##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2008

or



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

For the transition period from 
to

Commission File Number: 001-33961





HILL INTERNATIONAL, INC.

(Exact name of registrant as specified in its
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-0953973                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|303 Lippincott Centre, Marlton, NJ       |  | 08053     
|(Address of principal executive offices) |  | (Zip Code)

Registrants telephone number, including area code: (856) 810-6200





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has
been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   ̈    Accelerated Filer   ̈    Non-Accelerated
Filer  x

Smaller Reporting Company   ̈

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

There were 40,955,016 shares of the
Registrants Common Stock outstanding at August 1, 2008.









---

##### Table of Contents

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

Index to Form 10-Q

|                             |  |                                                                                                                             |  |   
|---------------------------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I FINANCIAL INFORMATION |  |                                                                                                                            
|                             |  |                                                                                                                            
|Item 1                       |  | Financial Statements                                                                                                        |  | 3 
|                             |  |                                                                                                                            
|                             |  | Consolidated Balance Sheets at June 30, 2008 (unaudited) and December 30, 2007                                              |  | 3 
|                             |  |                                                                                                                            
|                             |  | Consolidated Statements of Operations for the three and six month periods ended June 30, 2008 and June 30, 2007 (unaudited) |  | 4 
|                             |  |                                                                                                                            
|                             |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and June 30, 2007 (unaudited)                  |  | 5 
|                             |  |                                                                                                                            
|                             |  | Notes to Consolidated Financial Statements                                                                                  |  | 6 
|                             |  |                                                                                                                            
|Item 2                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                       |  | 26
|                             |  |                                                                                                                            
|Item 3                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                  |  | 41
|                             |  |                                                                                                                            
|Item 4                       |  | Controls and Procedures                                                                                                     |  | 41
|                             | 
|PART II OTHER INFORMATION    |  |                                                                                                                            
|                             |  |                                                                                                                            
|Item 1                       |  | Legal Proceedings                                                                                                           |  | 42
|                             |  |                                                                                                                            
|Item 1A                      |  | Risk Factors                                                                                                                |  | 43
|                             |  |                                                                                                                            
|Item 2                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |  | 43
|                             |  |                                                                                                                            
|Item 3                       |  | Defaults Upon Senior Securities                                                                                             |  | 43
|                             |  |                                                                                                                            
|Item 4                       |  | Submission of Matters to a Vote of Security Holders.                                                                        |  | 43
|                             |  |                                                                                                                            
|Item 5                       |  | Other Information                                                                                                           |  | 44
|                             |  |                                                                                                                            
|Item 6                       |  | Exhibits                                                                                                                    |  | 44
|                             | 
|Signatures                   |  | 45                                                                                                                         



2



---

##### Table of Contents

|Item 1. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                  |  | June 30,2008 |         |   | December 31,2007 |  
|                                                                                                                                                                  |  | (unaudited)  |         |   |                  |  
|Assets                                                                                                                                                            |  |              |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                         |  | $            | 30,313  |   |                  | $ | 66,128  |  
|Cash - restricted                                                                                                                                                 |  |              | 2,880   |   |                  |   | 3,749   |  
|Accounts receivable, less allowance for doubtful accounts of $5,399 and $5,143                                                                                    |  |              | 107,790 |   |                  |   | 83,151  |  
|Accounts receivable - affiliate                                                                                                                                   |  |              | 1,084   |   |                  |   | 3,394   |  
|Prepaid expenses and other current assets                                                                                                                         |  |              | 8,200   |   |                  |   | 4,961   |  
|Income taxes receivable                                                                                                                                           |  |              | 578     |   |                  |   | 550     |  
|Deferred tax assets                                                                                                                                               |  |              | 965     |   |                  |   | 495     |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Total current assets                                                                                                                                              |  |              | 151,810 |   |                  |   | 162,428 |  
|Property and equipment, net                                                                                                                                       |  |              | 10,607  |   |                  |   | 6,463   |  
|Cash - restricted, net of current portion                                                                                                                         |  |              | 1,289   |   |                  |   | 1,308   |  
|Retainage receivable, less allowance for doubtful accounts of $38 and $38                                                                                         |  |              | 1,084   |   |                  |   | 820     |  
|Acquired intangibles, net                                                                                                                                         |  |              | 23,254  |   |                  |   | 10,228  |  
|Goodwill                                                                                                                                                          |  |              | 40,306  |   |                  |   | 21,587  |  
|Investment in affiliates                                                                                                                                          |  |              | 13,064  |   |                  |   | 1,480   |  
|Other assets                                                                                                                                                      |  |              | 3,270   |   |                  |   | 2,885   |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Total assets                                                                                                                                                      |  | $            | 244,684 |   |                  | $ | 207,199 |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|                                                                                                                                                                  |  |             
|Liabilities and Stockholders Equity                                                                                                                              |  |              |         |   |                  |   |         |  
|Due to bank                                                                                                                                                       |  | $            | 219     |   |                  | $ | 942     |  
|Current maturities of notes payable                                                                                                                               |  |              | 2,370   |   |                  |   | 1,625   |  
|Current maturities of capital lease obligations                                                                                                                   |  |              | 75      |   |                  |   | 141     |  
|Accounts payable and accrued expenses                                                                                                                             |  |              | 43,395  |   |                  |   | 43,128  |  
|Income taxes payable                                                                                                                                              |  |              | 4,007   |   |                  |   | 4,377   |  
|Other current liabilities                                                                                                                                         |  |              | 16,661  |   |                  |   | 9,435   |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                         |  |              | 66,727  |   |                  |   | 59,648  |  
|Notes payable, net of current maturities                                                                                                                          |  |              | 177     |   |                  |   | 574     |  
|Capital lease obligations, net of current maturities                                                                                                              |  |              | 21      |   |                  |   | 30      |  
|Retainage payable                                                                                                                                                 |  |              | 1,025   |   |                  |   | 815     |  
|Deferred tax liabilities                                                                                                                                          |  |              | 2,467   |   |                  |   | 1,877   |  
|Deferred revenue                                                                                                                                                  |  |              | 10,871  |   |                  |   | 10,924  |  
|Other liabilities                                                                                                                                                 |  |              | 12,340  |   |                  |   | 4,701   |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                 |  |              | 93,628  |   |                  |   | 78,569  |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Minority interest                                                                                                                                                 |  |              | 3,558   |   |                  |   | 259     |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Commitments and contingencies (Notes 17, 18, 19, and 20)                                                                                                          |  |              |         |   |                  |   |         |  
|Stockholders equity:                                                                                                                                             |  |              |         |   |                  |   |         |  
|Preferred stock, $.0001 par value; 1,000,000 shares authorized, none issued                                                                                       |  |              |        |   |                  |   |        |  
|Common stock, $.0001 par value; 75,000,000 shares authorized, 41,471,862 shares and 38,953,111 shares issued at June 30, 2008 and
December 31, 2007, respectively |  |              | 4       |   |                  |   | 4       |  
|Additional paid-in capital                                                                                                                                        |  |              | 110,250 |   |                  |   | 106,481 |  
|Retained earnings                                                                                                                                                 |  |              | 38,897  |   |                  |   | 28,306  |  
|Accumulated other comprehensive income                                                                                                                            |  |              | 1,674   |   |                  |   | 257     |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|                                                                                                                                                                  |  |              | 150,825 |   |                  |   | 135,048 |  
|Less treasury stock of 599,282 shares, at cost                                                                                                                    |  |              | (3,327  | ) |                  |   | (3,327  | )
|Less stock held in escrow of 755,160 shares at December 31, 2007                                                                                                  |  |              |        |   |                  |   | (3,350  | )
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                        |  |              | 147,498 |   |                  |   | 128,371 |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                        |  | $            | 244,684 |   |                  | $ | 207,199 |  
|                                                                                                                                                                  |  |              |         |   |                  |   |         |  

See accompanying notes to consolidated financial statements.



3



---

##### Table of Contents

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)



|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|-------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------- | -
|                                                   |  | Three Months Ended |        |   | Six Months Ended |  
|                                                   |  | June 30, 2008      |        |   | June 30, 2007    |   |        | June 30, 2008 |  |   | June 30, 2007 |  
|Consulting fee revenue                             |  | $                  | 81,790 |   |                  | $ | 48,424 |               |  | $ | 151,428       |   |  | $ | 92,986  |  
|Reimbursable expenses                              |  |                    | 15,090 |   |                  |   | 20,527 |               |  |   | 26,345        |   |  |   | 38,889  |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Total revenue                                      |  |                    | 96,880 |   |                  |   | 68,951 |               |  |   | 177,773       |   |  |   | 131,875 |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Cost of services                                   |  |                    | 45,082 |   |                  |   | 25,952 |               |  |   | 82,336        |   |  |   | 49,519  |  
|Reimbursable expenses                              |  |                    | 15,090 |   |                  |   | 20,527 |               |  |   | 26,345        |   |  |   | 38,889  |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Total direct expenses                              |  |                    | 60,172 |   |                  |   | 46,479 |               |  |   | 108,681       |   |  |   | 88,408  |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Gross profit                                       |  |                    | 36,708 |   |                  |   | 22,472 |               |  |   | 69,092        |   |  |   | 43,467  |  
|Selling, general and administrative expenses       |  |                    | 31,844 |   |                  |   | 18,785 |               |  |   | 59,344        |   |  |   | 36,540  |  
|Equity in earnings of affiliates                   |  |                    | (796   | ) |                  |   | (318   | )             |  |   | (1,431        | ) |  |   | (555    | )
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Operating profit                                   |  |                    | 5,660  |   |                  |   | 4,005  |               |  |   | 11,179        |   |  |   | 7,482   |  
|Minority interest in income of subsidiaries        |  |                    | 458    |   |                  |   | 49     |               |  |   | 668           |   |  |   | 115     |  
|Interest expense (income), net                     |  |                    | 16     |   |                  |   | 273    |               |  |   | (349          | ) |  |   | 500     |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Earnings before provision for income taxes         |  |                    | 5,186  |   |                  |   | 3,683  |               |  |   | 10,860        |   |  |   | 6,867   |  
|Provision for income taxes                         |  |                    | 1,426  |   |                  |   | 876    |               |  |   | 269           |   |  |   | 1,600   |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Net earnings                                       |  | $                  | 3,760  |   |                  | $ | 2,807  |               |  | $ | 10,591        |   |  | $ | 5,267   |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Basic earnings per common share                    |  | $                  | 0.09   |   |                  | $ | 0.11   |               |  | $ | 0.26          |   |  | $ | 0.21    |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Basic weighted average common shares outstanding   |  |                    | 40,811 |   |                  |   | 24,601 |               |  |   | 40,801        |   |  |   | 24,601  |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Diluted earnings per common share                  |  | $                  | 0.09   |   |                  | $ | 0.10   |               |  | $ | 0.26          |   |  | $ | 0.18    |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  
|Diluted weighted average common shares outstanding |  |                    | 41,238 |   |                  |   | 28,854 |               |  |   | 41,180        |   |  |   | 28,965  |  
|                                                   |  |                    |        |   |                  |   |        |               |  |   |               |   |  |   |         |  

See accompanying notes to consolidated financial statements.



4



---

##### Table of Contents

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                              |  |                  |         |   |              |   |         |  
|--------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------ | - | ------- | -
|                                                                                              |  | Six Months Ended |        
|                                                                                              |  | June 30,2008     |         |   | June 30,2007 |  
|Cash flows from operating activities:                                                         |  |                  |         |   |              |   |         |  
|Net earnings                                                                                  |  | $                | 10,591  |   |              | $ | 5,267   |  
|Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |  |                  |         |   |              |   |         |  
|Depreciation and amortization                                                                 |  |                  | 2,683   |   |              |   | 1,454   |  
|Equity in earnings of affiliates                                                              |  |                  | (1,431  | ) |              |   | (555    | )
|Minority interest in income of subsidiaries                                                   |  |                  | 668     |   |              |   | 119     |  
|Provision for bad debts                                                                       |  |                  | 631     |   |              |   | 761     |  
|Deferred tax provision                                                                        |  |                  | (1,006  | ) |              |   | 377     |  
|Stock based compensation                                                                      |  |                  | 1,764   |   |              |   | 164     |  
|Changes in operating assets and liabilities, net of acquisitions:                             |  |                  |         |   |              |   |         |  
|Accounts receivable                                                                           |  |                  | (11,358 | ) |              |   | (10,320 | )
|Accounts receivable - affiliate                                                               |  |                  | 2,310   |   |              |   | 353     |  
|Prepaid expenses and other current assets                                                     |  |                  | (2,371  | ) |              |   | 92      |  
|Income taxes receivable                                                                       |  |                  | (27     | ) |              |   |        |  
|Retainage receivable                                                                          |  |                  | (264    | ) |              |   | 34      |  
|Other assets                                                                                  |  |                  | 93      |   |              |   | 18      |  
|Accounts payable and accrued expenses                                                         |  |                  | (2,353  | ) |              |   | (301    | )
|Income taxes payable                                                                          |  |                  | (1,457  | ) |              |   | (259    | )
|Deferred revenue                                                                              |  |                  | (365    | ) |              |   | (952    | )
|Other current liabilities                                                                     |  |                  | 3,384   |   |              |   | 3,681   |  
|Retainage payable                                                                             |  |                  | 211     |   |              |   | 196     |  
|Other liabilities                                                                             |  |                  | 322     |   |              |   | (1,123  | )
|                                                                                              |  |                  |         |   |              |   |         |  
|Net cash flows provided by (used in) operating activities                                     |  |                  | 2,025   |   |              |   | (994    | )
|                                                                                              |  |                  |         |   |              |   |         |  
|Cash flows from investing activities:                                                         |  |                  |         |   |              |   |         |  
|Purchase of businesses, net of cash acquired                                                  |  |                  | (32,461 | ) |              |   | (9,502  | )
|Contributions to affiliate                                                                    |  |                  |        |   |              |   | (6      | )
|Distributions from affiliate                                                                  |  |                  | 700     |   |              |   | 528     |  
|Restricted cash                                                                               |  |                  |        |   |              |   | 3,350   |  
|Purchase of minority interest in Knowles                                                      |  |                  |        |   |              |   | (62     | )
|Payments for purchase of property and equipment                                               |  |                  | (3,976  | ) |              |   | (1,111  | )
|                                                                                              |  |                  |         |   |              |   |         |  
|Net cash flows used in investing activities                                                   |  |                  | (35,737 | ) |              |   | (6,803  | )
|                                                                                              |  |                  |         |   |              |   |         |  
|Cash flows from financing activities:                                                         |  |                  |         |   |              |   |         |  
|Due to bank                                                                                   |  |                  | (724    | ) |              |   | 430     |  
|Payments on notes payable                                                                     |  |                  | (748    | ) |              |   | (779    | )
|Net borrowings (payments) on revolving loan                                                   |  |                  | 3       |   |              |   | 5,989   |  
|Dividends paid to subsidiaries minority stockholders                                         |  |                  |        |   |              |   | (166    | )
|Proceeds from exercise of stock options and warrants                                          |  |                  | 126     |   |              |   | 5       |  
|Payments on capital lease obligations                                                         |  |                  | (70     | ) |              |   | (153    | )
|                                                                                              |  |                  |         |   |              |   |         |  
|Net cash flow (used in) provided by financing activities                                      |  |                  | (1,413  | ) |              |   | 5,326   |  
|                                                                                              |  |                  |         |   |              |   |         |  
|Effect of exchange rate changes on cash                                                       |  |                  | (690    | ) |              |   | 430     |  
|                                                                                              |  |                  |         |   |              |   |         |  
|Net decrease in cash and cash equivalents                                                     |  |                  | (35,815 | ) |              |   | (2,041  | )
|Cash and cash equivalents  beginning of period                                               |  |                  | 66,128  |   |              |   | 11,219  |  
|                                                                                              |  |                  |         |   |              |   |         |  
|Cash and cash equivalents  end of period                                                     |  | $                | 30,313  |   |              | $ | 9,178   |  
|                                                                                              |  |                  |         |   |              |   |         |  

See accompanying notes to consolidated financial statements.



