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

                                    FORM 10-Q

     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the quarterly period ended July 31, 2005

                                       or

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                         Commission File Number: 0-30121

                                  ULTICOM, INC.
             (Exact name of registrant as specified in its charter)

           New Jersey                                    22-2050748
   (State or other jurisdiction of                    (I.R.S. Employer
   incorporation or organization)                     Identification No.)

     1020 Briggs Rd. Mt. Laurel, NJ                         08054
   (Address of principal executive offices)               (Zip Code)

                                 (856) 787-2700
              (Registrant's telephone number, including area code)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)

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.
                                             [X] Yes   [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
                                             [X] Yes   [ ] No

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
                                             [ ] Yes   [X] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

               The number of shares of Common Stock, no par value,
               outstanding as of September 1, 2005 was 43,245,045

<PAGE>
                                TABLE OF CONTENTS
                                -----------------

                                     PART I
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.
                                                                          Page
                                                                          ----

    1.   Condensed Consolidated Balance Sheets as
         of January 31, 2005 and July 31, 2005                              2

    2.   Condensed Consolidated Statements of Income
         for the Three and Six-Month Periods ended
         July 31, 2004 and 2005                                             3

    3.   Condensed Consolidated Statements of Cash Flows
         for the Six-Month Periods ended
         July 31, 2004 and 2005                                             4

    4.   Notes to Condensed Consolidated Financial
         Statements                                                         5


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.                    10

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
         MARKET RISK.                                                      24

ITEM 4.  CONTROLS AND PROCEDURES.                                          25

                                     PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.                                                26

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.              26

ITEM 6.  EXHIBITS.                                                         28

SIGNATURES                                                                 29

                                       ii
<PAGE>
FORWARD-LOOKING STATEMENTS

           From time to time, Ulticom, Inc. (together with its subsidiaries, 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. Forward-looking statements are often identified by future or
conditional words such as "will," "plans," "expects," "intends," "believes,"
"seeks," "estimates," or "anticipates" or by variations of such words or by
similar expressions.

           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.

           By their very nature, forward-looking statements are subject to
uncertainties, both general and specific, and risks exist that 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 factors 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 makes no commitment to revise or update any forward-looking
statements in order to reflect events or circumstances after the date any such
statement is made. 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 will make additional updates or corrections thereafter.


                                       1
<PAGE>
                                     PART I
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                         ULTICOM, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                     JANUARY 31,       JULY 31,
                                                                                        2005*            2005
                                                                                     ----------       ----------
                                                                                                      (UNAUDITED)
<S>                                                                             <C>               <C>
                                     ASSETS
 CURRENT ASSETS:
       Cash and cash equivalents                                                      $ 19,372         $ 28,831
       Short-term investments                                                          227,300          232,127
       Accounts receivable, net                                                         11,062            9,846
       Inventories                                                                       1,286            1,599
       Prepaid expenses and other current assets                                         3,558            5,109
                                                                                     ----------       ----------
          Total current assets                                                         262,578          277,512
       Property and equipment, net                                                       2,274            2,760
       Investments                                                                       5,375               --
       Other assets                                                                      1,765            1,577
                                                                                     ----------       ----------
          Total assets                                                               $ 271,992        $ 281,849
                                                                                     ==========       ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES:
       Accounts payable and accrued expenses                                          $ 11,966         $ 10,715
       Deferred revenue                                                                  4,462            3,745
                                                                                     ----------       ----------
          Total current liabilities                                                     16,428           14,460
                                                                                     ----------       ----------

 SHAREHOLDERS' EQUITY:
       Undesignated stock, no par value, 10,000,000 shares authorized,
         no shares issued and outstanding                                                   --               --
       Common stock, no par value, 200,000,000 shares authorized,
         43,101,804 and 43,244,695 shares issued and outstanding                            --               --
       Additional paid-in capital                                                      216,490          217,593
       Retained earnings                                                                39,840           47,392
       Accumulated other comprehensive income (loss)                                      (766)           2,404
                                                                                     ----------       ----------
          Total shareholders' equity                                                   255,564          267,389
                                                                                     ----------       ----------
          Total liabilities and shareholders' equity                                 $ 271,992        $ 281,849
                                                                                     ==========       ==========
</TABLE>

     * The Condensed Consolidated Balance Sheet as of January 31, 2005 has been
     summarized from the Company's audited Consolidated Balance Sheet as of that
     date.

   The accompanying notes are an integral part of these financial statements.


                                       2
<PAGE>
                         ULTICOM, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED                 THREE MONTHS ENDED
                                                                 JULY 31,        JULY 31,           JULY 31,      JULY 31,
                                                                   2004            2005              2004           2005
                                                                   ----            ----              ----           ----

<S>                                                          <C>           <C>               <C>              <C>
Sales                                                            $ 29,276       $ 29,198           $ 16,087       $ 15,057
Cost of sales                                                       7,037          6,815              3,541          3,513
                                                                 ---------      ---------          ---------      ---------
Gross profit                                                       22,239         22,383             12,546         11,544

Operating expenses:
    Research and development                                        5,345          6,383              2,568          3,284
    Selling, general and administrative                             8,942          7,917              4,666          3,287
                                                                 ---------      ---------          ---------      ---------

Income from operations                                              7,952          8,083              5,312          4,973
Interest and other income, net                                      1,134          2,862                652          1,696
                                                                 ---------      ---------          ---------      ---------

Income before income tax provision                                  9,086         10,945              5,964          6,669
Income tax provision                                                2,907          3,393              1,970          2,067
                                                                 ---------      ---------          ---------      ---------

Net income                                                       $  6,179       $  7,552           $  3,994       $  4,602
                                                                 =========      =========          =========      =========
Earnings per share:
    Basic                                                        $   0.15       $   0.17           $   0.09       $   0.11
                                                                 =========      =========          =========      =========
    Diluted                                                      $   0.14       $   0.17           $   0.09       $   0.10
                                                                 =========      =========          =========      =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>
                         ULTICOM, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                       SIX MONTHS ENDED
                                                                                    JULY 31,      JULY 31,
                                                                                      2004          2005
                                                                                      ----          ----
<S>                                                                             <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                         $  6,179        $  7,552
Adjustments to reconcile net income to net cash provided by
operating activities:
   Depreciation and amortization                                                        722             722
   Deferred income tax provision                                                      2,368             465
Changes in operating assets and liabilities:
   Accounts receivable, net                                                            (261)          1,216
   Inventories                                                                         (292)           (313)
   Prepaid expenses and other current assets                                            203          (1,710)
   Accounts payable and accrued expenses                                                361          (1,026)
   Deferred revenue                                                                     220            (717)
   Other, net                                                                          (380)           (329)
                                                                                   ---------       ---------
        Net cash provided by operating activities                                     9,120           5,860
                                                                                   ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                                 (537)         (1,208)
   Maturities and sales (purchases) of investments, net                              33,908           3,929
                                                                                   ---------       ---------
        Net cash provided by investing activities                                    33,371           2,721
                                                                                   ---------       ---------


CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock in connection with
     exercise of stock options and employee stock purchase plan                       1,201             878
                                                                                   ---------       ---------
        Net cash provided by financing activities                                     1,201             878
                                                                                   ---------       ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                            43,692           9,459

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        6,316          19,372
                                                                                   ---------       ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $ 50,008        $ 28,831
                                                                                   =========       =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>
                         ULTICOM, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

         BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           COMPANY BUSINESS AND BACKGROUND - Ulticom, Inc. (together with its
subsidiaries, the "Company"), a New Jersey corporation and a majority-owned
subsidiary of Comverse Technology, Inc. ("CTI"), designs, develops, markets,
licenses, and supports service enabling signaling software for fixed, mobile,
and Internet communications software and hardware for use in the communications
industry.

