##### 





SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
    FORM 10-Q
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarter ended
    March 31, 2008ORTRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934   Commission File
    No. 0-30821
  TELECOMMUNICATION SYSTEMS,
    INC.
   MARYLAND(State or Other Jurisdiction ofIncorporation or Organization)275 West Street, Annapolis, MD(Address of principal executive offices)

52-1526369(I.R.S. Employer Identification No.)21401(Zip Code)    (410) 263-7616
   þ o
  12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
    Shares outstandingas of March 31,Title of Each Class

2008Class A Common Stock, par value$0.01 per share


35,043,467Class B Common Stock, par value$0.01 per share


7,301,334Total Common Stock Outstanding


42,344,801




---



##### 





INDEX
  TELECOMMUNICATION
    SYSTEMS, INC.
  PagePART I. FINANCIAL INFORMATIONItem 1.


Financial Statements (Unaudited)Consolidated Statements of Operations for the three-months
    ended  March 31, 2008 and 2007


1Consolidated Balance Sheets as of March 31, 2008 and
    December 31,  2007


2Consolidated Statement of Stockholders Equity for the
    three-months  ended March 31, 2008


3Consolidated Statements of Cash Flows for the three-months
    ended  March 31, 2008 and 2007


4Notes to Consolidated Financial Statements


5Item 2.


Managements Discussion and Analysis of Financial Condition
    and Results  of Operations


16Item 3.


Quantitative and Qualitative Disclosures About Market Risk


30Item 4.


Controls and Procedures


30PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


31Item 1A.


Risk Factors


32Item 2.


Unregistered Sales of Equity Securities and Use of Proceeds


32Item 3.


Defaults Upon Senior Securities


32Item 4.


Submission of Matters to a Vote of Security Holders


32Item 5.


Other Information


32Item 6.


Exhibits


33SIGNATURES


34




---



##### 



TeleCommunication
    Systems, Inc.Consolidated Statements of Operations
    (amounts in thousands, except per share data)
    (unaudited)
  Three Months EndedMarch 31,2008


2007RevenueServices

$
22,766


$
20,885Systems


17,647



13,234Total revenue


40,413



34,119Direct costs of revenueDirect cost of services revenue


13,658



12,948Direct cost of systems revenue, including amortization of
    software development costs of $409, and $344, respectively


7,191



6,876Total direct cost of revenue


20,849



19,824Services gross profit


9,108



7,937Systems gross profit


10,456



6,358Total gross profit


19,564



14,295Operating costs and expensesResearch and development expense


4,088



3,105Sales and marketing expense


3,099



3,163General and administrative expense


5,318



4,652Depreciation and amortization of property and equipment


1,490



1,668Amortization of acquired intangible assets


37



37Total operating costs and expenses


14,032



12,625Income from operations


5,532



1,670Interest expense


(329
)


(552
)Amortization of debt discount and debt issuance expenses


(124
)


(411
)Other income/(expense), net


(413
)


60Income from continuing operations before income taxes


4,666



767Provision for income taxes


(48
)


Income from continuing operations


4,618



767Loss from discontinued operations






(124
)Net income

$
4,618


$
643Income/(loss) per share-basic and diluted:Income per share from continuing operations

$
0.11


$
0.02Loss per share from discontinued operations






(0.00
)Net income per share-basic and diluted

$
0.11


$
0.02Weighted average shares outstanding-basic


42,273



40,630Weighted average shares outstanding-diluted


43,778



42,471    1




---



##### 



TeleCommunication
    Systems, Inc.
  Consolidated
    Balance Sheets
 (amounts in
    thousands, except share data)
  March 31,


December 31,2008


2007(unaudited)AssetsCurrent assets:Cash and cash equivalents

$
18,461


$
15,955Accounts receivable, net of allowance of $158 in 2008 and $266
    in 2007