5



---

##### Table of Contents

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 - The Company

Hill
International, Inc. (Hill or the Company) is a publicly owned construction consulting firm headquartered in Marlton, New Jersey that provides both fee-based project management and construction claims consulting services to
clients worldwide. Hills clients include the U.S. federal government, U.S. state and local governments, foreign governments, and the private sector. Hills business was established in 1976 as a closely held corporation. On June 28,
2006, the closely held Hill (Old Hill) merged with and into Arpeggio Acquisition Corp. (Arpeggio), a specified purpose acquisition company, at which time Arpeggio changed its name to Hill International, Inc. The
Company is organized into two key operating divisions: the Project Management Group and the Construction Claims Group.

Note 2 - Basis of Presentation

The accompanying unaudited interim consolidated financial statements were prepared in accordance with accounting principles generally accepted in the
United States and the interim financial statement rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, these statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Consolidated Financial Statements. The consolidated
financial statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2007.

The consolidated financial statements include the accounts of Hill and its wholly and majority-owned subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.

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. The interim operating results are not necessarily indicative of the results for a full year.



6



---

##### Table of Contents

Note 3 - Acquisitions

Euromost Polska Sp. z o.o

On May 27, 2008, Hill International S.A., the Companys wholly-owned subsidiary, acquired all of
the outstanding capital stock of Euromost Polska Sp. z o.o (Euromost), a Warsaw-headquartered firm, with about 130 employees, that provides project management and other construction consulting services throughout Poland. Euromost also
has offices in Krakow, Wroclaw and Gdynia. The consideration paid by Hill International S.A. consisted of cash amounting to 10,850,000 ($17,063,000 at the exchange rate at the date of acquisition) and a non-interest bearing note amounting to
500,000 ($786,000) payable on June 17, 2009. The note is subject to reduction to satisfy any of the sellers indemnification obligations. The sellers may receive additional consideration of up to 5,350,000 ($8,413,000) under an
earn-out arrangement payable at the rate of 2,775,000 ($4,364,000) in 2009 and 2,575,000 ($4,049,000) in 2010 based on the future financial performance of Euromost for the years ending December 31, 2008 and 2009, respectively.

The acquisition was accounted for under the purchase method of accounting and accordingly, the results of operations and cash flows of Euromost have been
included in the accompanying consolidated financial statements for the period subsequent to the acquisition date. At May 27, 2008, the total purchase price, including acquisition expenses of $528,000, was $18,377,000. The Company is in the
process of obtaining a detailed valuation of the assets acquired and liabilities assumed and, therefore, the allocation of the purchase price and the valuation of the assets and liabilities are subject to refinement. The following table summarizes
the allocation (which is preliminary and subject to change) of the purchase price based on the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date (in thousands):



|                            |  |   |        |  
|--------------------------- |  | - | ------ | -
|Cash                        |  | $ | 1,668  |  
|Other current assets        |  |   | 2,754  |  
|Fixed assets                |  |   | 179    |  
|Acquired intangibles        |  |   | 8,305  |  
|Goodwill                    |  |   | 6,744  |  
|                            |  |   |        |  
|Total assets acquired       |  |   | 19,650 |  
|Current liabilities assumed |  |   | (1,273 | )
|                            |  |   |        |  
|Net assets acquired         |  | $ | 18,377 |  
|                            |  |   |        |  

Gerens Management Group, S.A.

On February 15, 2008, Hill International S.A., the Companys wholly-owned subsidiary, acquired 60% of the outstanding capital stock of Gerens Management Group, S.A. (Gerens), a
Spanish-headquartered firm that provides project management services on major construction projects throughout Spain as well as in Western Europe and Latin America. The consideration paid by Hill International S.A. was 10,800,000 ($15,981,000
at the exchange rate at the date of acquisition) in cash. The remaining minority stockholders of Gerens, who own 40% of the company, consist of Gerens Managing Director as well as a group of major Spanish savings banks. Gerens, which has about
250 employees, immediately changed its name to Gerens Hill International, S.A. following the acquisition.

Gerens is headquartered in Madrid, Spain and has
additional offices in Barcelona, Spain and Cancun, Mexico. The company has managed the construction of major projects in various sectors, including residential, commercial, healthcare, retail and leisure,



7



---

##### Table of Contents

infrastructure, and hotels and resorts. Gerens brings together extensive knowledge of the Spanish market and worldwide experience in the management and
control of complex design and construction processes offering their clients project management and independent technical consultancy services.

In
connection with the acquisition, Gerens shareholders, including Hill International S.A., entered into an agreement whereby the minority shareholders have a right to compel Hill International S.A. to purchase any or all of their shares during
the period from March 31, 2010 to March 31, 2020. Hill International S.A. also has the right to compel the minority shareholders to sell any or all of their shares during the period from March 31, 2011 to March 31, 2021. The
purchase price for such shares shall be the greater of (a) 18,000,000 increased by the General Price Index (capped at 3.5% per annum) or (b) ten times the companys earnings before interest and income taxes for the prior
fiscal year, multiplied by a percentage which the shares to be purchased bear to the total number of shares outstanding at the time of the purchase. Such amount may be increased by increases in equity subsequent to the acquisition date, and can be
paid in cash or shares of our common stock at the option of the sellers.

The acquisition was accounted for under the purchase method of accounting and
accordingly, the results of operations and cash flows of Gerens have been included in the accompanying consolidated financial statements for the period subsequent to the acquisition date. The total purchase price, including acquisition expenses of
$263,000, was $16,244,000. The Company is in the process of obtaining a detailed valuation of the assets acquired and liabilities assumed and, therefore, the allocation of the purchase price and the valuation of the assets and liabilities are
subject to refinement. The following table summarizes the allocation (which is preliminary and subject to change) of the purchase price based on the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date (in
thousands):



|                            |  |   |         |  
|--------------------------- |  | - | ------- | -
|Cash                        |  | $ | 2,478   |  
|Other current assets        |  |   | 11,170  |  
|Furniture and equipment     |  |   | 1,095   |  
|Investment in affiliate     |  |   | 9,909   |  
|Other assets                |  |   | 476     |  
|Acquired intangibles        |  |   | 4,002   |  
|Goodwill                    |  |   | 8,410   |  
|                            |  |   |         |  
|Total assets acquired       |  |   | 37,540  |  
|                            | 
|Current liabilities assumed |  |   | (11,423 | )
|Long term liabilities       |  |   | (7,317  | )
|Minority interest           |  |   | (2,556  | )
|                            |  |   |         |  
|Net assets acquired         |  | $ | 16,244  |  
|                            |  |   |         |  

The following unaudited pro forma information assumes the above acquisitions had occurred on December 31,
2006. The pro forma information, as presented below, is not necessarily indicative of the results that would have been obtained had the Euromost and Gerens acquisition occurred on that date, nor is it necessarily indicative of the Companys
future results:



8



---

##### Table of Contents

|                           |  |                                 |         |                                 |   |        
|-------------------------- |  | ------------------------------- | ------- | ------------------------------- | - | -------
|(in thousands)             |  | Three months endedJune 30, 2008 |         | Three months endedJune 30, 2007
|Total revenue              |  | $                               | 103,976 |                                 | $ | 77,441 
|Net earnings               |  | $                               | 3,425   |                                 | $ | 2,605  
|Basic earnings per share   |  | $                               | 0.08    |                                 | $ | 0.11   
|Diluted earnings per share |  | $                               | 0.08    |                                 | $ | 0.09   
|                           | 
|                           |  | Six months ended               
|(in thousands)             |  | June 30, 2008                   |         | June 30, 2007                  
|Total revenue              |  | $                               | 188,092 |                                 | $ | 144,309
|Net earnings               |  | $                               | 10,272  |                                 | $ | 5,350  
|Basic earnings per share   |  | $                               | 0.25    |                                 | $ | 0.22   
|Diluted earnings per share |  | $                               | 0.25    |                                 | $ | 0.18   

The pro forma net income reflects adjustments for amortization of intangibles, stock-based compensation expense,
interest charges and income taxes.

John Shreeves Holdings Ltd.

On January 4, 2008, Hill International (UK) Ltd., a wholly-owned subsidiary of the Company, acquired John Shreeves Holdings Ltd. and its operating subsidiary John Shreeves & Partners Ltd. (collectively
Shreeves), a London-based firm that provides project management and cost consultancy services on primarily private-sector projects throughout the United Kingdom. The acquired business will continue to operate under the Shreeves brand
name until its operations have been consolidated with Hills. Total consideration amounted to £1,850,000 ($3,700,000 at the exchange rate on the date of acquisition) consisting of a cash payment of £1,650,000 ($3,300,000) on the
date of closing and a cash payment of £200,000 ($400,000) payable six months after the closing date. The results of operations of Shreeves are not material to the consolidated results of operations of the Company.



9



---

##### Table of Contents

Note 4 - Comprehensive Income

The following table summarizes the Companys comprehensive income:



|                                                    |  |                    |       |              |                  |       |              |  |              |        |  |   |      
|--------------------------------------------------- |  | ------------------ | ----- | ------------ | ---------------- | ----- | ------------ |  | ------------ | ------ |  | - | -----
|                                                    |  | Three months ended |       |              | Six months ended
|(in thousands)                                      |  | June 30,2008       |       | June 30,2007 |                  |       | June 30,2008 |  | June 30,2007
|Net income                                          |  | $                  | 3,760 |              | $                | 2,807 |              |  | $            | 10,591 |  | $ | 5,267
|Foreign currency translation adjustment, net of tax |  |                    | 584   |              |                  | (58   | )            |  |              | 1,417  |  |   | 150  
|                                                    |  |                    |       |              |                  |       |              |  |              |        |  |   |      
|Comprehensive income                                |  | $                  | 4,344 |              | $                | 2,749 |              |  | $            | 12,008 |  | $ | 5,417
|                                                    |  |                    |       |              |                  |       |              |  |              |        |  |   |      

Note 5 - Accounts Receivable

The components of accounts receivable are as follows:



|                                |  |               |         |   |                   |   |        |  
|------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------ | -
|(in thousands)                  |  | June 30, 2008 |         |   | December 31, 2007 |  
|Billed                          |  | $             | 95,221  |   |                   | $ | 73,835 |  
|Retainage, current portion      |  |               | 4,374   |   |                   |   | 3,399  |  
|Unbilled                        |  |               | 13,594  |   |                   |   | 11,060 |  
|                                |  |               |         |   |                   |   |        |  
|                                |  |               | 113,189 |   |                   |   | 88,294 |  
|Allowance for doubtful accounts |  |               | (5,399  | ) |                   |   | (5,143 | )
|                                |  |               |         |   |                   |   |        |  
|                                |  | $             | 107,790 |   |                   | $ | 83,151 |  
|                                |  |               |         |   |                   |   |        |  

Note 6 - Intangible Assets

The following table summarizes the Companys acquired intangible assets as of June 30, 2008 and December 31, 2007:



|                                         |  |                     |        |                         |   |                     |  |                         |        |  |   |      
|---------------------------------------- |  | ------------------- | ------ | ----------------------- | - | ------------------- |  | ----------------------- | ------ |  | - | -----
|                                         |  | June 30, 2008       |        | December 31, 2007      
|                                         |  | GrossCarryingAmount |        | AccumulatedAmortization |   | GrossCarryingAmount |  | AccumulatedAmortization
|(in thousands)                           |  |                     |        |                         |   |                     |  |                        
|Contract rights                          |  | $                   | 8,568  |                         | $ | 2,659               |  | $                       | 2,505  |  | $ | 2,274
|Customer relationships                   |  |                     | 17,175 |                         |   | 1,983               |  |                         | 13,853 |  |   | 4,225
|Trade names                              |  |                     | 2,549  |                         |   | 407                 |  |                         | 618    |  |   | 263  
|Covenant not to compete                  |  |                     | 18     |                         |   | 7                   |  |                         | 18     |  |   | 4    
|                                         |  |                     |        |                         |   |                     |  |                         |        |  |   |      
|Total                                    |  | $                   | 28,310 |                         | $ | 5,056               |  | $                       | 16,994 |  | $ | 6,766
|                                         |  |                     |        |                         |   |                     |  |                         |        |  |   |      
|Intangible assets less amortization, net |  | $                   | 23,254 |                         |   |                     |  | $                       | 10,228 |  |   |      
|                                         |  |                     |        |                         |   |                     |  |                         |        |  |   |      

Amortization expense related to intangible assets totaled $748,000 and $243,000 for the three months ended
June 30, 2008 and June 30, 2007, respectively, and totaled $1,230,000 and $482,000 for the six months ended June 30, 2008 and June 30, 2007, respectively. Estimated amortization expense based on our present intangible assets for
the next five years:



10



---

##### Table of Contents

|                          |  |                               
|------------------------- |  | ------------------------------
|Year ending December 31,  |  | Estimated amortization expense
|                          |  | (in thousands)                
|2008 (remaining 6 months) |  | 1,896                         
|2009                      |  | 3,549                         
|2010                      |  | 3,380                         
|2011                      |  | 3,361                         
|2012                      |  | 2,307                         

Note 7 - Goodwill

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142,Goodwill and Other Intangible Assets, the Company performs its annual goodwill impairment testing, by reportable segment, in the third
quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on
internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur, and determination of the Companys weighted average cost of capital. Changes in these estimates and assumptions
could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit.