           BASIS OF PRESENTATION - The accompanying financial information should
be read in conjunction with the financial statements, including the notes
thereto, for the year ended January 31, 2005. The condensed consolidated
financial information included herein is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring adjustments),
which are, in the opinion of management, necessary for a fair statement of
results for the interim periods. The results of operations for the three-month
and six-month periods ended July 31, 2005 are not necessarily indicative of the
results to be expected for the full year.

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

           In connection with the preparation of the Company's Annual Report on
Form 10-K for the year ended January 31, 2005, the Company concluded that it was
appropriate to classify investments in Auction Rate Securities ("ARS") as
short-term investments. ARS generally have long-term stated maturities; however,
these investments have characteristics similar to short-term investments because
at pre-determined intervals, generally every 7 to 90 days, there is a new
auction process at which these securities are reset to current interest rates.
Previously, such investments had been classified as cash and cash equivalents
due to their liquidity and pricing reset feature. Accordingly, the Company has
revised the classification to report these securities as short-term investments
in the Condensed Consolidated Balance Sheets. The Company reclassified
approximately $139,925,000 of investments in ARS as of July 31, 2004, that were
previously included in cash and cash equivalents to short-term investments. The
Company also reclassified accrued interest related to investments in ARS of
approximately $178,000 as of July 31, 2004, from cash and cash equivalents to
prepaid expenses and other current assets.

           The Company has also revised the presentation of the Consolidated
Statements of Cash Flows for the period ended July 31, 2004 to reflect the
purchases and sales of ARS as investing activities rather than as a component of
cash and cash equivalents, which is consistent with the presentation for the
period ended July 31, 2005. In the previously reported Consolidated Statements
of Cash Flows for the period ended July 31, 2004, net cash used in investing
activities related to these short-term investments of approximately $17,676,000
were included in cash and cash equivalents and net cash used in operating
activities related to prepaid expenses and other current assets of approximately
$30,000 were also included in cash and cash equivalents. This change in
classification did not materially affect previously reported cash flows from
operations, and did not change previously reported cash flows from financing
activities in the Consolidated Statements of Cash Flows or previously reported
Consolidated Statements of Operations for any period.


                                       5
<PAGE>
           SALES - Sales for the six-month periods ended July 31, 2004 and 2005
consisted of product revenues of approximately $26,127,000 and $25,134,000,
respectively, and service revenues of approximately $3,149,000 and $4,064,000,
respectively. Sales for the three-month periods ended July 31, 2004 and 2005
consisted of product revenues of approximately $14,503,000 and $12,853,000,
respectively, and service revenues of approximately $1,584,000 and $2,204,000,
respectively.

           GAIN ON SETTLEMENT - During the three-month period ended July 31,
2005, the Company recorded a gain of approximately $828,000 resulting from the
settlement of a breach of contract claim. The Company has recorded the
settlement as a reduction of selling, general and administrative expenses during
the three-month period ended July 31, 2005.

           STOCK-BASED EMPLOYEE COMPENSATION - The Company accounts for stock
options under the recognition and measurement principles of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, no stock-based employee
compensation cost is reflected in net income for any periods, as all options
granted have an exercise price at least equal to the market value of the
underlying common stock on the date of grant. Refer to Recent Accounting
Pronouncements later in this Note for a description of pending changes to this
accounting treatment.

           Pro forma information regarding net income (loss) and net earnings
(loss) per share is required by Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation". Under SFAS No. 123,
the Company estimated the fair value of employee stock options utilizing the
Black-Scholes option valuation model, using appropriate assumptions, as required
under accounting principles generally accepted in the United States of America.
The Black-Scholes model was developed for use in estimating the fair value of
traded options and does not consider the non-traded nature of employee stock
options, vesting and trading restrictions, lack of transferability or the
ability of employees to forfeit the options prior to expiry. In addition, option
valuation models require the input of highly subjective assumptions including
the expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of the
Company's employee stock options.


                                       6
<PAGE>
           The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition provisions of
SFAS No. 123 to stock-based employee compensation for the six-month and the
three-month periods ended July 31, 2004 and 2005:

<TABLE>
<CAPTION>
                                                                   SIX MONTHS ENDED              THREE MONTHS ENDED
                                                                       JULY 31,                       JULY 31,

                                                                  2004          2005             2004          2005
                                                                  ----          ----             ----          ----
<S>                                                     <C>              <C>             <C>             <C>
      Net income, as reported                                   $ 6,179       $ 7,552          $ 3,994       $ 4,602

      Deduct: Total stock-based employee compensation
      expense determined under fair value based method
      for all awards, net of related tax effects                 (1,545)       (1,067)            (766)         (489)
                                                                --------      --------         --------      --------

      Pro forma net income                                      $ 4,634       $ 6,485          $ 3,228       $ 4,113
                                                                ========      ========         ========      ========

      Earnings per share:

      Basic - as reported                                       $  0.15       $  0.17          $  0.09       $  0.11
      Basic - pro forma                                         $  0.11       $  0.15          $  0.08       $  0.10

      Diluted - as reported                                     $  0.14       $  0.17          $  0.09       $  0.10
      Diluted - pro forma                                       $  0.11       $  0.15          $  0.07       $  0.09
</TABLE>

           COMPREHENSIVE INCOME - For the six-month periods ended July 31, 2004
and 2005, total comprehensive income was approximately $5.8 million and $10.7
million, respectively and for the three-month periods ended July 31, 2004 and
2005 was approximately $3.8 million and $7.2 million, respectively. The elements
of comprehensive income include net income, unrealized gains/losses on available
for sale securities, and foreign currency translation adjustments.


                                       7
<PAGE>
           Earnings Per Share - For the six-month and three-month periods ended
July 31, 2004 and 2005, the computation of basic earnings per share is based on
the weighted average number of outstanding common shares. Diluted earnings per
share further assumes the issuance of common shares for all dilutive potential
common shares outstanding (consisting entirely of stock options). The shares
used in the computations are as follows:

                                  SIX MONTHS ENDED       THREE MONTHS ENDED
                                      JULY 31,                 JULY 31,
                                  2004       2005          2004       2005
                                  ----       ----          ----       ----
                                                (In thousands)

                  Basic          42,295     43,157        42,380     43,177
                  Diluted        43,549     44,166        43,575     44,077

           In computing diluted earnings per share, 971,788 and 801,157 options
to purchase shares of common stock were excluded from the computations for the
six-month periods ending July 31, 2004 and 2005, respectively, and 1,032,777 and
1,411,834 options to purchase shares of common stock were excluded from the
computations for the three-month periods ending July 31, 2004 and 2005,
respectively. These options were excluded because the exercise prices of such
options were greater than the average market price of the Company's common stock
during the respective periods.

           RELATED PARTY TRANSACTIONS - The Company sells products and provides
services to other subsidiaries of CTI. For the six-month periods ended July 31,
2004 and 2005, sales to related parties were approximately $2.7 million and $2.1
million, respectively, and for the three-month periods ended July 31, 2004 and
2005, sales to related parties were approximately $1.7 million and $1.5 million,
respectively.

           As of July 31, 2005, amounts due from subsidiaries of CTI was
approximately $0.3 million.

           The Company has a corporate services agreement with CTI. Under this
agreement, CTI provides the Company various administrative and consulting
services. The Company has agreed to pay to CTI a quarterly fee of $150,000,
payable in arrears at the end of each fiscal quarter, in consideration for all
services provided by CTI during such fiscal quarter. The Company was charged
$300,000 and $150,000, respectively, in each of the six-month and three-month
periods ended July 31, 2004 and 2005 for services provided by CTI. In addition,
the Company has agreed to reimburse CTI for any out-of-pocket expenses incurred,
if any, by CTI in providing the services. The agreement is currently in effect
until January 31, 2006 and extends for additional twelve-month periods unless
terminated by either party.

