8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 8-K

Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

November 26, 2007

NUANCE COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	000-27038	94-3156479
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1 Wayside Road

Burlington, Massachusetts 01803

(Address of Principal Executive Offices, including Zip Code)

(781) 565-5000

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.01. Completion of Acquisition or Disposition of Assets.
	Item 9.01. Financial Statements and Exhibits
SIGNATURE
EXHIBIT INDEX
EX-23.1 - Consent of Independent Public Accountants
EX-99.1 - Consolidated financial statements of Viecore, Inc.
EX-99.2 - Consolidated financial statements of Viecore, Inc.
EX-99.3 - Unaudited pro forma combined financial statements

Item 2.01.   Completion of Acquisition or Disposition of Assets.

On November 26, 2007, Nuance Communications, Inc. (“Nuance”) acquired all of the outstanding capital stock of Viecore, Inc. (“Viecore”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among Nuance, Vanhalen Acquisition Corporation (“Sub I”), Vanhalen Acquisition LLC (“Sub II”, and with Sub I, the “Subs”), Viecore, U.S. Bank National Association, as escrow agent, and Thoma Cressey Bravo, Inc., as the shareholder representative. Pursuant to the terms of the Merger Agreement, Sub I was merged (the “First Step Merger”) with and into Viecore with Viecore continuing as the interim surviving corporation, and subsequently, Viecore will be merged (the “Second Step Merger” and together with the First Step Merger, the “Merger”) with and into Sub II with Sub II continuing as the surviving entity and a wholly owned subsidiary of Nuance. The aggregate consideration delivered to the former stockholders of Viecore consisted of 5,017,126 shares of Nuance common stock and a payment of approximately $8.4 million in cash. The terms of the Merger are more fully described in the Merger Agreement, filed by Nuance as Exhibit 2.1 to the Current Report on Form 8-K filed on October 25, 2007, and incorporated herein by reference.

Item 9.01.   Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

(1) The historical financial statements of Viecore, including Viecore’s consolidated balance sheets as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2006 are being filed as Exhibit 99.1 to this Form 8-K.

(2) The unaudited financial statements of Viecore, including Viecore’s consolidated balance sheet as of September 30, 2007, and the consolidated statements of income and cash flows for the nine month periods ended September 30, 2007 and 2006, are being filed as Exhibit 99.2 to this Form 8-K.

(b) Pro Forma Financial Information

(1) The unaudited pro forma combined financial statements of Nuance Communications, Inc. for the twelve months ended September 30, 2007, giving effect to the acquisition of Viecore, Inc., are included within Exhibit 99.3 to this Form 8-K.

(d) Exhibits

2	.1*	Agreement and Plan of Merger by and among Nuance Communications, Inc., Vanhalen Acquisition Corporation, Vanhalen Acquisition LLC, Viecore, Inc., U.S. Bank National Association, as Escrow Agent, and Thoma Cressey Bravo, Inc., as Stockholder Representative, dated as of October 21, 2007 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 25, 2007).
23	.1	Consent of Independent Auditors.
99	.1	Consolidated financial statements of Viecore, Inc., as of December 31, 2006 and 2005, and for each of the three years in the period ended December 31, 2006.
99	.2	Consolidated unaudited financial statements of Viecore, Inc., as of September 30, 2007, and for the nine month periods ended September 30, 2007 and 2006.
99	.3	Unaudited pro forma combined financial statements.

* Previously filed.

2

SIGNATURE

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 hereunto duly authorized.

NUANCE COMMUNICATIONS, INC.

By:  /s/  James R. Arnold, Jr.          

James R. Arnold, Jr.

Chief Financial Officer

Date: November 29, 2007

3

EXHIBIT INDEX

Exhibit No.			Description
	2	.1*	Agreement and Plan of Merger by and among Nuance Communications, Inc., Vanhalen Acquisition Corporation, Vanhalen Acquisition LLC, Viecore, Inc., U.S. Bank National Association, as Escrow Agent, and Thoma Cressey Bravo, Inc., as Stockholder Representative, dated as of October 21, 2007 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 25, 2007).
	23	.1	Consent of Independent Auditors.
	99	.1	Consolidated financial statements of Viecore, Inc., as of December 31, 2006 and 2005, and for each of the three years in the period ended December 31, 2006.
	99	.2	Consolidated unaudited financial statements of Viecore, Inc., as of September 30, 2007, and for the nine month periods ended September 30, 2007 and 2006.
	99	.3	Unaudited pro forma combined financial statements.

* Previously filed.

4

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the inclusion of our report dated October 29, 2007 relating to the consolidated financial statements of Viecore, Inc. as of December 31, 2006 and 2005, and for each of the years in the three year period ended December 31, 2006 included in this Form 8-K of Nuance Communications, Inc., into Nuance Communications, Inc.’s previously filed Registration Statements (Forms S-3 No. 333-100648, 333-142182 and 333-61862 and Forms S-8 No. 333-141819, 333-134687, 333-128396, 333-124856, 333-122718, 333-108767, 333-99729, 333-75406, 333-49656, 333-33464, 333-30518, 333-74343, 333-45425, 333-145971, 333-143465, 333-142183 and 333-04131).

/s/  WithumSmith+Brown, P.C.

WithumSmith+Brown, P.C.

Morristown, New Jersey

November 26, 2007

EX-99.1

Exhibit 99.1

VIECORE, INC. AND SUBSIDIARIES

Consolidated Financial Statements

December 31, 2006, 2005, and 2004

With Independent Auditors’ Report

Viecore, Inc. and Subsidiaries

Table of Contents

December 31, 2006, 2005 and 2004

	Page(s)
Independent Auditors’ Report		2
Financial Statements
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Shareholders’ Equity		5
Consolidated Statements of Cash Flows		6
Notes to Consolidated Financial Statements		7-20

Independent Auditors’ Report

Board of Directors

Viecore, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Viecore, Inc. and Subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for the years ended December 31, 2006, 2005, and 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, revised as described in Note 3, the consolidated financial position of Viecore, Inc. and Subsidiaries at December 31, 2006 and 2005 and the consolidated results of their operations and their cash flows for each of the years in the three year period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the consolidated financial statements, the Company has restated their 2005 and 2004 financial statements as a result of revising their recognition of revenue and costs on certain customer arrangements.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for stock-based compensation in 2006.

/s/  WithumSmith+Brown, P.C.

Morristown, New Jersey

October 29, 2007

2

Viecore, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2006 and 2005

	2006			2005
				(As restated, see Note 3)
ASSETS
Current assets
Cash and cash equivalents	$	11,338,000		$	11,617,000
Accounts receivable, net of allowances of $250,000 and $270,000 at December 31, 2006 and 2005, respectively		13,205,000			12,592,000
Costs and estimated earnings in excess of billings on uncompleted contracts (Note 5)		2,610,000			2,534,000
Deferred costs — customer arrangements		4,426,000			2,690,000
Deferred income taxes		2,245,000			2,164,000
Other current assets, principally prepaid expenses		914,000			688,000
Total current assets		34,738,000			32,285,000
Deferred income taxes		1,474,000			1,616,000
Property and equipment, net		1,354,000			1,654,000
Other assets		75,000			123,000
Total Assets	$	37,641,000		$	35,678,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	334,000		$	312,000
Accounts payable		2,878,000			2,824,000
Accrued expenses		7,862,000			5,999,000
Deferred revenue		13,060,000			9,463,000
Billings in excess of costs and estimated earnings on uncompleted contracts (Note 5)		4,522,000			3,540,000
Accrued income taxes		313,000			350,000
Total current liabilities		28,969,000			22,488,000
Long-term debt, net of current portion		354,000			688,000
Total liabilities		29,323,000			23,176,000
Commitments and contingencies		—			—
Shareholders’ equity (Note 10):
Class A cumulative redeemable convertible 8% preferred stock $1,000 par value; 100,000 shares authorized, 60,390 shares issued and outstanding (liquidation value of $74,482,000 and $76,607,000 at December 31, 2006 and 2005, respectively)		74,482,000			76,607,000
Class B cumulative redeemable convertible 6% preferred stock $1,000 par value; 2,500 shares authorized, issued and outstanding; (liquidation value of $3,195,000 and $3,009,000 at December 31, 2006 and 2005, respectively)		3,195,000			3,009,000
Common stock, $0.001 par value; 50,000,000 shares authorized; 30,736,907 and 30,669,707 shares issued and outstanding, at December 31, 2006 and 2005, respectively		31,000			31,000
Additional paid in capital		106,000			42,000
Accumulated deficit		(69,496,000	)		(67,187,000	)
Total shareholders’ equity		8,318,000			12,502,000
Total liabilities and shareholders’ equity	$	37,641,000		$	35,678,000

The Notes to Consolidated Financial Statements are an integral part of these statements.

3

Viecore, Inc. and Subsidiaries

Consolidated Statements of Income

Years Ended December 31, 2006, 2005 and 2004

	2006			2005			2004
				(As restated, see Note 3)			(As restated, see Note 3)
Revenues	$	59,657,000		$	49,942,000		$	46,855,000
Cost of revenues		36,566,000			30,481,000			29,757,000
Gross profit		23,091,000			19,461,000			17,098,000
Operating expenses:
Selling and marketing expenses		6,048,000			5,191,000			4,517,000
General and administrative expenses		11,089,000			9,755,000			9,149,000
Total operating expenses		17,137,000			14,946,000			13,666,000
Income from operations		5,954,000			4,515,000			3,432,000
Other income (expenses):
Gain on sale of VIA assets		—			—			111,000
Recognition of foreign currency translation gain		—			—			318,000
Other expenses		—			—			(40,000	)
Interest income		362,000			301,000			88,000
Interest expense		(59,000	)		(2,000	)		—
Total other income		303,000			299,000			477,000
Income before income taxes		6,257,000			4,814,000			3,909,000
Provision for income taxes		2,535,000			1,999,000			1,588,000
Net income	$	3,722,000		$	2,815,000		$	2,321,000

The Notes to Consolidated Financial Statements are an integral part of these statements.

4

Viecore, Inc

Consolidated Statements of Shareholders’ Equity

For the Years Ended December 31, 2006, 2005 and 2004

																	Other
	Class A Preferred Stock					Class B Preferred Stock					Common Stock				Additional Paid		Comprehensive
	Shares		Amount			Shares		Amount			Shares		Amount		in Capital		Gain (Loss)			Accumulated Deficit			Total
Balance at December 31, 2003 (As restated, see Note 3)		60,390	$	72,695,000			2,500	$	2,683,000			30,665,394	$	31,000	$	32,000	$	429,000		$	(60,570,000	)	$	15,300,000
Dividends accrued				5,523,000					166,000												(5,689,000	)		—
Dividends paid				(7,500,000	)				(15,000	)														(7,515,000	)
Comprehensive Income
Net income																					2,321,000			2,321,000
Other comprehensive income Recognition of foreign currency translation gain																		(429,000	)					(429,000	)
Total Comprehensive Income																								1,892,000
Balance at December 31, 2004 (As restated, see Note 3)		60,390		70,718,000			2,500		2,834,000			30,665,394		31,000		32,000		—			(63,938,000	)		9,677,000
Dividends accrued				5,889,000					175,000												(6,064,000	)		—
Exercise of stock options												4,313				10,000								10,000
Net income																					2,815,000			2,815,000
Balance at December 31, 2005 (As restated, see Note 3)		60,390		76,607,000			2,500		3,009,000			30,669,707		31,000		42,000		—			(67,187,000	)		12,502,000
Dividends accrued				5,845,000					186,000												(6,031,000	)		—
Dividends paid				(7,970,000	)																			(7,970,000	)
Exercise of stock options												67,200				58,000								58,000
Grant of stock options to employees under stock option plan																6,000								6,000
Net income																					3,722,000			3,722,000
Balance at December 31, 2006		60,390	$	74,482,000			2,500	$	3,195,000			30,736,907	$	31,000	$	106,000	$	—		$	(69,496,000	)	$	8,318,000

The Notes to Consolidated Financial Statements are an integral part of these statements.