The following table summarizes
the changes in the Companys carrying value of goodwill during 2008 (in thousands):



|                    |  |                            |        |           |   |                        |  |   |                         |   |  |   |       
|------------------- |  | -------------------------- | ------ | --------- | - | ---------------------- |  | - | ----------------------- | - |  | - | ------
|Segment             |  | Balance atDecember 31,2007 |        | Additions |   | TranslationAdjustments |  |   | Balance atJune 30, 2008
|Construction Claims |  | $                          | 18,803 |           | $ |                       |  | $ | (19                     | ) |  | $ | 18,784
|Project Management  |  |                            | 2,784  |           |   | 18,013                 |  |   | 725                     |   |  |   | 21,522
|                    |  |                            |        |           |   |                        |  |   |                         |   |  |   |       
|Total               |  | $                          | 21,587 |           | $ | 18,013                 |  | $ | 706                     |   |  | $ | 40,306
|                    |  |                            |        |           |   |                        |  |   |                         |   |  |   |       

Note 8 - Accounts Payable and Accrued Expenses

Below are the components of accounts payable and accrued expenses:



|                                    |  |              |        |                  |   |       
|----------------------------------- |  | ------------ | ------ | ---------------- | - | ------
|                                    |  | June 30,2008 |        | December 31,2007
|(in thousands)                      |  |              |        |                 
|Accounts payable                    |  | $            | 17,849 |                  | $ | 16,909
|Accrued payroll                     |  |              | 16,688 |                  |   | 12,920
|Accrued subcontractor fees          |  |              | 4,832  |                  |   | 6,084 
|Accrued legal and professional cost |  |              | 1,600  |                  |   | 4,601 
|Other accrued expenses              |  |              | 2,426  |                  |   | 2,614 
|                                    |  |              |        |                  |   |       
|                                    |  | $            | 43,395 |                  | $ | 43,128
|                                    |  |              |        |                  |   |       



11



---

##### Table of Contents

Note 9 - Deferred Revenue

In certain instances the Company may collect advance payments from clients for future services. As the services are performed these advance payments are recognized as revenue. Deferred revenue is classified as current or long term based on
the anticipated life of the project. The following table summarizes deferred revenue:



|                                                                                    |  |               |        |                   |   |       
|----------------------------------------------------------------------------------- |  | ------------- | ------ | ----------------- | - | ------
|                                                                                    |  | June 30, 2008 |        | December 31, 2007
|Current (included in the consolidated balance sheet in Other current liabilities) |  | $             | 9,892  |                   | $ | 2,954 
|Non-current                                                                         |  |               | 10,871 |                   |   | 10,924
|                                                                                    |  |               |        |                   |   |       
|Total                                                                               |  | $             | 20,763 |                   | $ | 13,878
|                                                                                    |  |               |        |                   |   |       

Note 10 - Notes Payable

Outstanding debt obligations are as follows:



|                                                                                                                                                                                                                                                                                                                                                                             |  |               |       |                   |   |      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----- | ----------------- | - | -----
|                                                                                                                                                                                                                                                                                                                                                                             |  | June 30, 2008 |       | December 31, 2007
|(in thousands)                                                                                                                                                                                                                                                                                                                                                               |  |               |       |                  
|Note payable, due February 1, 2009, for the Pickavance acquisition with an original issue discount of $231,000 at an imputed interest
rate of 8.0%.                                                                                                                                                                                                                          |  | $             | 560   |                   | $ | 1,175
|                                                                                                                                                                                                                                                                                                                                                                             |  |              
|Revolving credit loan payable to Barclays Bank PLC up to £500,000 ($997,000 and $999,000 at June 30, 2008 and December 31,
2007, respectively), with interest at 2.00% plus LIBOR of 5.00% (or 7.00%) and 5.50% (or 7.50%) at June 30, 2008 and December 31, 2007, respectively, collateralized by cross guarantees of all United Kingdom companies.                         |  |               | 944   |                   |   | 735  
|                                                                                                                                                                                                                                                                                                                                                                             |  |              
|Revolving credit loan payable to Egnatia Bank up to 1,000,000 ($1,579,000 and $1,473,000 at June 30, 2008 and December 31,
2007), with interest rates at 2.50% plus Egnatia Banks prime rate of 7.50% (or 10.0%) at June 30, 2008 and December 31, 2007, respectively, collateralized by certain assets of the Company. The loan has an expiration date of
April 30, 2009. |  |               |      |                   |   | 191  
|                                                                                                                                                                                                                                                                                                                                                                             |  |              
|Note payable in connection with the Euromost acquisition, non-interest bearing, due June 17, 2009                                                                                                                                                                                                                                                                            |  |               | 790   |                   |   |     
|                                                                                                                                                                                                                                                                                                                                                                             |  |              
|Other notes payable                                                                                                                                                                                                                                                                                                                                                          |  |               | 253   |                   |   | 98   
|                                                                                                                                                                                                                                                                                                                                                                             |  |               |       |                   |   |      
|                                                                                                                                                                                                                                                                                                                                                                             |  |               | 2,547 |                   |   | 2,199
|Less current maturities                                                                                                                                                                                                                                                                                                                                                      |  |               | 2,370 |                   |   | 1,625
|                                                                                                                                                                                                                                                                                                                                                                             |  |               |       |                   |   |      
|Notes payable, net of current maturities                                                                                                                                                                                                                                                                                                                                     |  | $             | 177   |                   | $ | 574  
|                                                                                                                                                                                                                                                                                                                                                                             |  |               |       |                   |   |      



12



---

##### Table of Contents

The Company is a party to a loan and security agreement with LaSalle Bank N.A. (LaSalle), which provides for
up to $35,000,000 to be made available on a revolving basis (the Credit Facility). The Credit Facility provides for a letter of credit sub-facility of $20,000,000. The Credit Facility is secured by all of the Companys assets,
including, without limitation, our accounts receivable, equipment, securities, financial assets and proceeds from the sale of the foregoing, as well as by a pledge of 66.67% of the outstanding capital stock of the following subsidiaries: Hill
International S.A., Hill International (UK) Ltd., Hill International (Middle East) Ltd. and James R. Knowles (Holdings) Ltd.

The Credit Facility is for a
term extending until January 1, 2011. The Credit Facility provides for LIBOR loans and prime rate loans, payable at margins above either LaSalles prime rate or LIBOR based on the Companys ratio of total debt to EBITDA ranging from 0
to 50 basis points above prime or 150 to 262.50 basis points above LIBOR. At March 31, 2008 the applicable margins were 0 basis points above LaSalles prime rate and 150 basis points above LIBOR. The Credit Facility contains covenants with
respect to the Companys minimum net worth, total debt to EBITDA ratios, fixed charge coverage ratios and billed accounts receivable to total debt ratios, as well as other financial covenants and certain restrictions on the incurrence of debt,
on the making of investments, on the payment of dividends, on transactions with affiliates and other affirmative and negative covenants and events of default customary for facilities of its type. At June 30, 2008, there were no outstanding
borrowings under the Credit Facility, although the Company had $7,988,000 in outstanding letters of credit which reduced availability under the Credit Facility.

The Company also maintains a credit facility with a bank in the Middle East for 11,500,000 AED ($3,131,000) collateralized by certain overseas receivables. The interest rate on that facility is the three-month Emirates InterBank Offer Rate
(EIBOR), which at June 30, 2008 was 1.89%, plus 2.0%. At June 30, 2008, there were no outstanding borrowings under this facility which expires on December 24, 2008.

The Company also maintains an unsecured credit facility with a bank in Spain for 750,000 ($1,184,000). The interest rate on that facility is the three month
EURIBOR rate which at June 30, 2008 was 4.75%, plus 0.75%. At June 30, 2008 there were no outstanding borrowings under this facility which expires on December 18, 2008.

Note 11 - Supplemental Cash Flow Information

On March 24, 2008, options to purchase 1,000 shares of Hills
common stock with an exercise price of $7.67 per share were exercised on a cashless basis when the fair market value was $12.59 resulting in Hill issuing 391 shares of its common stock.

On April 9, 2008, the Company issued 2,300,000 shares of its common stock in connection with the earn-out provision of the Merger Agreement with Arpeggio.

On May 10, 2008, the Company issued 134,360 shares of its common stock, with a fair value of $1,955,000, to the former owner of KJM & Associates, Ltd.
These shares had been held in escrow pending the satisfaction of certain indemnification obligations of the seller. The Company reflected this payment as additional purchase consideration and has increased goodwill.

In connection with the Euromost purchase, the Company issued a non-interest bearing note payable in the amount of 500,000 ($786,000) with a maturity date of
June 17, 2009.

As the result of a Third Circuit Court decision, the Company eliminated an accrued liability of $3,350,000 and the offsetting
reduction in stockholders equity. See the discussion in Note 19 related to the Wartsila matter.



13



---

##### Table of Contents

The following table provides additional cash flow information:



|                  |  |                  |       |               |   |      
|----------------- |  | ---------------- | ----- | ------------- | - | -----
|                  |  | Six months ended
|In thousands      |  | June 30, 2008    |       | June 30, 2007
|Interest paid     |  | $                | 212   |               | $ | 679  
|                  |  |                  |       |               |   |      
|Income taxes paid |  | $                | 1,883 |               | $ | 1,133
|                  |  |                  |       |               |   |      

Note 12 - Equity in Earnings of Affiliates

Stanley Baker Hill, LLC

Equity in earnings of affiliates reflects ownership by the Company of 33.33% of the
members equity of Stanley Baker Hill, LLC (SBH). SBH is a joint venture formed in February 2004 between Stanley Consultants, Inc., Michael Baker, Jr. Inc., and Hill.

SBH has a contract for an indefinite delivery and indefinite quantity for construction management and general architect-engineer services for facilities in Iraq with the U.S. Army Corps of Engineers.

At June 30, 2008 and December 31, 2007, the Company reported receivables totaling $1,084,000 and $3,394,000, respectively, from SBH for work performed by the
Company as a subcontractor to SBH. Such amounts were payable in accordance with the subcontract agreement between the Company and SBH.

Revenue from SBH
pursuant to such subcontract agreement for the three-month periods ended June 30, 2008 and June 30, 2007 was $6,680,200 and $1,905,000, respectively, and for the six-month periods ended June 30, 2008 and June 30, 2007 was
$13,494,000 and $3,137,000, respectively.

Note 13 - Earnings per Share

Basic earnings per common share and diluted earnings per common share are presented in accordance with SFAS No. 128, Earnings per Share. Basic earnings per common share have been computed using the
weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share incorporate the incremental shares issuable upon the assumed exercise of stock options, warrants and unit purchase options, if
dilutive. Dilutive shares were 426,888 shares and 4,252,584 shares for the three-month periods ended June 30, 2008 and 2007, respectively and 379,872 shares and 4,364,613 shares for the six-month periods ended June 30, 2008 and 2007.
Certain stock options, warrants and units were excluded from the 2007 calculation of diluted earnings per common share because their effect was antidilutive. The total number of such shares excluded from diluted earnings per common share was
1,710,659 shares for the three-month period ended June 30, 2007 and 1,443,702 shares for the six-month period ended June 30, 2007. The 2,300,000 common shares, which were issued in April 2008 in connection with the 2007 earn-out provision
of the merger agreement with Arpeggio, have been included, effective January 1, 2008, in both the basic and diluted weighted average shares for the three- and six-month periods ended June 30, 2008.



14



---

##### Table of Contents

Note 14 - Share-Based Compensation

At June 30, 2008, the Company had 933,000 options outstanding with a weighted average exercise price of $8.23. During the six-month period ended June 30, 2008, the Company granted 120,000 options, which vest
over a five-year period, with a weighted average exercise price of $12.53 and a contractual life of seven years. The aggregate fair value of the options was $535,200 calculated using the Black-Scholes valuation model. The weighted average
assumptions used to calculate the fair value were: expected life  five years; volatility  35.2% and risk free interest rate  2.78%. During the first half of 2008, options for 18,000 shares with a weighted average exercise price of
$7.66 were exercised and options for 24,000 shares with a weighted average exercise price of $7.61 were forfeited.

At the June 10, 2008 Annual
Meeting of Stockholders, the stockholders approved:



| |  |  | an increase in the number of shares available for options from 1,140,000 shares to 3,000,000 shares;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | the 2007 Restricted Stock Grant Plan, under which 340,000 shares of common stock were available for grant. The shares vest ratably over a five year period
commencing on February 28, 2007. The Company granted to various executives 335,000 shares of which 67,000 vested immediately, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the 2008 Employee Stock Purchase Plan. The Company has reserved 2,000,000 shares for purchase under the Plan. Employees may purchase shares of the Companys
common stock at 85% of the closing price on the day prior to purchase.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company recognized share-based compensation expense in
selling, general and administrative expenses in the consolidated statement of earnings totaling $1,608,000 and $125,000 for the three-month periods ended June 30, 2008 and 2007, respectively, and $1,764,000 and $164,000 for the six-month
periods ended June 30, 2008 and 2007. Total expense related to the 2007 Restricted Stock Grant Plan, which was approved by the stockholders on June 10, 2008, amounted to approximately $1,465,000 for each of the three- and six-month periods
ended June 30, 2008.

Note 15 - Income Taxes

In
July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which
provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. The Company adopted the provisions of FIN 48 on December 31, 2006, the first day of our 2007 fiscal year. As a result of the
implementation of FIN 48, the Company has analyzed filing positions in all of the federal, state and foreign filing jurisdictions where it is required to file income tax returns, as well as all open years in those jurisdictions. In this regard, an
uncertain tax position represents the Companys expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting
purposes. As a result of this review, the Company concluded that there were no uncertain tax positions which would require a cumulative effect adjustment to retained earnings as of December 31, 2006.

The Company files income tax returns in the U.S. federal jurisdiction and in various states and foreign jurisdictions. As a result of its acquisition of Knowles, the
Company has an ongoing audit with Inland Revenue for two Knowles affiliates for the years ended in 2000 through 2005. The Company generally is no longer subject to U.S. federal, state or foreign examinations by tax authorities for tax years prior to
2004.



15



---

##### Table of Contents

The Companys income tax expense for the three- and six-month periods ended June 30, 2008 was adversely
affected by a one-time modification to the cash-to-accrual estimate of approximately $1,300,000. During the six month period ended June 30, 2008, the Company recognized an income tax benefit principally relating to a tax benefit of $2,506,000
due to the expirations of statutes upon the filing of certain income tax returns resulting in the reduction in the reserves for uncertain tax positions.

The following table indicates the changes to the Companys uncertain tax positions for the period ended June 30, 2008, including interest and penalties:



|                                                       |  |                               |        |  
|------------------------------------------------------ |  | ----------------------------- | ------ | -
|(in thousands)                                         |  | Six months endedJune 30, 2008 |       
|Balance at December 31, 2007                           |  | $                             | 5,743  |  
|                                                       | 
|Reductions due to expiration of statute of limitations |  |                               | (2,506 | )
|                                                       | 
|Increase in current period                             |  |                               | 220    |  
|                                                       |  |                               |        |  
|Balance at June 30, 2008                               |  | $                             | 3,457  |  
|                                                       |  |                               |        |  

The Companys policy is to record income tax related interest and penalties in income tax expense. At
June 30, 2008, $1,850,000 for potential interest and penalties related to uncertain tax positions was included in the balance above.

The effective
income tax rates for the three-month periods ended June 30, 2008 and 2007 were 27.5% and 23.8%, respectively, and the effective income tax rates for the six-month periods ended June 30, 2008 and 2007 were 2.5% and 23.3%, respectively.
Excluding the effect of the cash-to-accrual adjustment and the reserve reduction included in the table above, the effective income tax rates would have been 2.4% and 13.6% for the three- and six-month periods ended June 30, 2008.

Note 16 - Business Segment Information

The Companys business
segments reflect how executive management makes resource decisions and assesses its performance. The Company bases these decisions on the type of services provided (Project Management and Construction Claims services) and secondarily by their
geography (Americas, Europe, the Middle East/North Africa and Asia/Pacific).

The Project Management business segment provides extensive construction and
project management services to construction owners worldwide. Such services include program management, project management, construction management, project management oversight, staff augmentation, management consulting, and estimating and cost
management services.

The Construction Claims business segment provides such services as claims consulting, litigation support, expert witness testimony,
cost and damages assessment, delay and disruption analysis, lender advisory, and adjudication services to clients worldwide.



16



---

##### Table of Contents

The Company evaluates the performance of its segments primarily on operating profit before corporate overhead allocations
and income taxes.