           LEGAL PROCEEDINGS - The Company does not believe that it is currently
party to any pending legal actions that could reasonably be expected to have a
material adverse effect on its business, financial condition and results of
operations.


                                       8
<PAGE>
           RECENT ACCOUNTING PRONOUNCEMENTS - In December 2004, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004),
"Share-Based Payment", ("SFAS No.123(R)") which revises SFAS No. 123 and
supersedes APB No. 25. In April 2005, the Securities and Exchange Commission
("SEC") amended Regulation S-X to modify the date for compliance with SFAS No.
123(R). The provisions of SFAS No. 123(R) must be applied beginning with the
first interim or annual reporting period of the first fiscal year beginning on
or after June 15, 2005, which for the Company is February 1, 2006 (the
"Effective Date"). SFAS No. 123(R) requires all share-based payments to
employees, including grants of employee stock options, to be valued at fair
value on the date of grant, and to be expensed over the applicable vesting
period. Pro forma disclosure of the income statement effects of share-based
payments is no longer an alternative. Beginning on the Effective Date, the
Company must (i) expense all options granted after the Effective Date over the
applicable vesting period, and (ii) expense the non-vested portions of existing
option grants going forward over their remaining vesting period. Compensation
expense for the non-vested portions of existing option grants as of the
Effective Date will be recorded based on the fair value of the awards previously
calculated in developing the pro forma disclosures in accordance with the
provisions of SFAS No. 123. Under SFAS No. 123(R), the Company is required to
adopt a fair value-based method for measuring the compensation expense related
to employee stock and stock options awards, which will lead to substantial
additional compensation expense. Any such expense, although it will not affect
the Company's cash flows, will have a material negative impact on the Company's
reported results of operations.

           In March 2004, the Emerging Issues Task Force ("EITF") of the FASB
reached a consensus on EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments", which provides
additional guidance for assessing impairment losses on investments.
Additionally, EITF 03-1 includes new disclosure requirements for investments
that are deemed to be temporarily impaired. In September 2004, the FASB delayed
the accounting provisions of EITF 03-1; however the disclosure requirements
remain effective for annual periods ending after June 15, 2004. The Company will
evaluate the impact of EITF 03-1 once final guidance is issued, however the
adoption of EITF 03-1 in its current form is not expected to have a material
effect on the Company's consolidated financial statements.


                                       9
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

INTRODUCTION

Ulticom designs, develops, markets, licenses, and supports service enabling
signaling software for fixed, mobile, and Internet communications. These
products are sold to network equipment manufacturers, application developers,
and service providers who include the Company's products within their products.
Signalware sales consist of software licenses, interface boards, training, and
support revenues. In certain limited circumstances, the Company sells Signalware
development services under fixed-fee arrangements with its customers. New
customers begin development of applications and services by purchasing the
appropriate Signalware development kit, which includes a development software
license, an interface board, cables, training, a one-year development support
plan, and documentation. At deployment, the customer generally purchases one or
more deployment licenses, additional interface boards, and an annual deployment
maintenance and support plan, which is typically renewed annually for the life
of the installation.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to the critical accounting policies and
estimates as disclosed in the Annual Report on Form 10-K for the year ended
January 31, 2005.






                                       10
<PAGE>
                              RESULTS OF OPERATIONS

Summary of Results

Consolidated results of operations in dollars and as a percentage of sales for
each of the six-month and three-month periods ended July 31, 2004 and 2005 were
as follows:

<TABLE>
<CAPTION>
                                                            Six Months ended
                                                     (in thousands, except percentages)
                                                              (Unaudited)

                                         July 31,               July 31,                               %
                                           2004    % of sales    2005    % of sales    Variance     variance
                                         ---------  ---------  ---------  ---------    ---------   ---------

<S>                               <C>              <C>       <C>        <C>        <C>            <C>
Sales                                    $ 29,276       100%   $ 29,198      100%      $    (78)       (0)%
Cost of sales                               7,037        24%      6,815       23%          (222)       (3)%
                                         ---------  ---------  ---------  ---------    ---------   ---------
Gross profit                               22,239        76%     22,383       77%           144         1%
Operating expenses:
    Research and development                5,345        18%      6,383       22%         1,038        19%
    Selling, general and administrative     8,942        31%      7,917       27%        (1,025)      (11)%
                                         ---------  ---------  ---------  ---------    ---------   ---------

Income from operations                      7,952        27%      8,083       28%           131         2%
Interest and other income,  net             1,134         4%      2,862       10%         1,728       152%
                                         ---------  ---------  ---------  ---------    ---------   ---------
Income before income tax provision          9,086        31%     10,945       38%         1,859        20%
Income tax provision                        2,907        10%      3,393       12%           486        17%
                                         ---------  ---------  ---------  ---------    ---------   ---------

Net income                               $  6,179        21%   $  7,552       26%      $  1,373        22%
                                         =========  =========  =========  =========    =========   =========

Effective tax rate                            32%                   31%
</TABLE>

                             ** TABLE CONTINUED **

<TABLE>
<CAPTION>
                                                            Three Months ended
                                                     (in thousands, except percentages)
                                                              (Unaudited)

                                          July 31,              July 31,                                %
                                           2004    % of sales    2005     % of sales    Variance     variance
                                         ---------  ---------  ---------   ---------    ---------   ---------

<S>                           <C>              <C>        <C>        <C>        <C>          <C>
Sales                                    $ 16,087       100%   $ 15,057       100%     $ (1,030)       (6)%
Cost of sales                               3,541        22%      3,513        23%          (29)       (1)%
                                         ---------  ---------  ---------  ---------    ---------   ---------
Gross profit                               12,546        78%     11,544        77%       (1,001)       (8)%
Operating expenses:
    Research and development                2,568        16%      3,284        22%          716        28%
    Selling, general and administrative     4,666        29%      3,287        22%       (1,378)      (30)%
                                         ---------  ---------  ---------  ---------    ---------   ---------

Income from operations                      5,312        33%      4,973        33%         (339)       (6)%
Interest and other income,  net               652         4%      1,696        11%        1,044       160%
                                         ---------  ---------  ---------  ---------    ---------   ---------
Income before income tax provision          5,964        37%      6,669        44%          705        12%
Income tax provision                        1,970        12%      2,067        13%           97         5%
                                         ---------  ---------  ---------  ---------    ---------   ---------

Net income                               $  3,994        25%   $  4,602        31%     $    608        15%
                                         =========  =========  =========  =========    =========   =========

Effective tax rate                            33%                   31%
</TABLE>
                              ** TABLE COMPLETE **


                                       11
<PAGE>
SIX-MONTH AND THREE-MONTH PERIODS ENDED JULY 31, 2005 COMPARED WITH
SIX-MONTH AND THREE-MONTH PERIODS ENDED JULY 31, 2004

           Sales. Sales for the six-month and three-month periods ended July 31,
2005 decreased by approximately $0.1 million and approximately $1.0 million, or
approximately 6%, to approximately $29.2 million and approximately $15.1
million, respectively, when compared with the six-month and three-month periods
ended July 31, 2004. The dollar decrease is primarily attributable to a lower
volume of product sales and deployments by our customers of our Signalware
products, which is partially offset by higher services revenues from new and
existing deployments of our Signalware products. Sales to international
customers represented approximately 68% and 74%, respectively, of sales for the
six-month and three-month periods ended July 31, 2005 and approximately 78% and
74%, respectively, of sales for the six-month and three-month periods ended July
31, 2004.