5

Viecore, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2006, 2005 and 2004

	2006			2005			2004
				(As restated,			(As restated,
				see Note 3)			see Note 3)
Cash flows from operating activities
Net income	$	3,722,000		$	2,815,000		$	2,321,000
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation expense		6,000			—			—
Depreciation		803,000			594,000			614,000
Gain on sale of assets		—			—			(111,000	)
Recognition of foreign currency translation gain		—			—			(318,000	)
Disposal of property and equipment		—			—			24,000
Deferred income taxes		60,000			418,000			1,101,000
Deferred costs — customer arrangements		(1,736,000	)		(1,214,000	)		1,301,000
Benefit for doubtful accounts		(20,000	)		(50,000	)		(100,000	)
Changes in operating assets and liabilities:
Accounts receivable		(593,000	)		(3,033,000	)		536,000
Costs and estimated earnings in excess of billings on uncompleted contracts		(76,000	)		(1,910,000	)		984,000
Prepaid income taxes		—			17,000			(17,000	)
Other current assets, principally prepaid expenses		(226,000	)		6,000			164,000
Other assets		49,000			(88,000	)		119,000
Accounts payable		55,000			1,483,000			(672,000	)
Accrued expenses		1,863,000			1,437,000			476,000
Deferred revenue		3,597,000			2,702,000			157,000
Accrued income taxes		(37,000	)		234,000			116,000
Billings in excess of costs and estimated earnings on uncompleted contracts		982,000			1,045,000			(2,275,000	)
Net cash provided by operating activities		8,449,000			4,456,000			4,420,000
Cash flows from investing activities
Purchases of property and equipment		(504,000	)		(1,396,000	)		(492,000	)
Net cash used in investing activities		(504,000	)		(1,396,000	)		(492,000	)
Cash flows from financing activities
Proceeds from exercise of stock options		58,000			10,000			—
Proceeds from term loan		—			1,000,000			—
Preferred stock dividends paid		(7,970,000	)		—			(7,515,000	)
Payments on term loan		(312,000	)		—			—
								—
Net cash provided by (used in) financing activities		(8,224,000	)		1,010,000			(7,515,000	)
Net change in cash and cash equivalents		(279,000	)		4,070,000			(3,587,000	)
Cash and cash equivalents, beginning of year		11,617,000			7,547,000			11,134,000
Cash and cash equivalents, end of year	$	11,338,000		$	11,617,000		$	7,547,000
Supplemental cash flow information
Cash paid for income taxes	$	2,318,000		$	1,327,000		$	367,000
Cash paid for interest	$	59,000		$	—		$	—

The Notes to Consolidated Financial Statements are an integral part of these statements.

6

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1.   Nature of Business, Basis of Presentation

The Company is a privately owned information technology consulting and a self-service application solutions provider for financial services and contact center customers.

The consolidated financial statements include the accounts of Viecore, Inc. (“VI”) and its wholly-owned subsidiaries, Viecore (Australia) Pty Ltd. (“VIA”) and Viecore FSD (“FSD” see Note 4), collectively, the “Company.” All intercompany accounts and transactions have been eliminated. In 2004, the Company adopted a definitive plan to cease VIA operations and sold a majority of its customer contracts and maintenance agreements to a third party. The effects of this plan resulted in a net gain of $111,000 in 2004. There are no significant assets or liabilities remaining at December 31, 2006 and 2005. VIA’s revenues were approximately $750,000 in 2004 and none in subsequent years. VIA is in the process of finalizing the formal liquidation under Australian regulations, and the 2004 statement of income includes a non-operating gain of $318,000 which represents the unrealized foreign exchange translation gain when the liquidation process commenced. The Company does not expect the ultimate financial effects of the formal liquidation of VIA to have a material effect on its consolidated financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2006 presentation.

Company Capital Structure

On April 1, 2000, the Company’s shareholders and VI sold 3,275,000 and 259,000 shares, respectively, of common stock to an investor at $11.60 per share, which resulted in a change of control. In connection therewith, the Company was re-capitalized to create two classes of capital stock, (1) common stock with a par value of $.001 per share and (2) Class A preferred stock with a par value of $1,000 per share. Each share of existing capital stock was exchanged for 5.80 shares of common stock and .011484 shares of preferred stock. The sale of stock and re-capitalization transaction referred to above are collectively known as the “Re-Capitalization Transaction” (also see Note 10).

2.   Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the determination of the allowance for doubtful accounts, valuation allowances against deferred tax assets, profitability estimates on uncompleted contracts and the related time and resources required to complete such contracts and accrued expenses.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with an original maturity of three months or less to be cash equivalents. The carrying values of cash equivalents approximate fair value.

Accounts Receivable

Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within thirty days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Customer account balances with invoices dated over thirty days old are considered delinquent. The

7

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Company does not bill or accrue interest on delinquent receivables. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of the amounts that may not be collected. Management individually reviews all accounts receivable balances that are past due and based upon an assessment of current creditworthiness, estimates the portion, if any, of the balance that may not be collected. Additionally, management provides, based on historical and industry data, an allowance against the aggregate remaining accounts receivable.

Investments

From time-to-time, the Company may invest in fixed income debt securities and equity securities which can be readily purchased or sold using established markets. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. At December 31, 2006 and 2005, the Company held no such investments.

Property and Equipment and Leasing Arrangements

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the improvements’ estimated useful life or the related remaining lease term. Maintenance and repairs are charged to expense and major renewals and betterments are capitalized. The effects of escalations in rent payments are recognized as expense over the term of the lease using the straight line method.

Long-Lived Assets

When impairment indicators are present, the Company reviews the carrying value of its assets in determining the ultimate recoverability of their unamortized values using future undiscounted cash flow analyses expected to be generated by the assets. If such assets are considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds the future discounted cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less cost to sell. There were no impairment charges recorded during 2006, 2005 and 2004.

The Company evaluates the periods of amortization continually in determining whether later events and circumstances warrant revised estimates of useful lives. If estimates are changed, the unamortized cost will be allocated to the increased or decreased number of remaining periods in the revised lives.

Revenue Recognition

The Company derives revenue primarily from professional services rendered in the installation of customized software, third party software licenses, hardware, software support and application maintenance and other customer fees. The Company may enter into one contract or related contracts for the sale of its various service offerings. As required by the AICPA Statement of Position No. 97-2, “Software Revenue Recognition”, the Company accounts for its arrangements with customers in accordance with Statement of Position 81-1, “Accounting for Performance of Construction Type and Certain Performance Type Contracts” (“SOP 81-1”). Under multiple element arrangements, the total contract value is attributed first to the undelivered elements based on vendor specific objective evidence (“VSOE”) of fair value. VSOE is established by the price charged when that element is sold separately. On contracts where VSOE exists on all the undelivered elements, the professional services and software revenue are typically recognized in accordance with SOP 81-1. The Company generally determines the percentage-of-completion by comparing the labor

8

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

hours incurred to date to the estimated total labor hours required to complete the project. The Company considers labor hours to be the most reliable, available measure of progress on these projects. Costs and amounts earned on specific jobs in excess of billings are treated as a current asset; billings in excess of costs and earnings are treated as a current liability. Adjustments to estimates to complete are made in the periods in which facts resulting in a change become known. When the estimate indicates that a loss will be incurred, such loss is recorded in the period identified. Significant judgments and estimates are involved in determining the percent complete of each contract. Different assumptions could yield materially different results. When the Company provides services on a time and materials basis, it recognizes revenue as it performs the services based on actual time incurred.

Software support and application maintenance revenue are recognized on a straight-line basis over the support and maintenance period, typically one year. For multiple element arrangements for which VSOE does not exist, the total contract value and associated costs are deferred until the only undelivered element is software support and application maintenance. The entire arrangement fee is then recognized on a straight-line basis over the software support and application maintenance period, typically one year, provided that all of the other revenue recognition criteria have been met. Deferred costs associated with these arrangements consist of direct labor, subcontractor costs and third party software licenses. At December 31, 2006 and 2005 these costs amounted to $4,426,000 and $2,690,000, respectively and were included in deferred costs — customer arrangements on the consolidated balance sheets.

The Company also sells hardware for which the Company’s customized software products are not essential to the customers’ use of such hardware. In accordance with Emerging Issues Task Force (“EITF”) 03-05, “Applicability of AICPA Statement of Position 97-2 to Non-Software Deliverables in an Arrangement Containing More-Than-Incidental Software”, this hardware is not considered software-related and therefore, the Company recognizes revenue for hardware sales generally upon delivery of the hardware.

The Company follows the guidance of EITF 01-14, “Income Statement Characterization of Reimbursements for ‘Out-of-Pocket’ Expenses Incurred,” and records reimbursements received for out-of-pocket expenses as revenue, with offsetting costs recorded as cost of revenues. Out-of-pocket expenses generally include, but are not limited to, expenses related to transportation, lodging and meals.

The Company defers revenue for software support and application maintenance contracts over the life of the application maintenance contract on a straight-line basis. The contracts are generally one year in duration.

The percentage of the Company’s total net revenues from these arrangements for the years ended December 31, 2006, 2005 and 2004 are as follows:

	2006			2005			2004
Professional services		72	%		72	%		69	%
Hardware and software sales		9	%		6	%		11	%
Software support and application maintenance		14	%		14	%		14	%
Other services and reimbursed expenses		5	%		8	%		6	%
		100	%		100	%		100	%

Stock-Based Compensation

In 2005 and 2004, the Company accounted for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and complied with the disclosure provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), as amended by SFAS 148 “Accounting for Stock Based Compensation — Transition and Disclosure”. Under APB No. 25,

9

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

compensation expense was based on the difference, if any, on the date of grant between the fair value of the Company’s stock and the exercise price. The Company did not record any stock-based compensation expense in 2005 and 2004.

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, Share-Based Payment (“SFAS 123R”) in accounting for stock-based compensation. Under the provisions of SFAS 123R, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period of the entire award (generally the vesting period of the award). The Company has elected to expense these awards on a straight line basis over the life of the awards. The Company adopted SFAS 123R on a prospective basis and, as permitted, was not required as a non-public enterprise, to record the accounting effects of granted but unvested options at January 1, 2006. Since the adoption of SFAS 123R, there have been no changes to the Company’s stock compensation plans or modifications to existing stock-based awards at January 1, 2006 which would increase the value of any outstanding awards.

Compensation expense for all stock-based compensation awards granted subsequent to January 1, 2006 was based on the grant-date fair value determined in accordance with the provisions of SFAS 123R. The non cash compensation charge resulting from the adoption of SFAS 123R on the Company’s 2006 statement of income approximated $6,000 (also see Note 16). The related tax benefit approximated $2,000.

Advertising Expense

The Company expenses advertising and relating marketing costs as incurred. Advertising expense totaled approximately $99,000, $62,000, and $76,000 in 2006, 2005, and 2004, respectively.

Income Taxes

The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS No. 109 requires a company to recognize deferred tax liabilities and assets for the expected future income tax consequences of events that have been recognized in the Company’s financial statements. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. Valuation allowances are established against deferred tax assets if realization of all (or a portion of) such amounts are not considered more likely than not.

The Company does not provide for taxes which would be payable if undistributed earnings of VIA, if any, were remitted because the Company either considers these earnings to be invested for an indefinite period, or anticipates that if any such earnings were distributed after the plan to cease operations to complete, the U.S. income taxes payable would be substantially offset by foreign tax credits.

Comprehensive Income (Loss)

Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income,” establishes standards for reporting and displaying comprehensive income and its components. Comprehensive income is defined to include all changes in equity except those resulting from investments by shareholders and distributions to shareholders and is reported in the statement of shareholders’ equity. Included in the Company’s comprehensive income as of January 1, 2004 are net income and foreign currency translation adjustments. As a result of the aforementioned liquidation of VIA, there are no adjustments in 2006 or 2005.

10

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Foreign Currency

The accounts of VIA are measured using local currency as the functional currency. The assets and liabilities of VIA are translated into U.S. dollars at exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average rates of exchange in effect during the year. The resulting cumulative translation adjustments have been recorded as a separate component of accumulated other comprehensive gain (loss) in shareholders’ equity at January 1, 2004. The recorded cumulative translation adjustments, when the process of liquidating VIA commenced, were recognized as a gain in 2004.

Effect of New Accounting Pronouncements Not Yet Adopted

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. Provisions of SFAS 157 would be effective for the Company’s year ending December 31, 2008, with earlier application encouraged. The Company is currently evaluating the effects, if any, in adopting SFAS 157.

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Viecore conducts business domestically and, as a result, files income tax returns in specific jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities.

In previous years, the Internal Revenue Service (“IRS”) audited the 2002 and 2003 tax returns and the results of that audit did not result in a material change to the Company’s returns, as filed.

The IRS has recently notified the Company of its intent to examine the 2005 tax return. The Company, at present, does not expect the culmination of this audit process to result in a material adverse effect on its financial position, results of operations and cash flows.

At present, there are no other ongoing audits or unresolved disputes with the various tax authorities that the Company files with. FIN 48 is effective for the Company’s year ending December 31, 2007. The Company adopted FIN 48 effective January 1, 2007, and there was no effect on the Company’s financial statements.

3.   Restatement of 2005 and 2004 Financial Statements

The Company has restated its previously issued December 31, 2005 and 2004 consolidated financial statements to reflect revisions to revenue recognized on certain arrangements and the treatment of costs expended in these services. The Company’s arrangements were previously recognized as if revenues from professional service fees related to implementation, third party software license fees, software support fees and application maintenance were separable elements under EITF 00-21, Revenue Arrangements with Multiple Deliverables. Revenue and costs relating to professional service and software license fees were recognized using the percentage of completion method under SOP 81-1. In performing a subsequent analysis of revenues earned on certain contracts, management concluded that certain arrangements should not have been treated as single units of accounting for revenue recognition purposes; as a result revenues and the related costs have been restated to recognize these arrangements as one unit of accounting over the software support and application maintenance period, typically one year. Previously expensed costs pertaining to these arrangements have been capitalized as deferred costs-customer arrangements and amortized over the same period.