The following tables reflect the required disclosures for the Companys reportable segments for the three- and six-month periods
ended June 30, 2008 and 2007 (in thousands):

Three Months Ended:

Consulting Fee Revenue:



|                    |  |                    |        |   |               |   |   |   |        |  |       |  
|------------------- |  | ------------------ | ------ | - | ------------- | - | - | - | ------ |  | ----- | -
|                    |  | Three months ended |       
|                    |  | June 30, 2008      |        |   | June 30, 2007 |  
|                    |  | $                  |        | % |               |   | $ |   | %      | 
|Project Management  |  | $                  | 59,330 |   | 72.5          | % |   | $ | 31,575 |  | 65.2  | %
|Construction Claims |  |                    | 22,460 |   | 27.5          | % |   |   | 16,849 |  | 34.8  | %
|                    |  |                    |        |   |               |   |   |   |        |  |       |  
|Total               |  | $                  | 81,790 |   | 100.0         | % |   | $ | 48,424 |  | 100.0 | %
|                    |  |                    |        |   |               |   |   |   |        |  |       |  

Total Revenue:



|                    |  |                    |        |   |               |   |   |   |        |  |       |  
|------------------- |  | ------------------ | ------ | - | ------------- | - | - | - | ------ |  | ----- | -
|                    |  | Three months ended |       
|                    |  | June 30, 2008      |        |   | June 30, 2007 |  
|                    |  | $                  |        | % |               |   | $ |   | %      | 
|Project Management  |  | $                  | 73,499 |   | 75.9          | % |   | $ | 48,525 |  | 70.4  | %
|Construction Claims |  |                    | 23,381 |   | 24.1          | % |   |   | 20,426 |  | 29.6  | %
|                    |  |                    |        |   |               |   |   |   |        |  |       |  
|Total               |  | $                  | 96,880 |   | 100.0         | % |   | $ | 68,951 |  | 100.0 | %
|                    |  |                    |        |   |               |   |   |   |        |  |       |  



17



---

##### Table of Contents

Operating Profit:



|                                                           |  |                    |        |   |               |   |        |  
|---------------------------------------------------------- |  | ------------------ | ------ | - | ------------- | - | ------ | -
|                                                           |  | Three months ended |       
|                                                           |  | June 30, 2008      |        |   | June 30, 2007 |  
|Project Management before equity in earnings of affiliates |  | $                  | 8,181  |   |               | $ | 4,633  |  
|Equity in earnings of affiliates                           |  |                    | 796    |   |               |   | 318    |  
|                                                           |  |                    |        |   |               |   |        |  
|                                                           |  |                    | 8,977  |   |               |   | 4,951  |  
|Construction Claims                                        |  |                    | 2,095  |   |               |   | 2,256  |  
|Corporate Expenses                                         |  |                    | (5,412 | ) |               |   | (3,202 | )
|                                                           |  |                    |        |   |               |   |        |  
|Total                                                      |  | $                  | 5,660  |   |               | $ | 4,005  |  
|                                                           |  |                    |        |   |               |   |        |  

Depreciation and Amortization Expense:



|                    |  |                    |       |               |   |    
|------------------- |  | ------------------ | ----- | ------------- | - | ---
|                    |  | Three months ended
|                    |  | June 30, 2008      |       | June 30, 2007
|Project Management  |  | $                  | 912   |               | $ | 159
|Construction Claims |  |                    | 476   |               |   | 527
|                    |  |                    |       |               |   |    
|Subtotal segments   |  |                    | 1,388 |               |   | 686
|Corporate           |  |                    | 183   |               |   | 75 
|                    |  |                    |       |               |   |    
|Total               |  | $                  | 1,571 |               | $ | 761
|                    |  |                    |       |               |   |    

In the fourth quarter of 2007, the Company revised the method by which it allocates revenue to geographic areas
for project management contracts. The Company now allocates revenue based on the site of the actual project which provides a more accurate portrayal of the areas in which the Company operates. Previously, the Company allocated revenue based on the
location of the client. For construction claims contracts, the Company allocates revenue based on the location of the office performing the work. The amounts for the three months ended June 30, 2007 have been revised to reflect the new method.



18



---

##### Table of Contents

Consulting Fee Revenue by Geographic Region:



|                           |  |                    |        |   |               |   |           |   |        |  |       |  
|-------------------------- |  | ------------------ | ------ | - | ------------- | - | --------- | - | ------ |  | ----- | -
|                           |  | Three months ended |       
|                           |  | June 30, 2008      |        |   | June 30, 2007 |  
|                           |  |                    |        |   |               |   | (Revised) |  
|                           |  | $                  |        | % |               |   | $         |   | %      | 
|Americas                   |  | $                  | 19,710 |   | 24.1          | % |           | $ | 17,666 |  | 36.5  | %
|Middle East / North Africa |  |                    | 31,765 |   | 38.8          | % |           |   | 16,664 |  | 34.4  | %
|Europe                     |  |                    | 28,291 |   | 34.6          | % |           |   | 12,329 |  | 25.5  | %
|Asia / Pacific             |  |                    | 2,024  |   | 2.5           | % |           |   | 1,765  |  | 3.6   | %
|                           |  |                    |        |   |               |   |           |   |        |  |       |  
|Total                      |  | $                  | 81,790 |   | 100.0         | % |           | $ | 48,424 |  | 100.0 | %
|                           |  |                    |        |   |               |   |           |   |        |  |       |  

Total Revenue by Geographic Region:



|                           |  |                    |        |   |               |   |           |   |        |  |       |  
|-------------------------- |  | ------------------ | ------ | - | ------------- | - | --------- | - | ------ |  | ----- | -
|                           |  | Three months ended |       
|                           |  | June 30, 2008      |        |   | June 30, 2007 |  
|                           |  |                    |        |   |               |   | (Revised) |  
|                           |  | $                  |        | % |               |   | $         |   | %      | 
|Americas                   |  | $                  | 33,494 |   | 34.6          | % |           | $ | 30,146 |  | 43.7  | %
|Middle East / North Africa |  |                    | 32,218 |   | 33.3          | % |           |   | 18,729 |  | 27.2  | %
|Europe                     |  |                    | 29,104 |   | 30.0          | % |           |   | 18,094 |  | 26.2  | %
|Asia / Pacific             |  |                    | 2,064  |   | 2.1           | % |           |   | 1,982  |  | 2.9   | %
|                           |  |                    |        |   |               |   |           |   |        |  |       |  
|Total                      |  | $                  | 96,880 |   | 100.0         | % |           | $ | 68,951 |  | 100.0 | %
|                           |  |                    |        |   |               |   |           |   |        |  |       |  

Consulting Fee Revenue By Client Type:



|                                          |  |                    |        |   |               |   |   |   |        |  |       |  
|----------------------------------------- |  | ------------------ | ------ | - | ------------- | - | - | - | ------ |  | ----- | -
|                                          |  | Three months ended |       
|                                          |  | June 30, 2008      |        |   | June 30, 2007 |  
|                                          |  | $                  |        | % |               |   | $ |   | %      | 
|U.S. federal government                   |  | $                  | 9,588  |   | 11.7          | % |   | $ | 4,439  |  | 9.2   | %
|U.S. state, local and regional government |  |                    | 8,687  |   | 10.6          | % |   |   | 10,023 |  | 20.7  | %
|Foreign government                        |  |                    | 6,814  |   | 8.3           | % |   |   | 6,934  |  | 14.3  | %
|Private sector                            |  |                    | 56,701 |   | 69.4          | % |   |   | 27,028 |  | 55.8  | %
|                                          |  |                    |        |   |               |   |   |   |        |  |       |  
|Total                                     |  | $                  | 81,790 |   | 100.0         | % |   | $ | 48,424 |  | 100.0 | %
|                                          |  |                    |        |   |               |   |   |   |        |  |       |  



19



---

##### Table of Contents

Total Revenue By Client Type:



|                                          |  |                    |        |   |               |   |   |   |        |  |       |  
|----------------------------------------- |  | ------------------ | ------ | - | ------------- | - | - | - | ------ |  | ----- | -
|                                          |  | Three months ended |       
|                                          |  | June 30, 2008      |        |   | June 30, 2007 |  
|                                          |  | $                  |        | % |               |   | $ |   | %      | 
|U.S. federal government                   |  | $                  | 10,159 |   | 10.5          | % |   | $ | 5,222  |  | 7.6   | %
|U.S. state, local and regional government |  |                    | 21,474 |   | 22.2          | % |   |   | 24,137 |  | 35.0  | %
|Foreign government                        |  |                    | 7,165  |   | 7.4           | % |   |   | 10,450 |  | 15.2  | %
|Private sector                            |  |                    | 58,082 |   | 59.9          | % |   |   | 29,142 |  | 42.2  | %
|                                          |  |                    |        |   |               |   |   |   |        |  |       |  
|Total                                     |  | $                  | 96,880 |   | 100.0         | % |   | $ | 68,951 |  | 100.0 | %
|                                          |  |                    |        |   |               |   |   |   |        |  |       |  

Six Months Ended:

Consulting Fee Revenue



|                    |  |                  |         |   |               |   |   |   |        |  |       |  
|------------------- |  | ---------------- | ------- | - | ------------- | - | - | - | ------ |  | ----- | -
|                    |  | Six months ended |        
|                    |  | June 30, 2008    |         |   | June 30, 2007 |  
|                    |  | $                |         | % |               |   | $ |   | %      | 
|Project Management  |  | $                | 108,707 |   | 71.8          | % |   | $ | 59,976 |  | 64.5  | %
|Construction Claims |  |                  | 42,721  |   | 28.2          | % |   |   | 33,010 |  | 35.5  | %
|                    |  |                  |         |   |               |   |   |   |        |  |       |  
|Total               |  | $                | 151,428 |   | 100.0         | % |   | $ | 92,986 |  | 100.0 | %
|                    |  |                  |         |   |               |   |   |   |        |  |       |  

Total Revenue



|                    |  |                  |         |   |               |   |   |   |         |  |       |  
|------------------- |  | ---------------- | ------- | - | ------------- | - | - | - | ------- |  | ----- | -
|                    |  | Six months ended |        
|                    |  | June 30, 2008    |         |   | June 30, 2007 |  
|                    |  | $                |         | % |               |   | $ |   | %       | 
|Project Management  |  | $                | 133,000 |   | 74.8          | % |   | $ | 92,375  |  | 70.0  | %
|Construction Claims |  |                  | 44,773  |   | 25.2          | % |   |   | 39,500  |  | 30.0  | %
|                    |  |                  |         |   |               |   |   |   |         |  |       |  
|Total               |  | $                | 177,773 |   | 100.0         | % |   | $ | 131,875 |  | 100.0 | %
|                    |  |                  |         |   |               |   |   |   |         |  |       |  



20



---

##### Table of Contents

Operating Profit:



|                                                           |  |                  |         |   |               |   |        |  
|---------------------------------------------------------- |  | ---------------- | ------- | - | ------------- | - | ------ | -
|                                                           |  | Six months ended |        
|                                                           |  | June 30, 2008    |         |   | June 30, 2007 |  
|Project Management before equity in earnings of affiliates |  | $                | 14,897  |   |               | $ | 9,790  |  
|Equity in earnings of affiliates                           |  |                  | 1,431   |   |               |   | 555    |  
|                                                           |  |                  |         |   |               |   |        |  
|                                                           |  |                  | 16,328  |   |               |   | 10,345 |  
|Construction Claims                                        |  |                  | 5,631   |   |               |   | 3,876  |  
|Corporate Expenses                                         |  |                  | (10,780 | ) |               |   | (6,739 | )
|                                                           |  |                  |         |   |               |   |        |  
|Total                                                      |  | $                | 11,179  |   |               | $ | 7,482  |  
|                                                           |  |                  |         |   |               |   |        |  

Depreciation and Amortization Expense:



|                    |  |                  |       |               |   |      
|------------------- |  | ---------------- | ----- | ------------- | - | -----
|                    |  | Six months ended
|                    |  | June 30, 2008    |       | June 30, 2007
|Project Management  |  | $                | 1,424 |               | $ | 289  
|Construction Claims |  |                  | 934   |               |   | 1,022
|                    |  |                  |       |               |   |      
|Subtotal segments   |  |                  | 2,358 |               |   | 1,311
|Corporate           |  |                  | 325   |               |   | 143  
|                    |  |                  |       |               |   |      
|Total               |  | $                | 2,683 |               | $ | 1,454
|                    |  |                  |       |               |   |      

In the fourth quarter of 2007, the Company revised the method by which it allocates revenue to geographic areas
for project management contracts. The Company now allocates revenue based on the site of the actual project which provides a more accurate portrayal of the areas in which the Company operates. Previously, the Company allocated revenue based on the
location of the client. For construction claims contracts, the Company allocates revenue based on the location of the office performing the work. The amounts for the six months ended June 30, 2007 have been revised to reflect the new method.



21



---

##### Table of Contents

Consulting Fee Revenue by Geographic Region:



|                           |  |                  |         |   |               |   |           |   |        |  |       |  
|-------------------------- |  | ---------------- | ------- | - | ------------- | - | --------- | - | ------ |  | ----- | -
|                           |  | Six months ended |        
|                           |  | June 30, 2008    |         |   | June 30, 2007 |  
|                           |  |                  |         |   |               |   | (Revised) |  
|                           |  | $                |         | % |               |   | $         |   | %      | 
|Americas                   |  | $                | 38,536  |   | 25.4          | % |           | $ | 33,016 |  | 35.5  | %
|Middle East / North Africa |  |                  | 61,361  |   | 40.6          | % |           |   | 32,510 |  | 35.0  | %
|Europe                     |  |                  | 48,063  |   | 31.7          | % |           |   | 24,215 |  | 26.0  | %
|Asia / Pacific             |  |                  | 3,468   |   | 2.3           | % |           |   | 3,245  |  | 3.5   | %
|                           |  |                  |         |   |               |   |           |   |        |  |       |  
|Total                      |  | $                | 151,428 |   | 100.0         | % |           | $ | 92,986 |  | 100.0 | %
|                           |  |                  |         |   |               |   |           |   |        |  |       |  

Total Revenue by Geographic Region:



|                           |  |                  |         |   |               |   |           |   |         |  |       |  
|-------------------------- |  | ---------------- | ------- | - | ------------- | - | --------- | - | ------- |  | ----- | -
|                           |  | Six months ended |        
|                           |  | June 30, 2008    |         |   | June 30, 2007 |  
|                           |  |                  |         |   |               |   | (Revised) |  
|                           |  | $                |         | % |               |   | $         |   | %       | 
|Americas                   |  | $                | 60,351  |   | 33.9          | % |           | $ | 57,298  |  | 43.4  | %
|Middle East / North Africa |  |                  | 63,031  |   | 35.5          | % |           |   | 36,734  |  | 27.9  | %
|Europe                     |  |                  | 50,876  |   | 28.6          | % |           |   | 34,185  |  | 25.9  | %
|Asia / Pacific             |  |                  | 3,515   |   | 2.0           | % |           |   | 3,658   |  | 2.8   | %
|                           |  |                  |         |   |               |   |           |   |         |  |       |  
|Total                      |  | $                | 177,773 |   | 100.0         | % |           | $ | 131,875 |  | 100.0 | %
|                           |  |                  |         |   |               |   |           |   |         |  |       |  

Consulting Fee Revenue By Client Type:



|                                          |  |                  |         |   |               |   |   |   |        |  |       |  
|----------------------------------------- |  | ---------------- | ------- | - | ------------- | - | - | - | ------ |  | ----- | -
|                                          |  | Six months ended |        
|                                          |  | June 30, 2008    |         |   | June 30, 2007 |  
|                                          |  | $                |         | % |               |   | $ |   | %      | 
|U.S. federal government                   |  | $                | 19,365  |   | 12.8          | % |   | $ | 8,297  |  | 8.9   | %
|U.S. state, local and regional government |  |                  | 17,845  |   | 11.8          | % |   |   | 17,864 |  | 19.2  | %
|Foreign government                        |  |                  | 11,979  |   | 7.9           | % |   |   | 13,378 |  | 14.4  | %
|Private sector                            |  |                  | 102,239 |   | 67.5          | % |   |   | 53,447 |  | 57.5  | %
|                                          |  |                  |         |   |               |   |   |   |        |  |       |  
|Total                                     |  | $                | 151,428 |   | 100.0         | % |   | $ | 92,986 |  | 100.0 | %
|                                          |  |                  |         |   |               |   |   |   |        |  |       |  



22



---

##### Table of Contents

Total Revenue By Client Type:



|                                          |  |                  |         |   |               |   |   |   |         |  |       |  
|----------------------------------------- |  | ---------------- | ------- | - | ------------- | - | - | - | ------- |  | ----- | -
|                                          |  | Six months ended |        
|                                          |  | June 30, 2008    |         |   | June 30, 2007 |  
|                                          |  | $                |         | % |               |   | $ |   | %       | 
|U.S. federal government                   |  | $                | 20,438  |   | 11.5          | % |   | $ | 9,556   |  | 7.2   | %
|U.S. state, local and regional government |  |                  | 37,864  |   | 21.3          | % |   |   | 42,954  |  | 32.6  | %
|Foreign government                        |  |                  | 13,462  |   | 7.6           | % |   |   | 19,173  |  | 14.5  | %
|Private sector                            |  |                  | 106,009 |   | 59.6          | % |   |   | 60,192  |  | 45.7  | %
|                                          |  |                  |         |   |               |   |   |   |         |  |       |  
|Total                                     |  | $                | 177,773 |   | 100.0         | % |   | $ | 131,875 |  | 100.0 | %
|                                          |  |                  |         |   |               |   |   |   |         |  |       |  

Total Assets by Geographic Region:



|                           |  |               |         |                   |   |        
|-------------------------- |  | ------------- | ------- | ----------------- | - | -------
|                           |  | June 30, 2008 |         | December 31, 2007
|Americas                   |  | $             | 64,337  |                   | $ | 111,665
|Europe                     |  |               | 137,894 |                   |   | 60,093 
|Middle East / North Africa |  |               | 38,782  |                   |   | 32,681 
|Asia / Pacific             |  |               | 3,671   |                   |   | 2,760  
|                           |  |               |         |                   |   |        
|Total                      |  |               | 244,684 |                   | $ | 207,199
|                           |  |               |         |                   |   |        

Property, Plant and Equipment, Net by Geographic Location:



|                           |  |               |        |                   |   |      
|-------------------------- |  | ------------- | ------ | ----------------- | - | -----
|                           |  | June 30, 2008 |        | December 31, 2007
|Americas                   |  | $             | 5,439  |                   | $ | 3,709
|Europe                     |  |               | 3,383  |                   |   | 1,523
|Middle East / North Africa |  |               | 1,413  |                   |   | 1,032
|Asia / Pacific             |  |               | 372    |                   |   | 199  
|                           |  |               |        |                   |   |      
|Total                      |  |               | 10,607 |                   | $ | 6,463
|                           |  |               |        |                   |   |      

Note 18 - Concentrations

The Company had two clients, Stanley Baker Hill, LLC and City of New York, that collectively accounted for 20% of total revenue for the three-month period ended June 30, 2008 and 18% of total revenue for the six
month period ended June 30, 2008. The Company had two clients, the City of New York and Nakheel Corporation, that collectively accounted for 27% of total revenue for the three-month period ended June 30, 2007 and 26% of total revenue for
the six month period ended June 30, 2007.