           Cost of Sales. Cost of sales for the six-month period ended July 31,
2005 decreased by approximately $0.2 million, or approximately 3%, to
approximately $6.8 million, when compared with the six-month period ended July
31, 2004. The dollar decrease is primarily attributable to decreased material
and production costs of approximately $0.1 million and personnel-related and
other costs of approximately $0.1 million, when compared with the corresponding
2004 period. Gross margins (expressed as a percentage of sales) increased to
approximately 77% for the six-month period ended July 31, 2005 from
approximately 76% for the corresponding 2004 period. Cost of sales for the
three-month period ended July 31, 2005 remained relatively constant at
approximately $3.5 million, when compared with the three-month period ended July
31, 2004. Gross margins (expressed as a percentage of sales) decreased to
approximately 77% for the three-month period ended July 31, 2005 from
approximately 78% for the corresponding 2004 period.

           Research and Development. Research and development expenses for the
six-month period ended July 31, 2005 increased by approximately $1.0 million, or
approximately 19%, to approximately $6.4 million, and as a percentage of sales,
increased to approximately 22% from approximately 18%, when compared with the
six-month period ended July 31, 2004. The dollar increase is primarily
attributable to higher personnel-related and other costs of approximately $1.0
million, when compared with the corresponding 2004 period. Research and
development expenses for the three-month period ended July 31, 2005 increased by
approximately $0.7 million, or approximately 28%, to approximately $3.3 million,
and as a percentage of sales, increased to approximately 22% from approximately
16%, when compared with the three-month period ended July 31, 2004. The dollar
increase is primarily attributable to higher personnel-related and other costs
of approximately $0.7 million, when compared with the corresponding 2004 period.

           Selling, General and Administrative. Selling, general and
administrative expenses for the six-month period ended July 31, 2005 decreased
by approximately $1.0 million, or approximately 11%, to approximately $7.9
million, and as a percentage of sales, decreased to approximately 27% from
approximately 31%, when compared with the six-month period ended July 31, 2004.
The dollar decrease is primarily attributable to a decrease of approximately
$0.9 million in professional services fees related to a gain of approximately
$0.8 million resulting from the settlement of a breach of contract claim and
approximately $0.4 million in sales commission costs, which is partially offset
by an increase in marketing costs of approximately $0.2 million and
miscellaneous expense of approximately $0.1 million, when compared with the


                                       12
<PAGE>
corresponding 2004 period. Selling, general and administrative expenses for the
three-month period ended July 31, 2005 decreased by approximately $1.4 million,
or approximately 30%, to approximately $3.3 million, and as a percentage of
sales, decreased to approximately 22% from approximately 29%, when compared with
the three-month period ended July 31, 2004. The dollar decrease is primarily
attributable to a decrease of approximately $1.3 million in professional
services fees related to a gain of approximately $0.8 million resulting from the
settlement of a breach of contract claim and approximately $0.3 million in sales
commission costs, which is partially offset by an increase in marketing costs of
approximately $0.1 million and personnel-related and other costs of
approximately $0.1 million, when compared with the corresponding 2004 period.

           Interest and Other Income, net. Interest and other income, net for
the six-month period ended July 31, 2005 increased by approximately $1.7
million, or approximately 152%, to approximately $2.9 million, when compared
with the six-month period ended July 31, 2004. The dollar increase is a result
of higher interest income earned on investments of approximately $1.3 million
and lower realized losses of approximately $0.4 million, when compared with the
corresponding 2004 period. Interest and other income, net for the three-month
period ended July 31, 2005 increased by approximately $1.0 million, or
approximately 160%, to approximately $1.7 million, when compared with the
three-month period ended July 31, 2004. The dollar increase is a result of
higher interest income earned on investments of approximately $0.8 million and
realized gains of approximately $0.3 million, which is partially offset by
foreign currency losses of approximately $0.1 million, when compared with the
corresponding 2004 period.

           Income Tax Provision. Provision for income taxes for the six-month
period ended July 31, 2005 increased by approximately $0.5 million, or
approximately 17%, to approximately $3.4 million, when compared with the
six-month period ended July 31, 2004. Provision for income taxes for the
three-month period ended July 31, 2005 increased by approximately $0.1 million,
or approximately 5%, to approximately $2.1 million, when compared with the
three-month period ended July 31, 2004. The Company's overall effective tax rate
was approximately 31% for both the six-month and three-month periods ended July
31, 2005 and approximately 32% and 33%, respectively, for the six-month and
three-month periods ended July 31, 2004.

           Net Income. Net income for the six-month period ended July 31, 2005
increased by approximately $1.4 million, or approximately 22%, to approximately
$7.6 million, and as a percentage of sales, increased to approximately 26% from
approximately 21%, when compared with the six-month period ended July 31, 2004.
Net income for the three-month period ended July 31, 2005 increased by
approximately $0.6 million, or approximately 15%, to approximately $4.6 million,
and as a percentage of sales, increased to approximately 31% from approximately
25%, when compared with the three-month period ended July 31, 2004. The changes
are primarily attributable to the factors described above.


                                       13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

           The Company had working capital at July 31, 2005 and January 31, 2005
of approximately $263.1 million and $246.2 million, respectively. At July 31,
2005 and January 31, 2005, the Company had cash and cash equivalents and
short-term investments of approximately $261.0 million and $246.7 million,
respectively.

           Operations for the six-month periods ended July 31, 2005 and 2004,
after adjustment for non-cash items, provided cash of approximately $8.7 million
and $9.3 million, respectively. During such periods, other changes in operating
assets and liabilities used cash of approximately $2.8 million and $0.2 million,
respectively.

           Investing activities for the six-month periods ended July 31, 2005
and 2004 provided cash of approximately $2.7 million and $33.4 million,
respectively. These amounts include (i) purchases of property and equipment of
approximately $(1.2) million and $(0.5) million, respectively; and (ii) net
maturities and sales (purchases) of investments, of approximately $3.9 million
and $33.9 million, respectively.

           Financing activities for the six-month periods ended July 31, 2005
and 2004 provided cash of approximately $0.9 million and $1.2 million,
respectively, related to proceeds from the issuance of common stock in
connection with the exercise of stock options and employee stock purchase plan.

           Although there are no present understandings, commitments or
agreements with respect to acquisitions of other businesses, products or
technologies, the Company may in the future consider such transactions, which
may require debt or equity financing. The issuance of debt or equity securities
could be expected to have a dilutive impact on the Company's shareholders, and
there can be no assurance as to whether or when any acquired business would
contribute positive operating results commensurate with the associated
investment.

           The Company may pursue acquisitions of businesses, products or
technologies in the future to expand its business and the products and services
it offers. Any material acquisition could result in a decrease in working
capital depending upon the amount, timing, and nature of the consideration paid.

           The Company believes that its existing cash balances will be
sufficient to meet anticipated cash needs for working capital, capital
expenditures and other activities for the foreseeable future. Thereafter, if
current sources are not sufficient to meet the Company's needs, it may seek
additional debt or equity financing.

CERTAIN TRENDS AND UNCERTAINTIES

           The Company derives substantially all of its revenue from the
communications industry, which has experienced a challenging capital spending
environment. Although the capital spending environment has improved recently,
business conditions currently are weaker than in prior quarters and if capital
spending and technology purchasing by the Company's customers does not continue
to improve or if they decline, revenue may stagnate or decrease, and the
Company's operating results will be adversely affected. Because a significant
proportion of the Company's sales occur in the late stages of a quarter, a
delay, cancellation or other factor resulting in the postponement or


                                       14
<PAGE>
cancellation of a sale may cause the Company to miss its financial projections,
which may not be discernible until the end of a financial reporting period.
Future results may differ materially from recent results and past reported
results should not be considered as an indication of future performance. For
these reasons and the risk factors outlined below, it has been and continues to
be very difficult for the Company to accurately forecast future revenues and
operating results.

