##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, DC 20549
      Form 10-Q
  (Mark One)
  þ

Quarterly report pursuant to Section 13 or 15(d) of the
    Securities  Exchange Act of 1934For the quarterly period ended September 30, 2006oro

Transition Report Pursuant to Section 13 or 15(d) of the
    Securities  Exchange Act of 1934For the transition period
    from          to          .  Commission File Number:
    0-21213
  LCC International,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

54-1807038(State or Other Jurisdiction of
    Incorporation or Organization)

(I.R.S. Employer Identification
    Number)7925 Jones Branch Drive,
    McLean, VA

22102(Address of Principal Executive
    Offices)

(Zip Code)   Registrants telephone number, including area code:
    (703) 873-2000
  Not Applicable
      (Former name, former address and
    former fiscal year, if changed, since last report.)
  þ o
  Rule 12b-2 þ o
  Rule 12b-2 o þ
  APPLICABLE
    ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
    PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
  o o
  APPLICABLE
    ONLY TO CORPORATE ISSUERS:




---



##### 



LCC
    International, Inc. and Subsidiaries
    Quarterly Report on
    Form 10-Q
    For the quarter ended September 30, 2006
 INDEX
  PageNumberPART I:

FINANCIAL INFORMATIONITEM 1:

FINANCIAL STATEMENTS


3Consolidated statements of
    operations for the three months and nine months ended
    September 30, 2006 and 2005 (unaudited)


3Consolidated balance sheets as of
    September 30, 2006 (unaudited) and December 31, 2005


4Consolidated statements of cash
    flows for the nine months ended September 30, 2006 and 2005
    (unaudited)


5Notes to consolidated financial
    statements


6ITEM 2:

MANAGEMENTS DISCUSSION AND
    ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


19ITEM 3:

QUANTITATIVE AND QUALITATIVE
    DISCLOSURES ABOUT MARKET RISK


29ITEM 4:

CONTROLS AND PROCEDURES


30PART II:

OTHER INFORMATION


32ITEM 1:

LEGAL PROCEEDINGS


32ITEM 1A:

RISK FACTORS


32ITEM 2:

UNREGISTERED SALES OF EQUITY
    SECURITIES AND USE OF PROCEEDS


32ITEM 3:

DEFAULTS UPON SENIOR SECURITIES


32ITEM 4:

SUBMISSION OF MATTERS TO A VOTE OF
    SECURITY HOLDERS


32ITEM 5:

OTHER INFORMATION


32ITEM 6:

EXHIBITS


32  2




---



##### 



PART I:
    FINANCIAL INFORMATION Item 1:
    Financial Statements  LCC
    International, Inc. and SubsidiariesConsolidated Statements of Operations(In thousands, except per share data)
    (Unaudited)
  Three Months


Nine Months EndedEnded September 30,


September 30,2006


2005


2006


2005REVENUES

$
31,933


$
39,030


$
101,673


$
105,764COST OF REVENUES (exclusive of
    depreciation shown separately below)


22,671



30,385



74,796



82,833GROSS PROFIT


9,262



8,645



26,877



22,931OPERATING EXPENSE:Sales and marketing


1,635



1,930



5,325



6,143General and administrative


6,082



6,241



18,545



19,736Restructuring charge










108



682Depreciation and amortization


673



714



2,033



2,0918,390



8,885



26,011



28,652OPERATING INCOME (LOSS)


872



(240
)


866



(5,721
)OTHER INCOME (EXPENSE):Interest income


7



15



46



73Interest expense


(171
)


(33
)


(576
)


(158
)Other


934



(170
)


1,239



(648
)770



(188
)


709



(733
)INCOME (LOSS) FROM CONTINUING
    OPERATIONS BEFORE INCOME TAXES


1,642



(428
)


1,575



(6,454
)PROVISION FOR INCOME TAXES


1,511



1,049



3,379



2,726INCOME (LOSS) FROM CONTINUING
    OPERATIONS


131



(1,477
)


(1,804
)


(9,180
)DISCONTINUED OPERATIONS:Income (loss) from discontinued
    operations (net of applicable taxes of zero)


(1,638
)


2,703



(2,707
)


(1,456
)Gain (loss) on disposal of
    discontinued operations (net of applicable taxes of zero)










922



Adjustment to gain on disposal of
    discontinued operations (net of applicable taxes of zero)


(63
)






(63
)


INCOME (LOSS) FROM DISCONTINUED
    OPERATIONS


(1,701
)


2,703



(1,848
)


(1,456
)NET INCOME (LOSS)

$
(1,570
)

$
1,226


$
(3,652
)

$
(10,636
)NET INCOME (LOSS) PER SHARE:Continuing operationsBasic and diluted

$
0.01


$
(0.06
)

$
(0.07
)

