending legal action that could reasonably be expected to    
have a material adverse effect on its business or operating results.            

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

Not applicable.                                                       

 PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.  

The Common Stock of Verint trades on the NASDAQ National Market System
under the symbol VRNT. The following table sets forth the range of closing      
prices of the Common Stock as reported on NASDAQ since Verint became publicly   
traded on May 16, 2002.                                                         

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                                                                [Download Table]


Year                     Fiscal Quarter              Low        High    

                                                                        
2002                     5/16/02 -  7/31/02           $  6.13     $14.49
                          8/1/02 - 10/31/02           $  6.60     $11.38
                         11/1/02 -  1/31/03           $ 10.60     $23.20

  There were 120 holders of record of Common Stock at April 28, 2003. Such
record holders include a number of holders who are nominees for an undetermined 
number of beneficial owners. The Company believes that the number of beneficial 
owners of the shares of Common Stock outstanding at such date was approximately 
5,000.                                                                          

The Company has not declared or paid any cash dividends on its equity 
securities and does not expect to pay any cash dividends in the foreseeable     
future, but rather intends to retain its earnings to finance the development of 
its business. Any future determination as to the declaration and payment of     
dividends will be made by the Board of Directors in its discretion, and will    
depend upon the Company's earnings, financial condition, capital requirements   
and other relevant factors. See "Management's Discussion and Analysis of        
Financial Condition and Results of Operations--Liquidity and Capital Resources."
Also, see "Certain Trends and Uncertainties" regarding Comverse Technology's    
control of the Board of Directors.                                              

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ITEM 6. SELECTED FINANCIAL DATA.                                                

  The Company derived the selected consolidated financial data
presented below from its consolidated financial statements and related notes    
included in this Form 10-K. You should read the selected consolidated financial 
data together with Verint's consolidated financial statements and related notes 
and the section of this Form 10-K entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations."                              

     Statement of operations data for the years ended January 31, 2001, 2002 and
2003, and the balance sheet data at January 31, 2002 and 2003 have been derived 
from Verint's audited consolidated financial statements included in Item 15 of  
this Form 10-K. Statement of operations data for the year ended January 31, 2000
and balance sheet data at January 31, 2000 and 2001 have been derived from      
Verint's audited financial statements not included herein. Statement of         
operations data for the year ended January 31, 1999, and the balance sheet data 
at January 31, 1999, have been derived from Verint's unaudited consolidated     
financial statements not included herein.                                       

                                                        [Enlarge/Download Table]


                                                            Year Ended January 31,                
                                         ---------------------------------------------------------
                                             1999          2000       2001      2002       2003   
                                         ------------  ----------  ---------  --------  ----------
                                                   (in thousands, except per share data)          
Statement of Operations Data:                                                                     
                                                                                                  
  Sales................................. $     89,282  $  120,612  $ 141,677  $131,235  $  157,775
  Cost of sales.........................       51,572      63,939     81,793    69,907      78,053
                                         ------------  ----------  --------- ---------  ----------

  Gross profit..........................       37,710      56,673     59,884    61,328      79,722
  Research and development, net.........       16,412      21,307     14,249    15,184      17,357
  Selling, general and administrative...       31,924      44,914     48,162    45,923      52,314
  Acquisition expenses..................            -           -      3,510         -           -
  Workforce Reduction, Restructuring and                                                          
   impairment charges...................            -           -      1,528     2,754           -
                                         ------------  ----------  --------- ---------  ----------

  Income (Loss) from operations.........      (10,626)     (9,548)    (7,565)   (2,533)     10,051
  Interest and other income (expense),                                                            
   net..................................         (753)       (641)      (497)     (564)      2,266
                                         ------------  ----------  --------- ---------  ----------

  Income (Loss) before income taxes.....      (11,379)    (10,189)    (8,062)   (3,097)     12,317
  Income tax provision..................          280         355        497     1,552       2,170
                                         ------------  ----------  --------- ---------  ----------

  Net income (loss)..................... $    (11,659) $  (10,544) $  (8,559) $ (4,649) $   10,147
                                         ============  ==========  ========= =========  ==========
  Net income (loss) per share - basic... $      (0.63) $    (0.57) $   (0.46) $  (0.25) $     0.46
                                         ============  ==========  ========= =========  ==========
  Net income (loss) per share - diluted. $      (0.63) $    (0.57) $   (0.46) $  (0.25) $     0.43
                                         ============  ==========  ========= =========  ==========
  Weighted average shares:                                                                        
     Basic..............................       18,618      18,619     18,704    18,767      22,165
     Diluted............................       18,618      18,619     18,704    18,767      23,542

                                                          As of January 31,                       
                                         ---------------------------------------------------------
                                               1999       2000        2001      2002       2003   
                                         ------------  ---------   ---------  --------  ----------
Balance Sheet Data:                                                                               
   Cash and cash equivalents............ $     32,456  $  35,933   $  43,330  $ 49,860  $  133,933
   Working capital......................       22,189     10,804       3,512    41,160      69,323
   Total assets.........................       88,942    103,410     117,554   116,726     207,050
   Long-term bank loans, including                                                                
    current maturities..................        1,161      1,323       2,806    43,623      43,877
   Stockholders' equity.................       40,075     30,896      22,525    18,735      96,166

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS.                                                  

 The following discussion of Verint's financial condition and results of
operations should be read in conjunction with its consolidated financial        
statements and the related notes thereto which appear elsewhere in this         
document.                                                                       

Overview                                                                        

   The Company is engaged in providing analytic software-based solutions for
the collection and analysis of unstructured data to the digital security        
surveillance and enterprise business intelligence markets. The Company operates 
in one business segment and manages its business on a geographic basis.         

Verint's analytic software-based solutions for digital security and   
surveillance include its STAR-GATE and RELIANT communications interception      
products and Verint's LORONIX digital video security products. STAR-GATE enables
communications service providers to intercept communications over a variety of  
wireline, wireless and IP networks, for delivery to law enforcement and other   
government agencies, and is sold to communications service and equipment        
providers. RELIANT provides intelligent recording and analysis solutions for    
communications interception activities and is sold to law enforcement and       
government agencies. Verint's LORONIX digital video security products provide   
intelligent recording and analysis of video for security and surveillance       
applications, and are sold to government agencies and public and private        
organizations for use in airports, public buildings, correctional facilities and
corporate sites.                                                                

Verint's analytic software-based solutions for enterprise business    
intelligence include its ULTRA contact center business intelligence products and
LORONIX video business intelligence products. Verint's ULTRA products are sold  
to contact centers within a variety of enterprises, including financial         
institutions, communications service providers and utilities, to record and     
analyze customer interactions with their contact centers. Verint's LORONIX video
business intelligence products enable enterprises to monitor and improve their  
operations through the analysis of live and recorded digital video and are sold 
primarily to commercial enterprises including retailers, shopping malls,        
casinos, manufacturers and other enterprises.                                   

Critical Accounting Policies                                                    

The preparation of financial statements in conformity with accounting 
principles generally accepted in the United States of America requires          
management to make certain estimates and assumptions that effect the reported   
amounts of assets and liabilities and disclosure 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.                                                           

    The Company generally recognizes revenue at the time of shipment for sales
of systems that do not require significant customization and when collection of 
the resulting receivable is deemed probable. Verint's systems generally consist 
of a bundled hardware and software solution that is shipped together. Customers 
may also purchase separate maintenance contracts, which generally consist of    
bug-fixing, telephone access to Verint's technical personnel and replacement of 
hardware components, but in certain circumstances may also include the right to 
receive unspecified product updates, upgrades and enhancements. The Company     
recognizes revenue from these maintenance contracts ratably over the contract   
period. The Company recognizes revenue from certain long-term contracts under   
the percentage-of-completion method on the basis of physical completion or using
actual costs incurred relative to total expected costs under the contract.      
Revisions in estimates of costs and profits are reflected in the accounting     
period in which the facts that require such revision become known. At the time a
loss on a contract is known, the entire amount of the estimated loss is accrued.
Amounts received from customers in excess of revenues earned are recorded as    
advance payments from customers. Accounts receivable are generally diversified  
due to the number of commercial and government entities comprising Verint's     
customer base and their dispersion across many geographical regions. At the end 
of each accounting period, the Company records a reserve for estimated bad debts
included in accounts receivable based upon its current and historical collection
history.                                                                        

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  Verint's cost of sales includes costs of materials, subcontractor costs,
royalties and license fees, 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, 
travel costs, and an overhead allocation. Research and development costs include
salary and related benefits, travel, depreciation and amortization of research  
and development equipment, an overhead allocation, and other costs associated   
with research and development activities, and is stated net of amounts          
reimbursed by the Israeli government. Selling, general and administrative costs 
include salary and related benefits, travel, depreciation and amortization,     
sales commissions, marketing and promotional materials, recruiting expenses,    
professional fees, facility costs, and other costs associated with sales,       
marketing, finance and administrative departments.                              

Software development costs are capitalized upon the establishment of  
technological feasibility and are amortized on a straight-line basis over the   
estimated useful life of the software, which has been four years or less to     
date. Amortization begins in the period in which the related product is         
available for general release to customers. The Company reviews software        
development costs for impairment at the end of each fiscal year, or whenever    
events or changes in circumstances indicate that the carrying amount may not be 
recoverable. An impairment loss would be recognized when the estimated net      
realizable value of the software is less than its carrying amount. The net      
realizable value is the estimated future gross revenue from the software reduced
by the estimated future costs of completing and supporting the software.        

 In July 2000, Verint's parent, Comverse Technology, acquired all of the
outstanding stock of Loronix, Inc., or Loronix, a company that develops         
software-based digital video recording and management systems and Syborg        
Informationsysteme bescrakt haftende OHG, or Syborg, a company that develops    
software-based digital voice and Internet recording systems. These business     
combinations were accounted for as poolings of interests. In February 2001, the 
Company issued 6,759,277 shares of its common stock to Comverse Technology in   
exchange for Comverse Technology's ownership interest in Loronix and Syborg.    
These shares are reflected in Verint's consolidated financial statements as if  
they were outstanding as of the earliest period presented, which is consistent  
with the pooling of interests method of accounting.                             

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  For a discussion of Verint's relationship and transactions with Comverse
Technology and its subsidiaries, see "Certain Relationships and Related         
Transactions - Relationship with Comverse Technology and its Subsidiaries," and 
note 13 to Verint's consolidated financial statements.                          

Results of Operations                                                           

Year Ended January 31, 2003 Compared to Year Ended January 31, 2002             

     Sales. Sales for the year ended January 31, 2003, or fiscal 2002, increased
by approximately $26.5 million, or 20%, compared to the year ended January 31,  
2002, or fiscal 2001. This increase reflected an increase in both sales of      
products of $20.4 million and service revenue of $6.1 million. This increase was
principally due to an increase in sales volume in the United States of          
approximately $22.7 million as a result of increased sales of Verint's digital  
security and surveillance solutions. The Company sells its products in multiple 
configurations and the price of any particular product varies depending on the  
configuration of the product sold. Due to the variety of customized             
configurations for each product that the Company sells, it is unable to quantify
the effects of a change in the price of any particular product and/or a change  
in the number of products sold on its revenues. Sales to international customers
represented 51% of sales for fiscal 2002 as compared to 58% of sales for fiscal 
2001.                                                                           

 Cost of Sales. Cost of sales for fiscal 2002 increased by approximately
$8.1 million, or 12%, compared to fiscal 2001. This increase was attributable to
an increase in materials and overhead costs of $6.1 million, increase in        
personnel related costs of $1.3 million and an increase in other production and 
service costs of $0.7 million. Gross margin increased to 50.5% in fiscal 2002   
from 46.7% in fiscal 2001.                                                      

    Research and Development Expenses, net. Research and development expenses,
net, for fiscal 2002 increased by approximately $2.2 million, or 14%, compared  
to fiscal 2001. The net increase was attributable to an increase in work done by
subcontractors amounting to $1.0 million, decrease in government reimbursement  
of $0.6 million, an increase in travel related expenses of $0.5 million and an  
increase of $0.1 million in other expenses.                                     

Selling, General and Administrative Expenses. Selling, general and    
administrative expenses for fiscal 2002 increased by approximately $6.4 million,
or 14%, compared to fiscal 2001. This increase was attributable to an increase  
in compensation and benefits for existing personnel and increase in headcount to
support the increased level of sales in fiscal 2002 totaling $3.4 million, an   
increase in agent commissions of $1.2 million, an increase in travel expenses of
$1.2 million and an increase in other expenses of $0.6 million. Selling, general
and administrative expenses as a percentage of sales decreased to 33.2% for     
fiscal 2002 from 35.0% for fiscal 2001.                                         

 Interest and Other Income (Expense), net. Net interest and other income
(expense) for fiscal 2002 increased by approximately $2.8 million as compared to
fiscal 2001. The increase was attributable to an increase in currency exchange  
gains of $3.2 million resulting mainly from fluctuations in the exchange rates  
of the US dollars against European and Israeli currencies, an increase in       
interest income of $0.2 million due to the increase in interest bearing cash    
balances following the Company's initial public offering and a decrease in      
interest expense of $0.4 million due to decrease in interest rates. These       
changes were partially offset by a decrease in the Company's share in the profit
of an affiliate of $0.4 million and a write down of an investment of $0.6       
million.                                                                        

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Income Tax Provision. During fiscal 2002, the income tax provision    
increased by approximately $0.6 million compared to fiscal 2001. This increase  
was attributable to an increase in pre-tax income after giving effect to        
available net operating loss carry-forwards. The effective tax rate for fiscal  
2002 was 18% reflecting the use of net operating loss carry-forwards in certain 
tax jurisdictions and preferential tax rates in Israel.                         

    Net Income (Loss). Net income increased by approximately $14.8 million for
fiscal 2002 compared to fiscal 2001. Net income (loss) as a percentage of sales 
improved to 6.4% for fiscal 2002 compared to a loss of 3.5% in fiscal 2001. This
increase was attributable to the factors described above.                       

Year Ended January 31, 2002 Compared to Year Ended January 31, 2001             

    Sales. Sales for the year ended January 31, 2002, or fiscal 2001 decreased
by approximately $10.4 million, or 7%, compared to the year ended January 31,   
2001, or fiscal 2000. This decrease was attributable to a decrease in sales of  
products of approximately $14.5 million offset by an increase in service        
revenues which increased by approximately $4.0 million. Such decrease was       
principally due to a decrease in sales volume as a result of a general slowdown 
in information technology spending. To a lesser extent, the Company was able to 
negotiate lower material prices from its vendors and passed these cost savings  
on to its customers. The Company sells its products in multiple configurations  
and the price of any particular product varies depending on the configuration of
the product sold. Due to the variety of customized configurations for each      
product that the Company sells, it is unable to quantify the effects of a change
in the price of any particular product and/or a change in the number of products
sold on its revenues. Sales to international customers represented 58% of sales 
for fiscal 2001 as compared to 51% for fiscal 2000.                             

 Cost of Sales. Cost of sales for fiscal 2001 decreased by approximately
$11.9 million, or 15%, as compared to fiscal 2000. This decrease was            
attributable to a decrease in material costs of $8.5 million due to the decrease
in product sales. This decrease was offset by an increase in subcontractor costs
of $1.2 million and an increase in other expenses of $1.3 million. Additionally,
during fiscal 2000, the Company incurred costs of $3.7 million relating to the  
write-off and abandonment of inventories that were considered obsolete and      
duplicative and $2.2 million relating to the write-off of certain capitalized   
software that became obsolete due to the existence of duplicative technology as 
a result of the Loronix and Syborg mergers. Gross margin increased to           
approximately 46.7% in fiscal 2001 from approximately 42.3% in fiscal 2000.     

    Research and Development Expenses, net. Research and development expenses,
net, for fiscal 2001 increased by approximately $0.9 million, or 7%, compared to
fiscal 2000. This net increase was attributable to a decrease in government     
reimbursements of $1.7 million offset by a decrease in research and development 
expenses of $0.8 million.                                                       

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Selling, General and Administrative Expenses. Selling, general and    
administrative expenses for fiscal 2001 decreased by approximately $2.2 million,
or 5%, compared to fiscal 2000. This decrease was attributable to lower agent   
commissions of $1.1 million and bad debt expense of $2.7 million offset by      
increases in other expenses of $1.6 million. Selling, general and administrative
expenses as a percentage of sales increased to 35% for fiscal 2001 from 34% for 
fiscal 2000.                                                                    

  Acquisition Expenses. In connection with the acquisitions of Loronix and
Syborg in fiscal 2000, the Company charged $3.5 million of merger related       
expenses to operations. These expenses are primarily related to professional    
fees to lawyers, investment bankers and accountants, as well as other direct    
costs in connection with the mergers, such as printing costs and filing fees.   

  Workforce Reduction, Restructuring and Impairment Charges. In connection
with the acquisitions of Loronix and Syborg in fiscal 2000, the Company charged 
$1.5 million of restructuring and impairment related charges to operations for  
the write-off of certain demonstration, laboratory and production equipment that
was abandoned as a result of the mergers.                                       

 During fiscal 2001, the Company recorded a charge to operations of $2.8
million for workforce reduction costs and for costs to consolidate its offices  
in the United Kingdom. These charges were necessary as a result of the difficult
economic and capital spending environment and were designed to improve Verint's 
cost structure by reducing its workforce in the United States, Israel, and      
Germany by approximately 65, 45, and 35 employees, respectively. The workforce  
reduction and consolidation of Verint's United Kingdom offices provided cost    
savings of approximately $4.0 million in fiscal 2001.                           

  Interest and Other Income (Expense), net. Net interest and other expense
for fiscal 2001 increased by approximately $0.1 million as compared to fiscal   
2000. This increase was attributable to decreased interest income of $0.6       
million and increased net foreign currency losses of $0.2 million, offset by    
decreased interest expense of $0.7 million. The decrease in interest income and 
expense is due to the decrease in interest rates that occurred during fiscal    
2001.                                                                           

Income Tax Provision. During fiscal 2001, the income tax provision    
increased by approximately $1.1 million compared to fiscal 2000. This increase  
was attributable to an increase in pre-tax income in certain foreign tax        
jurisdictions after giving effect to available net operating loss carryforwards.

 Net Loss. Net loss decreased by approximately $3.9 million, or 46%, for
fiscal 2001 compared to fiscal 2000, and as a percentage of sales it decreased  
to approximately 3.5% for fiscal 2001 from approximately 6.0% for fiscal 2000.  
This decrease was attributable to the factors described above.                  

Geographic Information                                                          

Summarized financial information for Verint's reportable geographic   
segments is presented in the following table. Sales in each geographic segment  
represents sales originating from that segment.                                 