           The Company's business is dependent on the strength of the
communications industry. The communications industry, including the Company, has
been negatively affected by, among other factors, the high costs and large debt
positions incurred by some communication service providers to expand capacity
and enable the provision of future services (and the corresponding risks
associated with the development, marketing, and adoption of these services as
discussed below), including the cost of acquisitions of licenses to provide
future broadband services and reductions in actual and projected revenues and
deterioration in actual and projected operating results. In the past, these
entities have significantly reduced their actual and planned expenditures to
expand their networks and delayed and reduced the deployment of services. A
number of communication service providers have indicated the existence of
conditions of excess capacity in certain markets and have delayed the planned
introduction of new services. The Company's sales to equipment manufacturers and
application developers who supply the communications industry have been
adversely affected by the past slowdown of infrastructure purchases by
communication service providers and by declines in technology expenditures.
While there has recently been an increase in such purchases, the return of
diminished purchases may have an adverse effect on the Company's future results.
In addition to loss of revenue, weakness in the communications industry has
affected and may, in the future, affect the Company's business by increasing the
risks of credit or business failures of suppliers, customers or distributors, by
delays and defaults in customer or distributor payments, and by price reductions
instituted by competitors to retain or acquire market share.

           A limited number of customers have contributed a significant
percentage of the Company's revenues; with 71% of the Company's sales derived
from only three customers for the six-month period ended July 31, 2005. The
Company anticipates that its operating results in any given period will continue
to depend significantly upon revenues from a small number of customers. The
deferral or loss of one or more significant orders from any of these customers
could have a material adverse effect on the Company's business and operating
results.

           To the extent that the Company's customer base consolidates as a
result of the announcements of several mergers in the telecommunications
industry, the Company may have an increased dependence on a few customers who
may be able to exert increased pressure on the Company's prices and contractual
terms in general. Consolidation also may result in the loss of both existing and
potential customers of the Company.

           While the Company's plan of operations is predicated, in part, on a
recovery in expenditures by equipment manufacturers, application developers and
communication service providers, the Company could experience deterioration in
its operating results, and may determine to modify its plan for future
operations in the absence of such recovery, which may include, among other
things, reductions in its workforce.


                                       15
<PAGE>
           The Company intends to continue to make significant investment in its
business, and to examine opportunities for growth. These activities may involve
significant expenditures and obligations that cannot readily be curtailed or
reduced if anticipated growth in demand for the associated products does not
materialize or is delayed. The impact of these decisions on future financial
results cannot be predicted with assurance, and the Company's commitment to
growth may increase its vulnerability to downturns in its markets, technology
changes and shifts in competitive conditions.

           The Company intends to continue to examine opportunities for growth
through merger and acquisitions. If the Company does make acquisitions, it may
not be able to discover all potential risks and liabilities of the newly
acquired business through the due diligence process, will inherit the acquired
companies' past financial statements with their associated risks and may enter
an industry in which it has limited or no experience. Also, the Company may not
be able to successfully incorporate the personnel, operations and customers of
these companies into the Company's business. In addition, the Company may fail
to achieve the anticipated synergies from the combined businesses, including
marketing, product integration, distribution, product development and other
synergies. The integration process may further strain the Company's existing
financial and managerial controls and reporting systems and procedures. This may
result in the diversion of management and financial resources from the Company's
core business objectives. In addition, an acquisition or merger may require the
Company to utilize cash reserves, incur debt or issue equity securities, which
may result in a dilution of existing shareholders, and the Company may be
negatively impacted by the assumption of liabilities of the merged or acquired
company. 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 also may
not be able to identify suitable merger or acquisition candidates, and even if
the Company does identify suitable candidates, it may not be able to make these
transactions on commercially acceptable terms, or at all.

           Currently, the Company accounts for employee stock options in
accordance with Accounting Principles Board ("APB") Opinion No. 25 and related
Interpretations, which provide that any compensation expense relative to
employee stock options be measured based on intrinsic value of the stock
options. As a result, when options are priced at or above fair market value of
the underlying stock on the date of the grant, as currently is the Company's
practice, the Company incurs no compensation expense. In December 2004, the
Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standard ("SFAS") No. 123 (Revised 2004), "Share-Based Payment",
("SFAS No. 123(R)") which revises SFAS No. 123 and supersedes APB Opinion No.
25. In April 2005, the SEC amended Regulation S-X to modify the date for
compliance with SFAS No. 123(R). The provisions of SFAS No. 123(R) must be
applied beginning with the first interim or annual reporting period of the first
fiscal year beginning on or after June 15, 2005, which for the Company is
February 1, 2006 (the "Effective Date"). SFAS No. 123(R) requires all
share-based payments to employees, including grants of employee stock options,
to be valued at fair value on the date of grant, and to be expensed over the
applicable vesting period. Pro forma disclosure of the income statement effects
of share-based payments is no longer an alternative. Beginning on the Effective
Date, the Company must (i) expense all options granted after the Effective Date
over the applicable vesting period, and (ii) expense the non-vested portions of
existing option grants going forward over their remaining vesting period.
Compensation expense for the non-vested portions of existing option grants as of
the Effective Date will be recorded based on the fair value of the awards
previously calculated in developing the pro forma disclosures in accordance with
the provisions of SFAS No. 123. Under SFAS No. 123(R), the Company is required
to adopt a fair value-based method for measuring the compensation expense
related to employee stock and stock options awards, which will lead to
substantial additional compensation expense. Any such expense, although it will
not affect the Company's cash flows, will have a material negative impact on the
Company's reported results of operations.


                                       16
<PAGE>
           The communications industry is subject to rapid technological change.
The introduction of new technologies in the communications market, including the
delay in the adoption of such new technologies, and new alternatives for the
delivery of services are having, and can be expected to continue to have, a
profound effect on competitive conditions in the market and the success of
market participants, including the Company. The Company's continued success will
depend on the ability to correctly anticipate technological trends, to react
quickly and effectively to such trends and to enhance its existing product line
and to introduce new products on a timely and cost-effective basis. As a result,
the life cycle of the Company's product line is difficult to estimate. In
addition, changing industry and market conditions may dictate strategic
decisions to restructure some business units and discontinue others.
Discontinuing a business unit or product line may result in the Company
recording accrued liabilities for special charges, such as costs associated with
a reduction in workforce. These strategic decisions could result in changes to
determinations regarding a product's useful life and the recoverability of the
carrying basis of certain assets.

           The Company's products involve sophisticated technology that perform
critical functions to highly demanding standards. If the Company's current or
future products develop operational problems, the Company may incur fees and
penalties in connection with such 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, errors or
operational problems until after a product has been released and used by the
customer. Significant costs may be incurred to correct undetected defects,
errors or operational problems in the Company's products and these defects,
errors or operational problems could result in future lost sales. Defects,
errors or operational problems in the Company's products also may result in
product liability claims, which could cause adverse publicity and impair their
market acceptance.

           The communications industry continues to undergo significant change
as a result of deregulation and privatization worldwide, reducing restrictions
on competition in the industry. The Company believes that existing competitors
will continue to present substantial competition, and that other companies, many
with considerably greater financial, marketing and sales resources than the
Company, may enter the markets for the Company's products. In addition, the
Company may lose sales to companies operating in regions such as India and China
as a result of pricing competition because of their lower operating costs.
Moreover, as the Company enters into new markets as a result of its own research
and development efforts or acquisitions, it is likely to encounter new
competitors. The Company's products are dependent upon their ability to operate
on new and existing hardware and operating systems of other companies. Any
modifications to the Company's software needed to adapt to these hardware and
operating systems may prove to be costly, time-consuming and may not be
successful. Undetected defects could result in lost sales, adverse publicity and
other claims against the Company. The Company's new product offerings may not
properly integrate into existing platforms and the failure of new product
offerings to be accepted by the market could have a material adverse effect on
the Company's business, results of operations, and financial condition.