23,749



20,424Unbilled receivables


12,770



15,229Inventory


4,513



5,373Other current assets


7,429



5,561Total current assets


66,922



62,542Property and equipment, net of accumulated depreciation and
    amortization of $37,459 in 2008 and $35,969 in 2007


11,456



11,209Software development costs, net of accumulated amortization of
    $5,192 in 2008 and $4,783 in 2007


4,216



4,406Acquired intangible assets, net of accumulated amortization of
    $546 in 2008 and $509 in 2007


672



709Goodwill


1,813



1,813Other assets


1,291



1,445Total assets

$
86,370


$
82,124Liabilities and stockholders equityCurrent liabilities:Accounts payable and accrued expenses

$
12,474


$
12,459Accrued payroll and related liabilities


3,800



4,915Deferred revenue


7,281



4,685Current portion of capital lease obligations and notes payable


3,836



5,444Total current liabilities


27,391



27,503Capital lease obligations and notes payable, less current portion


8,976



10,657Stockholders equity:Class A Common Stock; $0.01 par value:Authorized shares  225,000,000; issued and
    outstanding shares of 35,043,467 in 2008 and 34,970,394 in 2007


350



349Class B Common Stock; $0.01 par value:Authorized shares  75,000,000; issued and outstanding
    shares of 7,301,334 in 2008 and 7,301,334 in 2008


74



74Additional paid-in capital


229,150



227,987Accumulated other comprehensive income/(loss)


132



(125
)Accumulated deficit


(179,703
)


(184,321
)Total stockholders equity


50,003



43,964Total liabilities and stockholders equity

$
86,370


$
82,124    2




---



##### 



TeleCommunication
    Systems, Inc.Consolidated Statement of Stockholders
    Equity
    (amounts in thousands, except share data)
    (unaudited)
  AccumulatedClass A


Class B


Additional


OtherCommon


Common


Paid-In


Comprehensive


AccumulatedStock


Stock


Capital


Income/(Loss)


Deficit


TotalBalance at January 1, 2008

$
349


$
74


$
227,987


$
(125
)

$
(184,321
)

$
43,964Options exercised for the purchase of 51,020 shares of
    Class A Common Stock


1







115











116Issuance of 22,053 shares of Class A Common Stock
    under Employee Stock Purchase Plan










64











64Stock compensation expense for continuing operations










975











975Unrealized loss on securities and other










9



(225
)






(216
)Realization of unrealized loss on securities














482







482Net income for the three-months ended March 31, 2008


















4,618



4,618Balance at March 31, 2008

$
350


$
74


$
229,150


$
132


$
(179,703
)

$
50,003    3




---



##### 



TeleCommunication
    Systems, Inc.Consolidated Statements of Cash Flows
    (amounts in thousands)
    (unaudited)
  Three Months EndedMarch 31,2008


2007Operating activities:Net income

$
4,618


$
643Less: Loss from discontinued operations






(124
)Income from continuing operations


4,618



767Adjustments to reconcile net loss from continuing operations to
    net cash provided by/(used in) operating activities:Depreciation and amortization of property and equipment


1,490



1,668Amortization of acquired intangible assets


37



37Non-cash stock compensation expense


975



988Amortization of software development costs


409



344Amortization of debt discount






288Amortization of deferred financing fees included in interest
    expense


128



123Impairment of marketable securities


482



Other non-cash income


14



11Changes in operating assets and liabilities:Accounts receivable, net


(3,325
)


(8,053
)Unbilled receivables


2,459



1,262Inventory


860



357Other current assets


(2,093
)


(3,796
)Other assets


86



(259
)Accounts payable and accrued expenses


15



2,943Accrued payroll and related liabilities


(1,115
)


(3,730
)Deferred revenue


2,596



1,640Net cash provided by/(used in) operating activities of
    continuing operations


7,636



(5,410
)Net cash used in operating activities of discontinued operations






(2,370
)Total net cash provided by/(used in) operating activities


7,636



(7,780
)Investing activities:Purchases of property and equipment


(442
)