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                                                                                             Reconciling   Consolidated 
                               United States     Israel      United Kingdom       Other         Items         Totals    
                               -------------  ------------   --------------     ----------   ------------  -------------

Year Ended January 31, 2001                                            (In thousands)                                   
---------------------------                                                                                             
                                                                                                                        
Sales.........................  $   77,777      $   53,246     $   20,503       $    9,662   $  (19,511)   $  141,677   
Costs and expenses............     (84,679)        (54,045)       (20,994)          (9,115)      19,591      (149,242)  
                                ----------      ----------     ----------       ----------   ----------    ----------   
Operating income (loss).......  $   (6,902)     $     (799)    $     (491)      $      547   $       80    $   (7,565)  
                                ==========      ==========     ==========       ==========   ==========    ==========   
Year Ended January 31, 2002                                                                                             
---------------------------                                                                                             
Sales.........................  $   65,731      $   62,712     $   18,848       $    6,023   $  (22,079)   $  131,235   
Costs and expenses............     (70,290)        (58,813)       (19,349)          (7,882)      22,566      (133,768)  
                                ----------      ----------     ----------       ----------   ----------    ----------   
Operating income (loss).......  $   (4,559)     $    3,899     $     (501)      $   (1,859)  $      487    $   (2,533)  
                                ==========      ==========     ==========       ==========   ==========    ==========   
Year Ended January 31, 2003                                                                                             
---------------------------                                                                                             
Sales.........................  $   85,817      $   62,622     $   22,897       $   11,616   $  (25,177)   $  157,775   
Costs and expenses............     (80,847)        (57,477)       (21,624)         (12,881)      25,105      (147,724)  
                                ----------      ----------     ----------       ----------   ----------    ----------   
Operating income (loss).......  $    4,970      $    5,145     $    1,273       $   (1,265)  $      (72)   $   10,051   
                                ==========      ==========     ==========       ==========   ==========    ==========   

Year Ended January 31, 2003 Compared to Year Ended January 31, 2002             

    Sales for fiscal 2002 increased in all geographic segments, except Israel,
as compared to fiscal 2001 due to an overall increase in sales volume of        
products and services. Sales originating from the United States and the United  
Kingdom increased by $20.1 million or 31% and by $4.0 million, or 21%,          
respectively, in fiscal 2002 as compared with fiscal 2001. Costs and expenses in
the United States and the United Kingdom increased by $10.6 million or 15% and  
by $2.3 million or 12% respectively. The higher increase in sales accompanied by
lower increase in cost and expenses created an operating profit for fiscal 2002 
as compared with an operating loss in fiscal 2001, in those geographies.        

Year Ended January 31, 2002 Compared to Year Ended January 31, 2001             

  Sales for fiscal 2001 decreased in all geographic segments except Israel
compared to fiscal 2000 due to decreased product sales volumes. Sales           
originating from Israel increased by approximately $9.5 million due to an       
increase in product sales to international markets excluding the United States  
and the United Kingdom. Operating costs and expenses in Israel increased by $4.8
million due to the increase in cost of sales and other expenses supporting the  
increased sales. Operating costs and expenses in the United States decreased    
approximately $14.4 million due to the one-time merger, restructuring and       
impairment charges and inventory write-off and abandonment of approximately $6.0
million incurred during fiscal 2000 and due to a decrease in operating expenses 
which resulted from the decrease in sales. Operating costs and expenses in the  
United Kingdom decreased by $1.6 million due to the decrease in sales.          

Liquidity and Capital Resources                                                 

As of January 31, 2003, the Company had cash and cash equivalents of  
approximately $133.9 million and working capital of approximately $69.3 million.

Operating activities for fiscal 2000, 2001 and 2002, after adding back
non-cash items, provided cash of approximately $8.8 million, $2.3 million, and  
$19.6 million, respectively. For fiscal 2000, cash used by other changes in     
assets and liabilities of $0.2 million primarily consisted of an increase in    
accounts receivable of $6.4 million, an increase in prepaid expenses and other  
current assets of $3.9 million and a decrease in due to/from related parties of 
$2.9 million, partially offset by an increase in accounts payable and accrued   
liabilities of $5.6 million and an increase in advance payments from customers  
of $6.9 million. For fiscal 2001, cash provided from other changes in assets and
liabilities of $7.5 million primarily consisted of an increase in accounts      
payable and accrued liabilities of $3.6 million, a decrease in accounts         
receivable of $2.0 million, a decrease in inventories of $3.5 million, and a    
decrease in prepaid expenses and other current assets of $2.8 million, partially
offset by a change in due to/from related parties of $3.6 million. For fiscal   
2002, cash provided from other changes in assets and liabilities of $16.7       
million primarily consisted of an increase in advances from customers of $5.0   
million, an increase in accounts payable and accrued liabilities of $4.7        
million, a decrease in accounts receivable of $3.2 million and a change in due  
to/from related parties of $2.4 million.                                        

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Investing activities for fiscal 2000, 2001 and 2002 used cash of      
approximately $10.6 million, $8.5 million and $19.3 million, respectively. These
amounts primarily include additions to property and equipment in fiscal 2000,   
2001 and 2002 of approximately $6.3 million, $4.3 million and $ 4.9 million,    
respectively, capitalization of software development costs of approximately $4.3
million, $4.1 million and $4.8 million, respectively, and cash paid for business
combination of approximately $0 million, $0 million and $9.7 million,           
respectively.                                                                   

Financing activities for fiscal 2000, 2001 and 2002 provided cash of  
approximately $9.4 million, $5.2 million and $67.1 million, respectively. For   
fiscal 2000, 2001, and 2002 proceeds from the issuances of common stock provided
$0.9 million, $0.3 million and $67.2 million cash, respectively. For fiscal 2002
net cash provided from issuances of common stock is mainly attributable to the  
completion of the Company's initial public offering which generated net cash of 
$65.4 million. Net proceeds (repayments) from bank loans and related party loans
provided (used) cash of $8.6 million, $4.9 million and $(0.1) million,          
respectively.                                                                   

  In January 2002, the Company obtained a $42 million bank loan. This loan
matured in February 2003 and bore interest at LIBOR plus 0.55%. The proceeds of 
this loan were used to repay amounts owed to Comverse Technology. The loan was  
guaranteed by Comverse Technology and was repaid on February 28, 2003.          

The Company has obtained bank guaranties primarily to secure its      
performance of certain obligations under contracts with customers. These        
guaranties, which aggregated $5.9 million at January 31, 2003, are to be        
released by Verint's performance of specified contract milestones, which are    
scheduled to be completed in the next year.                                     

The following table sets forth Verint's contractual obligations and   
commercial commitments as of January 31, 2003:                                  

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                                                             Year Ending January 31,                  
                                                     ----------------------------------------         
Contractual Obligations                                                                          There
-----------------------                        Total     2004    2005    2006   2007    2008     after
                                               -----     ----    ----    ----   ----    ----     -----

                                                                   (in thousands)                     
                                                                   --------------                     

                                                                                                      
Long-term debt..............................$ 43,877  $42,199  $  200  $  202  $ 203   $ 205   $   868
Rent and other operating lease obligations..   7,933    3,290   1,933   1,422    644     644         -
                                            --------  -------  ------  ------  -----   -----   -------

Total.......................................$ 51,810  $45,489  $2,133  $1,624  $ 847   $ 849   $   868
                                            ========  =======  ======  ======  =====   =====   =======

  On February 1, 2002, Verint's wholly-owned subsidiary, Loronix, acquired
the digital video recording business of Lanex, LLC. The Lanex business provides 
digital video recording solutions for security and surveillance applications    
primarily to North American banks. The purchase price consisted of $9.5 million 
in cash and a $2.2 million convertible note issued by Verint to Lanex. The note 
is non-interest bearing and matures on February 1, 2004. The holder of the note 
may elect to convert the note, in whole or in part, into shares of Verint's     
common stock at a conversion price of $16.06 per share at any time on or after  
the completion of Verint's initial public offering. The note is guaranteed by   
Comverse Technology.                                                            

     The Company believes that its 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 Verint's   
needs, the Company may seek additional debt or equity financing. The Company    
does not expect to depend on Comverse Technology for its financing needs for the
foreseeable future, nor is Comverse Techology required to provide any financing.
In addition, although there is no present understanding, commitment or agreement
with respect to any acquisition of other businesses, products, or technologies, 
the Company may in the future consider such transactions, which may require     
additional debt or equity financing and could result in a decrease of its       
working capital. There can be no assurance that such additional financing would 
be available on acceptable terms, if at all.                                    

Effect of New Accounting Pronouncements                                         

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and     
Other Intangible Assets", SFAS No. 142 addresses financial accounting and       
reporting for acquired goodwill and other intangible assets. Under SFAS No. 142,
goodwill and some intangible assets will no longer be amortized, but rather will
be reviewed for impairment on a periodic basis. The provisions of SFAS No. 142  
were required to be applied starting with fiscal years beginning after December 
15, 2001. The adoption of SFAS No. 142 did not have a material impact on the    
Company's consolidated financial statements.                                    

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset   
Retirement Obligations." SFAS No. 143 establishes accounting standards for      
recognition and measurement of a liability for an asset retirement obligation   
and the associated asset retirement cost. SFAS No. 143 applies to legal         
obligations associated with the retirement of a tangible long-lived asset that  
result from the acquisition, construction, development and/or normal operation  
of a long-lived asset. This Statement is effective for fiscal years beginning   
after June 15, 2002; however, early adoption is encouraged. The adoption of SFAS
No. 143 is not expected to have a material effect on the Company's consolidated 
financial statements.                                                           

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In October 2001, the FASB issued SFAS No. 144, "Accounting for the    
Impairment or Disposal of Long-Lived Assets", SFAS No. 144 addresses financial  
accounting and reporting for the impairment or disposal of long-lived assets.   
SFAS No. 144 supercedes certain provisions of SFAS No. 121, "Accounting for the 
Impairment of Long-Lived Assets to Be Disposed Of" and certain provisions of    
Accounting Principles Board Opinion No. 30, "Reporting the Results of           
Operations-Reporting the Effects of Disposal of a Segment of a Business, and    
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 requires that long-lived assets be measured at the lower of carrying    
amount or fair value less cost to sell, whether reported in continuing          
operations or in discontinued operations. Therefore, discontinued operations    
will no longer be measured at net realizable value or include amounts for       
operating losses that have not yet occurred. SFAS No. 144 also broadens the     
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will  
be eliminated from the ongoing operations of the entity in a disposal           
transaction. SFAS No. 144 was effective for financial statements issued for     
fiscal years beginning after December 15, 2001 and interim periods within those 
fiscal years. The adoption of SFAS No. 144 did not have a material impact on the
Company's consolidated financial statements.                                    

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical             
Corrections." SFAS No. 145, among other things, rescinds SFAS No. 4, which      
required all gains and losses from the extinguishments of debt to be classified 
as an extraordinary item and amends SFAS No. 13 to require that certain lease   
modifications that have economic effects similar to sale-leaseback transactions 
be in the same manner as sale-leaseback transactions. The rescission of SFAS No.
4 is effective for fiscal years beginning after May 15, 2002. The remainder of  
the statement is generally effective for transactions occurring after May 15,   
2002 with earlier application encouraged. The adoption of SFAS No. 145 is not   
expected to have a material effect on the Company's consolidated financial      
statements.                                                                     

In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or   
Disposal Activities." This statement addresses the recognition, measurement and 
reporting of costs that are associated with exit and disposal activities. This  
statement includes the restructuring activities that are currently accounted for
pursuant to the guidance set forth in Emerging Issues Task Force ("EITF") Issue 
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and  
Other Costs to Exit an Activity (including Certain Costs Incurred in a          
Restructuring)", costs related to terminating a contract that is not a capital  
lease and one-time benefit arrangements received by employees who are           
involuntarily terminated - nullifying the guidance under EITF Issue No. 94-3.   
Under SFAS No. 146 the cost associated with an exit or disposal activity is     
recognized in the periods in which it is incurred rather than at the date a     
company committed to the exit plan. This statement is effective for exit or     
disposal activities initiated after December 31, 2002 with earlier application  
encouraged. The adoption of SFAS No. 146 did not have a material effect on the  
Company's consolidated financial statements.                                    

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     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure - an amendment of FASB Statement No.     
123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based             
Compensation", to provide alternative methods of transition for a voluntary     
change to the fair value based method of accounting for stock-based employee    
compensation and does not permit the use of the original SFAS No. 123           
prospective method of transition in fiscal years beginning after December 15,   
2003. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No.  
123 to require prominent disclosures in both annual and interim financial       
statements about the method of accounting for stock-based employee compensation 
and the effect of the method used on reported results, regardless of whether,   
when, or how an entity adopts the preferable, fair value based method of        
accounting. SFAS No. 148 improves the prominence and clarity of the pro forma   
disclosures required by SFAS No. 123 by prescribing a specific tabular format   
and by requiring disclosure in the "Summary of Significant Accounting Policies" 
or its equivalent and improves the timeliness of those disclosures by requiring 
their inclusion in financial reports for interim periods. The Company has       
adopted the disclosure requirements of SFAS No. 148 for the year ended January  
31, 2003. The Company will continue to account for stock-based employee         
compensation under APB Opinion No. 25 and its related interpretations.          

In November 2002, the FASB issued interpretation No. 45, "Guarantor's 
Accounting and Disclosure Requirement for Guarantees, Including Indirect        
Guarantees and indebtedness of Others." The Interpretation elaborates on the    
disclosures to be made by a guarantor in its interim and annual financial       
statements about its obligations under certain guaranties that it has issued.   
The Interpretation also clarifies that a guarantor is required to recognize, at 
the inception of a guarantee, a liability for the fair value of the obligation  
undertaken in issuing the guarantee. The initial recognition and initial        
measurements provisions of the Interpretation are applicable on a prospective   
basis to guaranties issued or modified after December 31, 2002. The Company has 
made no material guaranties subject to the liability recognition and disclosure 
provisions of the Interpretation.                                               

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CERTAIN TRENDS AND UNCERTAINTIES                                                

The Company's primary business is providing analytic solutions for    
communications interception, digital video security and surveillance, and       
enterprise business intelligence. Heightened awareness surrounding homeland     
defense and security, both in the U.S. and globally, has increased the need for 
analytic solutions for communications interception and digital video security   
and surveillance solutions such as those provided by the Company. Recent        
legislative and regulatory actions have provided greater surveillance powers to 
law enforcement agencies, imposed strict requirements on communications service 
providers to facilitate interception of communications over public networks, and
increased the security measures being implemented at public facilities such as  
airports. However, there is no assurance that these legislative and regulatory  
actions will result in increased demand for or purchasing of solutions such as  
Verint's or, if it does, that such solutions will be purchased from the Company.
If demand for or purchasing of solutions such as Verint's does not increase as  
anticipated, the Company may not be able to sustain or increase profitability on
a quarterly or annual basis.                                                    

    The market for the Company's enterprise business intelligence products has
been adversely affected by the global economic slowdown and the decline in      
information technology spending, which has caused many companies to reduce or,  
in extreme cases, eliminate altogether, information technology spending. If the 
Company's customers do not increase their spending on information technology or 
if such spending declines, the Company's revenues from sales of its enterprise  
business intelligence products may decrease. The information technology spending
of the Company's customers in the near term remains uncertain and the Company is
uncertain whether it will be able to increase or maintain its revenues. Although
the Company was profitable for fiscal 2002, the Company has incurred operating  
and net losses every other year since 1997. If sales do not increase as         
anticipated or if expenses increase at a greater pace than revenues, the Company
may not be able to sustain or increase profitability on a quarterly or annual   
basis.                                                                          

 It is difficult for the Company to forecast the timing of revenues from
product sales because customers often need a significant amount of time to      
evaluate the Company's products before purchasing them and, in the case of      
governmental customers, sales are dependent on budgetary and other bureaucratic 
processes. The period between initial customer contact and a purchase by a      
customer may vary from three months to more than one year. During the evaluation
period, customers may defer or scale down proposed orders of the Company's      
products for various reasons, including: (i) changes in budgets and purchasing  
priorities; (ii) reduced need to upgrade existing systems; (iii) customer       
deferrals in anticipation of enhancements or new products; (iv) introduction of 
products by competitors; and (v) lower prices offered by competitors.           

The Company derives a significant amount of its revenues from various 
government contracts worldwide. The Company expects that government contracts   
will continue to be a significant source of revenues for the foreseeable future.
Business generated from government contracts may be adversely affected if: (i)  
the Company's reputation or relationship with government agencies is impaired;  
(ii) the Company is suspended or otherwise prohibited from contracting with a   
domestic or foreign government or any significant law enforcement agency; (iii) 
levels of government expenditures and authorizations for law enforcement and    
security related programs decrease, remain constant or shift to programs in     
areas where the Company does not provide products and services; (iv) the Company
is prevented from entering into new government contracts or extending existing  
government contracts based on violations or suspected violations of laws or     
regulations, such as those related to procurement; (v) the Company is not       
granted security clearances that are required to sell products to domestic or   
foreign governments or such security clearances are revoked; or (vi) there is a 
change in government procurement procedures.                                    

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Quarterly operating results are difficult to predict and may fluctuate
significantly in the future, which in turn may result in volatility in the      
Company's stock price. The following factors, among others, many of which are   
outside the Company's control, can cause fluctuations in operating results and  
stock price volatility: (i) the size, timing, terms and conditions of orders    
from and shipments to customers; (ii) unanticipated delays or problems in       
releasing new products; (iii) the timing and success of the customers'          
deployment of the Company's products and services; and (iv) the amount and      
timing of investments in research and development activities.                   

    The deferral or loss of one or more significant sales could materially and
adversely affect the Company's operating results in any fiscal quarter,         
particularly if there are significant sales and marketing expenses associated   
with the deferred or lost sales. The Company's current and future expense levels
are based on internal operating plans and sales forecasts, and the Company's    
operating costs are to a large extent fixed. As a result, the Company may not be
able to sufficiently reduce its costs in any quarter to compensate for an       
unexpected near-term shortfall in revenues.                                     

The markets for the Company's digital security and surveillance and   
enterprise business intelligence products are still emerging. The Company's     
growth is dependent on, among other things, the size and pace at which the      
markets for its products develop. If the markets for the Company's products     
decrease, remain constant or grow slower than anticipated, the Company will not 
be able to maintain its growth. Continued growth in the demand for the Company's
products is uncertain as a result of, among other reasons, existing customers   
and potential customers may: (i) not achieve a return on their investment in the
Company's products; (ii) experience technical difficulty in utilizing the       
Company's products; or (iii) use alternative solutions to achieve their         
security, intelligence or business objectives. In addition, as the Company's    
enterprise business intelligence products are sold primarily to contact centers,
slower than anticipated growth or a contraction in the number of contact centers
will have an adverse effect on the Company's ability to maintain growth.        