                                       17
<PAGE>
           The Company's products are designed to support signaling system #7
("SS7"), SIGTRAN, SIP, and Diameter protocols. If future networks do not utilize
these protocols, and the Company is unable to adapt its products to work with
other appropriate signaling protocols, its products will become less competitive
or obsolete. A reduction in the demand for these products could adversely affect
the Company's business and operating results.

           The Company's 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 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 continue to emerge, which may create pricing pressure and reduce
the Company's market share. In addition, some of the Company's customers, may in
the future, decide to internally develop their own solutions instead of
purchasing them from the Company. Increased competition could force the Company
to lower its prices or take other actions to differentiate its products.

           The Company's recent growth in certain areas has strained its
managerial and operational resources. The Company's continued growth may further
strain its resources, which could hurt its business and results of operations.
There can be no assurance that the Company's managers will be able to manage
growth effectively. To manage future growth, the Company's management must
continue to improve the Company's operational, IT and financial systems,
procedures and controls and expand, train, retain and manage its employee base.
If the Company's systems, procedures and controls are inadequate to support its
operations, the Company's expansion could slow or come to a halt, and it could
lose its opportunity to gain significant market share. Any inability to manage
growth effectively could materially harm the Company's business, results of
operations and financial condition.

           The Company's business is subject to evolving corporate governance
and public disclosure regulations that have increased both costs and the risk of
noncompliance, which could have an adverse effect on the Company's stock price.
Because the Company's common stock is publicly traded on the Nasdaq stock
market, the Company is subject to rules and regulations promulgated by a number
of governmental and self-regulated organizations, including the SEC, Nasdaq and
the Public Company Accounting Oversight Board, which monitors the accounting
practices of public companies. Many of these regulations have only recently been
enacted, and continue to evolve, making compliance more difficult and uncertain.
In addition, the Company's efforts to comply with these new regulations have
resulted in, and are likely to continue to result in, increased general and
administrative expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities. In particular, Section
404 of Sarbanes-Oxley Act of 2002 and related regulations required the Company
to include a management assessment of its internal control over financial
reporting and auditor attestation of that assessment in its annual report for
the Company's fiscal year ending January 31, 2005. While the Company has
asserted, in the management assessment of its internal control over financial
reporting filed with the Company's Annual Report on Form 10-K, that the
Company's internal control over financial reporting is effective as of January
31, 2005 and that no material weaknesses have been identified, the Company must
continue to monitor and assess the internal control over financial reporting.
The Company cannot provide any assurances that material weaknesses will not be
discovered in the future. If, in the future, the Company's management identifies


                                       18
<PAGE>
one or more material weaknesses in the internal control over financial reporting
that remain unremediated, the Company will be unable to assert that such
internal control over financial reporting is effective. If the Company is unable
to assert that the internal control over financial reporting is effective for
any given reporting period (or if the Company's auditors are unable to attest
that the management's report is fairly stated or are unable to express an
opinion on the effectiveness of the internal control over financial reporting),
the Company could lose investor confidence in the accuracy and completeness of
the Company's financial reports, which could have an adverse effect on the
Company's stock price. The effort regarding Section 404 has required, and
continues to require, the commitment of significant financial and managerial
resources.

           Changes in existing accounting or taxation rules or practices, new
accounting pronouncements or taxation rules or new interpretations of existing
accounting principles could have a significant adverse effect on the Company's
results of operations and may affect the Company's reported financial results.

           The Company has made and continues to make significant investments in
the areas of sales and marketing, and research and development. The Company's
research and development activities include ongoing significant investment in
the development of additional features and functionality for its products,
including products based on emerging open standards for Internet protocols that
facilitate the convergence of voice and data networks. The success of these
initiatives will be dependent upon, among other things, the emergence of a
market for these types of products and their acceptance by existing and new
customers. The Company believes that expenditures on these initiatives are
necessary to enhance its products in order to remain competitive, provide future
growth opportunities and to maintain the Company's presence in the market. The
Company's product initiatives reflect the Company's continuing analysis of the
future demand for new products and services, and the Company from time to time
is required to reprioritize or otherwise modify its product plans based on such
analysis. The Company's business may be adversely affected by its failure to
correctly anticipate the emergence of a market demand for certain products or
services, or delays or changes in the evolution of market opportunities. If a
sufficient market does not emerge for new or enhanced products developed by the
Company, or the Company is not successful in marketing such products, the
Company's continued growth could be adversely affected and its investment in
those products may be lost.

           Geopolitical, economic and military conditions could directly affect
the Company's operations. The outbreak of diseases, such as severe acute
respiratory syndrome ("SARS") or avian flu have curtailed and may in the future
curtail travel to and from certain countries. Restrictions on travel to and from
these and other regions on account of additional incidents of diseases, such as
SARS or avian flu could have a material adverse effect on the Company's
business, results of operations, and financial condition. The continued threat
of terrorism around the world and heightened security and military action in
response to this threat, or any future acts of terrorism, may cause further
disruptions to the Company's business. To the extent that such disruptions
result in delays or cancellations of customer orders, or the manufacture or
shipment of the Company's products, the Company's business, operating results
and financial condition could be materially and adversely affected. More
recently, the United States military involvement in overseas operations
including, for example, the war in Iraq and other armed conflicts throughout the
world, could have a material adverse effect on the Company's business, results
of operations, and financial condition.


                                       19
<PAGE>
           The Company is a highly automated business and a disruption or
failure of its systems in the event of a catastrophic event, such as a major
earthquake, tsunami or other natural disaster, cyber-attack or terrorist attack
could cause delays in completing sales and providing services. A catastrophic
event that results in the destruction or disruption of any of the Company's
critical business systems could severely affect its ability to conduct normal
business operations and, as a result, the financial condition and operating
results could be adversely affected. "Hackers" and others have, in the past,
created a number of computer viruses or otherwise initiated "denial of service"
attacks on computer networks and systems. The Company's information technology
infrastructure is regularly subject to various attacks and intrusion efforts of
differing seriousness and sophistication. If such "hackers" are 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, a
security breach could harm the Company's reputation. Even the perception of
security risks, whether or not valid, could inhibit market acceptance of the
Company's products and could harm the Company's business, financial condition
and operating results. While the Company diligently maintains its information
technology infrastructure and continuously implements protections against such
viruses, electronic break-ins, disruptions or intrusions, if the defensive
measures fail or should similar defensive measures by the Company's customers
fail, the Company's business could be materially and adversely affected.

           The Company currently derives a majority of its total sales from
customers outside of the United States. International transactions involve
particular risks, including political decisions affecting tariffs and trade
conditions, rapid and unforeseen changes in economic conditions in individual
countries, difficulty in enforcing intellectual property rights, turbulence in
foreign currency and credit markets, and increased costs resulting from lack of
proximity to the customer. In addition, legal uncertainties regarding liability,
compliance with local laws and regulations, local taxes, labor laws, employee
benefits, currency restrictions, difficulty in accounts receivable collection,
longer collection periods and other requirements may have a negative impact on
the Company's operating results. Unforeseen changes in the regulatory
environment, including, but not limited to changes in product requirements also
may have an impact on the Company's revenues, operations and/or costs in any
given part of the world. New manufacturing requirements for the Company's
products could require the Company to redesign or find alternatives to such
products, resulting in delays and possibly lost sales.