23



---

##### Table of Contents

The Company had one client, Stanley Baker Hill, LLC, that accounted for 8% of consulting fee revenue for the three-month
period ended June 30, 2008 and 9% of consulting fee revenue for the six month period ended June 30, 2008. The Company had one client, Nakheel Corporation, that accounted for 13% of consulting fee revenue for the three-month period ended
June 30, 2007 and 12% of consulting fee revenue for the six month period ended June 30, 2007.

None of the Companys clients accounted for
10% or more of accounts receivable as of June 30, 2008 and December 31, 2007.

The Company has several contracts with U.S. federal government
agencies that accounted for 11% and 8% of total revenue during the three-month periods ended June 30, 2008 and 2007, respectively and 12% and 7% of total revenue during the six-month period ended June 30, 2008 and 2007, respectively.

Note 19 - Commitments and Contingencies

Litigation

On September 23, 1996, William Hughes General Contractors, Inc. (Hughes) filed a complaint in the Superior Court of New Jersey, Law
Division, Gloucester County, against the Monroe Township Board of Education, the Company and other parties, alleging breach of contract and other causes of action in connection with its performance of a construction project for Monroe Township,
seeking in excess of $3,500,000 in damages. Monroe Township, which had terminated Hughes from the construction project prior to the commencement of the litigation on the basis of Hughes performance, made a cross claim against the Company and
other parties for contribution and indemnification. Monroe Township is seeking approximately $89,000 in damages from the Company, in addition to an indemnification for Hughes claims. In relation to the Hughes claims, a claim was made against
the Company by Fidelity and Deposit Company of Maryland (F&D). F&D is claiming damages in the range of $425,000 to $470,000. The F&D claim is being defended by the New Jersey Professional Liability Insurance Guarantee
Association (NJPLIGA) and losses are covered up to $300,000. The Company believes that the claims of Hughes, Monroe Township and F&D are without merit and, based on the Companys current understanding and evaluation of the
relevant facts and circumstances, no accruals have been made for any of these claims because the Company considers the chance of loss to be remote.

On
September 22, 1999, Wartsila NSD North America, Inc. filed a complaint against the Company in the United States District Court for the District of New Jersey. Wartsila alleged negligence, breach of contract and fraud against the Company in
connection with plaintiffs hiring of a former Company employee and sought damages in excess of $7,300,000. A jury verdict was rendered on March 6, 2006. The jury found that the Company was negligent and breached the contract with
plaintiff but that the Company did not commit fraud. The jury awarded damages of approximately $2,000,000 plus interest. The Company filed a Motion to Mold the Verdict and to Enter Judgment consistent with the parties contract which contains a
limitation of liability clause which limits the Companys liability, absent fraud, to direct damages. On June 28, 2006 the Court denied the Companys motion and the Company subsequently filed a Notice of Appeal on July 26, 2006
with the Third Circuit Court of Appeals. Oral argument occurred on April 16, 2008. On June 20, 2008 the Third Circuit Court of Appeals vacated the damages award and remanded the case for a retrial on damages only and further ordered that
damages are limited to the amount Wartsila paid the Company for the services of the former Company employee. In connection with the Arpeggio and Hill merger described in Note 1, stockholders of Old Hill had escrowed a total of 451,665 shares of the
Companys stock to satisfy indemnification claims by the Company arising out of this matter . Liability in this matter was to be satisfied from such escrowed shares under the terms of an escrow agreement. Prior to the Courts decision, the
Company reflected an accrued liability in the amount of $3,350,000 and reflected the shares held in escrow as a $3,350,000 reduction of stockholders equity. As a result of the Courts decision, the Company has eliminated both the
liability and the stockholders equity reduction.



24



---

##### Table of Contents

On May 23, 2007, the Company filed a Demand for Arbitration with the American Arbitration Association alleging
breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment and/or fraudulent inducement against Bachmann Springs Holdings, LLC and Thomas Bachmann (hereinafter, collectively Bachmann). The Company was
hired by Bachmann to provide professional support services and is demanding payment of invoices in the amount of $634,904. On October 17, 2007, Bachmann filed a counterclaim with the American Arbitration Association alleging fraud and breach of
contract and seeking damages in the amount of $8,600,000. The matter was settled on June 12, 2008 wherein Bachmann agreed to pay the Company $500,000 within 90 days after the settlement date.

General Litigation

From time to time, the Company is a defendant or
plaintiff in various legal actions which arise in the normal course of business. As such the Company is required to assess the likelihood of any adverse outcomes to these matters as well as potential ranges of probable losses. A determination of the
amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each matter. The provision may change in the future due to new developments or changes in
circumstances. Changes in the provision could increase or decrease the Companys earnings in the period the changes are made. It is the opinion of management, after consultation with legal counsel, that the ultimate resolution of these matters
will not have a material adverse effect on the Companys financial condition, results of operations or cash flows.

Note 20 - Subsequent Event

On July 31, 2008, Hill purchased PCI Group, LLC, a firm that provides scheduling, construction claims, project management support, and software sales
and support services throughout the western United States. PCI Group, which has about 40 employees, is based in Las Vegas and has additional offices in Phoenix, Sacramento, Seattle and Dallas.

The purchase price was $6,400,000 consisting of $4,100,000 in cash plus shares of the Companys common stock valued at $2,300,000 based on the closing price of the
Companys common stock on July 28, 2008. At closing, 82,436 shares of common stock, representing $1,300,000, were issued to the sellers. The remaining $1,000,000 is being withheld for a period of not less than one year as a reserve against
indemnification claims. On July 31, 2009, Hill will pay to the sellers the difference, if any, between $1,000,000 and the amount of any unresolved indemnification claims in shares of Hill common stock valued at the closing price of such shares on
July 28, 2008. When all such claims have been resolved, Hill will pay the balance, if any, between the unpaid indemnification reserve and the amount of all resolved indemnification claims in shares of Hill common stock valued at the closing price of
such shares on July 28, 2008. The maximum number of shares issuable from the indemnification reserve is 63,412 shares.

In 2007, PCI Groups unaudited
financial results included total revenues of $7.5 million and net earnings of $1.0 million. The companys total backlog at closing was approximately $3.0 million.

The acquisition will be accounted for under the purchase method of accounting and PCI will be consolidated with the Company for periods subsequent to the date of the acquisition.



25



---

##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

We make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We use forward-looking words such as may, expect, anticipate,
contemplate, believe, estimate, intends, and continue or similar words. You should read statements that contain these words carefully because they discuss future expectations, contain
projections of future results of operations or financial condition or state other forward-looking information However, there may be events in the future that we are not able to predict accurately or over which we have no control.
Examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements include those described in Part I, Item 1A Risk Factors of our
2007 Form 10-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of hereof. All forward-looking statements included herein attributable to us are expressly qualified in their entirety
by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligations to update these forward-looking statements.

Arpeggio Acquisition Corporation (Arpeggio) was incorporated in Delaware in 2004 as a specified purpose acquisition corporation. On
June 28, 2006, Arpeggio merged with Hill International, Inc. (Old Hill), a Delaware corporation, and Arpeggio was the surviving entity of the merger. Old Hill was founded in 1976 by our current Chairman and Chief Executive Officer,
Irvin E. Richter. The merger was accounted for as a reverse acquisition under U.S. generally accepted accounting principles pursuant to which Old Hill was considered to be the acquiring entity and Arpeggio was the acquired company for accounting
purposes, accompanied by a recapitalization of Old Hill. Following the merger, Arpeggio changed its name to Hill International, Inc. In this report, the terms Company, we, us, our or Hill
refer to Hill International, Inc.

We provide fee-based project management and construction claims services to clients worldwide, but
primarily in the United States, Europe, the Middle East/North Africa and Asia/Pacific. Our clients include the United States and other national governments and their agencies, state and local governments and their agencies and the private sector.
Hill is organized into two key operating segments: the Project Management Group and the Construction Claims Group.

We believe we are one
of the leading firms in the world in both the project management and construction claims consulting businesses. We are a global company with 2,100 employees operating from 80 offices in more than 25 countries.

We derive our revenues from fees for professional services. As a service company we are labor intensive rather than capital intensive. Our revenue is
driven by our ability to attract and retain qualified and productive employees, identify business opportunities, secure new and renew existing client contracts, provide outstanding services to our clients and execute projects successfully. Our
income from operations is derived from our ability to generate revenue and collect cash under our contracts in excess of direct labor and other direct costs of executing the projects, subcontractors and other reimbursable costs and selling, general
and administrative costs.

In addition, we believe there are high barriers to entry for new competitors, especially in the project
management market. We compete for business based on reputation and past experience, including client requirements for substantial similar project and claims work. We have developed significant long-standing relationships which bring us repeat
business and would be very difficult to replicate. We have an excellent reputation for developing and rewarding employees, which allows us to attract and retain superior professionals.



26



---

##### Table of Contents

Critical Accounting Policies

The Companys interim financial statements were prepared in accordance with generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are
inherently uncertain. As the number of variables and assumptions affecting the judgment increases, such judgments become even more subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially
different than estimated. The critical accounting estimates and assumptions identified in the Companys 2007 Annual Report on Form 10-K filed March 25, 2008 with the Securities and Exchange Commission have not materially changed.

We operate through two segments: the Project Management Group and the Construction Claims Group. Reimbursable expenses are reflected in equal amounts in
both total revenue and total direct expenses. Because these revenues/costs are subject to significant fluctuation from year to year, we measure the performance of many of our key operating metrics as a percentage of consulting fee revenue
(CFR), as we believe that this is a better and more consistent measure of operating performance than total revenue.

Three
Months Ended June 30, 2008 Compared to

Three Months Ended June 30, 2007

Results of Operations

Consulting Fee Revenue (CFR)



|                    |  |                    |        |   |               |   |   |        |        |  |       |   |  |   |        |  |      |  
|------------------- |  | ------------------ | ------ | - | ------------- | - | - | ------ | ------ |  | ----- | - |  | - | ------ |  | ---- | -
|                    |  | Three months ended |       
|                    |  | June 30, 2008      |        |   | June 30, 2007 |   |   | Change |       
|(in thousands)      |  | $                  |        | % |               |   | $ |        | %      |  |       | $ |  | % |       
|Project Management  |  | $                  | 59,330 |   | 72.5          | % |   | $      | 31,575 |  | 65.2  | % |  | $ | 27,755 |  | 87.9 | %
|Construction Claims |  |                    | 22,460 |   | 27.5          | % |   |        | 16,849 |  | 34.8  | % |  |   | 5,611  |  | 33.3 | %
|                    |  |                    |        |   |               |   |   |        |        |  |       |   |  |   |        |  |      |  
|Total               |  | $                  | 81,790 |   | 100.0         | % |   | $      | 48,424 |  | 100.0 | % |  | $ | 33,366 |  | 68.9 | %
|                    |  |                    |        |   |               |   |   |        |        |  |       |   |  |   |        |  |      |  

The increase in project management CFR consists of a $25,916,000 increase in foreign projects and a $1,839,000
increase in domestic projects. The increase in foreign project management CFR was due to an $11,593,000 increase generated in the Middle East and $14,323,000 in Europe. Growth in our CFR in the Middle East has been strong because there has been a
significant increase in construction activity in a number of the countries in the Middle East/North Africa region (including the United Arab Emirates, Qatar, Saudi Arabia and Libya) where we do business. In addition, our involvement with the Iraq
reconstruction efforts funded by the United States government has led to additional work for us. Growth in Europe is mainly due to the acquisition of Gerens (effective February 2008) generating CFR in the second quarter of $9,711,000. The increase
in domestic project management CFR revenue of $1,839,000 was primarily due to the acquisition of KJM (effective May 2007) which generated an increase of $1,130,000, along with increases of $416,000 in Washington D.C. and $337,000 in New York where
several new projects began during the second half of 2007 and the early part of 2008.

The increase in construction claims CFR is primarily attributable to
foreign construction claims CFR including a $3,221,000 increase in the Middle East and $2,370,000 generated in the United Kingdom due to new work and expansion of existing work.



27



---

##### Table of Contents

Reimbursable Expenses



|                    |  |                    |        |   |               |   |   |        |        |  |       |   |  |   |        |   |  |       |  
|------------------- |  | ------------------ | ------ | - | ------------- | - | - | ------ | ------ |  | ----- | - |  | - | ------ | - |  | ----- | -
|                    |  | Three months ended |       
|                    |  | June 30, 2008      |        |   | June 30, 2007 |   |   | Change |       
|(in thousands)      |  | $                  |        | % |               |   | $ |        | %      |  |       | $ |  |   | %      |  
|Project Management  |  | $                  | 14,167 |   | 93.9          | % |   | $      | 16,950 |  | 82.6  | % |  | $ | (2,783 | ) |  | -16.4 | %
|Construction Claims |  |                    | 923    |   | 6.1           | % |   |        | 3,577  |  | 17.4  | % |  |   | (2,654 | ) |  | -74.2 | %
|                    |  |                    |        |   |               |   |   |        |        |  |       |   |  |   |        |   |  |       |  
|Total               |  | $                  | 15,090 |   | 100.0         | % |   | $      | 20,527 |  | 100.0 | % |  | $ | (5,437 | ) |  | -26.5 | %
|                    |  |                    |        |   |               |   |   |        |        |  |       |   |  |   |        |   |  |       |  

Reimbursable expenses consist of amounts paid to subcontractors and other third parties and travel and other job
related expenses that are contractually reimbursable from clients. These items are reflected as separate line items in both our revenue and cost of services captions in our consolidated statement of earnings. The decrease in project management
reimbursable expenses was due to lower use of subcontractors overseas in Europe and the Middle East. We use subcontractors for a variety of reasons, such as providing at-risk construction services on contracts where such work is required by a client
(generally known as CM/Build contracts) since we do not provide such services. The New York projects are principally CM/Build contracts which require more subcontracting work. The decrease in construction claims reimbursable expenses is
due to the decreased use of subcontractors overseas primarily in Europe.