The markets for the Company's products are characterized by rapidly   
changing technology and evolving industry standards. The introduction of        
products embodying new technology and the emergence of new industry standards   
can render the Company's existing products obsolete and unmarketable and can    
exert price pressures on existing products. It is critical to the Company's     
success to anticipate changes in technology or in industry standards and to     
successfully develop and introduce new, enhanced and competitive products on a  
timely basis. The Company cannot guaranty that it will successfully develop new 
products or introduce new applications for existing products, that new products 
and applications will achieve market acceptance or that the introduction of new 
products or technological developments by competitors will not render the       
Company's products obsolete. Thus, the Company's inability to develop products  
that are competitive in technology and price and meet customer needs could have 
a material adverse effect on its business, financial condition or results of    
operations.                                                                     

The global market for analytical solutions for security and business  
applications is intensely competitive, both in the number and breadth of        
competing companies and products and the manner in which products are sold. For 
example, the Company often competes for customer contracts through a competitive
bidding process that subjects it to risks associated with: (i) the frequent need
to bid on programs in advance of the completion of their design, which may      
result in unforeseen technological difficulties and cost overruns; and (ii) the 
expenditure of substantial time, effort and money, including design, development
and marketing activities, required to prepare bids and proposals for contracts  
that may not be awarded to the Company.                                         

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   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 the 
Company's competitors have, in relation to the Company, 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 take    
significant market share. In addition, some of the Company's customers may in   
the future decide to develop internally their own solutions instead of          
purchasing products from the Company. Increased competition could force the     
Company to lower prices or take other actions to differentiate its products.    

  Many of the Company's contracts with governments contain provisions that
give those governments rights and remedies not typically found in private       
commercial contracts, including provisions enabling the governments to: (i)     
terminate or cancel existing contracts for convenience; (ii) in the case of the 
U.S. government, suspend the Company from doing business with certain foreign   
governments or prevent it from selling products in certain countries; (iii)     
audit and object to contract-related costs and expenses, including allocated    
indirect costs; and (iv) change specific terms and conditions in the Company's  
contracts, including changes that would reduce a contract's value. Many         
jurisdictions have laws and regulations that deem government contracts in those 
jurisdictions to include these types of provisions, even if the contract itself 
does not contain them. If a government terminates a contract for convenience,   
the Company may not recover incurred or committed costs, any settlement expenses
or profit on work completed prior to the termination. If a government terminates
a contract for default, the Company may not recover even those amounts, and     
instead it may be liable for any costs incurred by a government in procuring    
undelivered items and services from another source.                             

     The Company also must comply with domestic and foreign laws and regulations
relating to the formation, administration and performance of government         
contracts. These laws and regulations affect how the Company does business with 
government agencies in various countries and may impose added costs on its      
business. For example, in the United States, the Company is subject to the      
Federal Acquisition Regulations, which comprehensively regulate the formation,  
administration and performance of federal government contracts, and to the Truth
in Negotiations Act, which requires certification and disclosure of cost and    
pricing data in connection with contract negotiations. The Company is subject to
similar regulations in certain foreign countries as well.                       

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If a government review or investigation uncovers improper or illegal  
activities, the Company may be subject to civil and criminal penalties and      
administrative sanctions, including termination of contracts, forfeiture of     
profits, suspension of payments, fines and suspension or debarment from doing   
business with government agencies, which could materially and adversely affect  
the Company's business, financial condition and results of operations. In       
addition, a government may reform its procurement practices or adopt new        
contracting rules and regulations that could be costly to satisfy or that could 
impair the Company's ability to obtain new contracts.                           

 The Company's subsidiary, Verint Technology Inc. ("Verint Technology"),
which markets, sells and supports communications interception solutions to      
various U.S. government agencies, is required by the National Industrial        
Security Program to maintain facility security clearances and to be insulated   
from foreign ownership, control or influence. To comply with the National       
Industrial Security Program requirements, in January 1999 the Company, Verint   
Technology, the Company's parent corporation, Comverse Technology, and the      
Department of Defense entered into a proxy agreement with respect to the        
ownership and operations of Verint Technology, which was superceded in May 2001 
to comply with the Department of Defense's most recent requirements. Under the  
proxy agreement, the Company, among other things, appointed three individuals   
who are U.S. citizens holding the requisite security clearances as holders of   
proxies to vote the Verint Technology stock. The proxy holders have the power to
exercise all prerogatives of ownership of Verint Technology. These three        
individuals are responsible for the oversight of Verint Technology's security   
arrangements.                                                                   

The proxy agreement may be terminated and Verint Technology's facility
security clearance may be revoked in the event of a breach of the proxy         
agreement, or if it is determined by the Department of Defense that termination 
is in the national interest. If Verint Technology's facility security clearance 
is revoked, the Company may lose all or a substantial portion of its sales to   
U.S. government agencies and its business, financial condition and results of   
operations would be harmed.                                                     

As the communications industry continues to evolve, governments may   
increasingly regulate products that monitor and record voice, video and data    
transmissions over public communications networks, such as the Company's        
solutions. For example, when sold in the United States, products the Company    
sells to law enforcement agencies and which interface with a variety of         
wireline, wireless and Internet protocol networks must comply with the technical
standards established by the Federal Communications Commission pursuant to the  
Communications Assistance for Law Enforcement Act and, when sold in Europe, must
comply with those established by the European Telecommunications Standard       
Institute. The adoption of new laws governing the use of the Company's products 
or changes made to existing laws could cause a decline in the use of the        
Company's products and could result in increased expenses, particularly if the  
Company is required to modify or redesign products to accommodate these new or  
changing laws.                                                                  

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The Company is required to obtain export licenses from the Israeli and
German governments to export some of the products developed or manufactured in  
these countries. The Company cannot guaranty that it will be successful in      
obtaining or maintaining the licenses and other authorizations required to      
export products from applicable governmental authorities. The failure to receive
or maintain any required export license or authorization would hinder the       
Company's ability to sell its products and could adversely affect its business, 
financial condition and results of operations.                                  

   The Company's ability to achieve revenue growth depends to some extent on
adding new partners to expand sales channels, as well as leveraging its         
relationships with existing partners. If the relationships with these value     
added resellers, systems integrators and strategic and technology partners      
deteriorate or terminate, the Company may lose important sales and marketing    
opportunities. As part of the Company's growth strategy, it intends to pursue   
new strategic alliances. The Company considers and engages in strategic         
transactions from time to time and may be evaluating alliances or joint ventures
at any time. The Company competes with other analytic solution providers for    
these opportunities and cannot guaranty that it will be able to effect these    
transactions on commercially reasonable terms or at all, and it cannot be sure  
that it will realize the anticipated benefits.                                  

The Company's products involve sophisticated hardware and software    
technology that performs critical functions to highly demanding standards. There
can be no assurance that the Company's current or future products will not      
develop operational problems, which could have a material adverse effect on the 
Company. The Company offers complex products that may contain undetected defects
or errors, particularly when first introduced or as new versions are released.  
The Company may not discover such defects or errors until after a product has   
been released and used by the customer. Significant costs may be incurred to    
correct undetected defects or errors in the Company's products and these defects
or errors could result in future lost sales. In addition, defects or errors in  
the Company's products may result in product liability claims, which could cause
adverse publicity and impair their market acceptance.                           

     Software licensed from third parties is incorporated into the vast majority
of the Company's products. If the Company loses or is unable to maintain any    
software licenses, it could incur additional costs or experience unexpected     
delays until equivalent software can be developed or licensed and integrated    
into the Company's products.                                                    

While the Company occasionally files patent applications, it cannot   
guaranty that patents will be issued on the basis of such applications or that, 
if such patents are issued, they will not be challenged, invalidated or         
circumvented or be sufficiently broad to protect the Company's technology. In   
order to safeguard the Company's unpatented proprietary know-how, trade secrets 
and technology, the Company relies primarily upon trade secret protection and   
non-disclosure provisions in agreements with employees and others having access 
to confidential information. The Company cannot guaranty that these measures    
will provide adequate protection from improper disclosure or misappropriation of
proprietary information.                                                        

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    The occurrence or perception of security breaches within the Company or by
third parties using the Company's products could harm the Company's business,   
financial condition and operating results. While the Company implements         
sophisticated security measures, third parties may attempt to breach the        
Company's security or inappropriately use the Company's products through        
computer viruses, electronic break-ins and other disruptions. If successful,    
confidential information, including passwords, financial information, or other  
personal information may be improperly obtained and the Company may be subject  
to lawsuits and other liability. Even if the Company is not held liable, such   
security breaches could harm the Company's reputation, and even the perception  
of security risks, whether or not valid, could inhibit market acceptance of the 
Company's products.                                                             

   The Company's products are often used by customers to compile and analyze
highly sensitive or confidential information and data. The Company may come into
contact with such information or data when it performs support or maintenance   
functions for its customers. While the Company has internal policies, procedures
and training for employees in connection with performing these functions, even  
the perception that an employee of the Company has improperly handled sensitive 
or confidential information and data of a customer could harm the Company's     
reputation and could inhibit market acceptance of the Company's products.       

The information technology industry is characterized by frequent      
allegations of intellectual property infringement. In the past, third parties   
have asserted that certain of the Company's products infringe their intellectual
property and similar claims may be made in the future. Any allegation of        
infringement could be time consuming and expensive to defend or resolve, result 
in substantial diversion of management resources, cause product shipment delays,
or force the Company to enter into royalty or license agreements rather than    
dispute the merits of such allegation. If patent holders or other holders of    
intellectual property initiate legal proceedings against the Company, it may be 
forced into protracted and costly litigation. The Company may not be successful 
in defending such litigation and it may not be able to procure any required     
royalty or license agreements on acceptable terms, or at all.                   

     The Company generally indemnifies customers with respect to infringement by
its products of the proprietary rights of third parties. Third parties may      
assert infringement claims against the Company's customers and these claims may 
require the initiation of or defense against protracted and costly litigation,  
regardless of the merits of these claims. If any of these claims succeed, the   
Company may be forced to pay damages or may be required to obtain licenses. If  
the Company cannot obtain all necessary licenses on commercially reasonable     
terms, customers may be forced to stop using or, in the case of value added     
resellers, selling, the Company's products.                                     

  Although the Company generally uses standard parts and components in its
products, it does use some non-standard parts and equipment. The Company relies 
on non-affiliated suppliers for the supply of certain standard and non-standard 
components, and on manufacturers of assemblies that are incorporated in all of  
its products. The Company does not have long-term supply or manufacturing       
agreements with all of these suppliers or manufacturers. If these suppliers or  
manufacturers experience financial, operational, manufacturing capacity or      
quality assurance difficulties, or if there is any other disruption in these    
relationships, the Company will be required to locate alternative sources of    
supply. The inability to obtain sufficient quantities of these components, if   
and as required in the future entails the following risks: (i) delays in        
delivery or shortages in components could interrupt and delay manufacturing and 
result in cancellations of product orders; (ii) alternative suppliers could     
increase component prices significantly and with immediate effect; (iii) the    
Company may not be able to develop alternative sources for product components;  
(iv) the Company may be required to modify products, which may cause delays in  
product shipments, increased manufacturing costs and increased product prices;  
and (v) the Company may be required to hold more inventory than it otherwise    
might in order to avoid problems from shortages or discontinuance.              

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On February 1, 2002, the Company acquired the digital video recording 
business of Lanex, LLC. If the Company is unable to successfully integrate Lanex
with its business, it may be unable to realize the anticipated benefits of this 
acquisition. The Company may experience technical difficulties that could delay 
the integration of Lanex's products into its solutions, resulting in business   
disruptions.                                                                    

   The Company may in the future pursue acquisitions of businesses, products
and technologies, or the establishment of joint venture arrangements. The       
negotiation of potential acquisitions or joint ventures as well as the          
integration of an acquired or jointly developed business, technology or product 
could result in a substantial diversion of management resources. Future         
acquisitions could result in potentially dilutive issuances of equity           
securities, the incurrence of debt and contingent liabilities, amortization of  
certain identifiable intangible assets, research and development write-offs and 
other acquisition-related expenses. These investments may be made in immature   
businesses with unproven track records and technologies. Such investments have a
high degree of risk, with the possibility that the Company may lose the total   
amount of its investments. The Company may not be able to identify suitable     
investment candidates, and, even if it does, the Company may not be able to make
those investments on acceptable terms, or at all. In addition, the Company also 
may fail to successfully integrate acquired businesses with its operations or   
successfully realize the intended benefits of any acquisition. Due to rapidly   
changing market conditions, the Company may find the value of its acquired      
technologies and related intangible assets, such as goodwill, as recorded in the
Company's financial statements, to be impaired, resulting in charges to         
operations. The Company may also fail to retain the acquired or merged company's
key employees and customers.                                                    

     The Company depends on the continued services of its executive officers and
other key personnel. In addition, the Company may need to attract and retain a  
substantial number of new employees, particularly sales and marketing personnel 
and technical personnel, who understand and have experience with the Company's  
products and services. If the Company is unable to attract and retain qualified 
employees, its ability to grow could be impaired. Competition for personnel in  
the Company's industry for certain positions is intense, and in the past it has 
experienced difficulty in recruiting qualified personnel due to the market      
demand for their services. The Company has also experienced difficulty in       
locating qualified candidates within desired geographic locations and, on       
occasion, has had to relocate personnel to fill positions in locations where it 
could not attract qualified experienced personnel.                              

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The Company conducts significant sales and research and development   
operations in foreign countries, including in Israel, Germany and the United    
Kingdom, and intends to continue to expand operations internationally. Business 
may suffer if the Company is unable to successfully expand and maintain foreign 
operations. Foreign operations are, and any future foreign expansion will be,   
subject to a variety of risks, many of which are beyond the Company's control,  
including risks associated with: (i) foreign currency fluctuations; (ii)        
customizing products for foreign countries; (iii) political and economic        
instability in foreign countries; (iv) potentially adverse tax consequences of  
operating in foreign countries; (v) legal uncertainties regarding liability,    
export and import restrictions, tariffs and other trade barriers; (vi)          
compliance with local laws and regulations, including labor laws, employee      
benefits, currency restrictions and other requirements; (vii) hiring qualified  
foreign employees; and (viii) difficulty in accounts receivable collection and  
longer collection periods.                                                      

     To date, most of the Company's sales have been denominated in U.S. dollars,
while a significant portion of expenses, primarily labor expenses in Israel,    
Germany and the United Kingdom, are incurred in the local currencies of these   
countries. As a result, the Company is exposed to the risk that fluctuations in 
the value of these currencies relative to the U.S. Dollar could increase the    
dollar cost of operations in Israel, Germany or the United Kingdom and would    
therefore have an adverse effect on the results of the Company's operations.    
Since a portion of the Company's sales are made in foreign currencies, primarily
the British Pound and the Euro, fluctuation in the value of these currencies    
relative to the U.S. dollar could decrease revenues and adversely effect the    
results of operations. In addition, the Company's costs of operations have at   
times been affected by changes in the cost of its operations in Israel,         
resulting from changes in the value of the New Israeli Shekel relative to the   
U.S. Dollar, which for certain periods had a negative impact.                   

   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 the       
continued state of hostility, varying in degree and intensity, has led to       
security and economic problems for Israel. While Israel has signed peace accords
with both Egypt and Jordan, since October 2000, there has been a significant    
increase in violence, primarily in the West Bank and Gaza Strip, and more       
recently Israel has experienced terrorist incidents within its borders. During  
this period, negotiations between Israel and representatives of the Palestinian 
Authority have been sporadic and are currently suspended. The Company could be  
adversely affected by hostilities involving Israel, the interruption or         
curtailment of trade between Israel and its trading partners, or a significant  
downturn in the economic or financial condition of Israel. In addition, the sale
of products manufactured in Israel may be adversely affected in certain         
countries by restrictive laws, policies or practices directed toward Israel or  
companies having operations in Israel. The continuation or exacerbation of      
violence in Israel or the outbreak of violent conflicts involving Israel may    
impede the Company's ability to sell its products or otherwise adversely affect 
the Company. In addition, many of the Company's Israeli employees are required  
to perform annual compulsory military reserve duty in Israel and are subject to 
being called to active duty at any time under emergency circumstances. The      
absence of these employees may have an adverse effect upon the Company's        
operations. These conditions could disrupt the Company's operations in Israel   
and could have a material adverse effect on the Company's business, results of  
operations, and financial condition.                                            

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The Company receives conditional grants from the Government of Israel 
through the Office of the Chief Scientist of the Ministry of Industry and Trade,
or OCS, for the financing of a portion of the Company's research and development
expenditures in Israel. The terms of these conditional grants limit the         
Company's ability to manufacture products and prohibit it from transferring     
technologies outside of Israel if such products or technologies were developed  
using these grants. Even if the Company received approval to manufacture        
products developed using these conditional grants outside of Israel, it may be  
required to pay a significantly increased amount of royalties on an accelerated 
basis to the Government of Israel, depending on the manufacturing volume that is
performed outside of Israel. This restriction may impair the Company's ability  
to outsource manufacturing or engage in similar arrangements for those products 
or technologies. In addition, if the Company fails to comply with any of the    
conditions imposed by the OCS, it may be required to refund any grants          
previously received together with interest and penalties, and it may be subject 
to criminal charges. In recent years, the Government of Israel has accelerated  
the rate of repayment of Chief Scientist grants and may further accelerate them 
in the future. Verint currently pays royalties, of between 3% and 5% (or 6%     
under certain circumstances) of associated product revenues (including service  
and other related revenues) to the Government of Israel for repayment of        
benefits received under this program. Such royalty payments by Verint are       
currently required to be made until the government has been reimbursed the      
amounts received by the Company plus, for amounts received under projects       
approved by the OCS after January 1, 1999, interest on such amount at a rate    
equal to the 12-month LIBOR rate in effect on January 1 of the year in which    
approval is obtained. Further, the Government of Israel has reduced the benefits
available under these programs in recent years and these programs may be        
discontinued or curtailed in the future.The continued reduction in these        
benefits or the termination of the Company's eligibility to receive such        
benefits may adversely affect the Company's operating results.                  

    The Company's investment programs in manufacturing equipment and leasehold
improvements at its facility in Israel has been granted approved enterprise     
status and is therefore eligible for tax benefits under the Israeli Law for     
Encouragement of Capital Investments. The Government of Israel may reduce or    
eliminate the tax benefits available to approved enterprise programs such as the
programs provided to the Company. The Company cannot guaranty that these tax    
benefits will be continued in the future at their current levels or at all. If  
these tax benefits are reduced, or eliminated, the amount of taxes that the     
Company pays in Israel will increase. In addition, if the Company fails to      
comply with any of the conditions and requirements of the investment programs,  
the tax benefits it has received may be rescinded and it may be required to     
refund the amounts it received as a result of the tax benefits, together with   
interest and penalties.                                                         

Comverse Technology beneficially owns a majority of the Company's     
outstanding shares of common stock. Consequently, Comverse Technology           
effectively controls the outcome of all matters submitted for stockholder       
action, including the composition of the Company's board of directors and the   
approval of significant corporate transactions. Through its representation on   
the Company's board of directors, Comverse Technology has a controlling         
influence on the Company's management, direction and policies, including the    
ability to appoint and remove officers. As a result, Comverse Technology may    
cause the Company to take actions that may not be aligned with the Company's    
interests or those of its other stockholders. For example, Comverse Technology  
may prevent or delay any transaction involving a change in control of the       
Company's or in which the Company's stockholders might receive a premium over   
the prevailing market price for their shares.                                   