11

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The effects of this restatement decreased the previously reported January 1, 2004 shareholders’ equity by $914,000, net of a deferred tax benefit of $646,000. The consolidated statements of income for the years ended December 31, 2005 and 2004 and the consolidated balance sheet as of December 31, 2005, have been restated as follows:

	As Previously
	Reported		As Restated
Selected Statement of Income Data:
2005 Revenues	$	52,388,000	$	49,942,000
2005 Cost of revenues	$	31,695,000	$	30,481,000
2005 Gross profit	$	20,693,000	$	19,461,000
2005 Provision for income taxes	$	2,510,000	$	1,999,000
2005 Net income	$	3,536,000	$	2,815,000
2004 Revenues	$	46,015,000	$	46,855,000
2004 Cost of revenues	$	28,456,000	$	29,757,000
2004 Gross profit	$	17,599,000	$	17,098,000
2004 Provision for income taxes	$	1,775,000	$	1,588,000
2004 Net income	$	2,595,000	$	2,321,000
Selected December 31, 2005 Balance Sheet Data:
Deferred costs — customer arrangements	$	—	$	2,690,000
Deferred income taxes- current	$	820,000	$	2,164,000
Total assets	$	31,644,000	$	35,678,000
Deferred revenue	$	3,521,000	$	9,463,000
Total current liabilities	$	16,545,000	$	22,488,000
Total shareholders’ equity	$	14,411,000	$	12,502,000

The previously reported totals for the 2005 and 2004 cash flows from operating activities remain unchanged as the effects of the aforementioned adjustments were all within working capital accounts.

4.   FSD Acquisition

On October 31, 2002, the Company completed a merger, structured as a tax free reorganization, with Eclipse Networks, Inc. (“Eclipse”) that resulted in an exchange of one share of Eclipse Preferred Stock for 2,500 shares of Company Class B Preferred Stock and one share of Eclipse Common Stock into a nominal amount of cash. The value ascribed to the Class B Preferred stock issuance was $2,500,000, which represented both the par and liquidating value at the date of the merger. Both Eclipse and the Company have common stockholders and ownership interests. However, due to the acquisition of all of Eclipse’s non-controlling interests within the scope of this transaction, the merger has been accounted for under the purchase method of accounting. After the merger, Eclipse operates as the Company’s Viecore FSD business (FSD).

For income tax purposes, the realization of Eclipse’s U.S. net operating loss carryforwards (“NOLs”) are considered to be more likely than not and the utilization of state NOLs is subject to an assessment of local statutory regulations.

12

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

5.   Long-Term Contracts

As of December 31, 2006 and 2005, costs, estimated profit, and billings on uncompleted long-term contracts accounted for by the percentage of completion method are summarized as follows:

	2006			2005
Costs incurred on uncompleted contracts	$	5,240,000		$	4,010,000
Estimated profit		23,342,000			9,519,000
		28,582,000			13,529,000
Less: Billings to date		(30,494,000	)		(14,535,000	)
	$	(1,912,000	)	$	(1,006,000	)

Such amounts are included in the accompanying consolidated balance sheets as follows:

	2006			2005
Current assets — Costs in Excess	$	2,610,000		$	2,534,000
Current liabilities — Billings in Excess		(4,522,000	)		(3,540,000	)
	$	(1,912,000	)	$	(1,006,000	)

6.   Property and Equipment

Property and equipment, at cost, consists of the following at December 31:

	2006			2005
Equipment	$	3,926,000		$	3,578,000
Leasehold improvements		1,054,000			974,000
Furniture and fixtures		1,132,000			1,056,000
		6,112,000			5,608,000
Less: accumulated depreciation and amortization		(4,758,000	)		(3,954,000	)
	$	1,354,000		$	1,654,000

Depreciation expense (included in general and administrative expenses) for the years ended December 31, 2006, 2005, and 2004 was $803,000, $594,000 and $614,000, respectively.

13

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

7.   Accrued Expenses

Accrued expenses consist of the following at December 31:

	2006		2005
Compensation	$	3,266,000	$	2,733,000
Payroll taxes		360,000		317,000
Sales and other taxes		201,000		56,000
Professional fees		220,000		305,000
Maintenance costs		172,000		190,000
Software purchases		1,171,000		590,000
Subcontracting costs		1,011,000		968,000
Retirement plan		606,000		450,000
Rental obligations		131,000		136,000
Other		724,000		254,000
	$	7,862,000	$	5,999,000

8.   Line of Credit

The Company has an available working capital line of credit of $500,000 from Commerce Bank, NA. The line of credit is callable at the discretion of the bank and matures on December 5, 2008. Borrowings under the line of credit are collateralized by principally all assets of the Company. Interest is payable monthly at a rate that is based on an independent index which is prime rate as published in the Wall Street Journal. Through December 31, 2006, no proceeds were received on the working capital line of credit.

9.   Long-Term Debt

On November 29, 2005, the Company and Commerce Bank, NA executed a term loan agreement for an amount of $1,000,000. Proceeds from the term loan were used for general corporate purposes and monthly principal and interest payments are required through the maturity date of December 5, 2008. The interest rate on the indebtedness is fixed at 6.37% and principally all assets of the Company serve as collateral for the outstanding borrowings. At December 31, 2006 the mandatory principal payments of the term loan are $334,000 in 2007 and $354,000 in 2008.

10.   Shareholders’ Equity

The Company currently has three classes of stock: (a) 100,000 authorized shares of cumulative redeemable convertible Class A Preferred Stock; (b) 2,500 authorized shares of cumulative redeemable convertible Class B Preferred Stock, and (c) 50,000,000 authorized shares of common stock.

Class A Preferred Stock — In connection with the Re-Capitalization Transaction, the Company issued 60,390 shares of Class A Preferred Stock. Each share of Class A Preferred Stock has a defined Liquidation Value of $1,000 and accrues dividends, whether those dividends are declared or not, at a rate of 8% compounded daily of the defined Liquidation Value of the Class A Preferred Stock. Cumulative dividends of approximately $14,092,000 and $16,217,000 have been accrued as of December 31, 2006 and 2005, respectively, and are included in the value of the Class A Preferred Stock. Dividends of $7,970,000, $-0- and $7,500,000 were declared and paid to Class A Preferred Shareholders during the years ended December 31, 2006, 2005, and 2004, respectively.

14

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Class B Preferred Stock — In connection with the FSD acquisition, the Company issued 2,500 shares of cumulative redeemable convertible Class B Preferred Stock. Each share of Class B Preferred Stock has a Class B Preferred Value of $1,000 and accrues dividends, whether those dividends are declared or not, at a rate of 6% compounded daily of the defined Liquidation Value of the Class B Preferred Stock. Cumulative dividends of $695,000 and $509,000 have been accrued as of December 31, 2006 and 2005, respectively, and are included in the value of the Class B Preferred Stock. Dividends of $-0-, $-0-, and $15,000 were paid to Class B Preferred Shareholders during the years ended December 31, 2006, 2005 and 2004, respectively. The rights of the Class B Preferred Shareholders are senior to the rights of the Class A Preferred Shareholders in the event of a liquidation of the Company or in distributions.

Both classes of Preferred Stock may be redeemed at the Company’s option at any time or on request by the holders of a majority of the Preferred Stock in connection with a public offering, change in ownership or fundamental change as follows: (1) For Class A shareholders, the redemption value will be the defined Liquidation Value per share and the issuance of 56.1165 shares of common stock per share of Preferred Stock; and (2) For Class B Shareholders, the redemption value will be the Liquidation Value per share which equals the Class B Preferred Value plus an amount equal to 50% of the gross revenue for the trailing 12 months of FSD. As certain conditions have not been met, the gross revenue component of the defined Liquidation Value is not recorded at December 31, 2006 (see Note 18).

Each share of Class A and B Preferred Stock converts automatically into common stock upon the occurrence of a public offering. Each share of Class A Preferred Stock, upon a 60% vote of Class A Preferred shareholders, may convert their preferred shares into common stock upon occurrence of a change of ownership transaction, fundamental change as defined or the liquidation of the Company. One share of Preferred Stock is convertible into the number of shares of common stock determined by dividing the sum of the defined Liquidation Value by the public offering price per share of common stock. In the event that a public offering of common stock does not occur, the conversion formula will be determined by defined values.

The holders of both classes of Preferred Stock are entitled to vote on all matters submitted to the shareholders of the Company on a share-for-share basis. The Company has a right of first refusal in the event that a Preferred or Common Shareholder wishes to sell or transfer their shares.

At December 31, 2006, the Company had reserved 6,263,593 shares of common stock for future issuance under its Stock Option Plan. The amount of shares of common stock to be reserved for possible conversion of Preferred Stock has not been calculated at December 31, 2006 due to the absence of conditions and values in determining the conversion formula (see Note 18).

15

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

11.   Income Taxes

The following are major components of the provision (benefit) for income taxes for the years ended December 31:

	2006			2005			2004
Current:
Federal	$	1,874,000		$	1,018,000		$	84,000
State		601,000			563,000			403,000
		2,475,000			1,581,000			487,000
Deferred:
Federal		144,000			500,000			1,143,000
State		(84,000	)		(82,000	)		(42,000	)
		60,000			418,000			1,101,000
Total provision	$	2,535,000		$	1,999,000		$	1,588,000

The following indicates the significant elements contributing to the difference between the U.S. federal statutory tax rate and the Company’s effective tax rate for the years ended December 31:

	2006			2005			2004
U.S. federal statutory rate		34.0	%		34.0	%		34.0	%
AMT federal rate		—	%		—	%		2.0	%
State income taxes, net of U.S. benefit		5.3	%		6.2	%		5.4	%
VIA valuation allowance		—	%		—	%		1.4	%
Other items, net		1.2	%		1.3	%		(2.2	)%
Effective tax rate		40.5	%		41.5	%		40.6	%

16

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The significant components of the Company’s deferred tax assets and liabilities at December 31 are as follows:

	2006			2005
Deferred tax assets — current:
U.S. net operating loss carryforwards	$	155,000		$	483,000
Accounts receivable		108,000			108,000
Deferred costs — customer arrangements		(1,780,000	)		(1,076,000	)
Deferred revenue — customer arrangements		3,478,000			2,420,000
Accruals		284,000			229,000
Deferred tax assets — current		2,245,000			2,164,000
U.S. net operating loss carryforwards — non current		1,403,000			1,616,000
State net operating loss carryforwards		1,023,000			1,167,000
VIA net operating loss carryforwards		176,000			176,000
Fixed assets		71,000			—
Valuation allowance		(1,199,000	)		(1,343,000	)
Deferred tax assets — non current		1,474,000			1,616,000
Total	$	3,719,000		$	3,780,000

After an assessment of all available evidence, including historical and forecasted operating results, management has concluded that realization of the Company’s U.S. NOLs and a portion of other deferred tax assets is more likely than not. With respect to the NOLs generated at the various state levels and through VIA operations, the Company has concluded that realization of such NOLs can not be considered more likely than not. During 2006, 2005 and 2004 the Company reduced its valuation allowance by $144,000, $68,000 and $12,000 (reducing current state expense), respectively, representing the realization of certain states’ NOLs in those periods.

For the years ended December 31, 2006, 2005, and 2004 the Company utilized approximately $1.6, $2.9, and $4.3 million of its Federal NOL, respectively. At December 31, 2006 the Company had Federal and state (principally New Jersey and California) NOLs of approximately $4.6 million and $11.2 million, respectively, arising from the predecessor FSD entities. Such amounts begin to expire in 2020 and 2009 for Federal and state purposes, respectively. Australian NOLs totaled approximately $565,000 at December 31, 2006.

There were no tax benefits associated with the exercise of options in 2006, 2005 and 2004.

12.   Retirement Plan

The Company sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code for its employees. Participants can make elective contributions subject to certain limitations. Under the plan, the Company can make matching contributions on behalf of all participants. For the years ended December 31, 2006, 2005 and 2004, the Company made or accrued contributions of approximately $633,000, $469,000 and $385,000, respectively.

13.   Risk Concentrations

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company maintains its cash balances on deposit with principally one financial institution. As of the balance sheet date and various times throughout the year, certain cash balances at this financial institution exceeded the Federally insured limit of $100,000. Management

17

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

monitors regularly the financial condition of the banking institution, along with their balances in cash and cash equivalents and endeavors to keep this potential risk at a minimum.

As disclosed in Note 2, professional services represented 72%, 72% and 69% of the Company’s net revenues in 2006, 2005 and 2004, respectively. Substantially all FSD revenue is derived, directly or indirectly, from arrangements with agencies or departments of the Federal government. FSD revenues totaled approximately $17 million, $15.2 million and $13.3 million for 2006, 2005 and 2004, respectively. With respect to individual customers, agencies or departments, in 2006 there were no specific risk concentrations for revenues derived from a single customer, while in 2005 and 2004, one customer represented 12% and another customer represented 11% of revenues, respectively. One customer represented 13% of accounts receivable as of December 31, 2006. One customer represented 13% and another customer represented 12%, of accounts receivable as of December 31, 2005.

The Company’s locations are based in the State of New Jersey.

14.   Related Party Transactions

During 2006, 2005 and 2004, the majority shareholder provided professional services and the Company recognized expenses of approximately $1,500, $7,700 and $-0-, respectively.