(389
)Capitalized software development costs


(219
)


(445
)Total net cash used in investing activities


(661
)


(834
)Financing activities:Payments on long-term debt and capital lease obligations


(4,584
)


(1,677
)Proceeds from short-term line of credit, net






8,000Proceeds from exercise of warrants






2,208Proceeds from exercise of employee stock options and sale of
    stock


115



488Net cash provided by/(used in) financing activities from
    continuing operations


(4,469
)


9,019Net cash used in financing activities of discontinued operations






(5
)Total net cash provided by/(used in) financing activities


(4,469
)


9,014Net increase in cash from continuing operations


2,506



2,775Net decrease in cash from discontinued operations






(2,375
)Net increase in cash


2,506



400Cash and cash equivalents at the beginning of the period


15,955



10,358Cash and cash equivalents at the end of the period

$
18,461


$
10,758    4




---



##### 



TeleCommunication
    Systems, Inc.
    Notes to Consolidated Financial Statements
    March 31, 2008
    (amounts in thousands, except per share amounts)
    (unaudited)
  1.
    Basis of
    Presentation and Summary of Significant Accounting
    Policies  Basis of Presentation. Form 10-Q Regulation S-X. Form 10-K.
  Use of Estimates.
  Investments in Marketable Securities and Note
    Receivable. Accounting for Certain Investments in Debt and Equity
    Securities 18-month
  Other Comprehensive
    Income/(Loss).
  Stock-Based Compensation. Share Based
    Payment
 5




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Earnings per share.
  Three Months EndedMarch 31,2008


2007Basic weighted average common shares outstanding


42,273



40,630Dilutive options outstanding


1,035



1,270Dilutive warrants outstanding


470



571Diluted weighted average common shares outstanding used in the
    calculation of diluted income/(loss)


43,778



42,471   Income Taxes.
        Recent Accounting
    Pronouncements.
   6




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement 133
  2.
    Stock-Based
    Compensation   7




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Three MonthsEnded March 31,2008


2007Continuing operations:Stock options granted at fair value

$
931


$
900Restricted stock


33



65Employee stock purchase plan


11



23Total stock compensation expense included in continuing
    operations

$
975


$
988Discontinued operations:Stock options granted at fair value

$



$
79Total stock compensation expense included in discontinued
    operations

$



$
79     Three Months Ended March 31,2008


2007Comm.


Gvmt


Total


Comm.


Gvmt


TotalStock compensation included in direct cost of revenue:Direct cost of services

$
301


$
129


$
430


$
257


$
158


$
415Direct cost of systems


45



172



217



39



20



59Total stock compensation included in direct costs of revenue

$
346


$
301


$
647


$
296


$
178


$
474   Three MonthsEndedMarch 31,2008


2007Stock compensation included in operating expenses:Research and development expense

$
213


$
198Sales and marketing expense


71



143General and administrative expense


44



173Total stock compensation included in operating expenses

$
328


$
514  8




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    WeightedAverageNumber of


Exercise(Share amounts in thousands)

Options


PriceOutstanding, beginning of year


11,144


$
3.69Granted


2,384


$
3.14Exercised


(51
)

$
2.27Forfeited


(151
)

$
3.43Outstanding, at March 31, 2008


13,326


$
3.60Exercisable, at March 31, 2008


7,556


$
3.99Vested and expected to vest at March 31, 2008


9,246


$
3.69Estimated weighted-average grant- date fair value of options
    granted during the year

$
3.69Weighted-average remaining contractual life of options
    outstanding at March 31, 2008


6.9 years   WeightedAverageNumber of


FairOptions


ValueNon-vested, beginning of year


4,629


$
2.30Forfeited


(151
)