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   The Company receives insurance, legal and certain administrative services
from Comverse Technology under a corporate service agreement. The Company's     
enterprise resource planning software is maintained and supported by Comverse,  
Ltd., a subsidiary of Comverse Technology, under an enterprise resource planning
software sharing agreement. The Company also obtains personnel and facility     
services from Comverse, Inc. under a satellite services agreement. If these     
agreements are terminated, the Company may be required to obtain similar        
services from other entities or, alternatively, may be required to hire         
qualified personnel and incur other expenses to obtain these services. The      
Company may not be able to hire such personnel or to obtain comparable services 
at prices and on terms as favorable as it currently has under these agreements. 

     The Company has entered into a business opportunity agreement with Comverse
Technology that addresses potential conflicts of interest between the companies.
This agreement allocates opportunities to pursue transactions or matters between
the companies that, absent such allocation, could constitute corporate          
opportunities of both companies. As a result, the Company may lose valuable     
business opportunities. In general, the Company is precluded from pursuing      
opportunities offered to officers or employees of Comverse Technology who may   
also be the Company's directors, officers or employees, unless Comverse         
Technology fails to pursue these opportunities. In addition, six of the         
Company's twelve directors are officers and/or directors or employees of        
Comverse Technology, or otherwise affiliated with Comverse Technology. These    
directors have fiduciary duties to both companies and may have conflicts of     
interest on matters affecting both companies and, in some circumstances, may    
have interests adverse to the Company. The Company's Chairman, Mr. Kobi         
Alexander, is the Chairman of Comverse Technology. This position imposes        
significant demands on Mr. Alexander's time and presents potential conflicts of 
interest.                                                                       

In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its    
securities. The Company could be the target of similar litigation in the future.
Securities litigation could result in the expenditure of substantial costs,     
divert management's attention and resources, harm the Company's reputation in   
the industry and the securities markets and reduce profitability.               

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  Geopolitical, economic and military conditions could directly affect the
Company's operations. The recent outbreak of severe acute respiratory syndrome  
("SARS") has curtailed travel to and from certain countries. Continued or       
additional restrictions on travel to and from these and other regions on account
of SARS could have a material adverse effect on our business, results of        
operations, and financial condition, which adversely could affect our stock     
price. The continued threat of terrorism and heightened security and military   
action in response to this threat, or any future acts of terrorism, may cause   
disruptions to our business. To the extent that such disruptions result in      
delays or cancellations of customer orders, or the manufacture or shipment of   
our products, our business, operating results and financial condition could be  
materially and adversely affected.                                              

     Terrorist attacks and other acts of war, and any response to them, may lead
to armed hostilities and such developments would likely cause instability in    
financial markets. Armed hostilities and terrorism may directly impact the      
Company's facilities, personnel and operations that are located in the United   
States, Israel, Europe, the Far East, Australia and South America, as well as   
those of the Company's clients. These developments could have a material adverse
effect on the Company's business and the trading price of its common stock.     

The Company's board of directors' ability to designate and issue up to
2,500,000 shares of preferred stock and to issue additional shares of common    
stock 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 could discourage a person from seeking to acquire, control of the Company. If
this occurs, investors could lose the opportunity to receive a premium on the   
sale of their shares in a change of control transaction.                        

    The trading price of the Company's shares has been affected by the factors
disclosed herein as well as prevailing economic and financial trends and        
conditions in the public securities markets. Share prices of companies in       
technology-related industries, such as the Company, tend to exhibit a high      
degree of volatility. The announcement of financial results that fall short of  
the results anticipated by the public markets could have an immediate and       
significant negative effect on the trading price of the Company's shares in any 
given period. Such shortfalls may result from events that are beyond the        
Company's immediate control, can be unpredictable and, since a significant      
proportion of the Company's sales during each fiscal quarter tend to occur in   
the latter stages of the quarter, may not be discernible until the end of a     
financial reporting period. These factors may contribute to the volatility of   
the trading value of its shares regardless of the Company's long-term prospects.
The trading price of the Company's shares may also be affected by developments, 
including reported financial results and fluctuations in trading prices of the  
shares of other publicly-held companies in its industry generally, and the      
Company's business segments in particular, which may not have any direct        
relationship with the Company's business or prospects.                          

FORWARD-LOOKING STATEMENTS                                                      

From time to time, the Company makes forward-looking statements.      
Forward-looking statements include financial projections, statements of plans   
and objectives for future operations, statements of future economic performance,
and statements of assumptions relating thereto.                                 

    The Company may include forward-looking statements in its periodic reports
to the Securities and Exchange Commission on Forms 10-K, 10-Q, and 8-K, in its  
annual report to shareholders, in its proxy statements, in its press releases,  
in other written materials, and in statements made by employees to analysts,    
investors, representatives of the media, and others.                            

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By their very nature, forward-looking statements are subject to       
uncertainties, both general and specific, and risks exist those predictions,    
forecasts, projections and other forward-looking statements will not be         
achieved. Actual results may differ materially due to a variety of factors,     
including without limitation those discussed under "Certain Trends and          
Uncertainties" and elsewhere in this report. Investors and others should        
carefully consider these and other uncertainties and events, whether or not the 
statements are described as forward-looking.                                    

   Forward-looking statements made by the Company are intended to apply only
at the time they are made, unless explicitly stated to the contrary. Moreover,  
whether or not stated in connection with a forward-looking statement, the       
Company undertakes no obligation to correct or update a forward-looking         
statement should the Company later become aware that it is not likely to be     
achieved. If the Company were in any particular instance to update or correct a 
forward-looking statement, investors and others should not conclude that the    
Company would make additional updates or corrections thereafter.                

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.            

The Company is exposed to market risk from changes in foreign currency
exchange rates that could impact its results of operations and financial        
condition. The Company considers the foreign currency exchange rate risk, in    
particular that of the U.S. Dollar versus the British Pound, the Euro and the   
New Israeli Shekel, to be its primary market risk exposure. To date, the Company
has not used any material foreign currency exchange contracts or other          
derivative instruments to reduce its exposure to the foreign currency exchange  
risks. In the future, the Company may use foreign currency exchange contracts   
and other derivative instruments to reduce its exposure to this risk.           

The Company currently maintains its surplus cash in short-term,       
interest-bearing investment-grade instruments or bank deposits. The Company does
not expect that a 100 basis point increase or decrease from current interest    
rates would have a material effect on its financial position, results of        
operations or cash flows.                                                       

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                            

    The financial information required by Item 8 is included elsewhere in this
report.                                                                         

See Part IV, Item 15.                                                 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND         
FINANCIAL DISCLOSURE.                                           

Not applicable.                                                       

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PART III

 The information required by Part III is omitted pursuant to instruction
G(3) in that the Company will file the Proxy statement no later than            
120 days after the end of the fiscal year covered by this Annual Report on Form 
10-K, and certain information included therein is incorporated by reference into
Part III of this Annual Report on Form 10-K.                                    

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                     

   The information required by this item is incorporated herein by reference
to the information in the Proxy Statement under the captions "Election of       
Directors," "Relationships Among Directors or Executive Officers," "Management" 
and "Section 16(a) Beneficial Ownership Reporting Compliance."                  

ITEM 11. EXECUTIVE COMPENSATION                                                 

   The information required by this item is incorporated herein by reference
to the information in the Proxy Statement under the captions "Director          
Compensation," "Compensation Committee Interlocks and Insider Participation,"   
"Executive Compensation," "Compensation Committee Report on Executive           
Compensation," and "Stock Performance Graph."                                   

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND     
RELATED STOCKHOLDER MATTERS                                   

   The information required by this item is incorporated herein by reference
to the information in the Proxy Statement under the captions "Security Ownership
of Certain Beneficial Owners and Management" and "Equity Compensation Plan      
Information."                                                                   

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                         

   The information required by this item is incorporated herein by reference
to the information in the Proxy Statement under the caption "Certain            
Relationships and Related Transactions."                                        

ITEM 14. CONTROLS AND PROCEDURES                                                

(a) The Company maintains disclosure controls and procedures that are 
designed to ensure that information required to be disclosed in the Company's   
filings under the Securities Exchange Act of 1934, as amended, is recorded,     
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Company's management, including its principal executive 
officer and principal financial officer, as appropriate, to allow timely        
decisions regarding required disclosure. The Company's management, including the
principal executive officer and the principal financial officer, recognizes that
any set of controls and procedures, no matter how well designed and operated,   
can provide only reasonable assurance of achieving the desired control          
objectives.                                                                     

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     Within 90 days prior to the filing date of this annual report on Form 10-K,
the Company has carried out an evaluation, under the supervision and the        
participation of the Company's management, including the Company's principal    
executive officer and the Company's principal financial officer, of the         
effectiveness of the design and operation of the Company's disclosure controls  
and procedures. Based on such evaluation, the Company's principal executive     
officer and principal financial officer concluded that the Company's disclosure 
controls and procedures are effective.                                          

(b) There have been no significant changes in the Company's internal  
controls or in other factors that could significantly affect the internal       
controls subsequent to the date of their evaluation, including any corrective   
actions with regard to significant deficiencies and material weaknesses.        

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 PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.       

                                                                     Page(s)
(a) Documents filed as part of this report.                   
---------------------------------------               

(1)  Financial Statements.                            
---------------------                       

               Index to Consolidated Financial Statements              F-1

Independent Auditors' Report  F-2           

Consolidated Balance Sheets as of           
                         January 31, 2002 and 2003                     F-3

Consolidated Statements of Operations       
for the   Years Ended   
                         January 31, 2001, 2002 and 2003               F-4

   Consolidated Statements of Stockholders' Equity
for the   Years Ended   
                         January 31, 2001, 2002 and 2003               F-5

Consolidated Statements of Cash Flows       
for the Years Ended     
                         January 31, 2001, 2002 and 2003               F-6

               Notes to Consolidated Financial Statements              F-7

(2) Financial Statement Schedules.                    
------------------------------                
None                                          

(3) Exhibits.                                         
---------                                     
        The Index of Exhibits commences on the following page.

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Exhibits

Number                       Description                                      

3.1+          Amended and Restated Certificate of Incorporation of Verint   
Systems Inc.                                    
3.2+          Amended and Restated Bylaws of Verint Systems Inc.            
4.1+          Specimen Common Stock certificate                             
10.1+          Corporate Services Agreement, dated as of January 31, 2002,    
            between Comverse Technology and the Registrant 10.2+ Federal
           Income Tax Sharing Agreement, dated as of January 31, 2002,
between Comverse Technology and the Registrant  
10.3+          Patent License Agreement, dated as of January 17, 2000, between
             Comverse Patent Holding and the Registrant 10.4+ Registration
                Rights Agreement, dated as of January 31, 2002, between Comverse
Technology and the Registrant                   
10.5+          Contribution Agreement, dated as of February 1, 2001, between  
                Comverse Technology and the Registrant 10.6+ Enterprise Resource
            Planning Software Sharing Agreement, dated as of January 31,
2002, between Comverse Ltd. and the Registrant  
10.7+          Satellite Services Agreement, dated as of January 31, 2002,    
between Comverse, Inc. and the Registrant       
10.8+          Proxy  Agreement,  dated as of May 21, 2001, between Comverse  
              Technology, the Registrant and the United Stated Department of
Defense                                         
10.9          Verint Systems Inc. Stock Incentive Compensation Plan (as     
amended through December 12, 2002)              
10.10+          Stock Purchase Agreement, dated as of January 31, 2002, between 
Comverse, Inc. and the Registrant               
10.11+          Distribution  Agreement,  dated as of July 1, 2001 between      
       Comverse Infosys (Singapore) PTE LTD and the Registrant
10.12+          Business Opportunities Agreement dated as of March  19, 2002,   
between Comverse Technology and the Registrant  
10.13+          Form of an Indemnification Agreement                            
10.14+          Verint Systems Inc. 2002 Employee Stock Purchase Plan           
21.1+          Subsidiaries of the Registrant                                 
23.1          Consent of Deloitte & Touche LLP, Independent Auditors        
24.1          Powers of Attorney (see signature page to this report)        

+ = Incorporated by reference to the Registrant's Registration Statement on Form
S-1 (Commission File No. 333-82300) which became effective on May 16, 2002.     

(b)  Reports on Form 8-K.                                   

       On December 13, 2002, the Company filed a Form 8-K, Item 9 that was
   accompanied by certifications by each of the principal executive officer,
Dan Bodner, and principal financial officer, Igal Nissim, pursuant to 
 Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

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SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange  
Act of 1934, the Registrant has duly caused this report to be signed on its     
behalf by the undersigned, thereunto duly authorized.                           

VERINT SYSTEMS INC. 
(Registrant)        

April 30, 2003                By:/S/ Dan Bodner                                 
                         ---------------------------------------
                             Dan Bodner, Chief Executive Officer

KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature      
appears below constitutes and appoints Dan Bodner and Igal Nissim and each of   
them, jointly and severally, his attorneys-in-fact, each with full power of     
substitution, for him in any and all capacities, to sign any and all amendments 
to this Form 10-K, and to file the same, with exhibits thereto and other        
documents in connection therewith, with the Securities and Exchange Commission, 
hereby ratifying and confirming all that each said attorneys-in-fact or his     
substitutes, may do or cause to be done by virtue hereof.                       

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the 
capacities and on the dates indicated.                                          

/S/ Dan Bodner                                            April 30, 2003        
----------------------------------------------------                            
Dan Bodner, Chief Executive Officer                                             
and President; Director                                                         
(Principal Executive Officer)                                                   

/S/ Igal Nissim                                           April 30, 2003        
----------------------------------------------------                            
Igal Nissim, Chief Financial Officer;                                           
Director                                                                        
(Principal Financial and Accounting Officer)                                    

/S/ Kobi Alexander                                        April 30, 2003        
----------------------------------------------------                            
Kobi Alexander, Chairman of the Board                                           
of Directors; Director                                                          

/S/ Paul Baker                                            April 30, 2003        
----------------------------------------------------                            
Paul Baker, Director                                                            

/S/ Victor A. De Marines                                  April 30, 2003        
----------------------------------------------------                            
Victor A. De Marines, Director                                                  

/S/ David Kreinberg                                       April 30, 2003        
----------------------------------------------------                            
David Kreinberg, Director                                                       

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/S/ David Ledwell                                         April 30, 2003        
----------------------------------------------------                            
David Ledwell, Director                                                         

/S/ Kenneth A. Minihan                                    April 30, 2003        
----------------------------------------------------                            
Kenneth A. Minihan, Director                                                    

/S/ Harris Oliner                                         April 30, 2003        
----------------------------------------------------                            
Harris Oliner, Director                                                         

/S/ Paul Robinson                                         April 30, 2003        
----------------------------------------------------                            
Paul Robinson, Director                                                         

/S/ Howard Safir                                          April 30, 2003        
----------------------------------------------------                            
Howard Safir, Director                                                          

/S/ William F. Sorin                                      April 30, 2003        
----------------------------------------------------                            
William F. Sorin, Director                                                      

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CERTIFICATIONS
--------------

I, Dan Bodner, the Chief Executive Officer of Verint Systems Inc., certify that:

1.   I have reviewed this Annual Report on Form 10-K of Verint Systems Inc.;    

2.   Based on my knowledge, this annual report does not contain any untrue      
    statement of a material fact or omit to state a material fact necessary to
  make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
this annual report;                                                   

3.   Based on my knowledge, the financial statements, and other financial       
    information included in this annual report, fairly present in all material
   respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for       
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and the Company
has:                                                                  

a.   designed such disclosure controls and procedures to ensure that  
  material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
        entities, particularly during the period in which this annual report
is being prepared;                                          

  b.   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and             

c.   presented in this annual report our conclusions about the        
        effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                       

5.   The registrant's other certifying officers and I have disclosed, based on  
our most recent evaluation, to the registrant's auditors and the audit
 committee of registrant's board of directors (or persons performing the
equivalent function):                                                 

  a.   all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to
 record, process, summarize and report financial data and have
       identified for the registrant's auditors any material weaknesses in
internal controls; and                                      

    b.   any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
controls; and                                               

6.   The registrant's other certifying officers and I have indicated in this    
 annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal 
  controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
weaknesses.                                                           

Date: April 30, 2003                            /s/Dan Bodner                   
                             -------------
                                 Name:  Dan Bodner
                                              Title: Chief Executive Officer

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I, Igal Nissim, the Chief Financial Officer of Verint Systems Inc., certify     
that:                                                                           

1.   I have reviewed this Annual Report on Form 10-K of Verint Systems Inc.;    

2.   Based on my knowledge, this annual report does not contain any untrue      
    statement of a material fact or omit to state a material fact necessary to
  make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
this annual report;                                                   

3.   Based on my knowledge, the financial statements, and other financial       
    information included in this annual report, fairly present in all material
   respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for       
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and the Company
has:                                                                  

a.   designed such disclosure controls and procedures to ensure that  
  material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
        entities, particularly during the period in which this annual report
is being prepared;                                          

  b.   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and             

c.   presented in this annual report our conclusions about the        
        effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                       

5.   The registrant's other certifying officers and I have disclosed, based on  
our most recent evaluation, to the registrant's auditors and the audit
 committee of registrant's board of directors (or persons performing the
equivalent function):                                                 

  a.   all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to
 record, process, summarize and report financial data and have
       identified for the registrant's auditors any material weaknesses in
internal controls; and                                      

    b.   any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
controls; and                                               

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6.   The registrant's other certifying officers and I have indicated in this    
 annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal 
  controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
weaknesses.                                                           

Date: April 30, 2003                           /s/Igal Nissim                   
                            --------------
                                 Name:   Igal Nissim
                                             Title:  Chief Financial Officer

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VERINT SYSTEMS INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements

                                                        [Enlarge/Download Table]


                                                                                                                   Page
                                                                                                                       
Independent Auditors' Report of Deloitte & Touche LLP............................................................. F-2 
Consolidated Balance Sheets as of January 31, 2002 and 2003....................................................... F-3 
Consolidated Statements of Operations for the Years Ended January 31, 2001, 2002 and 2003......................... F-4 
Consolidated Statements of Stockholders' Equity for the Years Ended January 31, 2001, 2002 and 2003............... F-5 
Consolidated Statements of Cash Flows for the Years Ended January 31, 2001, 2002 and 2003......................... F-6 
Notes to Consolidated Financial Statements........................................................................ F-7 


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INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of                                   
Verint Systems Inc.                                                             
Woodbury, New York                                                              

We have audited the accompanying consolidated balance sheets of Verint
Systems Inc. and subsidiaries (the "Company") as of January 31, 2002 and 2003,  
and the related consolidated statements of operations, stockholders' equity and 
cash flows for each of the three years in the period ended January 31, 2003.    
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,  
2002 and 2003, and the results of their operations and their cash flows for each
of the three years in the period ended January 31, 2003, in conformity with     
accounting principles generally accepted in the United States of America.       