Cost of Services



|                    |  |                    |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  
|------------------- |  | ------------------ | ------ | - | ------- | - |  | ------------- | - | - | ------- | ------ |  | ------ | - | - | ---- | - |  | - | ------ |  | ---- | -
|                    |  | Three months ended |       
|                    |  | June 30, 2008      |        |   | % ofCFR |   |  | June 30, 2007 |   |   | % ofCFR |        |  | Change |  
|(in thousands)      |  | $                  |        | % |         |   |  | $             |   | % |         |        |  | $      |   | % |     
|Project Management  |  | $                  | 35,392 |   | 78.5    | % |  | 59.7          | % |   | $       | 18,161 |  | 70.0   | % |   | 57.5 | % |  | $ | 17,231 |  | 94.9 | %
|Construction Claims |  |                    | 9,690  |   | 21.5    | % |  | 43.1          | % |   |         | 7,791  |  | 30.0   | % |   | 46.2 | % |  |   | 1,899  |  | 24.4 | %
|                    |  |                    |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  
|Total               |  | $                  | 45,082 |   | 100.0   | % |  | 55.1          | % |   | $       | 25,952 |  | 100.0  | % |   | 53.6 | % |  | $ | 19,130 |  | 73.7 | %
|                    |  |                    |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  

Cost of services consists of labor expenses for time charged directly to contracts and non-reimbursable job
related travel and out-of-pocket expenses. The increase in project management cost of services is primarily due to an increase in direct labor of $10,838,000 required to produce the higher volume of CFR. Of this amount, $4,398,000 is attributable to
the acquisition of Gerens. In addition, increases in direct (non-labor) expense included $2,037,000 on new work in North Africa and $1,400,000 at Gerens.

The increase in cost of services for construction claims was due to an increase of $1,454,000 in the United Kingdom required to support the increase in CFR.

Gross Profit



|                    |  |                    |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  
|------------------- |  | ------------------ | ------ | - | ------- | - |  | ------------- | - | - | ------- | ------ |  | ------ | - | - | ---- | - |  | - | ------ |  | ---- | -
|                    |  | Three months ended |       
|                    |  | June 30, 2008      |        |   | % ofCFR |   |  | June 30, 2007 |   |   | % ofCFR |        |  | Change |  
|(in thousands)      |  | $                  |        | % |         |   |  | $             |   | % |         |        |  | $      |   | % |     
|Project Management  |  | $                  | 23,939 |   | 65.2    | % |  | 40.3          | % |   | $       | 13,414 |  | 59.7   | % |   | 42.5 | % |  | $ | 10,525 |  | 78.5 | %
|Construction Claims |  |                    | 12,769 |   | 34.8    | % |  | 56.9          | % |   |         | 9,058  |  | 40.3   | % |   | 53.8 | % |  |   | 3,711  |  | 41.0 | %
|                    |  |                    |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  
|Total               |  | $                  | 36,708 |   | 100.0   | % |  | 44.9          | % |   | $       | 22,472 |  | 100.0  | % |   | 46.4 | % |  | $ | 14,236 |  | 63.4 | %
|                    |  |                    |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  

The increase in project management gross profit included $9,935,000 from foreign project management in which
$3,914,000 is attributable to the acquisition of Gerens, and $590,000 from domestic project management. The decrease in project management gross profit as a percentage of CFR is principally due to Gerens which has a gross profit percentage of 40%
and lower average margins on Middle East work where some higher margin projects came to an end in early 2008.



28



---

##### Table of Contents

The increase in construction claims gross profit included $2,462,000 in the Middle East and $1,167,000 in the United
Kingdom primarily due to new work and expansion of existing work. The increase in construction claims gross profit as a percentage of CFR is due to billing rate increases in the Middle East and Europe.

Selling, General and Administrative

(SG&A)
Expenses



|               |  |                    |        |         |               |   |   |        |         |  |      |   |  |   |        |  |      |  
|-------------- |  | ------------------ | ------ | ------- | ------------- | - | - | ------ | ------- |  | ---- | - |  | - | ------ |  | ---- | -
|               |  | Three months ended |       
|               |  | June 30, 2008      |        |         | June 30, 2007 |   |   | Change |        
|(in thousands) |  | $                  |        | % ofCFR |               |   | $ |        | % ofCFR |  |      | $ |  | % |       
|SG&A Expenses  |  | $                  | 31,844 |         | 38.9          | % |   | $      | 18,785  |  | 38.8 | % |  | $ | 13,059 |  | 69.5 | %
|               |  |                    |        |         |               |   |   |        |         |  |      |   |  |   |        |  |      |  

The increase in SG&A expenses is partially attributable to an increase of $4,466,000 from the 2007 KJM
acquisition and the 2008 Gerens, Shreeves and Euromost acquisitions. The significant components of the change are as follows:



| |  |  | An increase in unapplied and indirect labor expense of $6,218,000 due to increases in staff required to produce and support the increase in revenue as well as the
build-up of corporate staffing in connection with Hills recent and anticipated growth. This increase includes $1,771,000 for KJM, Gerens, Shreeves and Euromost.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in stock-based compensation expense of $1,517,000 principally due to the expense amounting to approximately $1,465,000 booked upon stockholder approval
of the 2007 Restricted Stock Grant Plan in the second quarter of 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase of $855,000 in administrative travel expense related to corporate executive and business development travel in support of the Companys strategic
growth initiatives.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase of $536,000 in rent expense primarily due to a $403,000 increase due to KJM, Gerens, Shreeves and Euromost.
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in computer equipment, software and support of $568,000 due to maintenance and license agreements.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | An increase of $500,000 in amortization expense due primarily to $133,000 from the KJM acquisition, $208,000 due to the Gerens acquisition, $49,000 due to the
Shreeves acquisition and $111,000 due to the Euromost acquisition.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equity in Earnings of Affiliates

Our share of the earnings of an affiliate, Stanley Baker Hill, LLC (SBH), increased $478,000, from $318,000 in the three-month period ended June 30, 2007
to $796,000 in the three-month period ended June 30, 2008.

SBH is a joint venture between Stanley Consultants, Inc. (Stanley), Michael
Baker, Jr., Inc. (Baker) and us. Stanley, Baker and we each own an equal one-third interest in SBH. SBH has a contract for an indefinite delivery and indefinite quantity for construction management and general architect-engineer services
for facilities in Iraq with the U.S. Army Corps of Engineers.



29



---

##### Table of Contents

Operating Profit

Operating profit increased $1,655,000, or 41.3% to $5,660,000, from $4,005,000 in the three-month period ended June 30, 2008 principally due to higher CFR and gross profit, partially offset by higher SG&A expenses principally
resulting from our overall growth and the stock-based compensation charge related to the 2007 Restricted Stock Plan Grant.

Interest (Income)
Expense, net

Net interest expense decreased $257,000 to $16,000 in the three-month period ended June 30, 2008 as compared with a net interest
expense of $273,000 in the three-month period ended June 30, 2007, primarily due to decreased borrowing on the companys senior credit facility and interest income generated from cash available from the exercise of our warrants in late
2007.

Income Taxes

For the three-month period
ended June 30, 2008, we incurred an income tax expense of $1,426,000 compared to an expense of $876,000 for the three-month period ended June 30, 2007. The Companys income tax expense for the three-month period ended June 30,
2008 was adversely affected by a one-time modification to the cash-to-accrual estimate which was required when the Company became a publicly-traded company in 2006. The net adjustment was approximately $1,300,000.

The effective income tax expense rates for the three-month periods ended June 30, 2008 and 2007 were 27.5% and 23.8%, respectively. Excluding the effect of the
cash-to-accrual adjustment noted above, the Companys effective income tax rate for the three months ended June 30, 2008 would have been 2.4%.

Net Earnings

Our net earnings for the three-month period ended June 30, 2008 were $3,760,000, or $0.09 per diluted common
share, based upon 41.2 million diluted common shares outstanding, as compared to net earnings for the three-month period ended June 30, 2007 of $2,807,000, or $0.10 per diluted common share, based upon 29.0 million diluted common
shares outstanding. The diluted earnings per share for 2008 were unfavorably impacted by a significant increase in diluted shares outstanding as a result of the exercise of substantially all of the Companys warrants in late 2007. Net earnings
for the three-month period ended June 30, 2008 improved by $953,000 or 34.0%, which was principally due to an increase in CFR, an increase in gross profit partially offset by higher SG&A expenses as a result of our overall growth, an
increase in stock-based compensation expense and the income tax charge related to the 2006 cash-to-accrual adjustment.



30



---

##### Table of Contents

Six Months Ended June 30, 2008 Compared to

Six Months Ended June 30, 2007

Results of
Operations

Consulting Fee Revenue (CFR)



|                    |  |                  |         |   |               |   |   |        |        |  |       |   |  |   |        |  |      |  
|------------------- |  | ---------------- | ------- | - | ------------- | - | - | ------ | ------ |  | ----- | - |  | - | ------ |  | ---- | -
|                    |  | Six months ended |        
|                    |  | June 30, 2008    |         |   | June 30, 2007 |   |   | Change |       
|(in thousands)      |  | $                |         | % |               |   | $ |        | %      |  |       | $ |  | % |       
|Project Management  |  | $                | 108,707 |   | 71.8          | % |   | $      | 59,976 |  | 64.5  | % |  | $ | 48,731 |  | 81.3 | %
|Construction Claims |  |                  | 42,721  |   | 28.2          | % |   |        | 33,010 |  | 35.5  | % |  |   | 9,711  |  | 29.4 | %
|                    |  |                  |         |   |               |   |   |        |        |  |       |   |  |   |        |  |      |  
|Total               |  | $                | 151,428 |   | 100.0         | % |   | $      | 92,986 |  | 100.0 | % |  | $ | 58,442 |  | 62.8 | %
|                    |  |                  |         |   |               |   |   |        |        |  |       |   |  |   |        |  |      |  

The increase in project management CFR consists of a $43,414,000 increase in foreign projects and a $5,317,000
increase in domestic projects. The increase in foreign project management CFR was due to an $23,468,000 increase generated in the Middle East and $19,946,000 in Europe. Growth in our CFR in the Middle East has been strong because there has been a
significant increase in construction activity in a number of the countries in the Middle East/North Africa region (including the United Arab Emirates, Qatar, Saudi Arabia and Libya) where we do business. In addition, our involvement with the Iraq
reconstruction efforts funded by the United States government has led to additional work for us. Growth in Europe is mainly due to the acquisition of Gerens (effective February 2008) and Shreeves (effective January 2008) generating CFR of
$17,863,000. The increase in domestic project management CFR revenue of $5,317,000 was primarily due to an increase of $4,593,000 for KJM (acquired May 2007) combined with increases of $505,000 in New York, $459,000 in Pennsylvania and $410,000 in
Washington D.C. where several projects began during the second half of 2007 and the early part of 2008.

The increase in construction claims CFR is
primarily attributable to foreign construction claims CFR. The increase mainly consists of $5,027,000 increase in the Middle East and a $4,343,000 generated in the United Kingdom, primarily due to new work and expansion of existing work.

Reimbursable Expenses



|                    |  |                  |        |   |               |   |   |        |        |  |       |   |  |   |         |   |  |       |  
|------------------- |  | ---------------- | ------ | - | ------------- | - | - | ------ | ------ |  | ----- | - |  | - | ------- | - |  | ----- | -
|                    |  | Six months ended |       
|                    |  | June 30, 2008    |        |   | June 30, 2007 |   |   | Change |       
|( in thousands)     |  | $                |        | % |               |   | $ |        | %      |  |       | $ |  |   | %       |  
|Project Management  |  | $                | 24,293 |   | 92.2          | % |   | $      | 32,399 |  | 83.3  | % |  | $ | (8,106  | ) |  | -25.0 | %
|Construction Claims |  |                  | 2,052  |   | 7.8           | % |   |        | 6,490  |  | 16.7  | % |  |   | (4,438  | ) |  | -68.4 | %
|                    |  |                  |        |   |               |   |   |        |        |  |       |   |  |   |         |   |  |       |  
|Total               |  | $                | 26,345 |   | 100.0         | % |   | $      | 38,889 |  | 100.0 | % |  | $ | (12,544 | ) |  | -32.3 | %
|                    |  |                  |        |   |               |   |   |        |        |  |       |   |  |   |         |   |  |       |  

Reimbursable expenses consist of amounts paid to subcontractors and other third parties and travel and other job
related expenses that are contractually reimbursable from clients. These items are reflected as separate line items in both our revenue and cost of services captions in our consolidated statement of earnings. The decrease in project management
reimbursable expenses was partially due to a $2,079,000 decrease in reimbursable subcontractors fees in New York combined with lower use of subcontractors overseas in Europe and the Middle East amounting to a decrease of $4,445,000. We use
subcontractors for a variety of reasons, such as providing at-risk construction services on contracts where such work is required by a client (generally known as CM/Build contracts) since we do not provide such services. The New York
projects are principally CM/Build contracts which require more subcontracting work. The decrease in construction claims reimbursable expenses is due to the decreased use of subcontractors overseas primarily in Europe.



31



---

##### Table of Contents

Cost of Services



|                    |  |                  |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  
|------------------- |  | ---------------- | ------ | - | ------- | - |  | ------------- | - | - | ------- | ------ |  | ------ | - | - | ---- | - |  | - | ------ |  | ---- | -
|                    |  | Six months ended |       
|                    |  | June 30, 2008    |        |   | % ofCFR |   |  | June 30, 2007 |   |   | % ofCFR |        |  | Change |  
|(in thousands)      |  | $                |        | % |         |   |  | $             |   | % |         |        |  | $      |   | % |     
|Project Management  |  | $                | 64,724 |   | 78.6    | % |  | 59.5          | % |   | $       | 34,593 |  | 69.9   | % |   | 57.7 | % |  | $ | 30,131 |  | 87.1 | %
|Construction Claims |  |                  | 17,612 |   | 21.4    | % |  | 41.2          | % |   |         | 14,926 |  | 30.1   | % |   | 45.2 | % |  |   | 2,686  |  | 18.0 | %
|                    |  |                  |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  
|Total               |  | $                | 82,336 |   | 100.0   | % |  | 54.4          | % |   | $       | 49,519 |  | 100.0  | % |   | 53.3 | % |  | $ | 32,817 |  | 66.3 | %
|                    |  |                  |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  

Cost of services consists of labor expenses for time charged directly to contracts and non-reimbursable job
related travel and out-of-pocket expenses. The increase in project management cost of services is primarily due to an increase in direct labor of $20,800,000 required to produce the higher volume of CFR. Of this amount, $6,726,000 is attributable to
the acquisition of Gerens. In addition, direct (non-labor) expenses amounting to $2,624,000 were incurred by Gerens, Shreeves, and Euromost and $2,485,000 for new work in North Africa.

The increase in the cost of services for construction claims was due primarily to an increase of $2,012,000 in the United Kingdom in line with an increase of $4,120,000 in CFR.