$
2.41Vested


1,106


$
2.29Exercisable, at March 31, 2008


7,556


$
3.53Non-vested, at March 31, 2008


5,771


$
2.12     Weighted-AverageWeighted-Average


Remaining Contractual





Weighted-AverageOptions


Exercise Prices of


Life of Options


Options


Exercise Prices ofExercise Prices

Outstanding


Options Outstanding


Outstanding (Years)


Exercisable


Options Exercisable$0.01 - $ 2.61


4,003


$
2.31



6.82



2,464


$
2.25$2.61 - $ 5.21


7,106


$
3.32



7.52



2,875


$
3.32$5.21 - $ 7.82


2,187


$
6.75



5.32



2,187


$
6.75$7.82 - $26.05


30


$
11.07



4.76



30


$
11.0713,326











7,556    9




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Three MonthsEndedMarch 31,2008

2007Expected life (in years)

5.5

5.5Risk-free interest rate(%)

2.8%-3.28%

4.66%-4.76%Volatility(%)

66%-67%

79%-83%Dividend yield(%)

0%

0%   3.
    Supplemental
    Disclosure of Cash Flow Information        4.
    Fair Value
    Measurement           10




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Fair Valueas of


Fair Value Measurements at 3/31/20083/31/2008


Using Fair Value HierarchyTotal


Level 1


Level 2


Level 3AssetsCash and cash equivalents

$
18,461


$
18,461


$



$
Marketable securities available for sale


648



648







$
19,109


$
19,109


$



$
     5.
    Segment
    Information    ®
  ®
   11




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Three Months Ended March 31,2008


2007Comm.


Gvmt


Total


Comm.


Gvmt


TotalRevenueServices

$
15,536


$
7,230


$
22,766


$
13,641


$
7,244


$
20,885Systems


10,706



6,941



17,647



6,810



6,424



13,234Total revenue


26,242



14,171



40,413



20,451



13,668



34,119Operating costs and expensesDirect cost of services


7,959



5,699



13,658



7,323



5,625



12,948Direct cost of systems


2,046



5,145



7,191



1,442



5,434



6,876Total direct costs


10,005



10,844



20,849



8,765



11,059



19,824Gross profitServices gross profit


7,577



1,531



9,108



6,318



1,619



7,937Systems gross profit


8,660



1,796



10,456



5,368



990



6,358Total gross profit

$
16,237


$
3,327


$
19,564


$
11,686


$
2,609


$
14,295   Three Months EndedMarch 31,2008


2007Total segment gross profit

$
19,564


$
14,295Research and development expense


(4,088
)


(3,105
)Sales and marketing expense


(3,099
)


(3,163
)General and administrative expense


(5,318
)


(4,652
)Depreciation and amortization of property and equipment


(1,490
)


(1,668
)Amortization of acquired intangible assets


(37
)


(37
)Interest expense


(329
)


(552
)Amortization of debt discount and debt issuance expenses


(124
)


(411
)Other income/(expense), net


(413
)


60Income from continuing operations before income taxes


4,666



767Provision for income taxes


(48
)


Income from continuing operations


4,618



767Loss from discontinued operations






(124
)Net income

$
4,618


$
643  12




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  6.
    Inventory  Mar. 31,


Dec. 31,2008


2007Component parts

$
2,682


$
2,670Finished goods


1,831



2,703Total inventory at period end

$
4,513


$
5,373   7.
    Acquired
    Intangible Assets and Capitalized Software Development
    Costs  March 31, 2008


December 31, 2007Gross








GrossCarrying


Accumulated





Carrying


AccumulatedAmount


Amortization


Net


Amount


Amortization


NetAcquired intangible assets:Customer Lists

$
606


$
434


$
172


$
606


$
405


$
201Trademarks & Patents


612



112



500



612



104



508Software development costs, including acquired technology


9,408



5,192



4,216



9,189



4,783



4,406Total

$
10,626


$
5,738


$
4,888


$
10,407


$
5,292


$
5,115Estimated future 
    amortization expense:Nine-months ending December 31, 2008