/s/ Deloitte & Touche LLP                                                       

Jericho, New York                                                               
March 10, 2003                                                                  

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VERINT SYSTEMS INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 JANUARY 31, 2002 AND 2003
 (IN THOUSANDS, EXCEPT SHARE DATA)

                                                        [Enlarge/Download Table]


                                                                             2002             2003      
ASSETS                                                                   -------------   ---------------
Current Assets:                                                                                         
                                                                                                        
   Cash and cash equivalents............................................ $      49,860    $     133,933 
   Accounts receivable, net.............................................        27,005           25,529 
   Inventories..........................................................         7,488            8,866 
   Due from related parties.............................................         3,813            1,763 
   Prepaid expenses and other current assets............................         4,987            4,066 
                                                                         -------------    ------------- 
      Total current assets..............................................        93,153          174,157 
   Property and equipment, net..........................................        12,486           12,965 
   Other assets.........................................................        11,087           19,928 
                                                                         -------------    ------------- 
      Total assets...................................................... $     116,726    $     207,050 
                                                                         =============    ============= 
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                    

Current Liabilities:                                                                                    
   Accounts payable and accrued expenses................................ $      37,508    $      42,465 
   Advance payments from customers......................................        13,518           19,013 
   Current maturities of long-term bank loans...........................           167           42,199 
   Due to related parties...............................................           800            1,157 
                                                                         -------------    ------------- 
      Total current liabilities.........................................        51,993          104,834 
   Convertible note.....................................................             -            2,200 
   Long-term bank loans.................................................        43,456            1,678 
   Liability for severance pay..........................................         1,265            1,173 
   Other liabilities....................................................         1,277              999 
                                                                         -------------    ------------- 
      Total liabilities.................................................        97,991          110,884 
                                                                         -------------    ------------- 
Commitments and Contingencies (Note 16)                                                                 

Stockholders' Equity:                                                                                   
   Preferred stock; $0.001 par value - authorized                                                       
      2,500,000 shares; no shares issued and outstanding................             -                - 
   Common stock, $0.001 par value - authorized                                                          
      120,000,000 shares; issued and outstanding,                                                       
      18,890,630, and 23,665,717 shares.................................            19               24 
   Additional paid-in capital...........................................        63,447          130,748 
   Accumulated deficit..................................................       (45,002)         (34,855)
   Cumulative translation adjustment....................................           271              249 
                                                                         -------------    ------------- 
      Total stockholders' equity........................................        18,735           96,166 
                                                                         -------------    ------------- 
      Total liabilities and stockholders' equity........................ $     116,726    $     207,050 
                                                                         =============    ============= 


 See notes to consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 YEARS ENDED JANUARY 31, 2001, 2002 AND 2003
 (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                        [Enlarge/Download Table]


                                                              2001           2002           2003     
                                                          ------------   ------------   ------------ 
Sales:                                                                                               
                                                                                                     
  Product revenues....................................... $    124,420   $    109,964   $    130,360 
  Service revenues.......................................       17,257         21,271         27,415 
                                                          ------------   ------------   ------------ 
                                                               141,677        131,235        157,775 
                                                          ------------   ------------   ------------ 

Cost of sales:                                                                                       
  Product costs..........................................       66,622         51,557         56,484 
  Service costs..........................................       15,171         18,350         21,569 
                                                          ------------   ------------   ------------ 
                                                                81,793         69,907         78,053 
                                                          ------------   ------------   ------------ 
Gross profit.............................................       59,884         61,328         79,722 
Operating expenses:                                                                                  
  Research and development, net..........................       14,249         15,184         17,357 
  Selling, general and administrative....................       48,162         45,923         52,314 
  Acquisition expenses...................................        3,510              -              - 
  Workforce Reduction, Restructuring and impairment                                                  
     charges.............................................        1,528          2,754              - 
                                                          ------------   ------------   ------------ 

  Income (loss) from operations..........................       (7,565)        (2,533)        10,051 
  Interest income........................................        2,151          1,542          1,781 
  Interest expense.......................................       (2,409)        (1,714)        (1,270)
  Other, net.............................................         (239)          (392)         1,755 
                                                          ------------   ------------   ------------ 
  Income (loss) before income taxes......................       (8,062)        (3,097)        12,317 
  Income tax provision...................................          497          1,552          2,170 
                                                          ------------   ------------   ------------ 
  Net income (loss)...................................... $     (8,559)  $     (4,649)  $     10,147 
                                                          ============   ============   ============ 

Earnings (loss) per share:                                                                           
 Basic................................................... $      (0.46)  $      (0.25)  $       0.46 
                                                          ============   ============   ============ 
 Diluted................................................. $      (0.46)  $      (0.25)  $       0.43 
                                                          ============   ============   ============ 

 See notes to consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 YEARS ENDED JANUARY 31, 2001, 2002 AND 2003
 (IN THOUSANDS, EXCEPT SHARE DATA)

                                                        [Enlarge/Download Table]


                                   Common Stock                                                         
                               -------------------- Additional              Cumulative       Total      
                                Number of     Par    Paid-in   Accumulated Translation   Stockholders'  
                                 Shares      Value   Capital     Deficit    Adjustment       Equity     
                               ----------  -------  --------- -----------  -----------  --------------- 
                                                                                                        
Balance, February 1, 2000..... 18,619,846  $    19  $  61,511 $   (30,577) $       (57) $        30,896 

Comprehensive loss:                                                                                     
Net loss......................                                     (8,559)                              
Translation adjustment........                                                      94                  
Total comprehensive loss......                                                                   (8,465)
Change in year end of pooled                                                                            
   Companies..................                                     (1,217)                       (1,217)
Issuance of subsidiaries' stock                                                                         
 to third parties.............                            704                                       704 
Exercise of stock options of                                                                            
   subsidiary.................                            338                                       338 
Exercise of stock options.....    117,714                 269                                       269 
                               ----------  ------- ----------  ----------- -----------  --------------- 
Balance, January 31, 2001      18,737,560       19     62,822     (40,353)          37           22,525 

Comprehensive loss:                                                                                     
Net loss......................                                     (4,649)                              
Translation adjustment........                                                     234                  
Total comprehensive loss......                                                                   (4,415)
Exercise of stock options.....    153,070                 327                                       327 
Sale of subsidiary shares to                                                                            
 affiliate....................                            298                                       298 
                               ----------   ------  ---------  ----------- -----------  --------------- 
Balance, January 31, 2002..... 18,890,630       19     63,447     (45,002)         271           18,735 

Comprehensive income:                                                                                   
Net income....................                                     10,147                               
Translation adjustment........                                                     (22)                 
Total comprehensive income....                                                                   10,125 
Net proceeds from initial                                                                               
 public offering..............  4,500,000        4     65,351                                    65,355 
Exercise of stock options.....    275,087        1      1,891                                     1,892 
Stock-based employee                                                                                    
 compensation cost............                             59                                        59 
                               ----------   ------  ---------  ----------- -----------  --------------- 
Balance, January 31, 2003..... 23,665,717   $   24  $ 130,748  $  (34,855) $       249  $        96,166 
                               ==========   ======  =========  =========== ===========  =============== 

 See notes to consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED JANUARY 31, 2001, 2002 AND 2003
(IN THOUSANDS)

                                                        [Enlarge/Download Table]


                                                                                 2001          2002            2003  
                                                                                 ----          ----            ----  
Cash flows from operating activities:                                                                                
                                                                                                                     
Net income (loss)......................................................   $     (8,559)  $     (4,649)  $     10,147 
Adjustments to reconcile net income (loss) to net cash provided by                                                   
   operating activities:                                                                                             
      Depreciation and amortization....................................          7,740          7,394          9,407 
      Provision for doubtful accounts..................................          2,183           (468)            12 
      Asset write-downs and impairments................................          7,399              -              - 
Changes in assets and liabilities:                                                                                   
      Accounts receivable..............................................         (6,413)         1,964          3,234 
      Inventories......................................................            461          3,473           (203)
      Prepaid expenses and other current assets........................         (3,877)         2,809            963 
      Accounts payable and accrued expenses............................          5,551          3,600          4,677 
      Advance payments from customers..................................          6,888           (148)         5,044 
      Liability for severance pay......................................            (43)           141            (92)
      Due to/from related parties......................................         (2,868)        (3,639)         2,407 
      Other............................................................             85           (652)           698 
                                                                          ------------   ------------   ------------ 
Net cash provided by operating activities..............................          8,547          9,825         36,294 
                                                                          ------------   ------------   ------------ 
Cash flows from investing activities:                                                                                
Cash paid for business combination.....................................              -              -         (9,706)
Purchase of property and equipment.....................................         (6,332)        (4,330)        (4,855)
Capitalization of software development costs...........................         (4,252)        (4,146)        (4,767)
                                                                          ------------   ------------   ------------ 
Net cash used in investing activities..................................        (10,584)        (8,476)       (19,328)
                                                                          ------------   ------------   ------------ 

Cash flows from financing activities:                                                                                
Net proceeds from issuance of common stock in connection with an initial                                             
   public offering.....................................................              -              -         65,355 
Proceeds from issuance of common stock in connection with exercise of                                                
   stock options.......................................................            607            327          1,892 
Proceeds from issuance of common stock of subsidiary...................            250              -              - 
Proceeds from long-term bank loan......................................              -         42,000              - 
Net proceeds (repayments) of other bank debt...........................          1,336           (115)          (140)
Proceeds from related party loans......................................          7,241              -              - 
Repayments of related party loans......................................              -        (37,031)             - 
                                                                          ------------   ------------   ------------ 
Net cash provided by financing activities..............................          9,434          5,181         67,107 
                                                                          ------------   ------------   ------------ 

Net increase in cash and cash equivalents..............................          7,397          6,530         84,073 
Cash and cash equivalents, beginning of year...........................         35,933         43,330         49,860 
                                                                          ------------   ------------   ------------ 
Cash and cash equivalents, end of year.................................   $     43,330   $     49,860   $    133,933 
                                                                          ============   ============   ============ 
Supplemental disclosures of cash flow information:                                                                   
      Cash paid during the year for interest...........................   $         85   $      5,142   $      1,054 
                                                                          ============   ============   ============ 
      Cash paid during the year for income taxes.......................   $        938   $        889   $      1,086 
                                                                          ============   ============   ============ 

 See notes to consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JANUARY 31, 2001, 2002 AND 2003

1.   Organization and Business                                                  

Verint Systems Inc. ("Verint" and, together with its subsidiaries, the
"Company") was organized as a Delaware corporation on February 23, 1994 under   
the name "Interactive Information Systems Corporation." The Company is engaged  
in providing analytic software-based solutions for communications interception, 
digital video security and surveillance, and enterprise business intelligence.  

    On January 30, 1996, the Company changed its name to "Comverse Information
Systems Corporation." Effective January 31, 1999, Comverse Infomedia Systems    
Corp. merged with and into Comverse Information Systems Corporation, changed the
name of the Company to Comverse Infosys, Inc. and amended its certificate of    
incorporation to increase its authorized common stock from 1,500 shares to      
100,000,000 shares. On February 1, 2001, the Company amended its certificate of 
incorporation to increase its authorized stock from 100,000,000 shares to       
300,000,000 shares. In February 2002, the name of the Company was changed to    
Verint Systems Inc.                                                             

     In February 2002, the Board of Directors of the Company approved the filing
of a registration statement by the Company under the Securities Act of 1933     
relating to an initial public offering of the Company's common stock.           

     On April 19, 2002, the Board of Directors declared a reverse stock split of
the Company's outstanding common stock at the rate of one share of common stock 
for each 5.11 shares of common stock outstanding. All references to per share   
amounts and number of shares in these financial statements have been adjusted to
reflect this reverse stock split. In addition, the Company amended its          
certificate of incorporation to change its authorized common stock, $0.001 par  
value, from 300,000,000 to 120,000,000 and to authorize 2,500,000 shares of     
preferred stock, $0.001 par value.                                              

    In May 2002, the Company completed an initial public offering of 4,500,000
shares of its common stock at a price of $16.00 per share. The net proceeds of  
the offering were approximately $65.4 million. The Company intends to use the   
net proceeds of this offering to finance the growth of its business, as working 
capital and for general corporate purposes and capital expenditures. In         
addition, the Company may also use a portion of the proceeds for acquisitions or
other investments. In February 2003 the Company repaid a bank loan of $42       
million dollars (see note 9).                                                   

2.   Summary of Significant Accounting Policies                                 

Basis of Presentation--The Company is a majority owned subsidiary of  
Comverse Technology, Inc. ("Comverse Technology"). Comverse Technology has      
provided certain corporate and administrative services to the Company and is    
expected to continue to provide such services for the foreseeable future. See   
note 13 to the consolidated financial statements. Management believes the       
consolidated financial statements include all the costs of doing business on a  
stand-alone basis. The Company believes that its current cash balances and      
potential cash flow from operations will be sufficient to meet the Company's    
anticipated working capital, capital expenditures and other activities for at   
least the next 12 months.                                                       

    Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and its wholly-owned and majority-owned             
subsidiaries. All material intercompany balances and transactions have been     
eliminated. Investments in business entities in which the Company does not have 
control, but has the ability to exercise significant influence over the         
operating and financing policies, are accounted for under the equity method.    

Cash and Cash Equivalents--The Company considers all highly liquid    
investments purchased with original maturities of three months or less to be    
cash equivalents.                                                               

  Fair Value of Financial Instruments--The estimated fair value amounts of
financial instruments have been determined by the Company using available market
information and appropriate valuation methodologies. However, considerable      
judgment 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 estimated fair value 
amounts.                                                                        

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Concentration of Credit Risk--Financial instruments, which potentially
expose the Company to concentration of credit risk, consist primarily of cash   
investments and accounts receivable. The Company places its cash investments    
with high-credit quality financial institutions and currently invests primarily 
in bank time deposits and high credit ranking debt securities held to maturity. 
Accounts receivable are generally diversified due to the number of commercial   
and government entities comprising the Company's customer base and their        
dispersion across many geographical regions. As of January 31, 2002 and 2003,   
the Company's allowance for doubtful accounts was approximately $2,909,000 and  
$2,545,000 respectively. The Company believes no significant concentration of   
credit risk exists with respect to these cash investments and accounts          
receivable. The carrying amounts of these 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 method.                                   

 Property and Equipment--Property and equipment are carried at cost less
accumulated depreciation and amortization. The Company depreciates its property 
and equipment, other than buildings, transportation equipment, and leasehold    
improvements, on a straight-line basis over periods ranging from two to ten     
years. Buildings are depreciated over periods ranging from thirty to fifty      
years. Transportation equipment is depreciated over a period ranging from three 
to fifteen years. Leasehold improvements are amortized over the shorter of their
estimated useful lives or the related lease term. The cost of maintenance and   
repairs is charged to operations as incurred. Significant renewals and          
improvements are capitalized.                                                   

 Income Taxes--The Company accounts for income taxes using the asset and
liability method. Under this method, deferred tax assets and liabilities are    
determined based on differences between financial reporting and 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. 
A valuation allowance is provided against net deferred tax assets unless, in    
management's judgment, it is more likely than not that such deferred tax assets 
will be realized. For federal income tax purposes in the years ended January 31,
2001 and 2002 and for the period from February 1, 2002 until May 15, 2002, the  
Company's results were included in the Comverse Technology consolidated tax     
return, due to Comverse Technology retaining beneficial ownership of more than  
80% of the total voting power and value of outstanding common stock of the      
Company. Income taxes were determined as if the Company was a separate taxpayer.
Income taxes payable, have been charged to the related parties account in the   
period that the liability arose, if any.                                        

   Upon completion of the Company's initial public offering on May 15, 2002,
Comverse Technology's ownership was reduced below 80% of the voting power and   
value of the outstanding common stock. The Company will prepare its income tax  
return on a standalone basis for the period from May 16, 2002 through January   
31, 2003. Subsequent to May 15, 2002, income taxes currently payable are charged
to accounts payable and accrued expenses in the period the liability arose, if  
any.                                                                            

 Revenue and Expense Recognition--Revenue is generally recognized at the
time of shipment for sales of systems which do not require significant          
customization and collection of the resulting receivable is deemed probable by  
the Company. The Company's systems are generally a bundled hardware and software
solution that is shipped together. Amounts received from customers pursuant to  
the terms specified in contracts but for which revenue has not been recognized  
are recorded as advance payments from customers. The Company generally has no   
obligations to customers after the date products are shipped, except for product
warranties. The Company generally warranties its products for one year after    
sale. A provision for estimated warranty costs is recorded at the time of sale. 

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     Customers may also purchase separate maintenance contracts, which generally
consist of bug-fixing and telephone access to Company technical personnel, but  
in certain circumstances may also include the right to receive unspecified      
product updates, upgrades and enhancements. Revenue from these maintenance      
contracts is recognized ratably over the contract period. Amounts received from 
customers in excess of revenues earned under maintenance contracts are recorded 
as advance payments from customers.                                             

Revenue from certain long-term contracts is recognized under the      
percentage-of-completion method on the basis of physical completion or using    
actual costs incurred relative to total expected costs under the contract.      
Revisions in estimates of costs and profits are reflected in the accounting     
period in which the facts that require the revision become known. At the time a 
loss on a contract is known, the entire amount of the estimated loss is accrued.
Amounts received from customers in excess of revenues earned under the          
percentage-of-completion method are recorded as advance payments from customers.
Related contract costs include all direct material and labor costs and those    
indirect costs related to contract performance, and are included in cost of     
sales in the consolidated statements of operations.                             

   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.      

Cost of Sales--Product costs include the costs associated with        
manufacturing the Company's products. Service costs include the costs associated
with the installation, warranty, and maintenance of the Company's products.     

     Software Development Costs--Software development costs are capitalized upon
the establishment of technological feasibility and are amortized on a           
straight-line basis over the estimated useful life of the software, which has   
been four years or less to date. Amortization begins in the period in which the 
related product is available for general release to customers. Amortization     
expenses amounted to $2,967,000, $2,892,000 and $3,721,000 for the years ended  
January 31, 2001, 2002 and 2003, respectively.                                  