Gross Profit



|                    |  |                  |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  
|------------------- |  | ---------------- | ------ | - | ------- | - |  | ------------- | - | - | ------- | ------ |  | ------ | - | - | ---- | - |  | - | ------ |  | ---- | -
|                    |  | Six months ended |       
|                    |  | June 30, 2008    |        |   | % ofCFR |   |  | June 30, 2007 |   |   | % ofCFR |        |  | Change |  
|(in thousands)      |  | $                |        | % |         |   |  | $             |   | % |         |        |  | $      |   | % |     
|Project Management  |  | $                | 43,983 |   | 63.7    | % |  | 40.5          | % |   | $       | 25,383 |  | 58.4   | % |   | 42.3 | % |  | $ | 18,600 |  | 73.3 | %
|Construction Claims |  |                  | 25,109 |   | 36.3    | % |  | 58.8          | % |   |         | 18,084 |  | 41.6   | % |   | 54.8 | % |  |   | 7,025  |  | 38.8 | %
|                    |  |                  |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  
|Total               |  | $                | 69,092 |   | 100.0   | % |  | 45.6          | % |   | $       | 43,467 |  | 100.0  | % |   | 46.7 | % |  | $ | 25,625 |  | 59.0 | %
|                    |  |                  |        |   |         |   |  |               |   |   |         |        |  |        |   |   |      |   |  |   |        |  |      |  

The increase in project management gross profit included $16,554,000 from foreign project management in which
$7,931,000 is attributable to the acquisition of Gerens, Shreeves and Euromost. The decrease in project management gross profit as a percentage of CFR is due to Gerens which has a gross profit percentage of 38%. In addition, our New Jersey, New York
and Illinois offices averaged lower gross margin percentages on their projects compared with the prior year due to lower average contractual rates. In addition, increases in Middle East, Iraq and North Africa amounted to $9,885,000 due to the
increased CFR discussed above.

The increase in construction claims gross profit of $7,025,000 included $6,158,000 in the Middle East and United Kingdom
primarily due to increased work and expansion of existing work. The increase in construction claims gross profit as a percentage of CFR is due to billing rate increases in the Middle East and Europe.



32



---

##### Table of Contents

Selling, General and Administrative

(SG&A) Expenses



|               |  |                  |        |         |               |   |   |        |         |  |      |   |  |   |        |  |      |  
|-------------- |  | ---------------- | ------ | ------- | ------------- | - | - | ------ | ------- |  | ---- | - |  | - | ------ |  | ---- | -
|               |  | Six months ended |       
|               |  | June 30, 2008    |        |         | June 30, 2007 |   |   | Change |        
|(in thousands) |  | $                |        | % ofCFR |               |   | $ |        | % ofCFR |  |      | $ |  | % |       
|SG&A Expenses  |  | $                | 59,344 |         | 39.2          | % |   | $      | 36,540  |  | 39.3 | % |  | $ | 22,804 |  | 62.4 | %
|               |  |                  |        |         |               |   |   |        |         |  |      |   |  |   |        |  |      |  

The increase in SG&A expenses is partially attributable to an increase of $7,613,000 from the 2007 KJM
acquisition and the 2008 Gerens, Shreeves and Euromost acquisitions. The significant components of the change are as follows:



| |  |  | An increase in unapplied and indirect labor expense of $12,913,000 due to increases in staff required to produce and support the increase in revenue as well as the
build-up of corporate staffing in connection with Hills recent and anticipated growth. This increase includes $3,536,000 for KJM, Gerens, Shreeves and Euromost.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in stock-based compensation expense of $1,600,000 due primarily to the expense of approximately $1,465,000 booked upon stockholder approval of the 2007
Restricted Stock Grant Plan in the second quarter of 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase of $1,381,000 in administrative travel expense related to corporate executive and business development travel in support of the Companys strategic
growth initiatives.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase of $1,368,000 in rent expense primarily due to a $738,000 increase due to KJM, Gerens, Shreeves and Euromost.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in computer equipment, software and support of $1,000,000 due to maintenance and license agreements.
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | An increase of $740,000 in amortization expense due primarily to $265,000 in the KJM acquisition, $278,000 due to the Gerens acquisition, $87,000 due to the
Shreeves acquisition and $111,000 due to the Euromost acquisition.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equity in Earnings of Affiliates

Our share of the earnings of an affiliate, Stanley Baker Hill, LLC (SBH), increased $876,000, from $555,000 in the six-month period ended June 30, 2007
to $1,431,000 in the six-month period ended June 30, 2008.

SBH is a joint venture between Stanley Consultants, Inc. (Stanley), Michael
Baker, Jr., Inc. (Baker) and us. Stanley, Baker and we each own an equal one-third interest in SBH. SBH has a contract for an indefinite delivery and indefinite quantity for construction management and general architect-engineer services
for facilities in Iraq with the U.S. Army Corps of Engineers.

Operating Profit

Operating profit increased $3,697,000, or 49.4%, to $11,179,000, from a profit of $7,482,000 in the six-month period ended June 30, 2007 principally due to higher CFR and gross profit, partially offset by higher
SG&A expenses.



33



---

##### Table of Contents

Interest (Income) Expense, net

Net interest income increased $849,000 to $349,000 in the six-month period ended June 30, 2008 as compared with a net interest expense of $500,000 in the six-month period ended June 30, 2007, primarily due
to decreased borrowing on the companys senior credit facility and interest income generated from cash available from the exercise of our warrants in late 2007.

Income Taxes

For the six-month period ended June 30, 2008, we recognized an income tax expense of
$269,000 compared to an expense of $1,600,000 for the six-month period ended June 30, 2007. The decrease is partially attributable to a tax benefit of $2,506,000 due to the expirations of statutes upon the filing of certain income tax returns
resulting in the reduction in the reserves for uncertain tax positions. The Companys income tax expense for the three-month period ended June 30, 2008 was adversely affected by a one-time modification to the cash-to-accrual estimate which
was required when the Company became a publicly-traded company in 2006. The net adjustment was approximately $1,300,000.

The effective income tax expense
rates for the six-month periods ended June 30, 2008 and 2007 were 25% and 23.3%, respectively. Excluding the effect of the two items noted above, the effective income tax expense rate would have been 13.6% for the six-month period ended
June 30, 2008.

Net Earnings

Our net
earnings for the six-month period ended June 30, 2008 were $10,591,000, or $0.26 per diluted common share, based upon 41.2 million diluted common shares outstanding, as compared to net earnings for the six-month period ended June 30,
2007 of $5,267,000, or $0.18 per diluted common share, based upon 29.0 million diluted common shares outstanding. The diluted earnings per share for 2008 were unfavorably impacted by a significant increase in diluted shares outstanding as a
result of (i) warrants and options becoming more dilutive due to a significant increase in the market price of the Companys common stock, and (ii) the exercise of substantially all of the Companys warrants in late 2007. Net
earnings improved by $5,324,000 or 101.1%, which was principally due to an increase in CFR, an increase in gross profit and an income tax benefit, partially offset by higher SG&A expenses as a result of our overall growth, an increase in
stock-based compensation expense and the income tax charge related to the 2006 cash-to-accrual adjustment.

Liquidity and Capital
Resources

The Company has historically funded its business activities with cash flow from operations and borrowings under credit facilities.

Credit Facilities

We are a party to a loan and
security agreement with LaSalle Bank N.A. (LaSalle), which provides for up to $35,000,000 to be made available to us on a revolving basis (the Credit Facility). The Credit Facility provides for a letter of credit sub-facility
of $20,000,000. The Credit Facility is secured by all of our assets, including, without limitation, our accounts receivable, equipment, securities, financial assets and the proceeds of the foregoing, as well as by a pledge of 66.67% of the
outstanding capital stock of the following subsidiaries: Hill International S.A., Hill International (UK) Ltd., Hill International (Middle East) Ltd. and James R. Knowles (Holdings) Ltd.



34



---

##### Table of Contents

The Credit Facility is for a term extending until January 1, 2011. The Credit Facility provides for LIBOR loans and
prime rate loans, payable at margins above either LaSalles prime rate or LIBOR based on the Companys ratio of total debt to EBITDA ranging from 0 to 50 basis points above prime or 150 to 262.50 basis points above LIBOR. At June 30,
2008, the applicable margins were 0 basis points above LaSalles prime rate and 150 basis points above LIBOR. The Credit Facility contains covenants with respect to our minimum net worth, total debt to EBITDA ratios, fixed charge coverage
ratios and billed accounts receivable to total debt ratios, as well as other financial covenants and certain restrictions on the incurrence of debt, on the making of investments, on the payment of dividends, on transactions with affiliates and other
affirmative and negative covenants and events of default customary for facilities of its type. At June 30, 2008, there were no outstanding borrowings under the Credit Facility, although the Company had $7,988,000 in outstanding letters of
credit which reduced availability under the Credit Facility.

We currently have three additional credit facilities with international financial
institutions as follows:



| |  |  | A credit facility with a bank in the Middle East for 11,500,000 AED ($3,131,000 at June 30, 2008) collateralized by certain overseas receivables. The interest
rate on that facility is the three-month Emirates InterBank Offer Rate (EIBOR), which at June 30, 2008 was 1.89%, plus 2.0%. At June 30, 2008, there were no outstanding borrowings under this facility which expires on
December 24, 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A credit facility with a European Bank for 1,000,000 ($1,579,000 at June 30, 2008) secured by receivables from one specific project. The interest rate on
this facility is bank prime, which at June 30, 2008 was 7.50%, plus 2.5%. At June 30, 2008, we had no borrowings under this facility which expires on April 30, 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company also maintains an unsecured credit facility with a bank in Spain for 750,000 ($1,184,000 at June 30, 2008). The interest rate on that
facility is the three month EURIBOR rate which at June 30, 2008 was 4.75%, plus 0.75%. At June 30, 2008 there were no outstanding borrowings under this facility which expires on December 18, 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Acquisitions

PCI Group, LLC

On July 31, 2008, Hill purchased PCI Group, LLC, a firm that provides scheduling, construction claims, project management support, and
software sales and support services throughout the western United States. PCI Group, which has about 40 employees, is based in Las Vegas and has additional offices in Phoenix, Sacramento, Seattle and Dallas. The purchase price was $6,400,000
consisting of $4,100,000 in cash plus shares of the Companys common stock valued at $2,300,000 based on the closing price of the Companys common stock on July 28, 2008. At closing, 82,436 shares of common stock, representing
$1,300,000, were issued to the sellers. The remaining $1,000,000 is being withheld for a period of not less than one year as a reserve against indemnification claims. On July 31, 2009, Hill will pay to the sellers the difference, if any,
between $1,000,000 and the amount of any unresolved indemnification claims in shares of Hill common stock valued at the closing price of such shares on July 28, 2008. When all such claims have been resolved, Hill will pay the balance, if any,
between the unpaid indemnification reserve and the amount of all resolved indemnification claims in shares of Hill common stock valued at the closing price of such shares on July 28, 2008. The maximum number of shares issuable from the
indemnification reserve is 63,412 shares.

Euromost Polska Sp. z o.o

On May 27, 2008, Hill International S.A., the Companys wholly-owned subsidiary, acquired all of the outstanding capital stock of Euromost
Polska Sp. z o.o (Euromost), a Warsaw-headquartered firm, with about 130 employees, that provides project



35



---

##### Table of Contents

management and other construction consulting services throughout Poland. The consideration paid by Hill International S.A. consisted of cash amounting to
10,850,000 ($17,063,000) and a note amounting to 500,000 ($786,000) payable on June 17, 2009. The note is subject to reduction to satisfy any of the sellers indemnification obligations. The sellers may receive additional
consideration of up to 5,350,000 ($8,413,000) under an earn-out arrangement payable at the rate of 2,775,000 ($4,364,000) in 2009 and 2,575,000 ($4,049,000) in 2010 based on the future financial performance of Euromost for the
years ending December 31, 2008 and 2009, respectively.

Gerens Management Group, S.A.

On February 15, 2008, Hill International S.A., our wholly-owned subsidiary, acquired 60% of the outstanding capital stock of Gerens Management Group, S.A.
(Gerens), a Spanish-headquartered firm that provides project management services on major construction projects throughout Spain as well as in Western Europe and Latin America. The consideration paid by Hill International S.A. was
10,800,000 ($15,981,000) in cash.

In connection with the acquisition, Gerens shareholders, including Hill International S.A., entered into an
agreement whereby the minority shareholders have the right to compel Hill International S.A. to purchase any or all of their shares during the period from March 31, 2010 to March 31, 2020. Hill International S.A. also has the right to
compel the minority shareholders to sell any or all of their shares during the period from March 31, 2011 to March 31, 2021. The purchase price for such shares shall be the greater of (a) 18,000,000 increased by the General
Price Index (capped at 3.5% per annum) or (b) ten times the companys earnings before interest and income taxes for the prior fiscal year, multiplied by a percentage which the shares to be purchased bear to the total number of shares
outstanding at the time of the purchase. Such amount may be increased by increases in equity subsequent to the acquisition date, and can be paid in cash or shares of our common stock at the option of the sellers.

John Shreeves Holdings Ltd.

On
January 4, 2008, Hill International (UK) Ltd., our wholly-owned subsidiary, acquired John Shreeves Holdings Ltd. and its operating subsidiary John Shreeves & Partners Ltd. (collectively Shreeves), a London-based firm that
provides project management and cost consultancy services on primarily private-sector projects throughout the United Kingdom. Total consideration amounted to £1,850,000 ($3,700,000) consisting of a cash payment of £1,650,000 ($3,300,000)
on the date of closing and a cash payment of £200,000 ($400,000) payable six months after the closing date.

Additional Capital Requirements

Due to our recent accelerated growth, we may experience lags between our receipt of fees from our clients and our payment of our costs. In order to
continue our growth, and in light of the cash obligations described above, we have entered into a credit agreement that allows for borrowings up to $35,000,000 with LaSalle Bank N.A. However, we may seek additional debt financing beyond this amount.

Sources of Additional Capital

At June 30, 2008,
our cash and cash equivalents amounted to approximately $30,313,000. We cannot provide any assurance that other sources of financing will be available, or if available, that the financing will be on terms acceptable to us.



36



---

##### Table of Contents

Cash Flow Activity during the Six Months Ended June 30, 2008

For the six months ended June 30, 2008, our cash decreased by $35,815,000 to $30,313,000. Cash provided by operations was $2,025,000, cash used in investing
activities was $35,737,000 and cash used in financing activities was $1,413,000. We also experienced a decrease in cash of $690,000 from the effect of foreign currency exchange rate fluctuations.

Operating Activities

Net cash provided by operating
activities for the six months ended June 30, 2008 was $2,025,000. Cash provided by operations is attributable to net income of $10,591,000 for the period adjusted by non-cash items included in net income and working capital changes such as:



| |  |  | depreciation and amortization of $2,683,000;
| | - |  | --------------------------------------------



| |  |  | bad debt expense of $631,000;
| | - |  | -----------------------------



| |  |  | equity in earnings of affiliates of ($1,431,000);
| | - |  | -------------------------------------------------



| |  |  | a deferred tax provision of ($1,006,000);
| | - |  | -----------------------------------------



| |  |  | stock based compensation expense of $1,764,000;
| | - |  | -----------------------------------------------

Working capital changes which increased cash provided from operations included the following:



| |  |  | a decrease in accounts receivable - affiliates of $2,310,000 due to the timing of collections from SBH;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | an increase in other current liabilities of $3,384,000 primarily due to the growth of business and the timing of payments relating to contracts.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

Working capital changes which decreased cash provided from operations included the following:



| |  |  | an increase in accounts receivable of $11,358,000 due to increased revenue as a result of organic growth and acquisitions; the increase in accounts receivable
results in an ending balance that approximates the average revenue per quarter;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in prepaid expenses and other current assets of $2,371,000 primarily due to the timing of payments for various selling, general and administrative
expenses;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | decreases in accounts payable and accrued expenses of $2,353,000, principally due to the reversal of a legal liability claim accrued in the Wartsila matter;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a decrease in deferred revenue of $365,000 primarily due to the timing of work performed on projects in Europe;
| | - |  | ---------------------------------------------------------------------------------------------------------------

Investing Activities

Net cash used in investing activities
was $35,737,000. We spent $3,976,000 to purchase computers, office equipment, furniture and fixtures and used $32,461,000, net of cash acquired, on the Gerens, Shreeves and Euromost acquisitions. We also received $700,000 as a distribution from SBH.

