1166388--5/19/2010--VERINT_SYSTEMS

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We have identified material weaknesses in our internal control over financial reporting as of January 31, 2010 that, if not remedied, could result in a failure to prevent or timely detect a material misstatement of our annual or interim financial statements. The extraordinary processes underlying the preparation of the financial statements contained in this report may not have been adequate and our financial statements remain subject to the risk of future restatement. We cannot assure that our regular financial statement preparation and reporting processes are or will be adequate or that future restatements will not be required. We cannot assure you that our common stock will be re-listed, or that once re-listed, it will remain listed. The circumstances which gave rise to our internal investigation, restatement, and extended filing delay continue to create the risk of litigation against us, which could be expensive and could damage our business. We were the subject of an SEC investigation relating to our reserve and stock option accounting practices and are the subject of an SEC proceeding relating to our failure to timely file required SEC reports. These government inquiries or any future inquiries to which we may become subject could result in penalties and/or other remedies that could have a material adverse effect on our financial condition and results of operation. We may not have sufficient insurance to cover our liability in any future litigation claims either due to coverage limits or as a result of insurance carriers seeking to deny coverage of such claims. We have been adversely affected as a result of being a consolidated, controlled subsidiary of Comverse and may continue to be adversely affected in the future. Our previous inclusion in Comverse s consolidated tax group and our related tax sharing agreement with Comverse may expose us to additional tax liabilities. Comverse can control our business and affairs, including our board of directors. We may lose business opportunities to Comverse that might otherwise be available to us. As a result of the delay in completing our financial statements, the timing and cost of raising future capital may be adversely affected. Risks Related to Our Business Our business is impacted by changes in general economic conditions and information technology spending in particular. Intense competition in our markets and competitors with greater resources than us may limit our market share, profitability, and growth. The industry in which we operate is characterized by rapid technological changes and evolving industry standards, and if we cannot anticipate and react to such changes our results may suffer. Because many of our solutions are sophisticated, we must invest greater resources in sales and installation processes with greater risk of loss if we are not successful. Many of our sales are made by competitive bid, which often requires us to expend significant resources, which we may not recoup. The nature of our business and our varying business models may impact and make it difficult for us to predict our operating results. If we are unable to maintain our relationships with resellers, systems integrators, and other third parties that market and sell our products, our business, financial condition, results of operations, and ability to grow could be materially adversely impacted. Certain provisions in agreements that we have entered into may expose us to liability that is not limited in amount by the terms of the contract. Our products may contain undetected defects which could impair their market acceptance and may result in customer claims for substantial damages if our products fail to perform properly. If the regulatory environment does not evolve as expected or does not favor our products, our results may suffer. For certain products and components, we rely on a limited number of suppliers and manufacturers and if these relationships are interrupted we may not be able to obtain substitute suppliers or manufacturers on favorable terms or at all. If we cannot recruit or retain qualified personnel, our ability to operate and grow our business may be limited. Because we have significant foreign operations, we are subject to geopolitical and other risks that could materially adversely affect our business. Conditions in Israel may materially adversely affect our operations and personnel and may limit our ability to produce and sell our products. We are dependent on contracts with governments around the world for a significant portion of our revenue. These contracts expose us to additional business risks and compliance obligations. We may not be able to receive or retain the necessary licenses or authorizations required for us to export some of our products that we develop or manufacture in specific countries. U.S. and foreign governments could refuse to buy our Communications Intelligence solutions or could deactivate our security clearances in their countries thereby restricting or eliminating our ability to sell these solutions in those countries and perhaps other countries influenced by such a decision. The mishandling or even the perception of mishandling of sensitive information could harm our business. Our intellectual property may not be adequately protected. Our products may infringe or may be alleged to infringe on the intellectual property rights of others, which could lead to costly disputes or disruptions for us and may require us to indemnify our customers and resellers for any damages they suffer. Reliance on or loss of third-party licensing agreements could materially adversely affect our business, financial condition, and results of operations. Use of free or open source software could expose our products to unintended restrictions and could materially adversely affect our business, financial condition, and results of operations. Risks Related to Our Capital Structure and Finances We have incurred significant indebtedness as a result of the acquisition of Witness, which makes us highly leveraged, subjects us to restrictive covenants, and could adversely affect our operations The rights of the holders of shares of our common stock are subject to, and may be adversely affected by, the rights of holders of the preferred stock that we issued to Comverse in connection with the Witness acquisition. Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments. If our goodwill or other intangible assets become impaired, our financial condition and results of operations would be negatively affected. Our international operations subject us to currency exchange risk. Our ability to realize value from and use our NOLs will impact our results and tax liability. Research and development and tax benefits we receive in Israel may be reduced or eliminated in the future and our receipt of these benefits subjects us to certain restrictions.

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1166388--5/19/2010--VERINT_SYSTEMS_INC