     The Company reviews software development costs for impairment at the end of
each fiscal year, or whenever events or changes in circumstances indicate that  
the carrying amount may not be recoverable. An impairment loss would be         
recognized when the estimated net realizable value of the software is less than 
its carrying amount. The net realizable value is the estimated future gross     
revenue from the software reduced by the estimated future costs of completing   
and supporting the software.                                                    

    Functional Currency and Foreign Currency Transaction Gains and Losses--The
United States dollar (the "dollar") is the functional currency of the major     
portion of the Company's foreign operations. Most of the Company's sales and    
materials purchased for manufacturing are denominated in or linked to the       
dollar. Certain operating costs, principally salaries, of foreign operations are
denominated in local currencies. In those instances where a foreign subsidiary  
has a functional currency other than the dollar, the Company records any        
necessary foreign currency translation adjustment, reflected in stockholders'   
equity, at the end of each reporting period.                                    

Net gains (losses) from foreign currency transactions, included in the
consolidated statements of operations, approximated $(541,000), $(741,000), and 
$2,505,000 for the years ended January 31, 2001, 2002 and 2003, respectively.   

    The Company may occasionally enter into foreign exchange forward contracts
and options on foreign currencies. The purpose of the Company's foreign         
currency-hedging activities is to protect the Company from the risk that the    
eventual dollar cash flows resulting from the sale of products to international 
customers will be adversely affected by changes in exchange rates. Any gain or  
loss on a foreign exchange contract which hedges a firm commitment is deferred  
until the underlying transaction is realized, at which time it is included in   
the consolidated statement of operations. The Company may also purchase foreign 
exchange options that permit, but do not require, the Company to exchange       
foreign currencies at a future date with another party at a contracted exchange 
rate. To finance premiums paid on such options, from time to time, the Company  
may also write offsetting options at exercise prices that limit, but do not     
eliminate, the effect of purchased options as a hedge. As of January 31, 2001,  
2002 and 2003, the Company had no outstanding foreign exchange contracts.       

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 Long-Lived Assets--The Company reviews property, equipment, and certain
identifiable intangibles for impairment whenever events or changes in           
circumstances indicate that the carrying amount of an asset may not be          
recoverable. An impairment loss would be recognized when estimated future       
undiscounted cash flows expected to result from the use of the asset and        
proceeds from its eventual disposition are less than its carrying amount.       
Impairment is measured at fair value.                                           

    Stock-Based Employee Compensation--The Company applies the intrinsic-value
based method prescribed by Accounting Principles Board Opinion No. 25,          
"Accounting for Stock Issued to Employees," and related interpretations in      
accounting for its stock-based employee compensation. Accordingly, stock-based  
employee compensation cost is recognized only when employee stock options are   
granted with exercise prices below the fair market value at the date of grant.  
Any resulting stock-based employee compensation cost is recognized ratably over 
the associated service period, which is generally the option vesting period.    
During the year ended January 31, 2003, the Company recognized stock-based      
employee compensation cost in the consolidated statement of operations of       
$59,000 relating to certain employee stock options granted with exercise prices 
below the fair market value at the date of grant. As of January 31, 2003, 65,898
employee stock options were outstanding with exercise prices below the fair     
market value at the date of the grant. All other employee stock options have    
been granted at exercise prices equal to fair market value on the date of grant,
and, accordingly, no compensation expenses has been recognized by the Company in
the consolidated statement of operations.                                       

 The following table illustrates the effect on net income (loss) and net
income (loss) per share if the Company had applied the fair value recognition   
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to       
stock-based employee compensation for all periods:                              

                                                        [Enlarge/Download Table]


                                                                                          Year Ended January 31,           
                                                                         ------------------------------------------------- 
                                                                              2001               2002             2003     
                                                                         ------------       ------------      ------------ 
                                                                                (In thousands, except per share amounts)   

                                                                                                                           
Net income (loss) as reported..........................................  $     (8,559)      $     (4,649)     $     10,147 
Less: Stock- based employee compensation cost determined under the fair                                                    
   value method, net of related tax effects ...........................        (1,760)            (2,962)           (4,192)
                                                                         ------------       ------------      ------------ 

Pro forma net income (loss)............................................  $    (10,319)      $     (7,611)     $      5,955 
                                                                         ============       ============      ============ 

Net income (loss) per share:                                                                                               
      Basic - as reported..............................................  $      (0.46)      $      (0.25)     $       0.46 
                                                                         ============       ============      ============ 
      Basic - pro forma................................................  $      (0.55)      $      (0.41)     $       0.27 
                                                                         ============       ============      ============ 

      Diluted - as reported............................................  $      (0.46)      $      (0.25)     $       0.43 
                                                                         ============       ============      ============ 
      Diluted - pro forma..............................................  $      (0.55)      $      (0.41)     $       0.25 
                                                                         ============       ============      ============ 


The fair value of these options was estimated using the Black-Scholes 
option pricing model with the following weighted-average assumptions:           

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                                                                                   Year Ended January 31,          
                                                                         ------------------------------------------
                                                                          2001             2002               2003 
                                                                         -----            ------             ------
                                                                                                                   
Risk free rate .......................................................   6.53%             4.66%              4.27%
Dividend yield .......................................................      0%                0%                 0%
Volatility............................................................   73.5%             79.2%              77.7%
Expected option life.................................................. 5 years           5 years            5 years

The weighted-average fair value of options granted for the years ended
January 31, 2001, 2002 and 2003 is estimated at $5.72, $5.77 and $12.69 per     
share, respectively.                                                            

Pervasiveness of Estimates--The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make certain estimates and assumptions that      
affect the reported amounts of assets and liabilities and disclosure 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.                               

 Reclassifications--Certain prior year amounts have been reclassified to
conform to the manner of presentation in the current year.                      

Effect of New Accounting Pronouncements--In June 2001, the Financial  
Accounting Standards Board ("FASB") issued Statement of Financial Accounting    
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other    
intangible assets. Under SFAS No. 142, goodwill and some intangible assets will 
no longer be amortized, but rather will be reviewed for impairment on a periodic
basis. The provisions of SFAS No. 142 were required to be applied starting with 
fiscal years beginning after December 15, 2001. The adoption of SFAS No. 142 did
not have a material effect on the Company's consolidated financial statements.  

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset   
Retirement Obligations." SFAS No. 143 establishes accounting standards for      
recognition and measurement of a liability for an asset retirement obligation   
and the associated asset retirement cost. SFAS No. 143 applies to legal         
obligations associated with the retirement of a tangible long-lived asset that  
result from the acquisition, construction, development and/or normal operation  
of a long-lived asset. This Statement is effective for fiscal years beginning   
after June 15, 2002; however, early adoption is encouraged. The adoption of SFAS
No. 143 is not expected to have a material effect on the Company's consolidated 
financial statements.                                                           

In October 2001, the FASB issued SFAS No. 144, "Accounting for the    
Impairment or Disposal of Long-Lived Assets", SFAS No. 144 addresses financial  
accounting and reporting for the impairment or disposal of long-lived assets.   
SFAS No. 144 supercedes certain provisions of SFAS No. 121, "Accounting for the 
Impairment of Long-Lived Assets to Be Disposed Of" and certain provisions of    
Accounting Principles Board Opinion No. 30, "Reporting the Results of           
Operations-Reporting the Effects of Disposal of a Segment of a Business, and    
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 requires that long-lived assets be measured at the lower of carrying    
amount or fair value less cost to sell, whether reported in continuing          
operations or in discontinued operations. Therefore, discontinued operations    
will no longer be measured at net realizable value or include amounts for       
operating losses that have not yet occurred. SFAS No. 144 also broadens the     
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will  
be eliminated from the ongoing operations of the entity in a disposal           
transaction. SFAS No. 144 was effective for financial statements issued for     
fiscal years beginning after December 15, 2001 and interim periods within those 
fiscal years. The adoption of SFAS No. 144 did not have a material impact on the
Company's consolidated financial statements.                                    

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     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical             
Corrections." SFAS No. 145, among other things, rescinds SFAS No. 4, which      
required all gains and losses from the extinguishment of debt to be classified  
as an extraordinary item and amends SFAS No. 13 to require that certain lease   
modifications that have economic effects similar to sale-leaseback transactions 
be in the same manner as sale-leaseback transactions. The rescission of SFAS No.
4 is effective for fiscal years beginning after May 15, 2002. The remainder of  
the statement is generally effective for transactions occurring after May 15,   
2002 with earlier application encouraged. The adoption of SFAS No. 145 is not   
expected to have a material effect on the Company's consolidated financial      
statements.                                                                     

In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or   
Disposal Activities." This statement addresses the recognition, measurement and 
reporting of costs that are associated with exit and disposal activities. This  
statement includes the restructuring activities that are currently accounted for
pursuant to the guidance set forth in Emerging Issues Task Force ("EITF") Issue 
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and  
Other Costs to Exit an Activity (including Certain Costs Incurred in a          
Restructuring)", costs related to terminating a contract that is not a capital  
lease and one-time benefit arrangements received by employees who are           
involuntarily terminated - nullifying the guidance under EITF Issue No. 94-3.   
Under SFAS No. 146 the cost associated with an exit or disposal activity is     
recognized in the periods in which it is incurred rather than at the date a     
company committed to the exit plan. This statement is effective for exit or     
disposal activities initiated after December 31, 2002 with earlier application  
encouraged. The adoption of SFAS No. 146 did not have a material effect on the  
Company's consolidated financial statements.                                    

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure - an amendment of FASB Statement No.     
123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based             
Compensation", to provide alternative methods of transition for a voluntary     
change to the fair value based method of accounting for stock-based employee    
compensation and does not permit the use of the original SFAS No. 123           
prospective method of transition in fiscal years beginning after December 15,   
2003. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No.  
123 to require prominent disclosures in both annual and interim financial       
statements about the method of accounting for stock-based employee compensation 
and the effect of the method used on reported results, regardless of whether,   
when, or how an entity adopts the preferable, fair value based method of        
accounting. SFAS No. 148 improves the prominence and clarity of the pro forma   
disclosures required by SFAS No. 123 by prescribing a specific tabular format   
and by requiring disclosure in the "Summary of Significant Accounting Policies" 
or its equivalent and improves the timeliness of those disclosures by requiring 
their inclusion in financial reports for interim periods. The Company has       
adopted the disclosure requirements of SFAS No. 148 for the year ended January  
31, 2003. The Company will continue to account for stock-based employee         
compensation under APB Opinion No. 25 and its related interpretations.          

In November 2002, the FASB issued interpretation No. 45, "Guarantor's 
Accounting and Disclosure Requirement for Guarantees, Including Indirect        
Guarantees and indebtedness of Others." The interpretation elaborates on the    
disclosures to be made by a guarantor in its interim and annual financial       
statements about its obligations under certain guaranties that it has issued.   
The interpretation also clarifies that a guarantor is required to recognize, at 
the inception of a guarantee, a liability for the fair value of the obligation  
undertaken in issuing the guarantee. The initial recognition and initial        
measurements provisions of the interpretation are applicable on a prospective   
basis to guaranties issued or modified after December 31, 2002. The Company has 
made no material guaranties subject to the liability recognition and disclosure 
provisions of the interpretation.                                               

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3.   Research and Development                                                   

    A significant portion of the Company's research and development operations
are located in Israel where the Company derives substantial benefits from       
participation in programs sponsored by the Government of Israel for the support 
of research and development activities conducted in that country. The Company's 
research and development activities include projects partially funded by the    
Office of the Chief Scientist of the Ministry of Industry and Trade of the State
of Israel (the "OCS") under which the OCS reimburses a portion of the Company's 
research and development expenditures under approved project budgets. The       
Company is currently involved in several ongoing research and development       
projects supported by the OCS. The Company accrues royalties to the OCS for the 
sale of products incorporating technology developed in these projects up to the 
amount of such funding, plus interest in certain circumstances. In addition,    
under the terms of the applicable funding agreements, products resulting from   
projects funded by the OCS may not be manufactured outside of Israel without    
government approval. The amounts reimbursed by the OCS for the years ended      
January 31, 2001, 2002 and 2003 were $7,499,000, $5,802,000, and $5,221,000,    
respectively.                                                                   

4.   Inventories                                                                

Inventories consist of:                                               

                                                        [Enlarge/Download Table]


                                                                                      January 31,         
                                                                             -----------------------------
                                                                                   2002             2003  
                                                                             --------------   ------------
                                                                                      (In thousands)      
                                                                                                          
Raw materials...............................................................  $       3,640      $   5,337
Work in process.............................................................          1,249          1,405
Finished goods..............................................................          2,599          2,124
                                                                              -------------      ---------
                                                                              $       7,488      $   8,866
                                                                              =============      =========

5.   Property and Equipment                                                     

Property and equipment consist of:                                    

                                                        [Enlarge/Download Table]


                                                                                      January 31,         
                                                                             -----------------------------
                                                                                   2002           2003    
                                                                             -------------     -----------
                                                                                      (In thousands)      

                                                                                                          
Fixtures and equipment...................................................... $      20,352      $   23,454
Land........................................................................           458             515
Building and building improvements..........................................         3,891           4,590
Software....................................................................         1,828           2,603
Transportation vehicles.....................................................           912             824
Leasehold improvements......................................................           581           1,009
                                                                             -------------      ----------
                                                                                    28,022          32,995
Less accumulated depreciation and amortization                                      15,536          20,030
                                                                             -------------      ----------
                                                                             $      12,486      $   12,965
                                                                             =============      ==========


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6.   Other Assets                                                               

Other assets consist of:                                              

                                                        [Enlarge/Download Table]


                                                                                  January 31,          
                                                                         ----------------------------- 
                                                                             2002              2003    
                                                                         --------------    ----------- 
                                                                                  (In thousands)       

                                                                                                       
Software development costs.............................................. $       25,203     $   29,856 
Accumulated amortization................................................        (15,748)       (19,355)
                                                                         --------------     ---------- 
Software development costs, net.........................................          9,455         10,501 
Goodwill................................................................              -          7,711 
Other assets............................................................          1,632          1,716 
                                                                         --------------     ---------- 
                                                                         $       11,087     $   19,928 
                                                                         ==============     ========== 

7.         Business Combinations                                                

On February 1, 2002, the Company acquired the digital video recording 
business of Lanex LLC. The Lanex business provides digital video recording      
solutions for security and surveillance applications. The purchase price        
consisted of $9,510,000 in cash and a $2,200,000 convertible note issued by the 
Company. The note is non-interest bearing and matures on February 1, 2004. The  
holders of the note may elect to convert the note, in whole or in part, into    
shares of the Company's common stock at a conversion price of $16.06 per share. 
The note is guaranteed by Comverse Technology. In connection with this          
acquisition, the Company incurred transaction costs, consisting primarily of    
professional fees amounting to approximately $196,000.                          

   The acquisition was accounted for using the purchase method. The purchase
price was allocated to those assets acquired and liabilities assumed based on   
the estimated fair value of those assets and liabilities as of February 1, 2002.
Identifiable intangible assets consist of sales backlog, acquired technology,   
trade name and non-competition agreements and have an estimated useful life of  
up to six years. The results of operations of Lanex's acquired business have    
been included in the Company's results of operations since February 1, 2002.    

     The following is a summary of the allocation of the purchase price for this
acquisition:                                                                    

                                                    (In thousands)

      Purchase price.......................        $11,710
      Acquisition costs....................            196
                                                   -------
          Total purchase price.............        $11,906
                                                   =======

      Fair value of net assets acquired....        $ 2,810
      Identifiable intangible assets.......          1,385
      Goodwill.............................          7,711
                                                   -------
         Total purchase price..............        $11,906
                                                   =======

      Purchase price paid in cash..........        $ 9,706
      Convertible note.....................          2,200
                                                   -------
          Total purchase price.............        $11,906
                                                   =======

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The summary unaudited pro forma condensed consolidated results of     
operations, assuming the acquisition had occurred on February 1, 2001 would have
reflected consolidated revenues of approximately $140,953,000, net loss of      
approximately $3,112,000 and net loss per share of $0.17 for the year ended     
January 31, 2002. These pro forma results are not necessarily indicative of what
would have occurred if the acquisition had been in effect for the period        
presented.                                                                      

  In July 2000, the Company's parent, Comverse Technology, acquired all of
the outstanding stock of Loronix Information Systems, Inc. ("Loronix"), a       
company that develops software-based digital video recording and management     
systems, for 1,994,806 shares of Comverse Technology's common stock and the     
assumption of options to purchase the equivalent of 370,101 shares of the       
Comverse Technology common stock. The business combination was accounted for as 
a pooling of interests. For the six months ended June 30, 2000, Loronix had     
sales of approximately $18,104,000 and a net loss, including merger related     
expenses, of approximately $2,249,000.                                          

    In July 2000, Comverse Technology acquired all of the outstanding stock of
Syborg Informationsysteme GmbH, ("Syborg") a company that develops              
software-based digital voice and Internet recording systems, for 201,251 shares 
of Comverse Technology common stock. The business combination was accounted for 
as a pooling of interests. For the six months ended June 30, 2000, Syborg had   
sales of approximately $2,561,000 and a net loss, including merger related      
expenses, of approximately $425,000.                                            

   In February 2001, the Company issued 6,759,277 shares of its common stock
to Comverse Technology in exchange for Comverse Technology's ownership interest 
in Loronix and Syborg. These shares are reflected in the consolidated financial 
statements as if they were outstanding as of the earliest period presented which
is consistent with the pooling of interests method of accounting.               

   Loronix's net loss for the period from July 1, 2000 through July 31, 2000
of approximately $715,000 has been excluded from the Company's consolidated     
statement of operations for the year ended January 31, 2001 as a result of      
conforming fiscal years and has been included as an adjustment to accumulated   
deficit. Syborg's net loss for the period from July 1, 2000 through July 31,    
2000 of approximately $502,000 has been excluded from the Company's consolidated
statement of operations for the year ended January 31, 2001 as a result of      
conforming fiscal years and has been included as an adjustment to accumulated   
deficit. Loronix's and Syborg's sales for the period from July 1, 2000 through  
July 31, 2000 were $1,568,000 and $139,000, respectively.                       