           In August 2005, the Waste Electrical and Electronic Equipment
Directive (the "WEEE Directive") became effective in the European Union. The
WEEE Directive requires producers of certain electrical and electronic equipment
to be financially responsible for the future disposal costs of this equipment
sold within the European Union. In July 2006, the Restriction of the Use of
Certain Hazardous Substances in Electrical and Electronic Equipment (the "RoHS
Directive") will become effective in the European Union. The RoHS Directive
restricts the use of certain hazardous substances, including mercury, lead,
cadmium, hexavalent chromium, and certain flame retardants, in the construction
of component parts of certain electrical and electronic equipment sold within
the European Union. The Company is currently making preparations to comply with
these directives to the extent applicable to the hardware contained in its
solutions. As part of this process, the Company will need to ensure that it has
a supply of compliant components from its suppliers. Ensuring compliance with
these directives and integrating compliance activities with suppliers will
result in additional costs to the Company and may result in disruptions to
operations. The Company cannot currently estimate the extent of such additional
costs or potential disruptions. However, to the extent that any such costs or
disruptions are substantial, the Company's financial results could be materially
and adversely affected.


                                       20
<PAGE>
           All of the Company's products are of US origin and are classified
under the US export regulations such that currently no licenses are required to
export to the countries with which the Company currently conducts business. In
the future, the Company may be required to obtain export licenses and other
authorizations from applicable governmental authorities for certain countries
within which it conducts business. The failure to receive any required license
or authorization would hinder the Company's ability to sell its products and
could adversely affect the Company's business, results of operations, financial
condition, and could subject the Company to civil and criminal penalties. Export
laws and regulations are revised from time to time and can be extremely complex
in their application. If the Company is found not to have complied with
applicable export control laws, the Company may be penalized by, among other
things, having its ability to receive export licenses curtailed or eliminated.
The Company's failure to comply with applicable export laws would hinder its
ability to sell its products and could materially and adversely affect its
business, financial condition and results of operations.

           International sales are predominately denominated in United States
dollars and the Company has not been exposed to material fluctuations in foreign
currency exchange rates related to sales. However, the Company expects that in
future periods, a greater portion of international sales may be denominated in
currencies other than the United States dollar, which could expose it to losses
and gains on foreign currency transactions. The Company does have certain
expenses denominated in foreign currency. From time to time, the Company may
choose to limit its exposure by utilizing hedging strategies. There can be no
assurance that any such hedging strategies that the Company undertakes would be
successful in avoiding exchange rate losses.

           In order to increase the Company's revenues, the Company will need to
attract additional customers on an ongoing basis. In addition, since the
Company's products have long sales cycles that typically range from six to
twelve months, the Company's ability to forecast the timing and amount for
specific sales is limited. The loss or deferral of one or more significant sales
could have a material adverse effect on the Company's operating results in any
fiscal quarter, especially if there are significant sales and marketing expenses
associated with the deferred or lost sales. The Company's software products are
primarily sold to equipment manufacturers and application developers, who
integrate its products with their products and sell them to communications
service providers. The success of the Company's business and operating results
is dependent upon its channel and marketing relationships with these
manufacturers and developers and the successful development and deployment of
their products. If the Company cannot successfully establish channel and
marketing relationships with leading equipment manufacturers and application
developers or maintain these relationships on favorable terms, or the Company's
sales channels are affected by economic weakness, the Company's business and
operating results may be adversely affected.

           Because the Company relies on a limited number of independent
manufacturers to produce boards for its products, if these manufacturers
experience financial, operational or other difficulties, the Company may
experience disruptions to its product supply. The Company may not be able to
find alternate manufacturers that meet its requirements and existing or
alternative sources for boards may not continue to be available at favorable
prices. The Company also relies on a limited number of suppliers for its board
components and it does not have any long-term supply agreements. Thus, if there
is a shortage of supply for these components, the Company may experience an
interruption in its product supply.


                                       21
<PAGE>
           The Company's success is dependent on recruiting and retaining key
management and highly skilled technical, managerial, sales, and marketing
personnel. The market for highly skilled personnel remains very competitive. The
Company has in the past and may in the future experience difficulty in
recruiting or retaining qualified personnel due to, among other reasons, the
market demand or constraints on the Company's ability to use equity compensation
due to recent changes in accounting rules. The Company's ability to attract and
retain employees also may be affected by cost control actions, which in the past
and may again in the future, include reductions in the Company's workforce and
the associated reorganization of operations. If the costs of attracting and
retaining qualified personnel increase significantly, the Company's financial
results could be materially and adversely affected.

           While the Company generally requires employees, independent
contractors and consultants to execute non-competition and confidentiality
agreements, the Company's intellectual property or proprietary rights could be
infringed or misappropriated, which could result in expensive and protracted
litigation. The Company relies on a combination of patent, copyright, trade
secret and trademark law to protect its technology. Despite the Company's
efforts to protect its intellectual property and proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use its
products or technology. Effectively policing the unauthorized use of the
Company's products is time-consuming and costly, and there can be no assurance
that the steps taken by the Company will prevent misappropriation of its
technology, particularly in foreign countries where in many instances the local
laws or legal systems do not offer the same level of protection as in the United
States.

           If others claim that the Company's products infringe their
intellectual property rights, the Company may be forced to seek expensive
licenses, reengineer its products, engage in expensive and time-consuming
litigation or stop marketing its products. The Company attempts to avoid
infringing known proprietary rights of third parties in its product development
efforts. The Company does not, however, regularly conduct comprehensive patent
searches to determine whether the technology used in its products infringes
patents held by third parties. There are many issued patents, as well as patent
applications in the fields, in which the Company is engaged. Because patent
applications in the United States are not publicly disclosed until published or
issued, applications may have been filed which relate to the Company's software
and products. If the Company were to discover that its products violated or
potentially violated third-party proprietary rights, it might not be able to
continue offering these products without obtaining licenses for those products
or without substantial reengineering of the products. Any reengineering effort
may not be successful and the Company cannot be certain as to whether such
licenses would be available. Even if such licenses were available, the Company
cannot be certain that any licenses would be offered to the Company on
commercially reasonable terms.

           While the Company occasionally files patent applications, it cannot
be assured that patents will be issued on the basis of such applications or
that, if such patents are issued, they will be sufficiently broad to protect its
technology. In addition, the Company cannot be assured that any patents issued
to it will not be challenged, invalidated or circumvented.


                                       22
<PAGE>
           Substantial litigation regarding intellectual property rights exists
in the communications industry, and the Company expects that its products may be
increasingly subject to third-party infringement claims as the number of
competitors in its industry segments grows and the functionality of software
products in different industry segments overlaps. In addition, the Company has
agreed to indemnify customers in certain situations should it be determined that
its products infringe on the proprietary rights of third parties. Any
third-party infringement claims could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
and service delays or require the Company to enter into royalty or licensing
agreements. Any royalty or licensing arrangements, if required, may not be
available on terms acceptable to the Company, if at all. A successful claim of
infringement against the Company and its failure or inability to license the
infringed or similar technology could have a material adverse effect on its
business, financial condition and results of operations.

           The Company holds a large proportion of its net assets in short-term
investments. Such investments subject the Company to the risks inherent in the
capital markets generally, and to the performance of other businesses over which
it has no direct control. Given the relatively high proportion of the Company's
liquid assets relative to its overall size, the results of its operations are
materially affected by the results of the Company's capital management and
investment activities and the risks associated with those activities. In
addition, although interest rates have risen recently, low interest rates have
in the past and may in the future have an adverse impact on the Company's
results of operations.

           Comverse Technology, Inc. ("CTI") beneficially owns a majority of the
Company's outstanding shares of common stock. Consequently, CTI effectively
controls the outcome of all matters submitted for shareholder 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, CTI has a controlling influence on the Company's management,
direction and policies, including the ability to appoint and remove officers. As
a result, CTI may cause the Company to take actions that may not be aligned with
the Company's interests or those of its other shareholders. For example, CTI may
prevent or delay any transaction involving a change in control of the Company or
in which the Company's shareholders might receive a premium over the prevailing
market price for their shares.