15.   Commitments and Contingencies

The Company leases office space under non-cancelable operating leases expiring through 2010. The future minimum payments for all non-cancelable operating leases as of December 31, 2006, are approximately as follows:

2007	$	944,000
2008		722,000
2009		722,000
2010		361,000
Total minimum future rental payments	$	2,749,000

Rent expense for the years ended December 31, 2006, 2005, and 2004 was approximately $1,116,000, $1,020,000, and $947,000 respectively.

The Company has employment agreements with certain employees which require the funding of specified level of payments, if certain events (such as change in control) or other circumstances occur.

The IRS has recently notified the Company of its intent to examine the 2005 tax return. The Company, at present, does not expect the culmination of this audit process to result in a material adverse effect on its financial position, results of operations and cash flows.

The Company is subject to claims and actions from customers (including those arrangements where the Company serves in a subcontractor role) and vendors that arise in the normal course of operations. Management believes that the outcome of all such actions will not have a material adverse effect on its financial position, results of operations and cash flows.

16.   Stock Option Plan

On April 7, 2000 the Board of Directors of the Company approved the 2000 Stock Incentive Plan (the “Plan”). The Plan provides for employees, directors, consultants and advisors of the Company the opportunity to acquire options that are incentive stock options or non-qualified stock options and/or the grant of restrictive stock. The Plan provides for grants of up to 6,500,000 shares of stock.

18

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The exercise price per share of a stock option is to be established by the Board of Directors in its discretion, but may not be less than the fair value of a share of common stock as of the date of grant. Stock options, subject to certain restrictions, may be exercisable any time after full vesting for a period not to exceed ten years from the date of grant. Upon termination of employment any unvested options are immediately cancelled and vested options are exercisable for a period of 90 days. The vesting period is to be established by the Board of Directors of the Company in its discretion on the date of grant, typically four years.

Activity with respect to options was as follows:

				Weighted-Average
	Number of Shares			Exercise Price
Balance, January 1, 2004		4,265,900		$	0.83
Granted		389,000			2.00
Exercised		—			—
Forfeitures		(133,500	)		1.72
Balance, December 31, 2004		4,521,400			0.90
Granted		114,000			2.00
Exercised		(4,313	)		2.00
Forfeitures		(142,387	)		.75
Balance, December 31, 2005		4,488,700			0.94
Granted		552,500			2.00
Exercised		(67,200	)		.87
Forfeitures		(252,600	)		1.17
Balance, December 31, 2006		4,721,400		$	1.07

At December 31, 2006 there were 1,541,693 shares of common stock available for future grant.

					Weighted-				Weighted-
	Outstanding		Weighted-		Average		Number		Average
Range of	Options at		Average		Exercise		Exercisable at		Exercise
Exercise Prices	12/31/06		Contractual Life		Price		12/31/06		Price
$.20		2,463,900		3.25	$	.20		2,463,900	$	.20
2.00		2,257,500		6.01		2.00		1,476,468		2.00
		4,721,400						3,940,368

The fair value of options granted by the Company was $.10 in 2006 and was estimated using the Black Scholes Valuation model. The following assumptions were applied in valuing the 2006 grants: (i) expected lives of six years, (ii) a risk-free interest rate of 4.6%, (iii) a dividend yield of 0%, (iv) volatility of 33% (determined by using an industry index for peer companies) and (v) consideration of the option’s exercise price when compared to the fair value of the Company’s common stock. The weighted-average remaining contractual life of options outstanding at December 31, 2006 and 2005 was 4.44 and 4.86 years, respectively.

The total intrinsic value of options exercised in 2006 was not material. The aggregate intrinsic value of vested options at December 31, 2006 was approximately $1,404,000. Since the adoption of SFAS 123R, none of the option issued in 2006 have vested.

The total compensation cost related to nonvested awards not yet recognized approximates $25,000 at December 31, 2006; such amount will be recognized over the remaining vesting period of 3.2 years. Assuming

19

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

the Company had adopted the accounting provisions of SFAS 123R in 2005 and 2004, pro forma net income was not materially different from reported amounts.

17.   Non Cash Investing and Financing Activities

During 2006, 2005 and 2004 the Company accrued preferred stock dividends of $6,031,000, $6,064,000 and $5,689,000 respectively, which resulted in increases in preferred stock and accumulated deficit.

18.   Subsequent Event (unaudited)

On October 21, 2007, the Company entered into an agreement and plan of merger with Nuance Communications, Inc. The merger is subject to a vote of the Company’s shareholders, regulatory approval and customary closing conditions. It is expected that the merger will be completed in the fourth quarter of 2007. If and when the transaction is consummated, the Company will reclassify the carrying value of the Class A and B Preferred Stock to current liabilities, as the condition for redeeming this stock will have occurred. The Company has reserved 3,388,875 shares of common stock for the conversion of the Class A Preferred Stock. In addition, the Company has estimated that cash payments on the gross revenue component of the Class B Preferred Stock will approximate $8,250,000.

20

EX-99.2

Exhibit 99.2

VIECORE, INC. AND SUBSIDIARIES

Consolidated Financial Statements

Nine Months Ended September 30, 2007 and 2006

Viecore, Inc. and Subsidiaries

Table of Contents

September 30, 2007 and December 31, 2006

	Page(s)
Financial Statements
Consolidated Balance Sheets at September 30, 2007 (unaudited) and December 31, 2006 (audited)		2
Consolidated Statements of Income for the nine months ended September 30, 2007 and 2006 (unaudited)		3
Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 (unaudited)		4
Notes to Consolidated Financial Statements (unaudited)		5-14

Viecore, Inc. and Subsidiaries

Consolidated Balance Sheets

September 30, 2007 and December 31, 2006

	September 30,			December 31,
	2007			2006
	(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	9,561,000		$	11,338,000
Accounts receivable, net of allowances of $250,000		11,978,000			13,205,000
Costs and estimated earnings in excess of billings on uncompleted contracts		1,379,000			2,610,000
Deferred costs — customer arrangements		2,854,000			4,426,000
Deferred income taxes		1,767,000			2,245,000
Other current assets, principally prepaid expenses		2,017,000			914,000
Total current assets		29,556,000			34,738,000
Deferred income taxes		997,000			1,474,000
Property and equipment, net		1,400,000			1,354,000
Other assets		86,000			75,000
Total assets	$	32,039,000		$	37,641,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	350,000		$	334,000
Accounts payable		1,710,000			2,878,000
Accrued expenses		7,466,000			7,862,000
Deferred revenue		9,131,000			13,060,000
Billings in excess of costs and estimated earnings on uncompleted contracts		310,000			4,522,000
Accrued income taxes		345,000			313,000
Total current liabilities		19,312,000			28,969,000
Long-term debt, net of current portion		90,000			354,000
Total liabilities		19,402,000			29,323,000
Commitments and contingencies		—			—
Shareholders’ equity:
Class A cumulative redeemable convertible 8% preferred stock $1,000 par value; 100,000 shares authorized, 60,390 shares issued and outstanding (liquidation value of $79,074,000 and $74,482,000 at September 30, 2007 and December 31, 2006, respectively)		79,074,000			74,482,000
Class B cumulative redeemable convertible 6% preferred stock $1,000 par value; 2,500 shares authorized, issued and outstanding; (liquidation value of $3,342,000 and $3,195,000 at September 30, 2007 and December 31, 2006, respectively)		3,342,000			3,195,000
Common stock, $0.001 par value; 50,000,000 shares authorized; 30,963,507 and 30,736,907 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively		31,000			31,000
Additional paid in capital		173,000			106,000
Accumulated deficit		(69,983,000	)		(69,496,000	)
Total shareholders’ equity		12,637,000			8,318,000
Total liabilities and shareholders’ equity	$	32,039,000		$	37,641,000

The Notes to Consolidated Financial Statements are an integral part of these statements.

2

Viecore, Inc. and Subsidiaries

Consolidated Statements of Income

Nine Months Ended September 30, 2007 and 2006

	2007			2006
	(Unaudited)			(Unaudited)
Revenues	$	53,033,000		$	43,551,000
Cost of revenues		31,394,000			27,477,000
Gross profit		21,639,000			16,074,000
Operating Expenses:
Selling and marketing expenses		5,478,000			4,206,000
General and administrative expenses		9,294,000			8,282,000
Total operating expenses		14,772,000			12,488,000
Income from operations		6,867,000			3,586,000
Other income (expenses):
Interest income		375,000			268,000
Interest expense		(28,000	)		(48,000	)
Total other income		347,000			220,000
Income before income taxes		7,214,000			3,806,000
Provision for income taxes		2,961,000			1,546,000
Net income	$	4,253,000		$	2,260,000

The Notes to Consolidated Financial Statements are an integral part of these statements.

3

Viecore, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2007 and 2006

	2007			2006
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	4,253,000		$	2,260,000
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation expense		6,000			5,000
Depreciation		472,000			604,000
Deferred income taxes		955,000			64,000
Changes in operating assets and liabilities:
Accounts receivable		1,227,000			3,334,000
Costs and estimated earnings in excess of billings on uncompleted contracts		1,231,000			1,909,000
Deferred costs — customer arrangements		1,572,000			(1,157,000	)
Other current assets, principally prepaid expenses		(1,103,000	)		(167,000	)
Other assets		(12,000	)		37,000
Accounts payable		(1,168,000	)		(1,402,000	)
Accrued expenses		(396,000	)		107,000
Deferred revenue		(3,929,000	)		1,978,000
Accrued income taxes		32,000			(255,000	)
Billings in excess of costs and estimated earnings on uncompleted contracts		(4,212,000	)		(2,176,000	)
Net cash (used in) provided by operating activities		(1,072,000	)		5,141,000
Cash flows from investing activities
Purchases of property and equipment		(518,000	)		(449,000	)
Net cash used in investing activities		(518,000	)		(449,000	)
Cash flows from financing activities
Proceeds from exercise of stock options		61,000			7,000
Preferred stock dividends paid		—			(7,970,000	)
Payments on term loan		(248,000	)		(232,000	)
Net cash used in financing activities		(187,000	)		(8,195,000	)
Net change in cash and cash equivalents		(1,777,000	)		(3,503,000	)
Cash and cash equivalents, beginning of year		11,338,000			11,617,000
Cash and cash equivalents, end of period	$	9,561,000		$	8,114,000
Supplemental cash flow information
Cash paid for income taxes	$	1,978,000		$	1,764,000
Cash paid for interest	$	28,000		$	48,000

The Notes to Consolidated Financial Statements are an integral part of these statements.

4

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1.   Nature of Business and Basis of Presentation

The Company is a privately owned information technology consulting and a self-service application solutions provider for financial services and contact center customers.

The consolidated financial statements include the accounts of Viecore, Inc. (“VI”) and its wholly-owned subsidiaries, Viecore (Australia) Pty Ltd. (“VIA”) and Viecore FSD (“FSD”), collectively, the “Company.” All intercompany accounts and transactions have been eliminated.

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, these interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of the Company at September 30, 2007 and the results of operations and cash flows for the nine month periods ended September 30, 2007 and 2006. Disclosures relating to amounts as of September 30, 2007 and amounts for the nine month periods ended September 30, 2007 and 2006 are unaudited.

The accompanying financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2006 and 2005 and for each of the years in the three year period ended December 31, 2006. The results of operations and cash flows for the nine month period ended September 30, 2007 are not necessarily indicative of the results and cash flows that may be expected for the year ending December 31, 2007, or any future period.

Company Capital Structure

On April 1, 2000, the Company’s shareholders and VI sold 3,275,000 and 259,000 shares, respectively, of common stock to an investor at $11.60 per share, which resulted in a change of control. In connection therewith, the Company was re-capitalized to create two classes of capital stock, (1) common stock with a par value of $.001 per share and (2) Class A preferred stock with a par value of $1,000 per share. Each share of existing capital stock was exchanged for 5.80 shares of common stock and .011484 shares of preferred stock. The sale of stock and re-capitalization transaction referred to above are collectively known as the “Re-Capitalization Transaction” (see Note 8).

2.   Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the determination of the allowance for doubtful accounts, valuation allowances against deferred tax assets, profitability estimates on uncompleted contracts and the related time and resources required to complete such contracts and accrued expenses.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with an original maturity of three months or less to be cash equivalents. The carrying values of cash equivalents approximate fair value.

Accounts Receivable

Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within thirty days from the invoice date. Accounts receivable are stated at the amount billed to the

5

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

customer. Customer account balances with invoices dated over thirty days old are considered delinquent. The Company does not bill or accrue interest on delinquent receivables. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of the amounts that may not be collected. Management individually reviews all accounts receivable balances that are past due and based upon an assessment of current creditworthiness, estimates the portion, if any, of the balance that may not be collected. Additionally, management provides, based on historical and industry data, an allowance against the aggregate remaining accounts receivable. Unbilled accounts receivable total $626,000 and $26,000 at September 30, 2007 and December 31, 2006, respectively.

Investments

From time-to-time, the Company may invest in fixed income debt securities and equity securities which can be readily purchased or sold using established markets. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. At September 30, 2007 and December 31, 2006, the Company held no such investments.

Property and Equipment and Leasing Arrangements

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the improvements’ estimated useful life or the related remaining lease term. Maintenance and repairs are charged to expense and major renewals and betterments are capitalized. The effects of escalations in rent payments are recognized as expense over the term of the lease using the straight line method.