$
1,791Year ending December 31, 2009

$
1,799Year ending December 31, 2010

$
738Year ending December 31, 2011

$
179Thereafter

$
381     8.
    Concentrations
    of Credit Risk and Major Customers      % of TotalRevenue Forthe ThreeMonths EndedMarch 31,Customer

Segment

2008

2007U.S. Government

Government


24
%


27
%Customer A

Commercial


35
%


27
%  13




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  As of March 31, 2008Accounts

UnbilledCustomer

Segment

Receivable

ReceivablesU.S. Government

Government

24%

61%Customer A

Commercial

18%

15%   9.
    Lines of
    Credit and Financing Arrangements          10.
    Contingencies   14




---



##### 



TeleCommunication
    Systems, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   15




---



##### 



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q Form 10-Q). Form 10-Q Form 10-Q
  Critical
    Accounting Policies and Estimates
    
    accounting for our percentage-of-completion and proportional
    performance contracts involving multiple elements and software,
    accounts receivable realizability,
    inventory value, 16




---



##### 




    evaluating goodwill for impairment,
    the realizability and remaining useful lives of long-lived
    assets, and
    contingent liabilities.      
    revenue recognition for our software and other contracts with
    multiple elements,
    revenue recognition for our contracts accounted for using the
    percentage-of-completion and proportional performance methods,
    capitalized software development costs,
    acquired intangible assets, and
    income taxes.  Form 10-K Form 10-K).
  Overview
    Form 10-K Form 10-Q.
  Indicators of Our
    Financial and Operating Performance
    
    Revenue and gross profit.  We derive revenue
    from the sales of systems and services including recurring
    monthly service and subscriber fees, software licenses and
    related service fees for the design, development, and deployment
    of software and communication systems, and products and services
    derived from the delivery of information processing and
    communication systems to governmental agencies.
    Gross profit represents revenue minus direct cost of revenue,
    including certain non-cash expenses.The major items
    comprising our cost of revenue are compensation and benefits,
    third-party hardware and software, amortization of software
    development costs, non-cash stock-based compensation, and
    overhead expenses. The costs of hardware and third-party
    software are 17




---



##### 



primarily associated with the delivery of systems, and fluctuate
    from period to period as a result of the relative volume, mix of
    projects, level of service support required and the complexity
    of customized products and services delivered. Amortization of
    software development costs, including acquired technology, is
    associated with the recognition of systems revenue from our
    Commercial Segment.  
    Operating expenses.  Our operating expenses are
    primarily compensation and benefits, professional fees, facility
    costs, marketing and sales-related expenses, and travel costs as
    well as certain non-cash expenses such as non-cash stock
    compensation expense, depreciation and amortization of property
    and equipment, and amortization of acquired intangible assets.
    Liquidity and cash flows.  The primary driver
    of our cash flows is the results of our operations. Other
    important sources of our liquidity are our lease financings
    secured for the purchase of equipment and potential borrowings
    under our credit lines.
    Balance sheet.  We view cash, working capital,
    and accounts receivable balances and days revenues outstanding
    as important indicators of our financial health.  Results of
    Operations
  Revenue and Cost
    of Revenue
    Commercial
    Segment:
  Three MonthsEndedMarch 31,


2008 vs. 2007($ in millions)

2008


2007


$


%Services revenue

$
15.5


$
13.7


$
1.8



13
%Systems revenue


10.7



6.8



3.9



57
%Commercial Segment revenue


26.2



20.5



5.7



28
%Direct cost of services revenue


7.9



7.4



0.5



7
%Direct cost of systems revenue


2.0



1.4



0.6



43
%Commercial Segment cost of revenue


9.9



8.8



1.1



13
%Services gross profit


7.6



6.3



1.3



21
%Systems gross profit


8.7



5.4



3.3



61
%Commercial Segment gross
    profit1

$
16.3


$
11.7


$
4.6



39
%Segment gross profit as a percent of revenue


62
%


57
%     1 See
    discussion of segment reporting in Note 5 to the
    accompanying unaudited consolidated financial statements  Commercial
    Services Revenue, Cost of Revenue, and Gross Profit:
    E-911,
 18