           The Company issues stock options as a key component of its overall
compensation. There is growing pressure on public companies from shareholders
generally and various organizations to reduce the rate at which companies,
including the Company, issue stock options to employees, which may make it more
difficult to obtain shareholder approval of equity compensation plans when
required. In addition, FASB has adopted changes to generally accepted accounting
principles ("GAAP") that will require the Company to adopt a different method of
determining the compensation expense for its employee stock options and employee
stock purchase plan beginning in the first quarter of fiscal year 2006. As a
result, the Company has terminated its employee stock purchase plan. In
addition, the Company believes expensing stock options will increase shareholder
pressure to limit future option grants and could make it more difficult for the
Company to grant stock options to employees in the future. As a result, the
Company may lose top employees to non-public, start-up companies or may
generally find it more difficult to attract, retain and motivate employees,
either of which could materially and adversely affect the Company's business,
results of operations and financial condition.


                                       23
<PAGE>
           The Company's operating results have fluctuated in the past and may
do so in the future. 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, which at times is unrelated to the operating
performance of a company. 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 the communications industry in
general, and the Company's business segment in particular, which may not have
any direct relationship with the Company's business or prospects.

           The Company has not declared or paid any cash dividends on its common
stock and currently does not expect to pay cash dividends in the near future.
Consequently, any economic return to a shareholder may be derived, if at all,
from appreciation in the price of the Company's stock, and not as a result of
dividend payments.

           In addition, the Company's board of directors has the authority to
cause the Company to issue, without vote or action of the Company's shareholders
up to 10,000,000 shares of undesignated stock, and has the ability to divide
such undesignated shares into one or more classes of common or preferred stock
and to further divide any classes of preferred stock into series. Any such
series of preferred stock could contain dividend rights, conversion rights,
voting rights, terms of redemption, redemption prices, liquidation preferences
or other rights superior to the rights of holders of its common stock. The
Company's board of directors has no present intention of issuing any such
preferred series, but reserves the right to do so in the future. The Company is
also authorized to issue, without shareholder approval, common stock under
certain circumstances. The issuance of either preferred or common stock 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.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

           The Company is exposed to market risk from changes in interest rates.
Various financial instruments held by the Company are sensitive to changes in
interest rates. Interest rate changes could result in an increase or decrease in
interest income as well as in gains or losses in the market value of the
Company's debt security investments due to differences between the market
interest rates and rates at the date of purchase of these investments.

           The Company places its cash investments with high credit-quality
financial institutions and currently invests primarily in money market funds
placed with major banks and financial institutions, Auction Rate Securities,
corporate and municipal short and medium-term notes, asset-backed securities,
and United States government and United States government corporation and agency
obligations and/or mutual funds investing in the like. The Company has
investment guidelines relative to diversification and maturities designed to


                                       24
<PAGE>
maintain safety and liquidity. As of January 31, 2005, the Company had cash and
cash equivalents totaling approximately $19,372,000 and had short-term
investments totaling approximately $227,300,000. If, during the year ended
January 31, 2006, average short-term interest rates increase or decrease by 50
basis points relative to average rates realized during the year ended January
31, 2005, the Company's projected interest income from cash and cash equivalents
and short-term investments would increase or decrease by approximately
$1,233,000, assuming a similar level of investments in the year ended January
31, 2006.

           Due to the short-term nature of the Company's cash and cash
equivalents, the carrying value approximates market value and are not generally
subject to price risk due to fluctuations in interest rates. The Company's
short-term investments are subject to price risk due to fluctuations in interest
rates. Neither a 10% increase nor decrease in prices would have a material
effect on the Company's consolidated financial statements. All short-term
investments are considered to be available-for-sale, accounted for at fair
value, with resulting unrealized gains or losses reported as a separate
component of shareholders' equity. If these available-for-sale securities
experience declines in fair value that are considered other-than-temporary, an
additional loss would be reflected in net income (loss) in the period when the
subsequent impairment becomes apparent. See Note 2 of the financial statements
in the Company's Annual Report on Form 10-K for the year ended January 31, 2005
for more information regarding the Company's short-term investments.


ITEM 4.  CONTROLS AND PROCEDURES.

(a) The Company's management evaluated, with the participation of the Company's
principal executive and principal financial officers, the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), as of July 31, 2005. Based on their evaluation, the Company's principal
executive and principal financial officers concluded that the Company's
disclosure controls and procedures were effective as of July 31, 2005.

(b) There has been no change in the Company's internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the Company's fiscal quarter ended July 31, 2005, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.


                                       25
<PAGE>
                                     PART II


ITEM 1.  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 currently party to any pending legal actions that could
reasonably be expected to have a material adverse effect on its business,
financial condition and results of operations.


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

           At the Company's annual meeting of shareholders held on June 15,
2005, for which proxies were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, the following matters were voted
upon by shareholders:

           1. The election of nine directors to serve as the Board of Directors
of the Company until the next annual meeting of shareholders and the election of
their qualified successors.

           2. A proposal to adopt the Company's 2005 Stock Incentive
Compensation Plan, under which up to 1,000,000 shares of the Company's common
stock, no par value, may be issued as equity-based compensation to employees,
directors and consultants of the Company and its subsidiary and affiliates.

           3. A proposal to ratify the engagement of Deloitte & Touche LLP as
independent registered public accounting firm of the Company for the year ending
January 31, 2006.



                                       26
<PAGE>
           The nominees for directors were elected based upon the following
votes:

  Nominee                         Votes For                 Votes Withheld

Kobi Alexander                    37,084,720                    5,548,107
Paul D. Baker                     37,307,939                    5,324,888
Michael J. Chill                  41,576,390                    1,056,437
Ron Hiram                         40,963,226                    1,669,601
Yaacov Koren                      37,490,779                    5,142,048
David Kreinberg                   36,078,767                    6,554,060
Rex McWilliams                    36,845,652                    5,787,175
Shawn K. Osborne                  37,335,414                    5,297,413
Paul L. Robinson                  37,308,239                    5,324,588

           The adoption of the Company's 2005 Stock Incentive Compensation Plan
was approved as follows:

                  Votes for Approval - 34,847,108

                  Votes Against - 6,334,773

                  Abstentions - 2,162

           The ratification of the engagement of Deloitte & Touche LLP as
independent registered public accounting firm of the Company for the year ending
January 31, 2006 was approved as follows:

                  Votes for Approval - 41,191,796

                  Votes Against - 1,439,990

                  Abstentions - 1,041


                                       27
<PAGE>
ITEM 6.  EXHIBITS.

(a)  Exhibit Index.
     --------------

         31.1       Certification of Chief Executive Officer pursuant to Rule
                    13a-14(a) of the Exchange Act, as adopted pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002.

         31.2       Certification of Chief Financial Officer pursuant to Rule
                    13a-14(a) of the Exchange Act, as adopted pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002.

         32.1       Certifications of Chief Executive Officer and Chief
                    Financial Officer pursuant to Rule 13a-14(b) of the Exchange
                    Act and 18 U.S.C. Section 1350, as adopted pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002.








                                       28
<PAGE>
                                   SIGNATURES


           Pursuant to the requirements 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.


                                        ULTICOM, INC.


Dated:   September 8, 2005              /s/ Shawn K. Osborne
                                        ----------------------------------------
                                        Shawn K. Osborne
                                        President and Chief Executive Officer


Dated:   September 8, 2005              /s/ Mark A. Kissman
                                        ----------------------------------------
                                        Mark A. Kissman
                                        Vice President of Finance and
                                        Chief Financial Officer







                                       29