BASIS OF PRESENTATION

Company Background

Comverse Technology, Inc. (“CTI” and, together with its subsidiary, the “Company”) is a holding company organized as a New York corporation in October 1984 that, subsequent to the Share Distribution (as defined below) that occurred on October 31, 2012, conducts business through its majority-owned subsidiary, Verint Systems Inc. (“Verint Systems” and together with its subsidiaries, “Verint”). Prior to the Share Distribution, CTI also conducted business through its wholly-owned subsidiary, Comverse, Inc. (together with its subsidiaries, “Comverse”), and prior to the completion of the Starhome Disposition (as defined below) on October 19, 2012, through its majority-owned subsidiary Starhome B.V. (together with its subsidiaries, “Starhome”). Comverse's and Starhome's assets and liabilities and results of operations are included in discontinued operations (see Note 12, Discontinued Operations).

Continuing Operations

Verint

Overview

Verint is a global leader in Actionable Intelligence solutions and value-added services. Verint's solutions enable organizations of all sizes to make more timely and effective decisions to improve enterprise performance and enhance safety. Verint's customers use Verint's Actionable Intelligence solutions to capture, distill, and analyze complex and underused information sources, such as voice, video and unstructured text.

In the enterprise intelligence market, Verint's workforce optimization and voice of the customer solutions help organizations enhance the customer service experience, increase customer loyalty, enhance products and services, reduce operating costs, and drive revenue. In the security intelligence market, Verint's communications and cyber intelligence, video and situation intelligence and public safety solutions help government and commercial organizations in their efforts to protect people and property and neutralize terrorism and crime.

Merger of CTI and Verint

On August 12, 2012, CTI entered into an agreement and plan of merger (the “Verint Merger Agreement”) with Verint pursuant to which CTI agreed to merge with and into a subsidiary of Verint and become a wholly-owned subsidiary of Verint (the “Verint Merger”). Upon completion of the Verint Merger the separate corporate existence of CTI will cease.

Discontinued Operations

Comverse

Overview

Comverse is a leading provider of software-based products, systems and related services that:

•

provide converged, prepaid and postpaid billing and active customer management systems ("Business Support Systems" or "BSS") for wireless, wireline and cable network operators delivering a value proposition designed to ensure timely and efficient service monetization, consistent customer experience, reduced complexity and cost, and enable real-time marketing based on all relevant customer profile information;


•	enable wireless and wireline (including cable) network-based Value-Added Services ("VAS"), comprised of two categories—Voice and Messaging—that include voicemail, visual voicemail, call completion, short messaging service ("SMS") text messaging ("texting"), multimedia picture and video messaging, and Internet Protocol ("IP") communications; and


•	provide wireless users with optimized access to Internet websites, content and applications, manage and enforce policy and generate data usage and revenue for wireless operators.

Comverse's products and services are used by more than 450 wireless, wireline and cable network communication service providers in more than 125 countries, including the majority of the world's 100 largest wireless network operators. Comverse's products and services are designed to generate voice and data network traffic, increase revenue and customer loyalty, monetize services and improve operational efficiency.

Comverse Share Distribution

On October 31, 2012, CTI completed its previously announced spin-off of Comverse as an independent, publicly-traded company, accomplished by means of a pro rata distribution of 100% of Comverse's outstanding common shares to CTI's shareholders (the “Share Distribution”). Following the Share Distribution, CTI no longer holds any of Comverse's outstanding capital stock.

Immediately prior to the Share Distribution, CTI contributed to Comverse Exalink Ltd. (“Exalink”), its wholly-owned subsidiary. Other than holding certain intellectual property rights, Exalink has no operations. Following the Share Distribution, Comverse and CTI operate independently, and neither have any ownership interest in the other. In order to govern certain ongoing relationships between CTI and Comverse after the Share Distribution and to provide mechanisms for an orderly transition, CTI and Comverse entered into agreements relating to the provision of certain services and setting forth certain rights and obligations between them following the Share Distribution. CTI and Comverse agreed, among other things, to indemnify each other against certain liabilities arising from their respective businesses and the services that will be provided under such agreements (see Note 12, Discontinued Operations).

Starhome

Starhome is a provider of wireless service mobility solutions that enhance international roaming. Wireless operators use Starhome’s software-based solutions to generate additional revenue and to improve profitability by directing international roaming traffic to preferred networks and by providing a wide range of services to subscribers traveling outside their home network.

Sale of Starhome

On August 1, 2012, CTI, certain other Starhome shareholders and Starhome entered into a Share Purchase Agreement (the “Starhome Share Purchase Agreement”) with Fortissimo Capital Fund II (Israel), L.P., Fortissimo Capital Fund III (Israel), L.P. and Fortissimo Capital Fund III (Cayman), L.P. (collectively, “Fortissimo”) pursuant to which Fortissimo agreed to purchase all of the outstanding share capital of Starhome (the “Starhome Disposition”). On September 19, 2012, CTI, in order to ensure it could meet the conditions to the Verint Merger, contributed to Comverse, its interest in Starhome, including its rights and obligations under the Starhome Share Purchase Agreement. The Starhome Disposition was completed on October 19, 2012.