Financing Activities

Net cash used in
financing activities was $1,413,000. We received $126,000 from the exercise of stock options. We made payments on notes payable amounting to $748,000 and on our capital leases amounting to $70,000. Due to bank decreased $724,000 due to the timing of
certain payments which were disbursed but not immediately funded by the bank.



37



---

##### Table of Contents

Recent Accounting Pronouncements

FASB Interpretation No. 157

In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The
adoption of SFAS No. 157 did not have a material impact on our financial statements.

FASB Staff Position No. 157-1

In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and
Its Related Interpretive Accounting Pronouncements That Address Leasing Transactions, which became effective for the Company on January 1, 2008. This FSP excludes FASB Statement No. 13, Accounting for Leases, and its related
interpretive accounting pronouncements from the provisions of SFAS No. 157. Implementation of this standard did not have a material effect on our financial statements.

FASB Staff Position FAS No. 157-2

In February 2008, the FASB issued FSP No. 157-2,Effective
Date of FASB Statement No. 157,which delays the Companys January 1, 2008 effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually), until January 1, 2009. Implementation of this standard is not expected to have a material effect on our financial statements.

FASB Statement No. 159

In February 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115,which became effective for the company on January 1, 2008. This standard permits companies
to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. Implementation of SFAS
No. 159 did not have a material effect on our financial statements.

FASB Statement No. 141 (revised 2007)

In December 2007, the FASB issued SFAS No. 141(revised 2007), Business Combinations, which will become effective for business combination transactions having
an acquisition date on or after January 1, 2009. This standard requires the acquiring entity in a business combination to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition
date to be measured at their respective fair values. The Statement requires acquisition-related costs, as well as restructuring costs the acquirer expects to incur for which it is not obligated at acquisition date, to be recorded against income
rather



38



---

##### Table of Contents

than included in purchase-price determination. It also requires recognition of contingent arrangements at their acquisition-date fair values, with subsequent
changes in fair value generally reflected in income. Because this standard is generally applied prospectively, the effect of adoption on the Companys financial statements will depend primarily on specific transactions, if any, completed after
2008. Management is currently evaluating the effects that SFAS No. 141(R) is likely to have on potential post-2008 transactions.

FASB Statement
No. 160

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51,which will become effective for the Company January 1, 2009, with retroactive adoption of the Statements presentation and disclosure requirements for existing minority
interests. This standard will require ownership interests in subsidiaries held by parties other than the parent to be presented within the equity section of the consolidated balance sheet but separate from the parents equity. It will also
require the amount of consolidated net income attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated income statement. Certain changes in a parents ownership interest
are to be accounted for as equity transactions and when a subsidiary is deconsolidated, any noncontrolling equity investment in the former subsidiary is to be initially measured at fair value. We do not anticipate the implementation of SFAS
No. 160 will significantly change the presentation of our consolidated income statement or consolidated balance sheet.

Staff
Accounting Bulletin No. 110

In December 2007, the SEC released Staff Accounting Bulletin (SAB) No. 110 which indicates that
the staff will continue to accept, under certain circumstances, the use of the simplified method in developing an estimate of the expected term for plain vanilla options in accordance with SFAS No. 123(R), Share-Based
Payment. The Company has no historical data on which to base its estimate (see Note 14 to the Companys consolidated financial statements), and, accordingly, it will continue to use the simplified method until such historical data becomes
available.

Quarterly Fluctuations

Our operating
results vary from period to period as a result of the timing of projects and the growth of our business. We do not believe that our business is seasonal.

Backlog

We believe a strong indicator of our future performance is our backlog of uncompleted projects under contract or awarded. Our
backlog represents managements estimate of the amount of contracts and awards in hand that we expect to result in future consulting fees. Project management backlog is evaluated by management, on a project-by-project basis and is reported for
each period shown based upon the binding nature of the underlying contract, commitment or letter of intent, and other factors, including the economic, financial and regulatory viability of the project and the likelihood of the contract being
extended, renewed or cancelled. Construction claims backlog is based largely on managements estimates of future revenue based on known construction claims assignments and historical results for new work. Because a significant number of
construction claims may be awarded and completed within the same period, our actual construction claims revenue has historically exceeded backlog by a significant amount.



39



---

##### Table of Contents

Our backlog is important to us in anticipating and planning for our operational needs. Backlog is not a measure defined
in generally accepted accounting principles, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.

At June 30, 2008, our backlog was approximately $606,000,000 compared to approximately $480,000,000 at March 31, 2008. We estimate that approximately $301,000,000, or 49.7%, of the backlog at June 30,
2008 will be recognized during the twelve months subsequent to June 30, 2008.

The schedule below includes backlog under two categories:
(1) contracts for which work authorizations have been or are expected to be received on a time and material basis, fixed-price basis and not-to-exceed projects that are well defined and (2) contracts awarded to the company where some or
all of the work has not yet been authorized. As of June 30, 2008, approximately $497,000,000 or 82.0%, of our backlog was in category (1) and approximately $109,000,000 or 18.0%, of our backlog was in category (2). We do not track whether
the public sector contracts included in our backlog are fully funded, incrementally funded, or unfunded.

Included in category (2) of our backlog is
the maximum amount of all indefinite delivery/indefinite quantity (ID/IQ), or task order contracts, or a lesser amount if we do not reasonably expect task orders to be issued for the maximum amount of such contracts. Also included in
category (2) of our backlog is the amount of anticipated revenues in option years beyond the base term of our contracts if we reasonably expect our clients to exercise such option years Although backlog reflects business that we consider to be
firm, cancellations or scope adjustments may occur. Further, substantially all of our contracts with our clients may be terminated at will, in which case the client would only be obligated to us for services provided through the termination date.
The impact of terminations and modifications on our realization of revenues from our backlog has not been significant. Furthermore, reductions of our backlog as a result of contract terminations and modifications may be more than offset by additions
to the backlog.

We adjust backlog to reflect project cancellations, deferrals and revisions in scope and cost (both upward and downward) known at the
reporting date; however, future contract modifications or cancellations may increase or reduce backlog and future revenue.



|                         |   |               |         |  |                  |   |  |   |         |  |       |  
|------------------------ | - | ------------- | ------- |  | ---------------- | - |  | - | ------- |  | ----- | -
|In thousands             |   | Total Backlog |         |  | 12 Month Backlog |  
|                         | $ |               | %       |  |                  | $ |  | % |        
|As of June 30, 2008:     |   |               |         |  |                  |   |  |   |         |  |       |  
|                         |   |               |         | 
|Project Management       |   | $             | 527,000 |  | 87.0             | % |  | $ | 233,000 |  | 77.4  | %
|Construction Claims      |   |               | 79,000  |  | 13.0             |   |  |   | 68,000  |  | 22.6  |  
|                         |   |               |         |  |                  |   |  |   |         |  |       |  
|Total                    |   | $             | 606,000 |  | 100.0            | % |  | $ | 301,000 |  | 100.0 | %
|                         |   |               |         |  |                  |   |  |   |         |  |       |  
|                         |   |               |         | 
|As of March 31, 2008:    |   |               |         |  |                  |   |  |   |         |  |       |  
|Project Management       |   | $             | 428,000 |  | 89.2             | % |  | $ | 201,000 |  | 83.1  | %
|Construction Claims      |   |               | 52,000  |  | 10.8             |   |  |   | 41,000  |  | 16.9  |  
|                         |   |               |         |  |                  |   |  |   |         |  |       |  
|Total                    |   | $             | 480,000 |  | 100.0            | % |  | $ | 242,000 |  | 100.0 | %
|                         |   |               |         |  |                  |   |  |   |         |  |       |  
|                         |   |               |         | 
|As of December 31, 2007: |   |               |         |  |                  |   |  |   |         |  |       |  
|Project Management       |   | $             | 382,000 |  | 91.8             | % |  | $ | 172,000 |  | 87.8  | %
|Construction Claims      |   |               | 34,000  |  | 8.2              |   |  |   | 24,000  |  | 12.2  |  
|                         |   |               |         |  |                  |   |  |   |         |  |       |  
|Total                    |   | $             | 416,000 |  | 100.0            | % |  | $ | 196,000 |  | 100.0 | %
|                         |   |               |         |  |                  |   |  |   |         |  |       |  



40



---

##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Refer
to the Companys Annual Report on Form 10-K for the year ended December 30, 2007 for a complete discussion of the Companys market risk. There have been no material changes to the market risk information included in the Companys
Annual Report on Form 10-K for the year December 30, 2007.



|Item 4. | Controls and Procedures
|------- | -----------------------

An evaluation was performed under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period
covered by this quarterly report. Based on that evaluation, our management, including our chief executive officer and chief financial officer, concluded that, as of June 30, 2008, our disclosure controls and procedures were effective. During
the second quarter ended June 30, 2008, there were no changes in our internal control over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.



41



---

##### Table of Contents

Part II - Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

Litigation

On September 23, 1996, William Hughes General Contractors, Inc. (Hughes) filed a complaint in the Superior Court of New Jersey, Law Division, Gloucester
County, against the Monroe Township Board of Education, the Company and other parties, alleging breach of contract and other causes of action in connection with its performance of a construction project for Monroe Township, seeking in excess of
$3,500,000 in damages. Monroe Township, which had terminated Hughes from the construction project prior to the commencement of the litigation on the basis of Hughes performance, made a cross claim against the Company and other parties for
contribution and indemnification. Monroe Township is seeking approximately $89,000 in damages from the Company, in addition to an indemnification for Hughes claims. In relation to the Hughes claims, a claim was made against the Company by
Fidelity and Deposit Company of Maryland (F&D). F&D is claiming damages in the range of $425,000 to $470,000. The F&D claim is being defended by the New Jersey Professional Liability Insurance Guarantee Association
(NJPLIGA) and losses are covered up to $300,000. The Company believes that the claims of Hughes, Monroe Township and F&D are without merit and, based on the Companys current understanding and evaluation of the relevant facts
and circumstances, no accruals have been made for any of these claims because the Company considers the chance of loss to be remote.

On September 22,
1999, Wartsila NSD North America, Inc. filed a complaint against the Company in the United States District Court for the District of New Jersey. Wartsila alleged negligence, breach of contract and fraud against the Company in connection with
plaintiffs hiring of a former Company employee and sought damages in excess of $7,300,000. A jury verdict was rendered on March 6, 2006. The jury found that the Company was negligent and breached the contract with plaintiff but that the
Company did not commit fraud. The jury awarded damages of approximately $2,000,000 plus interest. The Company filed a Motion to Mold the Verdict and to Enter Judgment consistent with the parties contract which contains a limitation of
liability clause which limits the Companys liability, absent fraud, to direct damages. In connection with the Arpeggio and Hill merger, stockholders of the pre-merger Hill International, Inc. have escrowed a total of 1,450,000 shares of the
Companys stock to satisfy non-tax indemnification claims by the Company arising out of this and certain other matters (see below). Liability in this matter, if any, will ultimately be satisfied from such escrowed shares under the terms of an
escrow agreement. Following the satisfaction of its indemnification claims arising out of this matter, the Company intends to maintain any such shares as treasury stock. On June 28, 2006 the Court denied the Companys motion and the
Company subsequently filed a Notice of Appeal on July 26, 2006 with the Third Circuit Court of Appeals. Oral argument occurred on April 16, 2008. On June 20, 2008 the Third Circuit Court of Appeals vacated the damages award and
remanded the case for a retrial on damages only and further ordered that damages are limited to the amount Wartsila paid the Company for the services of the former Company employee.

On May 23, 2007, the Company filed a Demand for Arbitration with the American Arbitration Association alleging breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment and/or
fraudulent inducement against Bachmann Springs Holdings, LLC and Thomas Bachmann (hereinafter, collectively Bachmann). The Company was hired by Bachmann to provide professional support services and is demanding payment of invoices in the
amount of $634,904. On October 17, 2007, Bachmann filed a counterclaim with the American Arbitration Association alleging fraud and breach of contract and seeking damages in the amount of $8,600,000. The matter was settled on June 12, 2008
wherein Bachmann agreed to pay the Company $500,000 within 90 days.



42



---

##### Table of Contents

General Litigation

From time to time, the Company is a defendant or plaintiff in various legal actions which arise in the normal course of business. As such the Company is required to assess the likelihood of any adverse outcomes to these matters as well as
potential ranges of probable losses. A determination of the amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each matter. The provision may change
in the future due to new developments or changes in circumstances. Changes in the provision could increase or decrease the Companys earnings in the period the changes are made. In the opinion of management, after consultation with legal
counsel, the ultimate resolution of these matters will not have a material adverse effect on the Companys financial condition, results of operations or cash flows.



|Item 1A. | Risk Factors
|-------- | ------------

There has been no material changes pertaining to risk
factors discussed in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007.



|Item 2. | Unregistered Shares of Equity Securities and Use of Funds
|------- | ---------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

We held our
Annual Meeting of Stockholders on June 10, 2008. At the Annual Meeting, our stockholders voted on the following proposals identified in our Proxy Statement dated May 7, 2008:



|(1) | Vote for the Election of Directors:
|--- | -----------------------------------

The following directors were elected
to serve as members of our Board of Directors:



|                   |  |            |  |          
|------------------ |  | ---------- |  | ---------
|                   |  | For        |  | Withheld 
|David L. Richter   |  | 27,266,879 |  | 9,356,656
|Alan S. Fellheimer |  | 35,385,344 |  | 1,238,191



|(2) | Vote for an increase in the number of shares issuable under the Companys 2006 Employee Stock Option Plan:
|--- | ----------------------------------------------------------------------------------------------------------



|           |  |            |  |          
|---------- |  | ---------- |  | ---------
|For        |  | Against    |  | Abstained
|21,214,568 |  | 11,175,856 |  | 822,026  



43



---

##### Table of Contents

|(3) | Vote for the Companys 2007 Restricted Stock Grant Plan:
|--- | --------------------------------------------------------



|           |  |         |  |          
|---------- |  | ------- |  | ---------
|For        |  | Against |  | Abstained
|32,361,141 |  | 200,456 |  | 650,853  



|(4) | Vote for the Companys 2008 Employee Stock Purchase Plan:
|--- | ---------------------------------------------------------



|           |  |         |  |          
|---------- |  | ------- |  | ---------
|For        |  | Against |  | Abstained
|32,351,530 |  | 65,625  |  | 795,295  



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits
|------- | --------



|     |  |                                                                                                                                                                                                 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                
|     | 
|31.2 |  | Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                
|     | 
|32.1 |  | Certification of Irvin E. Richter, Chief Executive Officer of Hill International, Inc., pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|     | 
|32.2 |  | Certification of John Fanelli III, Chief Financial Officer of Hill International, Inc., pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.



44



---

##### Table of Contents

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                      |  |                          |  |                                                               
|--------------------- |  | ------------------------ |  | --------------------------------------------------------------
|                      |  | Hill International, Inc.
|Dated: August 7, 2008 |  |                          |  |                                                               
|                      |  | By:                      |  | /s/ Irvin E. Richter                                          
|                      |  |                          |  | Irvin E. Richter                                              
|                      |  |                          |  | Chairman and Chief Executive Officer (Duly Authorized
Officer)
|Dated: August 7, 2008 |  |                          |  |                                                               
|                      |  | By:                      |  | /s/ John Fanelli III                                          
|                      |  |                          |  | John Fanelli III                                              
|                      |  |                          |  | Senior Vice President and Chief Financial Officer             



45