---



##### 



®
      Commercial
    Systems Revenue, Cost of Revenue, and Gross Profit:
       19




---



##### 



Government
    Segment:
  Three MonthsEndedMarch 31,


2008 vs. 2007($ in millions)

2008


2007


$


%Services revenue

$
7.3


$
7.3


$




Systems revenue


6.9



6.4



0.5



8
%Government Segment revenue


14.2



13.7



0.5



4
%Direct cost of services revenue


5.7



5.7







Direct cost of systems revenue


5.1



5.4



(0.3
)


(6
)%Government Segment cost of revenue


10.8



11.1



(0.3
)


(3
)%Services gross profit


1.5



1.6



(0.1
)


(6
)%Systems gross profit


1.8



1.0



0.8



80
%Government Segment gross
    profit1

$
3.3


$
2.6


$
0.7



27
%Segment gross profit as a percent of revenue


23
%


19
%     1 See
    discussion of segment reporting in Note 5 to the
    accompanying unaudited consolidated financial statements   20




---



##### 



Government
    Services Revenue, Cost of Revenue, and Gross Profit:
        Government
    Systems Revenue, Cost of Revenue, and Gross Profit:
  ®
  ®
      Major
    Customers
   21




---



##### 



Revenue
    Backlog
    Three MonthsEndedMarch 31,


2008 vs. 2007($ in millions)

2008


2007


$


%Commercial Segment

$
89.9


$
39.2


$
50.7



129
%Government Segment


34.9



29.6



5.3



18
%Total funded contract backlog

$
124.8


$
68.8


$
56.0



81
%Commercial Segment

$
98.6


$
39.2


$
59.4



152
%Government Segment


126.4



50.4



76.0



151
%Total backlog of orders and commitments, including customer
    options

$
225.0


$
89.6


$
135.4



151
%Expected to be realized within next 12 months

$
78.0


$
57.8


$
20.2



35
%   and/or
  Operating
    Expenses
  Research and
    development expense:
  Three MonthsEndedMarch 31,

2008 vs. 2007($ in millions)

2008

2007

$

%Research and development expense

$
4.1


$
3.1


$
1.0



32
%Percent of total revenue


10
%


9
%    22




---



##### 



product-by-product
    Sales and
    marketing expense:
  Three MonthsEndedMarch 31,

2008 vs. 2007($ in millions)

2008

2007

$

%Sales and marketing expense

$
3.1


$
3.2


$
(0.1
)


(3
)%Percent of total revenue


8
%


9
%     General and
    administrative expense:
  Three MonthsEndedMarch 31,

2008 vs. 2007($ in millions)

2008

2007

$

%General and administrative expense

$
5.3


$
4.7


$
0.6



13
%Percent of total revenue


13
%


14
%    23




---



##### 



Depreciation and
    amortization of property and equipment:
  Three MonthsEndedMarch 31,

2008 vs. 2007($ in millions)

2008

2007

$

%Depreciation and amortization of property and equipment

$
1.5


$
1.7


$
( 0.2
)


( 12
)%Average gross cost of property and equipment during the period

$
48.0


$
53.6


$
(5.6
)


(10
)%     Amortization of
    acquired intangible assets:
  Three MonthsEndedMarch 31

2008 vs. 2007($ in millions)

2008

2007

$

%Amortization of acquired intangible assets

$
0.1


$
0.1


$




     Interest
    expense:
  Three MonthsEndedMarch 31


2008 vs. 2007($ in millions)

2008


2007


$


%Interest expense incurred on notes payable

$
0.3


$
0.5


$
(0.2
)