Long-Lived Assets

When impairment indicators are present, the Company reviews the carrying value of its assets in determining the ultimate recoverability of their unamortized values using future undiscounted cash flow analyses expected to be generated by the assets. If such assets are considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds the future discounted cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less cost to sell. There were no impairment charges recorded during each of the nine month periods ended September 30, 2007 and 2006.

The Company evaluates the periods of amortization continually in determining whether later events and circumstances warrant revised estimates of useful lives. If estimates are changed, the unamortized cost will be allocated to the increased or decreased number of remaining periods in the revised lives.

Revenue Recognition

The Company derives revenue primarily from professional services rendered in the installation of customized software, third party software licenses, hardware, software support and application maintenance and other customer fees. The Company may enter into one contract or related contracts for the sale of its various service offerings. As required by the AICPA Statement of Position No. 97-2, “Software Revenue Recognition” the Company accounts for its arrangements with customers in accordance with Statement of Position 81-1, “Accounting for Performance of Construction Type and Certain Performance Type Contracts” (“SOP 81-1”). Under multiple element arrangements, the total contract value is attributed first to the

6

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

undelivered elements based on vendor specific objective evidence (“VSOE”) of fair value. VSOE is established by the price charged when that element is sold separately. On contracts where VSOE exists on all the undelivered elements, the professional services and software revenue are typically recognized in accordance with SOP 81-1. The Company generally determines the percentage-of-completion by comparing the labor hours incurred to date to the estimated total labor hours required to complete the project. The Company considers labor hours to be the most reliable, available measure of progress on these projects. Costs and amounts earned on specific jobs in excess of billings are treated as a current asset; billings in excess of costs and earnings are treated as a current liability. Adjustments to estimates to complete are made in the periods in which facts resulting in a change become known. When the estimate indicates that a loss will be incurred, such loss is recorded in the period identified. Significant judgments and estimates are involved in determining the percent complete of each contract. Different assumptions could yield materially different results. When the Company provides services on a time and materials basis, it recognizes revenue as it performs the services based on actual time incurred.

Software support and application maintenance revenue are recognized on a straight-line basis over the support and maintenance period, typically one year. For multiple element arrangements for which VSOE does not exist, the total contract value and associated costs are deferred until the only undelivered element is software support and application maintenance. The entire arrangement fee is then recognized on a straight-line basis over the software support and application maintenance period, typically one year, provided that all of the other revenue recognition criteria have been met. Deferred costs associated with these arrangements consist of direct labor, subcontractor costs and third party software licenses. At September 30, 2007 and December 31, 2006, these costs amounted to $2,854,000 and $4,426,000, respectively and were included in deferred costs — customer arrangements on the consolidated balance sheets.

The Company also sells hardware for which the Company’s customized software products are not essential to the customers’ use of such hardware. In accordance with Emerging Issues Task Force (“EITF”) 03-05: “Applicability of AICPA Statement of Position 97-2 to Non-Software Deliverables in an Arrangement Containing More-Than-Incidental Software”, this hardware is not considered software-related and therefore, the Company recognizes revenue for hardware sales generally upon delivery of the hardware.

The Company follows the guidance of EITF 01-14, “Income Statement Characterization of Reimbursements for ‘Out-of-Pocket’ Expenses Incurred,” and records reimbursements received for out-of-pocket expenses as revenue, with offsetting costs recorded as cost of revenues. Out-of-pocket expenses generally include, but are not limited to, expenses related to transportation, lodging and meals.

The Company defers revenue for software support and application maintenance contracts over the life of the application maintenance contract on a straight-line basis. The contracts are generally one year in duration.

The percentage of the Company’s total net revenues from these arrangements for the nine months ended September 30, 2007 and 2006 as follows:

	2007			2006
Professional services		73	%		71	%
Hardware and software sales		6	%		9	%
Software support and application maintenance		15	%		14	%
Other services and reimbursed expenses		6	%		6	%
		100	%		100	%

7

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Stock-Based Compensation

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, Share-Based Payment (“SFAS 123R”) in accounting for stock-based compensation. Under the provisions of SFAS 123R, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period of the entire award (generally the vesting period of the award). The Company has elected to expense these awards on a straight line basis over the life of the awards. The Company adopted SFAS 123R on a prospective basis and, as permitted, was not required as a non-public enterprise, to record the accounting effects of granted but unvested options at January 1, 2006. Since the adoption of SFAS 123R, there have been no changes to the Company’s stock compensation plans or modifications to existing stock-based awards at January 1, 2006 which would increase the value of any outstanding awards.

Compensation expense for all stock-based compensation awards granted subsequent to January 1, 2006 was based on the grant-date fair value determined in accordance with the provisions of SFAS 123R. The non cash compensation charge resulting from the effects of stock-based compensation awards for the nine months ended September 30, 2007 and 2006 approximated $6,000 and $5,000, offset by a tax benefit of approximately $2,000 in both periods.

Advertising Expense

The Company expenses advertising and relating marketing costs as incurred. Advertising expense totaled approximately $240,000 and $75,000 for the nine months ended September 30, 2007 and 2006, respectively.

Income Taxes

The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS No. 109 requires a company to recognize deferred tax liabilities and assets for the expected future income tax consequences of events that have been recognized in the Company’s financial statements. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. Valuation allowances are established against deferred tax assets if realization of all (or a portion of) such amounts are not considered more likely than not.

The Company does not provide for taxes which would be payable if undistributed earnings of VIA, if any, were remitted because the Company either considers these earnings to be invested for an indefinite period, or anticipates that if any such earnings were distributed after the plan to cease operations to complete, the U.S. income taxes payable would be substantially offset by foreign tax credits.

Effect of New Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. Provisions of SFAS 157 would be effective for the Company’s year ending December 31, 2008, with earlier application encouraged. The Company is currently evaluating the effects, if any, in adopting SFAS 157.

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. FIN 48 also provides guidance on derecognition, classification, interest and penalties,

8

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

accounting in interim periods, disclosure, and transition. Viecore conducts business domestically and, as a result, files income tax returns in specific jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities.

The Internal Revenue Service (“IRS”) has recently notified the Company of its intent to examine the 2005 tax return. The Company, at present, does not expect the culmination of this audit process to result in a material adverse effect on its financial position, results of operations and cash flows.

At present, there are no other ongoing audits or unresolved disputes with the various tax authorities that the Company files with. The Company adopted FIN 48 effective January 1, 2007, and there was no effect on the Company’s consolidated financial statements

3.   Long-Term Contracts

As of September 30, 2007 and December 31, 2006, costs, estimated profit, and billings on uncompleted long-term contracts accounted for by the percentage of completion method are summarized as follows:

	2007			2006
Costs incurred on uncompleted contracts	$	3,652,000		$	5,240,000
Estimated profit		25,576,000			23,342,000
		29,228,000			28,582,000
Less: Billings to date		(28,159,000	)		(30,494,000	)
	$	(1,069,000	)	$	(1,912,000	)

Such amounts are included in the accompanying consolidated balance sheets as follows:

	2007			2006
Current assets — Costs in Excess	$	1,379,000		$	2,610,000
Current liabilities — Billings in Excess		(310,000	)		(4,522,000	)
	$	(1,069,000	)	$	(1,912,000	)

4.   Property and Equipment

Property and equipment, at cost, consists of the following at September 30, 2007 and December 31, 2006:

	2007			2006
Equipment	$	4,301,000		$	3,926,000
Leasehold improvements		1,062,000			1,054,000
Furniture and fixtures		1,266,000			1,132,000
		6,629,000			6,112,000
Less: accumulated depreciation and amortization		(5,229,000	)		(4,758,000	)
	$	1,400,000		$	1,354,000

Depreciation expense (included in general and administrative expenses) for the nine months ended September 30, 2007 and 2006 was $472,000, and $604,000, respectively.

9

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

5.   Accrued Expenses

Accrued expenses consist of the following at September 30, 2007 and December 31, 2006:

	2007		2006
Compensation	$	3,168,000	$	3,266,000
Payroll taxes		232,000		360,000
Sales and other taxes		202,000		201,000
Professional fees		705,000		220,000
Maintenance costs		312,000		172,000
Software purchases		150,000		1,171,000
Subcontracting costs		1,369,000		1,011,000
Retirement plan		421,000		606,000
Rental obligations		106,000		131,000
Other		801,000		724,000
	$	7,466,000	$	7,862,000

6.   Line of Credit

The Company has an available working capital line of credit of $500,000 from Commerce Bank, NA. The line of credit is callable at the discretion of the bank and matures on December 5, 2008. Borrowings under the line of credit are collateralized by principally all assets of the Company. Interest is payable monthly at a rate that is based on an independent index which is prime rate as published in the Wall Street Journal. Through September 30, 2007, no proceeds were received on the working capital line of credit.

7.   Long-Term Debt

On November 29, 2005, the Company and Commerce Bank, NA executed a term loan agreement for an amount of $1,000,000. Proceeds from the term loan were used for general corporate purposes and monthly principal and interest payments are required through the maturity date of December 5, 2008. The interest rate on the indebtedness is fixed at 6.37% and principally all assets of the Company serve as collateral for the outstanding borrowings. At September 30, 2007, the mandatory principal payments of the term loan are $350,000 through September 30, 2008 and $90,000 thereafter.

8.   Shareholders’ Equity

In the nine month period ended September 30, 2007 the Company’s shareholders’ equity increased due to the exercise of stock options ($61,000) and the effects of stock compensation expense ($6,000) and net income ($4,253,000). As disclosed in Note 14, there is no overall change from the accrual of preferred stock dividends.

The Company currently has three classes of stock: (a) 100,000 authorized shares of cumulative redeemable convertible Class A Preferred Stock; (b) 2,500 authorized shares of cumulative redeemable convertible Class B Preferred Stock, and (c) 50,000,000 authorized shares of common stock.

Class A Preferred Stock — In connection with the Re-Capitalization Transaction, the Company issued 60,390 shares of Class A Preferred Stock. Each share of Class A Preferred Stock has a defined Liquidation Value of $1,000 and accrues dividends, whether those dividends are declared or not, at a rate of 8% compounded daily of the defined Liquidation Value of the Class A Preferred Stock. Cumulative dividends of approximately $18,684,000 and $14,092,000 have been accrued as of September 30, 2007 and December 31,

10

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

2006, respectively, and are included in the value of the Class A Preferred Stock. Dividends of $0 and $7,970,000, were declared and paid to Class A Preferred Shareholders during the nine months ended September 30, 2007 and 2006, respectively.

Class B Preferred Stock — In connection with the FSD acquisition, the Company issued 2,500 shares of cumulative redeemable convertible Class B Preferred Stock. Each share of Class B Preferred Stock has a Class B Preferred Value of $1,000 and accrues dividends, whether those dividends are declared or not, at a rate of 6% compounded daily of the defined Liquidation Value of the Class B Preferred Stock. Cumulative dividends of $842,000 and $695,000 have been accrued as of September 30, 2007 and December 31, 2006, respectively, and are included in the value of the Class B Preferred Stock. No dividends were paid to Class B Shareholders during the nine months ended September 30, 2007 and 2006, respectively. The rights of the Class B Preferred Shareholders are senior to the rights of the Class A Preferred Shareholders in the event of a liquidation of the Company or in distributions.

Both classes of Preferred Stock may be redeemed at the Company’s option at any time or on request by the holders of a majority of the Preferred Stock in connection with a public offering, change in ownership or fundamental change as follows: (1) For Class A shareholders, the redemption value will be the defined Liquidation Value per share and the issuance of 56.1165 shares of common stock per share of Preferred Stock; and (2) For Class B Shareholders, the redemption value will be the Liquidation Value per share which equals the Class B Preferred Value plus an amount equal to 50% of the gross revenue for the trailing 12 months of FSD. As certain conditions have not been met, the gross revenue component of the defined Liquidation Value is not recorded at September 30, 2007 (see Note 15).

Each share of Class A and B Preferred Stock converts automatically into common stock upon the occurrence of a public offering. Each share of Class A Preferred Stock, upon a 60% vote of Class A Preferred shareholders, may convert their preferred shares into common stock upon occurrence of a change of ownership transaction, fundamental change as defined or the liquidation of the Company. One share of Preferred Stock is convertible into the number of shares of common stock determined by dividing the sum of the defined Liquidation Value by the public offering price per share of common stock. In the event that a public offering of common stock does not occur, the conversion formula will be determined by defined values.

The holders of both classes of Preferred Stock are entitled to vote on all matters submitted to the shareholders of the Company on a share-for-share basis. The Company has a right of first refusal in the event that a Preferred or Common Shareholder wishes to sell or transfer their shares.

At September 30, 2007, the Company had reserved 6,036,993 shares of common stock for future issuance under its Stock Option Plan (see Note 15).

9.   Retirement Plan

The Company sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code for its employees. Participants can make elective contributions subject to certain limitations. Under the plan, the Company can make matching contributions on behalf of all participants. For the nine months ended September 30, 2007 and 2006, the Company accrued contributions of approximately $438,000 and $432,000, respectively.