In connection with the mergers in the year ended January 31, 2001, the
Company incurred merger related costs of $3,510,000 consisting of professional  
fees to lawyers, investment bankers and accountants, as well as other merger    
costs, such as printing costs and filing fees. The Company also incurred        
$1,528,000 of impairment charges in the year ended January 31, 2001 for the     
write-off of certain demonstration, laboratory and production equipment that was
abandoned as a result of the mergers. In addition, the Company has charged      
approximately $5,871,000 to cost of sales in the year ended January 31, 2001.   
These charges consisted of: (i) $3,685,000 relating to the write-off and        
abandonment of inventories that were considered obsolete and duplicative as a   
result of the mergers; and (ii) $2,186,000 for the write-off of certain         
capitalized software, which became obsolete due to the existence of duplicative 
technology as a result of the mergers.                                          

8.   Accounts Payable and Accrued Expenses                                      

Accounts payable and accrued expenses consist of:                     

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                                                                                           January 31,           
                                                                                  -------------------------------
                                                                                       2002             2003     
                                                                                  --------------   --------------
                                                                                           (In thousands)        

                                                                                                                 
Accounts payable................................................................. $       14,593    $      17,051
Accrued salaries.................................................................          6,283            5,892
Accrued royalties................................................................          3,862            6,429
Accrued vacation.................................................................          3,018            3,463
Accrued warranty costs...........................................................          1,111            1,210
Other accrued expenses...........................................................          8,641            8,420
                                                                                  --------------    -------------

                                                                                  $       37,508    $      42,465
                                                                                  ==============    =============

 In April 2001, the Company announced a plan to reduce its workforce and
recorded a charge of $1,164,000. In December 2001, the Company announced a plan 
to further reduce its workforce and consolidate its offices in the United       
Kingdom and recorded a charge of $1,590,000. These charges totaling $2,754,000  
for the year ended January 31, 2002, were charged to expense and are included in
the caption restructuring and impairment charges in the consolidated statement  
of operations. These reductions were necessary as a result of the difficult     
economic and capital spending environment and were designed to improve the      
Company's cost structure and to increase its profitability. These plans included
reducing the workforce in the United States, Israel and Germany by 65, 45 and 35
employees, respectively. These workforce reductions included employees within   
all departments of the Company. As of January 31, 2002, substantially all of the
employees identified in the plan have been terminated in accordance with the    
terms of the plan.                                                              

   In December 2001, the Company notified the landlord of its United Kingdom
office of its intention to terminate the Company's lease. The Company recorded a
charge for the remaining lease payments from the vacancy date through the       
expiration date of the lease. The Company vacated the facility in March 2002.   

     As of January 31, 2003 the Company had accrued liabilities of approximately
$ 215,000 related to the workforce reduction and facilities consolidation costs.
The changes in the accrued liabilities for the workforce reduction and          
facilities consolidation costs starting from January 31, 2001 are as follows:   

                                                        [Enlarge/Download Table]


                          Accrual                                      Accrual                   Accrual    
                        Balance at                                    Balance at                Balance at  
                        January 31,                    Cash          January 31,     Cash      January 31,  
                           2001         Provision    Payments            2002      Payments        2003     
                           -----        ---------    --------            ----      --------        ----     
                                                           (In thousands)                                   
                                                                                                            
Severance and related  $            -  $      2397  $     1,710        $      687  $      661   $         26
Facilities                          -          357            -               357         168            189
                       --------------  -----------  -----------        ----------  ----------   ------------
Total                  $            -  $     2,754  $     1,710        $    1,044  $      829   $        215
                       ==============  ===========  ===========        ==========  ==========   ============


Severance and related costs consist primarily of severance payments to
terminated employees and fringe related costs associated with severance         
payments, other termination costs and legal and consulting costs. The balance of
the severance and related costs is expected to be paid by April 30, 2003.       

   Facilities and related costs consist primarily of contractually obligated
lease liabilities and operating expenses related to facilities vacated in the   
United Kingdom as a result of the facility consolidation. The balance of the    
facilities and related costs is expected to be paid by October 31, 2003.        

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9.   Long-term bank loans                                                       

Bank loans consist of the following:                                  

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                                                                             January 31,             
                                                                   ----------------------------------
                                                                       2002                 2003     
                                                                   -------------         ------------
                                                                            (In thousands)           
                                                                                                     
Long-term bank loan............................................... $      42,000         $     42,000
Other bank debt...................................................         1,623                1,877
                                                                   -------------         ------------
                                                                          43,623               43,877
Less:  current maturities.........................................           167               42,199
                                                                   -------------         ------------
Long-term bank loans.............................................. $      43,456         $      1,678
                                                                   =============         ============

  In January 2002, the Company took a long-term bank loan in the amount of
$42 million. This loan matured in February 2003 and bore interest at LIBOR plus 
0.55% . The proceeds of this loan were used to repay amounts owed to Comverse   
Technology. The loan was guaranteed by Comverse Technology and was repaid on    
February 28, 2003.                                                              

   Other bank debt is secured by certain land and buildings. Restricted cash
balance that was required to be maintained at these banks in the amount of      
$679,000 and $0 as of January 31, 2002, and 2003, respectively, was included in 
the caption of other assets on the consolidated balance sheets.                 

Maturities of long-term bank loans are as follows:                    

Year Ending January 31,                     Amount      
-------------------------------------------      -----------------              
                                      (In thousands)
2004.......................................      $          42,199              
2005.......................................                    200              
2006.......................................                    202              
2007.......................................                    203              
2008.......................................                    205              
2009 and thereafter........................                    868              
                                   -----------------

                                   $          43,877
                                   =================
10.  Liability for Severance Pay                                                

  Liability for severance pay consists of the Company's unfunded liability
for severance pay to employees of certain foreign subsidiaries.                 

   Under Israeli law, the Company is obligated to make severance payments to
employees of its Israeli subsidiary on the basis of each individual's current   
salary and length of employment. These liabilities are currently provided       
primarily by premiums paid by the Company to insurance providers.               

11.  Stock Options                                                              

    Employee Stock Options--As of January 31, 2003, 2,853,671 shares of common
stock were reserved for issuance upon the exercise of stock options then        
outstanding and 1,598,990 shares were available for future grant under the      
Company's Stock Option Plan, under which options 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 plan
may be granted with an exercise price not less than the fair market value of the
underlying shares at the date of grant and are subject to certain quantity and  
other limitations specified in Section 422 of the Internal Revenue Code. Options
which are not intended to qualify as "incentive stock options" may be granted at
any price, but not less than the par value of the underlying shares, and without
restriction as to amount. The options and the underlying shares are subject to  
adjustment in accordance with the terms of the plan in the event of stock       
dividends, recapitalizations and similar transactions. The right to exercise    
options generally vests in increments over periods of up to four years from the 
date of grant or the date of commencement of the grantee's employment with the  
Company, up to a maximum term of ten years for all options granted.             

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The changes in the number of options were as follows:                 

                                                        [Enlarge/Download Table]


                                                                 Year Ended January 31,                 
                                                     -------------------------------------------------- 
                                                        2001                2002                2003    
                                                     ----------          -----------         ---------- 

                                                                                                        
Outstanding at beginning of period..................  1,980,586           2,322,888           2,788,776 
Granted during the period...........................    704,892             873,209             581,249 
Exercised during the period.........................   (117,714)           (153,070)           (275,087)
Cancelled, terminated and expired...................   (244,876)           (254,251)           (241,267)
                                                      ---------           ---------           --------- 

Outstanding at end of period........................  2,322,888           2,788,776           2,853,671 
                                                      =========           =========           ========= 


   At January 31, 2003, options to purchase an aggregate of 1,341,497 shares
were vested and currently exercisable under the option plan and options to      
purchase an additional 1,512,174 shares, vest at various dates extending through
the year 2006.                                                                  

Weighted average option exercise price information was as follows:    

                                                        [Enlarge/Download Table]


                                                                    Year Ended January 31,         
                                                     ----------------------------------------------
                                                      2001                 2002                2003
                                                      ----                 ----                ----
                                                                                                   
Outstanding at beginning of period.................. $5.37                $6.44              $ 7.26
Granted during the period........................... $8.84                $8.69              $15.05
Exercised during the period......................... $2.30                $2.10              $ 6.88
Canceled, terminated and expired.................... $6.54                $8.02              $ 8.78
Outstanding at end of period........................ $6.44                $7.26              $ 8.75
Exercisable at end of period........................ $4.70                $6.08              $ 6.60

Significant option groups outstanding at January 31, 2003 and related 
weighted average exercise price and life information were as follows:           

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                                          Weighted Average                       
                                             Remaining                           
 Exercise Price     Number Outstanding    Contractual Life    Number Exercisable 
----------------- ----------------------  ----------------    ------------------ 
                                                                                 
  $  0.56                     104,990             3.30                104,990    
  $  2.56                      16,619             1.20                 16,619    
  $  5.88                     943,244             5.80                772,807    
  $  6.90                     401,274             6.70                198,344    
  $  8.69                     698,991             8.10                160,043    
  $  8.86                      59,050             9.20                      -    
  $ 12.01                       4,108             5.60                  2,058    
  $ 14.90                      84,948             9.80                  3,800    
  $ 15.33                     107,178             7.00                 51,300    
  $ 16.00                     414,483             9.20                 12,750    
  $ 17.02                       9,002             3.90                  9,002    
  $ 23.00                       9,784             4.90                  9,784    
                  ----------------------  ------------------  -------------------
                            2,853,671             7.20              1,341,497    
                  ======================  ==================  ===================

12.  Earnings (Loss) Per Share (EPS)                                            

    Basic earnings (loss) per share are computed by dividing net income (loss)
by the weighted-average number of common shares outstanding during the period.  
Diluted earnings per share further assumes the issuance of common shares for all
potentially dilutive issuances of stock. The calculation for earnings (loss) per
share for the years ended January 31, 2001, 2002 and 2003 is as follows:        

                                                        [Enlarge/Download Table]


                            Year ended January 31, 2001      Year ended January 31, 2002           Year ended January 31, 2003      
                        -------------------------------  -----------------------------------   -------------------------------------
                            Net               Per Share      Net                Per Share          Net                  Per Share   
                           Loss     Shares      Amount      Loss      Shares      Amount          Income     Shares       Amount    
                                    ======                            ======                                 ======                 
                                                         (In thousands, except per share data)                                      
   Basic EPS                                                                                                                        
                                                                                                                                    
   Net Income (Loss)     $(8,559)   18,704     $ (0.46)  $  (4,649)   18,767     $ (0.25)        $ 10,147   22,165        $ 0.46    
                                               =======   =========               =======                                  ======    

   Effect of  Dilutive                                                                                                              
      Securities                                                                                                                    
------------------------                                                                                                            
   Stock Options                                                                                              1,240                 
   Convertible Note                                                                                             137                 
                         --------   ------               ---------    ------                     --------    ------                 
   Diluted EPS           $(8,559)   18,704     $ (0.46)  $ (4,649)    18,767     $  (0.25)       $ 10,147    23,542       $  0.43   
                         ========   ======    =========  =========    ======     ========        ========    ======       =======   

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The diluted loss per share computation for the years ended January 31,
2001, and 2002 excludes, approximately 1,235,000 and 1,280,000 incremental      
shares related to employee stock options, respectively. These shares are        
excluded from the dilutive net loss per share calculation due to their          
antidilutive effect as a result of the Company's net loss during these periods. 

13.  Related Party Transactions                                                 

Corporate Services Agreement--The Company has a corporate services    
agreement with Comverse Technology. Under this agreement, Comverse Technology   
provides the Company with the following services:                               

   --   maintaining in effect general liability and other insurance policies
providing coverage for the Company;                         

   --   maintaining in effect a policy of directors' and officers' insurance
covering the Company's directors and officers;              

--   administration of employee benefit plans;                        

--   routine legal services; and                                      

  --   consulting services with respect to the Company's public relations.

   For the years ended January 31, 2001, 2002 and 2003, the Company recorded
expenses of $500,000, $500,000, and $525,000, respectively, for the services    
provided by Comverse Technology. As of February 1, 2003, the Company will pay   
Comverse Technology a quarterly fee of $143,750, subject to adjustment and      
annual increases, for services provided by Comverse Technology during each      
fiscal quarter. In addition, the Company agreed to reimburse Comverse Technology
for any out-of-pocket expenses incurred by Comverse Technology in providing the 
services. During the years ended January 31, 2001, 2002 and 2003, no amounts    
were paid to Comverse Technology for reimbursement of out-of-pocket expenses.   
The term of this agreement extends to January 31, 2005 and is automatically     
extended for additional twelve-month periods unless terminated by either        
Comverse Technology or the Company.                                             

   Enterprise Resource Planning Software Sharing Agreement--In January 2002,
the Company entered into an enterprise resource planning ("ERP") software       
sharing agreement with Comverse, Ltd., a subsidiary of Comverse Technology.     
Under this agreement, Comverse Ltd. agreed to continue to share the use of      
specific ERP software with the Company and undertook to exert its reasonable    
commercial efforts to arrange for the ongoing operation, maintenance and support
of the software for an annual fee of $100,000. The terms of the ERP Software    
Sharing Agreement and the fee payable to Comverse Ltd. were determined by arm's 
length negotiations between the Company and Comverse Ltd. The Company recorded  
expenses of $200,000, $100,000, and $100,000 for the years ended January 31,    
2001, 2002 and 2003, respectively, for ERP support services. This agreement     
expires February 1, 2004, and automatically renews for successive one year terms
unless terminated upon six months prior written notice. The first time notice of
termination may be given is on February 1, 2004.                                

   Satellite Services Agreement--In January 2002, the Company entered into a
services agreement with Comverse Inc., a subsidiary of Comverse Technology,     
pursuant to which Comverse Inc. and its subsidiaries provide the Company with   
the exclusive use of the services of specified employees of Comverse Inc. and   
its facilities where such employees are located. Under this agreement, the      
Company pays Comverse Inc. a fee, which is equal to the expenses Comverse Inc.  
incurs in providing these services plus ten percent. During the year ended      
January 31, 2001, 2002 and 2003, the Company recorded expenses of $1,193,000,   
$1,817,000, and $1,809,000, respectively, for these services provided by        
Comverse, Inc. during these periods.                                            

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  The Company believes that the terms of the Corporate Services Agreement,
the Enterprise Resource Planning Software Sharing Agreement and the Satellite   
Services Agreement are fair to the Company and are not materially different than
those they could have obtained from an unaffiliated third party.                

Other Transactions with Other Subsidiaries of Comverse Technology--The
Company charges subsidiaries of Comverse Technology for services relating to the
use of the Company's facilities and employees. Charges to these subsidiaries    
were approximately $1,006,000, $1,030,000, and $175,000 for the years ended     
January 31, 2001, 2002 and 2003, respectively. In addition the Company sold     
products to subsidiaries of Comverse Technology. Sales to these subsidiaries    
were approximately $0, $0 and $8,000 for the years ended January 31, 2001, 2002 
and 2003, respectively.                                                         

     The Company also purchased products and services from other subsidiaries of
Comverse Technology in the ordinary course of business. Purchases from these    
subsidiaries were approximately $0, $2,000, and $18,000 for the years ended     
January 31, 2001, 2002 and 2003, respectively.                                  

Federal Income Tax Sharing Agreement--The Company has a tax sharing   
agreement with Comverse Technology. Comverse Technology is the parent company of
a group of companies which includes the Company and for which Comverse          
Technology files a consolidated federal income tax return. Under the terms of   
the tax sharing agreement, during years in which Comverse Technology filed a    
consolidated federal income tax return which includes the Company, the Company  
was required to pay Comverse Technology an amount equal to the Company's        
separate tax liability, if any, computed by Comverse Technology in its          
reasonable discretion. The Company's separate tax liability generally is the    
amount of federal income tax that the Company would owe if the Company had filed
a tax return independent of the Comverse Technology group. If the calculation of
the Company's separate tax liability for any year results in a net operating    
loss or capital loss, the Company was not entitled to receive any payments from 
Comverse Technology with respect to such loss in such year or as a result of    
carrying such loss back to any prior year or forward to any future year, or     
otherwise to take such loss into account in determining the Company's liability 
to Comverse Technology, including in the event that Comverse Technology utilizes
such loss to reduce its own tax liability so that such loss is not available to 
the Company in the event of deconsolidation. The tax sharing agreement also     
provided for certain payments in the event of adjustments to the tax liability. 
The tax sharing agreement continues in effect until 60 days after the expiration
of the applicable statute of limitations with respect to the final year of the  
Comverse Technology consolidated group which includes the Company. Upon         
completion of the Company's initial public offering in May 2002 Comverse        
Technology's ownership was reduced below 80% of the voting power and value of   
outstanding common stock of the Company. The Company started filing federal tax 
returns on a stand-alone basis starting May 16, 2002.                           

     Patent License Agreement--The Company's affiliate, Comverse Patent Holding,
granted Lucent GRL a non-exclusive license to those patents now owned by        
Comverse Patent Holding or for which Comverse Patent Holding has a right to     
license and to those patents granted to Comverse Patent Holding or for 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 certain patents now owned by Lucent GRL or for which Lucent GRL has  
the right to license and to those patents granted to Lucent GRL or for 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 the Company. In connection with that arrangement, effective       
December 30, 1999, the Company entered into a patent license agreement with     
Comverse Patent Holding under which the Company has granted a non-exclusive     
royalty-free license to Comverse Patent Holding with the right to sublicense to 
Lucent GRL the Company's patents and those patents granted to the Company or for
which the Company obtains the right to license during the term of the agreement.
In return, Comverse Patent Holding granted to the Company a non-exclusive       
royalty-free sublicense to all patents that are licensed by Lucent GRL to       
Comverse Patent Holding. The Company believes that the value of the sublicense  
from Comverse Patent Holding is greater than the value of the license to        
Comverse Patent Holding.                                                        

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    Registration Rights Agreement--The Company has entered into a registration
rights agreement with Comverse Technology. Under this agreement, Comverse       
Technology may require the Company on one occasion to register the Company's    
common stock for sale on Form S-1 under the Securities Act of 1933 (the "Act")  
if the Company is not eligible to use Form S-3 under the Act. After the Company 
becomes eligible to use Form S-3, Comverse Technology may require the Company on
unlimited occasions to register the Company's common stock for sale on this     
form. Comverse Technology will also have an unlimited number of piggyback       
registration rights.                                                            

     The Company has agreed to pay all expenses that result from registration of
its common stock under the registration rights agreement, other than            
underwriting commissions for such shares and taxes. The Company has also agreed 
to indemnify Comverse Technology, its directors, officers and employees against 
liabilities that may result from its sale of the Company's common stock,        
including Securities Act liabilities.                                           

    Business Opportunities Agreement--The Company has a business opportunities
agreement with Comverse Technology, which addresses potential conflicts of      
interest between Comverse Technology and the Company. This agreement allocates  
between Comverse Technology and the Company opportunities to pursue transactions
or matters that, absent such allocation, could constitute corporate             
opportunities of both companies. The Company is precluded from pursuing an      
opportunity offered to any person who is a director of the Company but not an   
officer or employee of the Company and who is also an officer or employee of    
Comverse Technology, unless Comverse Technology fails to pursue such opportunity
diligently. Comverse Technology is precluded from pursuing an opportunity       
offered to any person who is a director of Comverse Technology but not an       
officer or employee of Comverse Technology and who is also an officer or        
employee of the Company, unless the Company fails to pursue such opportunity    
diligently. The Company is 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 Technology fails to pursue such opportunity     
diligently. Accordingly, the Company may be precluded from pursuing transactions
or opportunities that the Company would otherwise be able to pursue if the      
Company was not affiliated with Comverse Technology. The Company has agreed to  
indemnify Comverse Technology and its directors, officers, employees and agents 
against any liabilities arising out of any claim that any provision of the      
agreement or the failure to offer any business opportunity to the Company       
violates or breaches any duty that may be owed to the Company by Comverse       
Technology or any such person.                                                  

Proxy Agreement with the Department of Defense--One of the Company's  
subsidiaries, Verint Technology Inc. ("Verint Technology"), is engaged in the   
development, marketing and the sale of the Company's communications interception
solutions to various U.S. governmental agencies. In order to conduct its        
business, Verint Technology is required to maintain facility security clearances
under the National Industrial Security Program ("NISP"). The NISP requires      
companies maintaining facility security clearances to be insulated from foreign 
ownership, control or influence. The Company, Comverse Technology and the       
Department of Defense have entered into a proxy agreement with respect to the   
ownership and operations of Verint Technology. The proxy agreement has been     
approved by the Defense Security Service, which has oversight responsibilities  
on behalf of the Department of Defense.                                         

   Under the proxy agreement, the Company appointed three U.S. citizens that
have the requisite personal security clearance as directors of Verint Technology
and as holders of proxies to vote the stock of Verint Technology. These         
individuals are responsible for the oversight of Verint Technology's security   
arrangements, including the separation of Verint Technology from the Company and
the Company's affiliates. As proxy holders, these individuals have the power to 
exercise all prerogatives of ownership of Verint Technology, except that without
obtaining the Company's express written approval they may not authorize any     
individual sale or disposal of capital assets constituting a material amount of 
Verint Technology's assets, the mortgaging of assets other than for working     
capital or capital improvement purposes, any merger, consolidation,             
reorganization or dissolution of Verint Technology and the filing of a petition 
under the federal bankruptcy laws.                                              

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  Under the proxy agreement, the Company has also established a government
security committee, which consists of the three proxy holders. The government   
security committee is in charge of the development and implementation of a      
technology control plan, which prescribes measures and establishes procedures to
prevent unauthorized disclosure or export of controlled information to the      
Company, any of the Company's affiliates or others. In addition, the proxy      
agreement establishes procedures regarding meetings, visits and communications  
between Verint Technology, the Company and the Company's other affiliates. The  
Department of Defense continually reviews the technology control plan and       
receives an annual report from the proxy holders.                               