(40
)%Interest expense incurred on capital lease obligations


0.1



0.1







NMAmortization of deferred financing fees


0.1



0.1







NMAmortization of debt discount






0.3



(0.3
)


100
%Total interest and financing expense

$
0.5


$
1.0


$
( 0.5
)


(50
)%      24




---



##### 



Other
    income/(expense), net:
    Income
    taxes:
   25




---



##### 



Discontinued
    Operations  Enterprise assets
  Form 10-Q Accounting for the Impairment or Disposal of
    Long-Lived Assets
  18-month
    Three MonthsEndedMarch 31


2008 vs. 2007($ in millions)

2008


2007


$


%Enterprise revenue

$



$
3.9


$
(3.9
)


NMEnterprise gross profit






0.5



(0.5
)


NMLoss from discontinued operations

$



$
(0.1
)

$
(0.1
)


NM     Net
    income:
  Three MonthsEndedMarch 31,

2008 vs. 2007($ in millions)

2008

2007

$

%Net income

$
4.6


$
0.6


$
4.0



667
%    26




---



##### 



Liquidity and
    Capital Resources
  Three MonthsEndedMarch 31,


2008 vs. 2007($ in millions)

2008


2007


$


%Net cash and cash equivalents provided by/(used in):Continuing operationsIncome

$
4.6


$
0.8


$
3.8



475
%Non-cash charges


3.5



3.4



0.1



3
%Net changes in working capital including changes in other assets


(0.5
)


(9.6
)


9.1



95
%Operating activities


7.6



(5.4
)


13.0



240
%Purchases of property and equipment


(0.4
)


(0.4
)


NM



NMCapitalized software development costs


(0.2
)


(0.4
)


0.2



50
%Proceeds from new borrowings






8.0



(8.0
)


100
%Payments on long-term debt and capital lease payments


(4.6
)


(1.6
)


(3.0
)


(188
)%Other financing activities


0.1



2.6



(2.5
)


(96
)%Cash provided by continuing operations


2.5



2.8



(0.3
)


(107
)%Discontinued operationsCash used in operating activities in discontinued operations






(2.4
)


2.4



100
%Net increase in cash

$
2.5


$
0.4


$
2.1



525
%Days revenues outstanding in accounts receivable, including
    unbilled receivables


81



95   Capital resources:
  Sources and uses of cash:
  Operations:
  Investing activities:
  Financing activities:
 27




---



##### 



28




---



##### 



Off-Balance Sheet
    Arrangements
    Contractual
    Commitments
    Within 12


1-3


3-5


More than($ in millions)

Months


Years


Years


5 Years


TotalNotes payable

$
2.7


$
4.8


$
2.8


$



$
10.3Capital lease obligations


2.1



2.0



0.5







4.6Operating leases


3.3



6.8



1.1



0.3



11.5Total contractual commitments

$
8.1


$
13.6


$
4.4


$
0.3


$
26.4  29




---



##### 



Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest Rate
    Risk
  Form 10-K.
  Foreign Currency
    Risk
    Form 10-K.
  Item 4.
    Controls
    and Procedures    Rule 13a-15(b),
   30




---



##### 



PART II. 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  No. 01-CV-9500. Rule 10b-5 Rule 10b-5
     31




---



##### 



Item 1A.
    Risk
    Factors  Form 10-K.
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Item 3.
    Defaults
    Upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 5.
    Other
    Information     32




---



##### 



Item 6.
    Exhibits  ExhibitNumbers

Description31
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200231
.2

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200232
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 200232
.2

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002  33




---



##### 



SIGNATURES
       By:
    /s/  Maurice
    B. Tosé       /s/ Maurice B. ToséMaurice B. ToséMay 5, 2008

Chairman, President and Chief Executive Officer
    (Principal Executive Officer)/s/ Thomas M. Brandt, Jr.Thomas M. Brandt, Jr.May 5, 2008

Senior Vice President and Chief Financial Officer
    (Principal Financial Officer)  34