10.   Risk Concentrations

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company maintains its cash balances on deposit with principally one financial institution. As of the balance sheet dates and various times throughout the year, certain cash balances at this financial institution exceeded the Federally insured limit of $100,000.

11

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Management monitors regularly the financial condition of the banking institution, along with their balances in cash and cash equivalents and endeavors to keep this potential risk at a minimum.

As disclosed in Note 2, professional services represented 73% and 71% of the Company’s net revenues for the nine months ended September 30, 2007 and 2006, respectively. Substantially all FSD revenue is derived, directly or indirectly, from arrangements with agencies or departments of the Federal government. FSD revenues totaled approximately $11.9 million and $12.9 million for the nine months ended September 30, 2007 and 2006, respectively. With respect to individual customers, agencies or departments, for the nine months ended September 30, 2007 and 2006 there were no specific risk concentrations for revenues derived from a single customer. At September 30, 2007 no one customer represented more than 10% of accounts receivable and at December 31, 2006 one customer represented 13% of accounts receivable

The Company’s locations are based in the State of New Jersey.

11.   Related Party Transactions

For the nine months ended September 30, 2007 and 2006, there were no related party transactions.

12.   Commitments and Contingencies

The Company leases office space under non-cancelable operating leases expiring through 2010. The future minimum payments for all non-cancelable operating leases as of September 30, 2007, which includes a rental commitment extended in 2007, are as follows:

2007(October 1, 2007 to December 31, 2007)	$	264,000
2008		1,056,000
2009		722,000
2010		361,000
Total minimum future rental payments	$	2,403,000

Rent expense for the nine months ended September 30, 2007 and 2006 was approximately $754,000 and $843,000, respectively.

The Company has employment agreements with certain employees which require the funding of specified level of payments, if certain events (such as change in control) or other circumstances occur.

The IRS has recently notified the Company of its intent to examine the 2005 tax return. The Company, at present, does not expect the culmination of this audit process to result in a material adverse effect on its financial position, results of operations and cash flows.

The Company is subject to claims and actions from customers (including those arrangements where the Company serves in a subcontractor role) and vendors that arise in the normal course of operations. Management believes that the outcome of all such actions will not have a material adverse effect on its financial position, results of operations and cash flows.

13.   Stock Option Plan

On April 7, 2000 the Board of Directors of the Company approved the 2000 Stock Incentive Plan (the “Plan”). The Plan provides for employees, directors, consultants and advisors of the Company the opportunity to acquire options that are incentive stock options or non-qualified stock options and/or the grant of restrictive stock. The Plan provides for grants of up to 6,500,000 shares of stock.

The exercise price per share of a stock option is to be established by the Board of Directors in its discretion, but may not be less than the fair value of a share of common stock as of the date of grant. Stock

12

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

options, subject to certain restrictions, may be exercisable any time after full vesting for a period not to exceed ten years from the date of grant. Upon termination of employment any unvested options are immediately cancelled and vested options are exercisable for a period of 90 days. The vesting period is to be established by the Board of Directors of the Company in its discretion on the date of grant, typically four years.

Activity with respect to options was as follows:

	Number of			Weighted-Average
	Shares			Exercise Price
Balance, December 31, 2006		4,721,400		$	1.07
Granted		—			0.00
Exercised		(226,600	)		0.27
Forfeitures		(188,900	)		1.69
Balance, September 30, 2007		4,305,900		$	1.07

At September 30, 2007 there were 1,728,093 shares of common stock available for future grant.

					Weighted-				Weighted-
	Outstanding		Weighted-		Average		Number		Average
Range of	Options at		Average		Exercise		Exercisable at		Exercise
Exercise Prices	9/30/07		Contractual Life		Price		9/30/07		Price
$.20		2,228,400		2.50	$	.20		2,228,400	$	.20
2.00		2,077,500		5.36		2.00		1,421,699		2.00
		4,305,900						3,650,099

No options were granted during the nine months ended September 30, 2007 and no options granted subsequent to the adoption of SFAS 123R were vested during the period. The fair value of options granted by the Company, for the nine months ended September 30, 2006, using the Black Scholes Valuation model, was $31,000. The following assumptions were applied in valuing the 2006 grants: (i) expected lives of six years, (ii) a risk-free interest rate of 4.6%, (iii) a dividend yield of 0%, (iv) volatility of 33% (determined by using an industry index for peer companies) and (v) consideration of the option’s exercise price when compared to the fair value of the Company’s common stock. The weighted-average remaining contractual life of options outstanding at September 30, 2007 and December 31, 2006 was 3.75 and 4.44, years respectively.

The total intrinsic value of options exercised for the nine months ended September 30, 2007 and 2006 was $113,000 and $-0-, respectively. The aggregate intrinsic value of vested options at September 30, 2007 was approximately $1,270,000. The fair value of options vesting in the nine months ended September 30, 2007 approximated $96,000.

The total compensation cost related to nonvested awards not yet recognized approximates $19,000 at September 30, 2007; such amount will be recognized over the remaining vesting period of 2.4 years.

14.   Non Cash Investing and Financing Activities

During the nine months ended September 30, 2007 and 2006, the Company accrued preferred stock dividends of $4,739,000 and $4,497,000 respectively, which resulted in increases in preferred stock and accumulated deficit.

13

Viecore, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

15.   Subsequent Event (unaudited)

On October 21, 2007, the Company entered into an agreement and plan of merger with Nuance Communications, Inc. The merger is subject to a vote of the Company’s shareholders, regulatory approval and customary closing conditions. It is expected that the merger will be completed in the fourth quarter of 2007. If and when the transaction is consummated, the Company will reclassify the carrying value of the Class A and B Preferred Stock to current liabilities, as the condition for redeeming this stock will have occurred. The Company has reserved 3,388,875 shares of common stock for the conversion of the Class A Preferred Stock. In addition, the Company has estimated that cash payments on the gross revenue component of the Class B Preferred Stock will approximate $8,250,000.

14

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

On October 21, 2007, Nuance Communications, Inc. (“Nuance” or “the Company”) announced it had entered into an Agreement and Plan of Merger dated as of October 21, 2007, by and among Nuance, Vanhalen Acquisition Corporation, Vanhalen Acquisition LLC, Viecore, Inc. (“Viecore”), U.S. Bank National Association, as escrow agent and Thoma Cressey Bravo, Inc., serving as the representative of Viecore’s stockholders. Under this agreement, the Company agreed to acquire Viecore for total purchase consideration of approximately $108.5 million including estimated transaction costs of $6.1 million, $8.4 million in cash, $0.4 million in assumed debt, and 4.4 million shares of Nuance common stock valued at $21.11 per share. In connection with the Company’s acquisition of Viecore, the Agreement and Plan of Merger required 0.6 million shares of the Company’s common stock to be placed into escrow for 15 months from the date of acquisition, in connection with certain standard representations and warranties. The Company cannot make a determination, beyond a reasonable doubt, that the escrow will become payable to the former shareholders of Viecore, and accordingly has not included the escrow as a component of the purchase price. Upon satisfaction of the contingency, the escrowed amount will be recorded as additional purchase price and allocated to goodwill. The cash paid in the merger may increase, and the shares issued in the merger may decrease, based on the volume weighted average price of Nuance common stock on the effective date of the registration statement of the shares issued in the transaction. Shares of Nuance common stock issued in the acquisition will be valued in accordance with Emerging Issues Task Force (EITF) Issue 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination (“EITF 99-12”).

On October 2, 2007, Nuance announced it had entered into a definitive Agreement and Plan of Merger dated September 28, 2007, by and among Nuance, Csonka Acquisition Corporation, Csonka Acquisition LLC, Commissure, Inc. and U.S. Bank National Association, as Escrow Agent and Stockholder Representative. Under this agreement, the Company agreed to acquire Commissure for total purchase consideration of approximately $25.6 million including estimated transaction costs of $2.3 million, and 1.2 million shares of Nuance common stock valued at $19.49 per share. In connection with the Company’s acquisition of Commissure, the purchase and sale agreement required 0.2 million shares of the Company’s common stock to be placed into escrow for 15 months from the date of acquisition, in connection with certain standard representations and warranties. The Company cannot make a determination, beyond a reasonable doubt, that the escrow will become payable to the former shareholders of Commissure, and accordingly has not included the escrow as a component of the purchase price. Upon satisfaction of the contingency, the escrowed amount will be recorded as additional purchase price and allocated to goodwill. In addition, the Plan of Merger includes a contingent earnout payment of up to an additional $8.0 million, in cash or shares of Nuance common stock, to be paid, if at all, over a three year period based on the business achieving certain performance targets. Shares of Nuance common stock issued in the acquisition will be valued in accordance with EITF 99-12.

On August 24, 2007, pursuant to the Agreement and Plan of Merger dated May 14, 2007 by and among Nuance, Vicksburg Acquisition Corporation (a wholly owned subsidiary of Nuance Communications, Inc.), and Voice Signal Technologies, Inc. (“VoiceSignal”), the Company acquired VoiceSignal for total purchase consideration of approximately $282.1 million including $174.5 million in cash, transaction costs of $16.8 million and 5.84 million shares of Nuance common stock valued at $15.57 per share. In connection with the Company’s acquisition of VoiceSignal, the purchase and sale agreement required $30.0 million in cash to be placed into escrow for 12 months from the date of acquisition, in connection with certain standard representations and warranties. The Company cannot make a determination, beyond a reasonable doubt, that the escrow will become payable to the former shareholders of VoiceSignal, and accordingly has not included the escrow as a component of the purchase price. Shares of Nuance common stock issued in the acquisition were valued in accordance with EITF 99-12. The merger consideration was paid to VoiceSignal stockholders in accordance with the terms of the merger agreement.

1

On August 24, 2007, pursuant to the Stock Purchase Agreement dated June 21, 2007 by and among Nuance, AOL LLC, and Tegic Communications, Inc. (“Tegic”), Nuance acquired Tegic for total purchase consideration of approximately $268.3 million in cash, including approximately $3.3 million of transaction costs.

On March 26, 2007, pursuant to a Share Purchase Agreement dated March 13, 2007, Nuance Communications, Inc. acquired Bluestar Resources Limited, the parent of Focus Enterprises Limited and Focus Infosys India Private Limited (collectively “Focus”). Under the purchase agreement the aggregate consideration consists of approximately $48.7 million in cash, the assumption of approximately $2.1 million of debt and transaction costs of $2.8 million. In connection with the Company’s acquisition of Focus, the purchase and sale agreement required $5.8 million in cash to be placed into escrow for 12 months from the date of acquisition, in connection with certain standard representations and warranties. The Company cannot make a determination, beyond a reasonable doubt, that the escrow will become payable to the former shareholders of Focus, and accordingly has not included the escrow as a component of the purchase price.

On August 7, 2007, Nuance entered into a purchase agreement (the “Purchase Agreement”) with Citigroup Global Markets, Inc. and Goldman, Sachs & Co. (the “Initial Purchasers”) to offer and sell $220 million aggregate principal amount of its 2.75% Senior Convertible Debentures due 2027 (the “Debentures”), plus up to an additional $30 million aggregate principal amount of such debentures at the option of the Initial Purchasers to cover over-allotments, if any, in a private placement to the Initial Purchasers for resale to qualified institutional buyers pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Act”), afforded by Section 4(2) of the Act and Rule 144A under the Act. On August 13, 2007, Nuance closed the sale of $250 million aggregate principle amount of the Debentures, including the exercise of the Initial Purchasers’ over-allotment option in full. On August 24, 2007, Nuance entered into an Increase Joinder dated as of August 24, 2007 (the “Increase Joinder”) with UBS AG, Stamford Branch, as administrative agent, Citigroup North America, as syndication agent, Lehman Commercial Paper Inc. and Goldman Sachs Credit Partners L.P., as co-documentation agents, Citigroup Global Markets Inc. and Lehman Brothers Inc., as joint lead arrangers, Citigroup Global Markets Inc., Lehman Commercial Paper Inc. and Goldman Sachs Credit Partners L.P., as joint bookrunners, Banc of America Securities LLC as co-arranger, and Citicorp North America, Inc., Lehman Commercial Paper Inc., Goldman Sachs Credit Partners L.P., and Bank of America, N.A., as lenders. The Increase Joinder amended Nuance’s existing credit agreement entered into on March 31, 2006 and amended and restated on April 5, 2007 (the “Existing Credit Agreement”) to provide for incremental term loans in the amount of $225 million (“Incremental Credit Facility”). The term loans under the Incremental Credit Facility increase the outstanding term loans under the Existing Credit Agreement from $440.3 million to a total of $665.3 million. The existing term loans and the term loans under the Incremental Credit Facility amortize, at a rate of 1.0% of the principal amount on an annual basis, payable quarterly, with the balance due at maturity in March 2013. The Increase Joinder also provided for an increase in the interest rates applicable to all term loans of 0.25% so that the term loans now bear interest at a rate equal to a new applicable margin plus, at our option, either (a) the base rate (which is the higher of the corporate base rate of UBS AG, Stamford Branch, or the federal funds rate plus 0.50% per annum) or (b) LIBOR (determined by reference to the British Bankers’ Association Interest Settlement Rates for deposits in U.S. dollars). The applicable margin for borrowings now ranges from 0.75% to 1.50% per annum with respect to base rate borrowings and from 1.75% to 2.50% per annum with respect to LIBOR-based borrowings, depending upon our leverage ratio. The Existing Credit Agreement also provides for a $75 million revolving credit facility due in March 2012. The interest rates for the revolving credit facility remain unchanged. The additional funds received by Nuance under the Incremental Credit Facility were used to fund the cash portion of the merger consideration for Nuance’s acquisition of VoiceSignal to pay related fees and expenses and for general corporate purposes. The Incremental Credit Facility forms a part of the Existing Credit Agreement and is secured by the same assets of Nuance and its domestic subsidiaries as is provided for under the Existing Credit Agreement and related loan documents. The covenants, representations and warranties and events of default under the Existing Credit Facility remain unchanged.