Discontinued Operations Presentation

As a result of the Share Distribution and the Starhome Disposition, the results of operations of Comverse and Starhome, are included in discontinued operations, less applicable income taxes, as a separate component of net income (loss) in the Company's condensed consolidated statements of operations for all periods presented. The assets and liabilities of Comverse and Starhome are included in discontinued operations as separate components to the Company's condensed consolidated balance sheet as of January 31, 2012 (see Note 12, Discontinued Operations).

Condensed Consolidated Financial Statements Preparation

The condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2012 (the “2011 Form 10-K”). The condensed consolidated statements of operations, comprehensive income (loss) and cash flows for the periods ended October 31, 2012 and 2011, and the condensed consolidated balance sheets as of October 31, 2012 and January 31, 2012 are not audited but in the opinion of management reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair presentation of the results of the periods presented. Certain information and disclosures normally included in annual consolidated financial statements have been omitted in this interim period report pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and disclosures required by U.S. GAAP for annual financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the 2011 Form 10-K. The results for interim periods are not necessarily indicative of a full fiscal year’s results.

For information regarding measurement period adjustments related to certain business combinations that have been applied retrospectively to condensed consolidated balance sheet as of January 31, 2012, refer to Note 5, “Business Combinations.”

Principles of Consolidation

The accompanying condensed consolidated financial statements include CTI and its controlled subsidiary Verint Systems (in which CTI owned 40.6% of the common stock and held 51.5% of the voting power as of October 31, 2012). Comverse was a wholly-owned subsidiary prior to the Share Distribution on October 31, 2012 and Starhome was a majority-owned subsidiary prior to its sale on October 19, 2012 and their results were included in the consolidated balance sheets and the consolidated statements of operations, comprehensive loss and cash flows through such dates. For controlled subsidiaries that are not wholly-owned, the noncontrolling interest is included as a separate component of “Net income (loss)” in the condensed consolidated statements of operations and “Total equity” in the condensed consolidated balance sheets. Verint Systems holds a 50% equity interest in a consolidated variable interest entity in which it is the primary beneficiary. The results of operations of this variable interest entity for the three and nine months ended October 31, 2012 and 2011 were not significant to the condensed consolidated statements of operations.

All intercompany balances and transactions have been eliminated.

The Company includes the results of operations of acquired businesses from the dates of acquisition.

Segment Reporting and Changes in Reportable Segments

The Company has one reportable segment, Verint. The results of CTI's holding company operations, are included in the column captioned “All Other” as part of the Company’s business segment presentation. As a result of the Share Distribution, the Company no longer presents Comverse BSS and Comverse VAS as reportable segments and Comverse's operations previously included in “All Other” have been removed therefrom as Comverse's results of operations are included in discontinued operations for the three and nine months ended October 31, 2012 and 2011. In addition, on August 1, 2012, CTI entered into the Starhome Share Purchase Agreement with unaffiliated purchasers and accordingly, Starhome's results of operations, which previously were included in “All Other,” have been removed therefrom and are included in discontinued operations for the three and nine months ended October 31, 2012 and 2011.

Use of Estimates

The preparation of the condensed consolidated financial statements and the accompanying notes in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses.

The most significant estimates include:


•	Estimates relating to the recognition of revenue, including the determination of vendor specific objective evidence (“VSOE”) of fair value and the determination of best estimate of selling price for multiple element arrangements;


•	Inventory write-off;


•	Allowance for doubtful accounts;


•	Fair value of stock-based compensation;


•	Valuation of assets acquired and liabilities assumed in business combinations, including contingent consideration;


•	Fair value of reporting units for the purpose of goodwill impairment test;


•	Valuation of other intangible assets;


•	Valuation of investments and financial instruments;


•	Realization of deferred tax assets; and


•	The identification and measurement of uncertain tax positions.

The Company’s actual results may differ from its estimates.

Cash Position

The Company incurred substantial losses and had negative cash flows during the three fiscal years ended January 31, 2012 and the nine months ended October 31, 2012, and had a significant accumulated deficit as of October 31, 2012.

The Company forecasts that available cash and cash equivalents will be sufficient to meet the liquidity needs of CTI for at least the next 12 months. The Company’s forecast is based upon a number of assumptions, which the Company believes are reasonable. However, should one or more of the assumptions prove incorrect, or should one or more of the risks or uncertainties attendant to the Company and its business materialize, the Company’s business and operations could be materially adversely affected. Management believes that sources of liquidity could be identified.