 Sale of Comverse Media Holding Inc.--In February 2001, the Company sold
100% of the capital stock of Comverse Media Holding Inc. to Comverse, Inc. for  
$100,000. The Company increased stockholders' equity for the year ended January 
31, 2002 by $298,000, which represents the excess of the consideration given and
the carrying amount of the net liabilities of Comverse Media Holding Inc.       

  Indemnification Agreement with Comverse Technology--On January 31, 2002,
the Company entered into an indemnification agreement with Comverse Technology  
pursuant to which Comverse Technology agreed to indemnify the Company for any   
damages that may arise from two specified disputes, which are not material to   
the Company. In return, the Company granted to Comverse Technology the exclusive
control of the settlement and defense of these disputes, and the Company agreed 
to fully cooperate with Comverse Technology in any such settlement or defense.  

    Transactions with an Affiliate--The Company sells products and services to
Verint Systems (Singapore) PTE LTD (formerly - Comverse Infosys (Singapore) PTE 
LTD) ("Verint Singapore") an affiliated systems integrator in which the Company 
holds 50% equity interest. Sales to Verint Singapore were approximately         
$4,271,000, $4,024,000, and $2,286,000 for the years ended January 31, 2001,    
2002 and 2003, respectively. The Company sells its products and services to     
Verint Singapore on the same terms the Company sells similar products and       
services to their non-affiliated customers. In addition, the Company was charged
marketing and office service fees by that affiliate. These fees were            
approximately $270,000, $490,000, and $361,000 for the years ended January 31,  
2001, 2002 and 2003, respectively. The Company believes that Verint Singapore   
has determined these charges on the basis of its estimated costs in providing   
such services.                                                                  

 Intercompany Loan--The Company was charged interest on balances owed to
Comverse Technology amounting to $2,142,000 and $1,458,000 for the years ended  
January 31, 2001 and 2002, respectively. The interest rate on the indebtedness  
to Comverse Technology was the three-month LIBOR rate. The principal amount of  
the indebtedness to Comverse Technology and related accrued and unpaid interest 
was due on demand and was repaid on January 31, 2002 with the proceeds of a bank
loan. The Company does not expect to be dependent on Comverse Technology for its
financing needs for the foreseeable future.                                     

     Guarantee of Leases--Comverse Technology has guaranteed the payment of rent
and the performance of all other obligations under the leases for the Company's 
facilities in Woodbury, New York which expires June 2003 and the lease for the  
Company's vacated facility in the United Kingdom.                               

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14.  Income taxes                                                               

The provision for income taxes consists of the following:             

                                                        [Enlarge/Download Table]


                                                                       Year Ended January 31,           
                                                              ------------------------------------------
                                                                2001             2002            2003   
                                                              ---------        ---------       ---------
                                                                            (In thousands)              
Current provision:                                                                                      
                                                                                                        
   Federal................................................... $       2        $       -       $       -
   State.....................................................        91              145             360
   Foreign...................................................       624            1,393           1,729
                                                              ---------        ---------        --------
      Total current..........................................       717            1,538           2,089
                                                              ---------        ---------        --------
Deferred provision (benefit):                                                                           
   Federal...................................................         -                -               -
   State.....................................................         -                -               -
   Foreign...................................................      (220)              14              81
                                                              ---------        ---------        --------
      Total deferred.........................................      (220)              14              81
                                                              ---------        ---------        --------
                                                              $     497        $   1,552       $   2,170
                                                              =========        =========       =========

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

                                                                [Download Table]

                                          Year Ended January 31             
                                ------------------------------------------- 
                                   2001             2002             2003   
                                ----------        ---------        -------- 
                                                                            
U.S. Federal statutory rate             34%              34%             34%
Change in valuation allowance          (34)             (34)            (34)
Foreign and state income taxes          (6)             (50)             18 
                                ----------        ---------        -------- 
Company's effective tax rate            (6)%            (50)%            18%
                                ==========        =========        ======== 

Deferred income taxes reflect the net tax effects of (a) temporary    
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes and (b)         
operating loss carry forwards. The tax effects of significant items comprising  
the Company's deferred tax assets and liabilities at January 31, 2002 and 2003  
are as follows:                                                                 

                                                        [Enlarge/Download Table]


                                                                              January 31,          
                                                                   ------------------------------- 
                                                                         2002             2003     
                                                                   --------------     ------------ 
                                                                             (In thousands)        
Deferred tax liabilities:                                                                          
                                                                                                   
   Expenses deductible for tax purposes and not   for              $         (418)    $       (585)
                                                                   --------------     ------------ 
      financial reporting purposes..........................                                       
Deferred tax assets:                                                                               
   Reserves not currently deductible..............................          4,360            4,316 
   Tax loss carry-forwards........................................          7,154           13,982 
                                                                   --------------     ------------ 
                                                                           11,514           18,298 
Less:  valuation allowance........................................        (11,115)         (17,813)
                                                                   --------------     ------------ 
Net deferred tax liabilities...................................... $          (19)    $       (100)
                                                                   ==============     ============ 

   As of January 31, 2003 the Company had approximately $35.0 million of net
operating loss carry forwards for federal income tax purposes. These carry      
forwards will begin to expire in 2020 if not utilized.                          

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Income tax has not been provided on unrepatriated earnings of foreign 
subsidiaries, as currently it is the intention of the Company to reinvest such  
foreign earnings in their operations.                                           

15.  Business Segment Information                                               

   The Company is engaged in providing analytic solutions for communications
interception, digital video security and surveillance, and enterprise business  
intelligence. The Company operates in one business segment and manages its      
business on a geographic basis. Summarized financial information for the        
Company's reportable geographic segments is presented in the following table.   
Sales in each geographic segment represents sales originating from that segment.
The accounting policies of the segments are the same as those described in the  
summary of significant accounting policies.                                     

                                                        [Enlarge/Download Table]


                                                                                          Reconciling   Consolidated
                               United States   Israel      United Kingdom     Other          Items         Totals   
Year Ended January 31, 2001    -------------  -----------   -----------      -----------   -----------  ----------- 
---------------------------                                        (In thousands)                                   

                                                                                                                    
Sales.........................   $   77,777   $   53,246     $   20,503      $    9,662    $  (19,511)  $  141,677  
Costs and expenses............      (84,679)     (54,045)       (20,994)         (9,115)       19,591     (149,242) 
                                 ----------   ----------     ----------      ----------    ----------   ----------  
Operating income (loss).......   $   (6,902)  $     (799)    $     (491)     $      547    $       80   $   (7,565) 
                                 ==========   ==========     ==========      ==========    ==========   ==========  
Year Ended January 31, 2002                                                                                         
Sales.........................   $   65,731   $   62,712     $   18,848      $    6,023    $  (22,079)  $  131,235  
Costs and expenses............      (70,290)     (58,813)       (19,349)         (7,882)       22,566     (133,768) 
                                 ----------   ----------     ----------      ----------    ----------   ----------  
Operating income (loss).......   $   (4,559)  $    3,899     $     (501)     $   (1,859)   $      487   $   (2,533) 
                                 ==========   ==========     ==========      ==========    ==========   ==========  
Year Ended January 31, 2003                                                                                         
Sales.........................   $   85,817   $   62,622     $   22,897      $   11,616    $  (25,177)  $  157,775  
Costs and expenses............      (80,847)     (57,477)       (21,624)        (12,881)       25,105     (147,724) 
                                 ----------   ----------     ----------      ----------    ----------   ----------  
Operating income (loss).......   $    4,970   $    5,145     $    1,273      $   (1,265)   $      (72)  $   10,051  
                                 ==========   ==========     ==========      ==========    ==========   ==========  

Long-lived assets by country of domicile consist of:                  

                                                        [Enlarge/Download Table]


                                                                                     January 31,         
                                                                           ------------------------------
                                                                               2002               2003   
                                                                           ------------        ----------
                                                                                    (In thousands)       
                                                                                                         
Israel.................................................................... $     12,632        $   12,795
United States.............................................................        8,014            15,936
Germany...................................................................        2,463             3,100
United Kingdom............................................................          273               816
Other.....................................................................          191               246
                                                                           ------------        ----------
                                                                           $     23,573        $   32,893
                                                                           ============        ==========

Sales by country, based on end-user location, as a percentage of total
sales were as follows:                                                          

                                                        [Enlarge/Download Table]


                                                                                           January 31,             
                                                                         ------------------------------------------
                                                                           2001              2002            2003  
                                                                         --------          --------        --------
                                                                                                                   
United States...........................................................      49%               42%             49%
United Kingdom..........................................................      15%               14%             16%
Other...................................................................      36%               44%             35%
                                                                         --------          --------        --------
                                                                             100%              100%            100%
                                                                         ========          ========        ========

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   No single customer accounted for 10% or more of sales for the years ended
January 31, 2001, 2002 and 2003.                                                

16.  Commitments and Contingencies                                              

     Leases--The Company leases office, manufacturing, and warehouse space under
non-cancelable operating leases. Rent expense for all leased premises           
approximated $2,596,000, $2,887,000 and $3,385,000 in the years ended January   
31, 2001, 2002 and 2003, respectively.                                          

    As of January 31, 2003, the minimum annual rent obligations of the Company
were approximately as follows:                                                  

Year Ending January 31,                              Amount                     
-----------------------------------------------  --------------                 
                                (In thousands)
2004...........................................       $ 3,290                   
2005...........................................         1,933                   
2006...........................................         1,422                   
2007...........................................           644                   
2008...........................................           644                   
                                   -------
                                   $ 7,933
                                   =======

     Licenses and Royalties--The Company licenses certain technology, "know-how"
and related rights for use in the manufacture and marketing of its products, and
pays royalties to third parties under such licenses and under other agreements  
entered into in connection with research and development financing. The Company 
currently pays royalties on a substantial portion of its product sales in       
varying amounts based upon the revenues attributed to the various components of 
such products. Royalties typically range up to 6% of net sales of the related   
products and, in the case of royalties due to government funding sources in     
respect of research and development projects, are required to be paid until the 
funding organization has received total royalties amounting to 100% of the      
amounts received by the Company under the approved project budgets, plus        
interest in certain circumstances.                                              

     Dividend Restrictions--The ability of the Company's Israeli subsidiaries to
pay dividends is governed by Israeli law, which provides that cash dividends may
be paid by an Israeli corporation only out of retained earnings as determined   
for statutory purposes in Israeli currency. In the event of a devaluation of the
Israeli currency against the dollar, the amount in dollars available for payment
of cash dividends out of prior years' earnings will decrease accordingly. Cash  
dividends paid by an Israeli corporation to United States residents are subject 
to withholding of Israeli income tax at source at a rate of up to 25%, depending
on the particular facilities, which have generated the earnings that are the    
source of the dividends.                                                        

  Guaranties--The Company has obtained bank guaranties primarily to secure
its performance of certain obligations under contracts with customers. These    
guaranties, which aggregated approximately $5,942,000 at January 31, 2003, are  
to be released by the Company's performance of specified contract milestones,   
which are scheduled to be completed primarily during 2003.                      

Litigation--From time to time, the Company is subject to certain 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 any significant adverse effect
upon the Company's consolidated financial statements.                           

17.  Selected Quarterly Data (Unaudited)                                        

  The following table shows selected results of operations for each of the
quarters during the years ended January 31, 2002 and 2003:                      

                                                        [Enlarge/Download Table]


                                                            Fiscal Quarter ended                                   
                                                            --------------------                                   
                         April 30,  July 31,   Oct. 31,    Jan. 31,     April 30,      July 31,  Oct. 31,  Jan. 31,
                         --------   --------   --------    --------     ---------     ---------  --------  --------
                           2001      2001       2001         2002         2002           2002      2002      2003  
                           ----      ----       ----         ----         ----           ----      ----      ----  
                                                  (In thousands, except per share amounts)                         

                                                                                                                   
Sales                    $ 34,558   $ 32,017   $ 31,039    $ 33,621     $ 36,317      $  38,470  $ 40,671  $ 42,317
Gross profit(1)            15,999     14,985     14,249      16,095       17,753         19,082    20,922    21,965
Net income (loss)            (892)    (1,742)    (1,023)       (992)       1,707          2,222     2,759     3,459

Diluted earnings (loss)                                                                                            
   per share             $  (0.05)  $  (0.09)  $  (0.05)   $  (0.05)    $   0.08      $    0.09  $   0.11  $   0.14
                         ========   ========   ========    ========     ========      =========  ========  ========


((1)) Gross profit for all periods is calculated as sales minus cost of goods   
sold, which includes royalties and license fees, an expense which     
    historically has been included as a separate line item in the statement of
operations.                                                           

Royalties and license fees included in cost of goods sold were as follows:      

                                                                [Download Table]


                                                                          
Royalties and license fees  $719  $697  $670  $765  $765  $806  $793  $853
                            ====  ====  ====  ====  ====  ====  ====  ====

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 INDEX TO EXHIBITS

                                                        [Enlarge/Download Table]


Number  Description                                                                                               
------  -----------                                                                                               
                                                                                                                  
  3.1+  Amended and Restated Certificate of Incorporation of Verint Systems Inc.                                  
  3.2+  Amended and Restated Bylaws of Verint Systems Inc.                                                        
  4.1+  Specimen Common Stock certificate                                                                         
 10.1+  Corporate Services Agreement, dated as of January 31, 2002,                                               
        between Comverse Technology and the Registrant 10.2+ Federal Income Tax                                   
        Sharing Agreement, dated as of January 31, 2002, between Comverse                                         
        Technology and the Registrant                                                                             
 10.3+  Patent License Agreement, dated as of January 17, 2000, between                                           
        Comverse Patent Holding and the Registrant 10.4+ Registration Rights                                      
        Agreement, dated as of January 31, 2002, between Comverse Technology                                      
        and the Registrant                                                                                        
 10.5+  Contribution Agreement, dated as of February 1, 2001, between                                             
        Comverse Technology and the Registrant 10.6+ Enterprise Resource                                          
        Planning Software Sharing Agreement, dated as of January 31, 2002,                                        
        between Comverse Ltd. and the Registrant                                                                  
 10.7+  Satellite Services Agreement, dated as of January 31, 2002, between Comverse, Inc. and the Registrant     
 10.8+  Proxy  Agreement,  dated as of May 21, 2001,  between Comverse  Technology,  the Registrant and the United
        Stated Department of Defense                                                                              
  10.9  Verint Systems Inc. Stock Incentive Compensation Plan (as amended through December 12, 2002)              
10.10+  Stock Purchase Agreement, dated as of January 31, 2002, between Comverse, Inc. and the Registrant         
10.11+  Distribution  Agreement,  dated as of July 1, 2001 between  Comverse  Infosys  (Singapore) PTE LTD and the
        Registrant                                                                                                
10.12+  Business  Opportunities  Agreement  dated  as of March  19,  2002,  between  Comverse  Technology  and the
        Registrant                                                                                                
10.13+  Form of an Indemnification Agreement                                                                      
10.14+  Verint Systems Inc. 2002 Employee Stock Purchase Plan                                                     
 21.1+  Subsidiaries of the Registrant                                                                            
  23.1  Consent of Deloitte & Touche LLP, Independent Auditors                                                    
  24.1  Powers of Attorney (see signature page to this report)                                                    

+ = Incorporated by reference to the Registrant's Registration Statement on Form
S-1 (Commission File No. 333-82300) which became effective on May 16, 2002.     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		1/31/05		71					10-K,  10-K/A
		2/1/04		28		71
		12/15/03		30		63			10-Q
		10/31/03		67					10-Q
Filed on:		5/1/03							8-K
		4/30/03		18		67			10-Q
		4/28/03		1		19
		3/10/03		53
		2/28/03		27		68
		2/1/03		71
For Period End:		1/31/03		1		77
		12/31/02		29		63
		12/13/02		46					10-Q,  8-K
		12/12/02		46		78
		7/31/02		1					10-Q
		6/15/02		28		62
		5/16/02		18		78			424B4
		5/15/02		29		63
		4/19/02		58
		3/19/02		46		78
		2/1/02		2		65
		1/31/02		20		78
		12/31/01		4
		12/15/01		28		62
		11/19/01		5
		7/1/01		46		78
		5/21/01		46		78
		2/1/01		46		78
		1/31/01		20		77
		7/31/00		66
		7/1/00		66
		6/30/00		4		66
		2/1/00		56
		1/31/00		20
		1/17/00		46		78
		12/30/99		72
		1/31/99		2		58
		1/1/99		39
		1/30/96		2		58
		2/23/94		2		58
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