The following tables show summary unaudited pro forma combined financial information as if Nuance, Focus, VoiceSignal, Tegic, Commissure and Viecore had been combined as of October 1, 2006 for statement

2

of operations purposes and as if Nuance and Viecore had been combined for balance sheet purposes as of September 30, 2007. Focus, VoiceSignal, Tegic, and Commissure are included in Nuance’s consolidated balance sheet as of September 30, 2007, which was included in Nuance’s financial statements, included herein.

The unaudited pro forma combined financial information of Nuance, Focus, VoiceSignal, Tegic, Commissure and Viecore is based on estimates and assumptions, which have been made solely for purposes of developing such pro forma information. The estimated pro forma adjustments arising from the recently completed acquisitions of Focus, VoiceSignal, Tegic and Commissure and the acquisition of Viecore are derived from the preliminary purchase price allocation.

The historical financial information of Viecore for the year ended September 30, 2007 has been derived from the unaudited financial information for the twelve months ended September 30, 2007. The historical financial information of Focus for the period from October 1, 2006 to March 26, 2007 (date of acquisition) was derived from unaudited information for the respective period. The historical financial information of VoiceSignal and Tegic for the period from October 1, 2006 to August 24, 2007 (date of acquisitions) was derived from unaudited information for the respective period. The historical financial information of Commissure for the period from October 1, 2006 to September 28, 2007 (date of acquisition) was derived from unaudited information for the respective period.

The pro forma combined financial statements do not include the historical or pro forma financial information for Mobile Voice Control, Inc. or BeVocal, Inc., which were acquired by Nuance during fiscal 2007 or Vocada, Inc. which was acquired by Nuance during fiscal 2008. The financial statements for these acquired companies and pro forma financial information for the transactions are not included herein as the transactions were determined not to be “significant” in accordance with the calculations required by Rule 1-02(w) of Regulation S-X of the Securities Exchange Act of 1934, as amended.

The pro forma data are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if each transaction had been consummated as of October 1, 2006 for statement of operations purposes, or September 30, 2007, for balance sheet purposes, respectively, nor are the data necessarily indicative of future operating results or financial position.

3

NUANCE COMMUNICATIONS, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

As of September 30, 2007

	Historical			Historical
	Nuance at			Viecore at
	September 30,			September 30,			Pro Forma			Pro Forma
	2007 (A)			2007 (B)			Adjustments			Combined
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	184,335		$	9,561		$	(14,500	)(3A)	$	179,396
Short term investments		2,628			—			—			2,628
Accounts receivable, net		174,646			11,978			(127	)(3F)		186,497
Acquired unbilled accounts receivable		35,061			1,379			—			36,440
Inventories, net		8,013			—			—			8,013
Prepaid expenses and other current assets		16,489			4,871			(3,619	)(3B)		17,741
Deferred tax assets		444			1,767			—			2,211
Total current assets		421,616			29,556			(18,246	)		432,926
Land, building and equipment, net		37,618			1,400			—			39,018
Goodwill		1,249,642			—			61,083	(3G)		1,310,725
Other intangible assets, net		391,190			—			30,550	(3E)		421,740
Other long-term assets		72,721			1,083			—			73,804
Total assets	$	2,172,787		$	32,039		$	73,387		$	2,278,213
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and obligations under capital leases	$	7,430		$	350		$	—		$	7,780
Accounts payable		55,659			1,710			(127	)(3F)		57,242
Accrued expenses		83,245			7,811			—			91,056
Current portion of accrued business combination costs		14,547			—			—			14,547
Deferred maintenance revenue		68,075			—			—			68,075
Unearned revenue and customer deposits		27,787			9,441			(7,431	)(3D)		29,797
Total current liabilities		256,743			19,312			(7,558	)		268,497
Long-term debt and obligations under capital leases, net of current portion		899,921			90			—			900,011
Accrued business combination costs, net of current portion		35,472			—			—			35,472
Deferred maintenance revenue, net of current portion		13,185			—			—			13,185
Deferred tax liability		26,038			—			—			26,038
Other liabilities		63,161			—			—			63,161
Total liabilities		1,294,520			19,402			(7,558	)		1,306,364
Commitments and contingencies
Stockholders’ equity:
Preferred stock		4,631			82,416			(82,416	)(3C)		4,631
Common stock		196			31			(27	)(3C)		200
Additional paid-in capital		1,078,020			173			93,405	(3C)		1,171,598
Treasury stock, at cost		(15,418	)		—			—			(15,418	)
Accumulated other comprehensive income		14,979			—			—			14,979
Accumulated deficit		(204,141	)		(69,983	)		69,983	(3C)		(204,141	)
Total stockholders’ equity		878,267			12,637			80,945			971,849
Total liabilities and stockholders’ equity	$	2,172,787		$	32,039		$	73,387		$	2,278,213

(A)	As reported in Nuance’s audited balance sheet included in its Form 10-K as of September 30, 2007, as filed with the SEC.
(B)	As derived from Viecore’s unaudited financial information as of September 30, 2007.

See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

4

NUANCE COMMUNICATIONS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the Twelve Months Ended September 30, 2007

				Historical									Historical					Historical
	Historical			Focus									Tegic					VoiceSignal
	Nuance			For the									For the					For the
	For the			Period from									Period from					Period from
	Twelve Months			October 1,									October 1,					October 1,
	Ended			2006 to									2006 to					2006 to
	September 30,			March 26,			Pro Forma			Debt			August 24,		Pro Forma			August 24,			Pro Forma			Pro Forma
	2007 (A)			2007 (B)			Adjustments			Offering			2007 (C)		Adjustments			2007 (D)			Adjustments			Combined
	(In thousands, except per share amounts)
Product and licensing	$	311,847		$	—		$	—		$	—		$	60,313	$	—		$	21,767		$	—		$	393,927
Professional services, subscription and hosting		165,520			10,563			(1,161	)(15)		—			—		—			2,319			—			177,241
Maintenance and support		124,629			—			—			—			—		—			—			—			124,629
Total revenue		601,996			10,563			(1,161	)		—			60,313		—			24,086			—			695,797
Costs and expenses:
Cost of product and licensing		43,162			—			—			—			3,314		(1,906	)(14)		—			—			44,570
Cost of professional services, subscription and hosting		114,228			6,611			(1,161	)(15)		—			—		—			1,106			—			120,784
Cost of maintenance and support		27,461			—			—			—			—		—			—			—			27,461
Cost of revenue from amortization of intangible assets		13,090			—			184	(16)		—			566		1,180	(12)		451			1,761	(9)		17,232
Total cost of revenue		197,941			6,611			(977	)		—			3,880		(726	)		1,557			1,761			210,047
Gross Margin		404,055			3,952			(184	)		—			56,433		726			22,529			(1,761	)		485,750
Operating expenses:
Research and development		80,024			—			—			—			9,984		—			6,077			—			96,085
Sales and marketing		184,948			381			—			—			6,137		—			4,266			—			195,732
General and administrative		75,564			2,037			—			—			6,815		—			11,691			—			96,107
Amortization of other intangible assets		24,596			—			1,468	(16)		—			44		10,031	(12)		—			9,947	(9)		46,086
Restructuring and other charges (credits), net		(54	)		—			—			—			—		—			—			—			(54	)
Total operating expenses		365,078			2,418			1,468			—			22,980		10,031			22,034			9,947			433,956
Income (loss) from operations		38,977			1,534			(1,652	)		—			33,453		(9,305	)		495			(11,708	)		51,794
Other income (expense):
Interest income		5,991			—			—			—			—		(1,257	)(13)		120			—			4,854
Interest expense		(36,501	)		(90	)		(2,621	)(17)		(7,097	)(8)		—		—			(58	)		(17,327	)(10)		(63,694	)
Other (expense) income, net		20			74			—			—			—		—			(1	)		—			93
Income (loss) before income taxes		8,487			1,518			(4,273	)		(7,097	)		33,453		(10,562	)		556			(29,035	)		(6,953	)
Provision for (benefit from) income taxes		22,502			278			—			—			—		—			(18	)		—			22,762
Net income (loss)	$	(14,015	)	$	1,240		$	(4,273	)	$	(7,097	)	$	33,453	$	(10,562	)	$	574		$	(29,035	)	$	(29,715	)
Basic and diluted earnings per share
Net loss per share	$	(0.08	)																					$	(0.16	)
Weighted average common shares outstanding:
Basic and diluted		176,424																				5,245	(11)		181,669

(A)	As reported in Nuance’s Form 10-K, as filed with the SEC.
(B)	As derived from Focus’ unaudited financial information for the period from October 1, 2006 to March 26, 2007.
(C)	As derived from Tegic’s unaudited financial information for the period from October 1, 2006 to August 24, 2007.
(D)	As derived from VoiceSignal’s unaudited financial information for the period from October 1, 2006 to August 24, 2007.
(E)	As derived from Commissure’s unaudited financial information for the period from October 1, 2006 to September 28, 2007.
(F)	As derived from Viecore’s unaudited financial information for the twelve months ended September 30, 2007.

See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

5

NUANCE COMMUNICATIONS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS, Continued

For the Twelve Months Ended September 30, 2007

	Historical									Historical
	Commissure									Viecore
	For the									For the
	Period from									Twelve Months
	October 1, 2006									Ended
	to September 28,			Pro Forma			Pro Forma			September 30,			Pro Forma			Pro Forma
	2007 (E)			Adjustments			Combined			2007 (F)			Adjustments			Combined
	(In thousands, except per share amounts)
Product and licensing	$	1,870		$	(23	)(6)	$	395,774		$	—		$	—		$	395,774
Professional services, subscription and hosting		—			—			177,241			69,139			(2,011	)(2)		244,369
Maintenance and support		—			—			124,629			—			—			124,629
Total revenue		1,870			(23	)		697,644			69,139			(2,011	)		764,772
Costs and expenses:
Cost of product and licensing		1,714			(23	)(6)		46,261			—			—			46,261
Cost of professional services, subscription and hosting		—			—			120,784			40,482			(1,350	)(2)		159,916
Cost of maintenance and support		—			—			27,461			—			—			27,461
Cost of revenue from amortization of intangible assets		172			306	(5)		17,710			—			—			17,710
Total cost of revenue		1,886			283			212,216			40,482			(1,350	)		251,348
Gross Margin		(16	)		(306	)		485,428			28,657			(661	)		513,424
Operating expenses:
Research and development		58			—			96,143			—			—			96,143
Sales and marketing		1,391			—			197,123			7,347			—			204,470
General and administrative		2,056			—			98,163			12,066			—			110,229
Amortization of other intangible assets		—			423	(5)		46,509			—			7,165	(1)		53,674
Restructuring and other charges (credits), net		—			—			(54	)		—			—			(54	)
Total operating expenses		3,505			423			437,884			19,413			7,165			464,462
Income (loss) from operations		(3,521	)		(729	)		47,544			9,244			(7,826	)		48,962
Other income (expense):
Interest income		—			—			4,854			470			(725	)(4)		4,599
Interest expense		(85	)		—			(63,779	)		(40	)		—			(63,819	)
Other (expense) income, net		—			—			93			—			—			93
Income (loss) before income taxes		(3,606	)		(729	)		(11,288	)		9,674			(8,551	)		(10,165	)
Provision for (benefit from) income taxes		—			—			22,762			3,957			—			26,719
Net income (loss)	$	(3,606	)	$	(729	)	$	(34,050	)	$	5,717		$	(8,551	)	$	(36,884	)
Basic and diluted earnings per share
Net loss per share							$	(0.19	)							$	(0.20	)
Weighted average common shares outstanding:
Basic and diluted					1,195	(7)		182,864						4,432	(3C)		187,296

(A)	As reported in Nuance’s Form 10-K, as filed with the SEC.
(B)	As derived from Focus’ unaudited financial information for the period from October 1, 2006 to March 26, 2007.
(C)	As derived from Tegic’s unaudited financial information for the period from October 1, 2006 to August 24, 2007.
(D)	As derived from VoiceSignal’s unaudited financial information for the period from October 1, 2006 to August 24, 2007.
(E)	As derived from Commissure’s unaudited financial information for the period from October 1, 2006 to September 28, 2007.
(F)	As derived from Viecore’s unaudited financial information for the twelve months ended September 30, 2007.

See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

6

A summary of the preliminary purchase price allocation as of September 30, 2007 for the acquisition of Viecore is as follows (in thousands):

Estimated Purchase Consideration
Stock	$	93,582
Cash		8,400
Debt Assumed		440
Transaction Costs		6,100
Total Estimated Purchase Consideration	$	108,522
Preliminary Allocation of Purchase Consideration
Current Assets	$	25,810
Property & Equipment		1,400
Other Long Term Assets		1,083
Identifiable Intangible Assets		30,550
Goodwill		61,083
Total Assets Acquired		119,926
Current Liabilities Assumed		(11,404	)
	$	108,522

Current assets acquired from Viecore primarily relate to cash, accounts receivable, prepaid expenses, deferred tax assets and acquired unbilled accounts receivable. Current liabilities assumed primarily relate to accounts payable, accrued expenses and deferred revenue.

Nuance estimates the $30.6 million of value ascribed to Viecore’s identifiable intangible assets will be allocated to customer relationships and trademarks.

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The amounts preliminarily assigned to Viecore’s identifiable intangible assets acquired are based on their respective fair values determined as of the acquisition dates. The excess of the purchase price over the tangible and identifiable assets will be recorded as goodwill and amounts to approximately $61.1 million. In accordance with current accounting standards, the goodwill is not being amortized and will be tested for impairment as required by SFAS No. 142.

The pro forma data are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if each transaction had been consummated as of October 1, 2006 for the statement of operations or as of September 30, 2007 for the balance sheet, nor are the data necessarily indicative of future operating results or financial position. Certain of Tegic’s expenses and income, such as AOL corporate overhead, interest income, interest expense, and income taxes, are not included in Tegic’s statements of revenues and direct expenses, as they are not directly associated with the operations of Tegic and were recorded by the parent Company, AOL. Management has determined that the corporate overhead recorded by the parent Company, AOL, will not be incremental to the financial statements as it will be recorded by Nuance. See below pro forma adjustments twelve through fourteen for details.

Pro forma adjustments reflect only those adjustments which are factually determinable and do not include the impact of contingencies which will not be known until the resolution of the contingency. The allocation of the purchase price relating to these acquisitions is preliminary, pending the finalization of Nuance’s review of certain of the accounts and the finalization of the appraisal of identifiable intangible assets.

Viecore

(1) Adjustment to record amortization expense of $7,165,000 for the identifiable intangible assets for the twelve months ended September 30, 2007, as if the acquisition had occurred on October 1, 2006. The allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed is preliminary pending collection of data to evaluate estimates of future revenues and earnings to determine a discounted cash flow valuation of certain intangibles that meet the separate recognition criteria of SFAS No. 141. Nuance’s preliminary assessment is that the weighted average useful life of the acquired identifiable intangible assets will be approximately 5.6 years. The acquired identifiable intangible assets will be amortized over a term consistent with their economic life. Trademarks will be amortized to cost of revenue using the straight line method. Customer relationships will be amortized to operating expense over a term consistent with the related cash flow streams.

An increase in the amount of identifiable intangible assets or a change in the allocation between the acquired identifiable intangible assets and goodwill for the Viecore acquisition of $1,000,000 would result in a change in pro forma amortization expense of approximately $235,000 for the twelve months ended September 30, 2007. An increase in the weighted average useful life of the acquired identifiable intangible assets of one year would result in a decrease in pro forma amortization expense of approximately $838,000 for the twelve months ended September 30, 2007. A decrease in the weighted average useful life of the acquired identifiable intangible assets of one year would result in an increase in pro forma amortization expense of approximately $1,206,000 for the twelve months ended September 30, 2007.

(2) Adjustment to eliminate Nuance revenue in connection with intercompany transactions with Viecore of $1,837,000 for the year ended September 30, 2007. Adjustment to eliminate Viecore revenue in connection with intercompany transaction with Nuance of $174,000 for the year ended September 30, 2007.

Adjustment to eliminate Viecore expense in connection with intercompany transactions with Nuance of $1,176,000 for the year ended September 30, 2007. Adjustment to eliminate Nuance expense in connection with intercompany transaction with Viecore of $174,000 for the year ended September 30, 2007.

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS — (Continued)

(3) Adjustments to record the fair value of the assets acquired and the liabilities assumed of Viecore, subject to adjustment pending the completion of a post-closing review of the purchased assets. Adjustments assume the acquisition was consummated as of September 30, 2007 and include the following:

(A) Adjustment to record $8,400,000 of cash paid to acquire Viecore and $6,100,000 for transaction fees paid, which include legal, accounting and tax fees, and due diligence fees. These transaction fees are included in the total estimated purchase consideration.

(B) Adjustment to eliminate $2,854,000 in deferred contract costs relating to customer arrangements (discussed in note 3D) and $765,000 in other current assets.

(C) Adjustment to Viecore’s historical data made to eliminate $12,637,000 of stockholders’ equity.

Adjustment to record common stock of $4,000 and Additional Paid in Capital of $93,578,000 related to the estimated issuance of 4,432,202 shares of Nuance common stock at a value of $21.11. Shares of Nuance common stock issued in the acquisition were valued in accordance with Emerging Issues Task Force (EITF) Issue 99-12; Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination.

(D) Adjustment to eliminate $7,431,000 of current deferred revenues. The adjustment is preliminary and is subject to a detailed review of Viecore’s deferred revenues. The final adjustments will be based on the guidance provided in EITF No. 01-03, Accounting in a Purchase Business Combination for Deferred Revenue of an Acquiree.

(E) Adjustment to record the fair value of intangible assets acquired totaling $30,550,000.

(F) Adjustment to eliminate $127,000 in accounts payable owed by Viecore to Nuance and the related accounts receivable balance.

(G) Adjustment to record goodwill of $61,083,000 (assuming for the purpose of these pro forma financial statements that the acquisition has been consummated on September 30, 2007) as a result of the purchase consideration in excess of the fair value of assets acquired and liabilities assumed.

(4) Adjustment to reduce interest income by $725,000 for the twelve months ended September 30, 2007 which represents cash paid to acquire Viecore, assuming an interest rate of 5%. A change of 1.0% in the interest rate would result in an annualized change of $145,000 in interest income.

Commissure

(5) Adjustment to record amortization expense of $901,000 for the identifiable intangible assets, partially offset by an adjustment to eliminate amortization expense of $172,000 related to historical intangible assets of Commissure for the twelve months ended September 30, 2007, as if the acquisition had occurred on October 1, 2006. The allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed is preliminary pending collection of data to evaluate estimates of future revenues and earnings to determine a discounted cash flow valuation of certain intangibles that meet the separate recognition criteria of SFAS No. 141. Nuance’s preliminary assessment is that the weighted average useful life of the acquired identifiable intangible assets will be approximately 5.9 years. The acquired identifiable intangible assets will be amortized over a term consistent with their economic life. Core and completed technologies will be amortized to cost of revenue using the straight line method. Customer relationships will be amortized to operating expense over a term consistent with the related cash flow streams.

An increase in the amount of identifiable intangible assets or a change in the allocation between the acquired identifiable intangible assets and goodwill for the Commissure acquisition of $1,000,000 would result in a change in pro forma amortization expense of approximately $159,000 for the twelve months ended September 30, 2007. An increase in the weighted average useful life of the acquired identifiable intangible assets of one year would result in a decrease in pro forma amortization expense of approximately $141,000 for

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS — (Continued)

the twelve months ended September 30, 2007. A decrease in the weighted average useful life of the acquired identifiable intangible assets of one year would result in an increase in pro forma amortization expense of approximately $199,000 for the twelve months ended September 30, 2007.

(6) Adjustment to eliminate Nuance revenue in connection with intercompany transaction with Commissure of $23,000 for the year ended September 30, 2007.

Adjustment to eliminate Commissure expense in connection with intercompany transaction with Nuance of $23,000 for the year ended September 30, 2007.

(7) Adjustment to record 1,195,095 shares of Nuance common stock issued in connection with the Commissure acquisition.

Debt Offering

(8) Adjustment to record interest expense of $7,097,000 for the year ended September 30, 2007, related to the convertible debt issued based on an annual interest rate of 2.75% including amortization of debt issuance costs and debt discount. Interest expense for the period August 13, 2007 through September 30, 2007 is included in Nuance’s historical financial statements for the twelve months ended September 30, 2007. A change of 0.25% in the interest rate would result in an annualized change of $625,000 in interest expense.

VoiceSignal

(9) Adjustment to record amortization expense of $11,708,000 for the identifiable intangible assets, for the twelve months ended September 30, 2007, as if the acquisition had occurred on October 1, 2006. The allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed is preliminary pending collection of data to evaluate estimates of future revenues and earnings to determine a discounted cash flow valuation of certain intangibles that meet the separate recognition criteria of SFAS No. 141. Nuance’s preliminary assessment is that the weighted average useful life of the acquired identifiable intangible assets will be approximately 6.8 years. The acquired identifiable intangible assets will be amortized over a term consistent with their economic life. Core and completed technologies will be amortized to cost of revenue using the straight line method. Customer relationships will be amortized to operating expense over a term consistent with the related cash flow streams.

An increase in the amount of identifiable intangible assets or a change in the allocation between the acquired identifiable intangible assets and goodwill for the VoiceSignal acquisition of $1,000,000 would result in a change in pro forma amortization expense of approximately $198,000 for the twelve months ended September 30, 2007. An increase in the weighted average useful life of the acquired identifiable intangible assets of one year would result in a decrease in pro forma amortization expense of approximately $1,334,000 for the twelve months ended September 30, 2007. A decrease in the weighted average useful life of the acquired identifiable intangible assets of one year would result in an increase in pro forma amortization expense of approximately $1,790,000 for the twelve months ended September 30, 2007.

(10) Adjustment to record interest expense of $17,327,000 for the year ended September 30, 2007, associated with the $225 million term loan issued in connection with the VoiceSignal acquisition based on an interest rate of 7.84%, including amortization of debt issuance costs and an associated increase of 0.25% on Nuance’s pre-existing loan balance. Interest expense for the period August 24, 2007 through September 30, 2007 is included in Nuance’s historical financial statements for the twelve months ended September 30, 2007. A change of 0.25% in the interest rate would result in an annualized change of $563,000 in interest expense.

(11) Adjustment to increase the weighted average common shares outstanding by 5,245,000 shares to fully weight the 5,837,000 shares of Nuance Common Stock issued on August 24, 2007 in connection with the VoiceSignal acquisition as if the acquisition closed on October 1, 2006.

10

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS — (Continued)

Tegic

(12) Adjustment to record amortization expense of $11,821,000 for the identifiable intangible assets, partially offset by an adjustment to eliminate amortization expense of $610,000 related to historical intangible assets of Tegic for the twelve months ended September 30, 2007, as if the acquisition had occurred on October 1, 2006. The allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed is preliminary pending collection of data to evaluate estimates of future revenues and earnings to determine a discounted cash flow valuation of certain intangibles that meet the separate recognition criteria of SFAS No. 141. Nuance’s preliminary assessment is that the weighted average useful life of the acquired identifiable intangible assets will be approximately 6.6 years. The acquired identifiable intangible assets will be amortized over a term consistent with their economic life. Core and completed technologies will be amortized to cost of revenue using the straight line method. Customer relationships will be amortized to operating expense over a term consistent with the related cash flow streams.

An increase in the amount of identifiable intangible assets or a change in the allocation between the acquired identifiable intangible assets and goodwill for the Tegic acquisition of $1,000,000 would result in a change in pro forma amortization expense of approximately 207,000 for the twelve months ended September 30, 2007. An increase in the weighted average useful life of the acquired identifiable intangible assets of one year would result in a decrease in pro forma amortization expense of approximately 1,186,000 for the twelve months ended September 30, 2007. A decrease in the weighted average useful life of the acquired identifiable intangible assets of one year would result in an increase in pro forma amortization expense of approximately 1,607,000 for the twelve months ended September 30, 2007.

(13) Adjustment to reduce interest income by $1,257,000 for the twelve months ended September 30, 2007, which represents additional cash outlay in excess of debt proceeds to acquire Tegic, assuming an interest rate of 5%. A change of 1.0% in the interest rate would result in an annualized change of $280,000 in interest income.

(14) Adjustment to eliminate Tegic expense in connection with intercompany transaction with Nuance of $1,906,000 for the year ended September 30, 2007.

Focus

(15) Adjustment to eliminate intercompany professional services, subscription and hosting revenue and cost of professional services, subscription and hosting revenue totaling $1,161,000 for the year ended September 30, 2007.

(16) Adjustment to record amortization expense of $1,652,000 for the identifiable intangible assets acquisition for the twelve months ended September 30, 2007. Core and completed technology are amortized to cost of revenue on a straight-line basis while customer relationships and non-compete agreements are amortized to operating expenses over a term consistent with the related cash flow streams.

(17) Adjustment to record interest expense of $2,621,000 for the twelve months ended September 30, 2007, associated with the debt assumed in connection with the Focus acquisition based on an interest rate of 7.3%. Interest expense for the period subsequent to the Focus acquisition, March 26, 2007 through September 30, 2007, is included in Nuance’s historical financial statements for the twelve months ended September 30, 2007. A change of 0.25% in the interest rate would result in an annualized change of $140,000 in interest expense.

11