$
(0.37
)Discontinued operationsBasic and diluted

$
(0.07
)

$
0.11


$
(0.08
)

$
(0.06
)Net Income (loss) per shareBasic and diluted

$
(0.06
)

$
0.05


$
(0.15
)

$
(0.43
)WEIGHTED AVERAGE SHARES USED
    IN CALCULATION OF NET INCOME (LOSS) PER SHARE:Basic


24,981



24,424



24,848



24,496Diluted


24,981



24,578



24,848



24,496    3




---



##### 



LCC
    International, Inc. and Subsidiaries
  Consolidated
    Balance Sheets
 (In
    thousands, except per share data)
  September 30,


December 31,2006


2005(Unaudited)ASSETS:Current assets:Cash and cash equivalents

$
6,231


$
14,196Restricted cash


870



1,141Receivables, net of allowances of
    $190 and $317, respectively:Trade accounts receivable


43,069



47,448Unbilled receivables


22,850



35,791Due from related parties and
    affiliates


5



15Due from disposal of business


9,214



Prepaid expenses and other current
    assets


3,379



1,998Prepaid tax receivable and prepaid
    taxes


214



1,195Assets held for sale


586



Total current assets


86,418



101,784Property and equipment, net


2,643



3,642Deferred income taxes, net


1,171



1,171Goodwill


11,924



11,014Other intangibles, net


118



312Other assets


943



1,030Total assets

$
103,217


$
118,953LIABILITIES AND
    SHAREHOLDERS EQUITY:Current liabilities:Line of credit

$
948


$
2,975Note payable


4,200



Accounts payable


17,905



27,876Accrued expenses


16,061



22,480Accrued employee compensation and
    benefits


4,301



5,390Deferred revenue


200



1,020Income taxes payable


3,564



2,891Accrued restructuring current


1,101



1,072Other current liabilities


328



310Liabilities held for sale


321



Total current liabilities


48,929



64,014Accrued restructuring non-current


83



492Other liabilities


655



696Total liabilities


49,667



65,202Shareholders equity:Preferred stock:10,000 shares authorized;
    0 shares issued and outstanding






Class A common stock,
    $0.01 par value:70,000 shares authorized;
    20,847 shares issued and 20,688 shares outstanding and
    20,485 shares issued and 20,326 shares outstanding at
    September 30, 2006 and December 31, 2005, respectively


208



205Class B common stock,
    $0.01 par value:20,000 shares authorized;
    4,426 shares and 4,428 shares issued and outstanding
    at September 30, 2006 and December 31, 2005,
    respectively


44



44Paid-in capital


110,795



108,902Accumulated deficit


(59,092
)


(55,440
)Subtotal


51,955



53,711Accumulated other comprehensive
    income  foreign currency translation adjustments


2,477



922Treasury stock, at cost
    (159 shares)


(882
)


(882
)Total shareholders equity


53,550



53,751Total liabilities and
    shareholders equity

$
103,217


$
118,953    4




---



##### 



LCC
    International, Inc. and Subsidiaries
  Consolidated
    Statements of Cash Flows
    (In thousands)
    (Unaudited)
  Nine Months EndedSeptember 30,2006


2005Cash flows from operating
    activities:Net Loss

$
(3,652
)

$
(10,636
)Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation and amortization


2,164



2,148Provision for (recovery of)
    doubtful accounts


(29
)


169Loss on equity method investment






308Non-cash compensation


1,303



195Restructuring charge


108



759Gain on disposal of Network
    Deployment business


(859
)


Changes in operating assets and
    liabilities:Trade, unbilled, and other
    receivables


10,784



(5,604
)Accounts payable and accrued
    expenses


(18,380
)


(3,671
)Other current assets and
    liabilities


(2,932
)


702Other non-current assets and
    liabilities


223



(319
)Net cash used in operating
    activities


(11,270
)


(15,949
)Cash flows from investing
    activities:Purchases of property and equipment


(974
)


(2,249
)Proceeds from disposals of
    property and equipment






61Proceeds from sale of Network
    Deployment business


985



Investments






(125
)Net cash provided (used) in
    investing activities


11



(2,313
)Cash flows from financing
    activities:Borrowings on line of credit


11,182



12,575Payments on line of credit


(13,230
)


(8,732
)Borrowings on note payable


4,200



Proceeds from issuance of common
    stock, net






87Proceeds from exercise of options


608



446(Increase) decrease in restricted
    cash


220



(113
)Net cash provided by financing
    activities


2,980



4,263Effect of exchange rate changes on
    cash and equivalents


314



(517
)Net decrease in cash and cash
    equivalents


(7,965
)


(14,516
)Cash and cash equivalents at
    beginning of period


14,196



21,930Cash and cash equivalents at end
    of period

$
6,231


$
7,414Supplemental disclosures of cash
    flow information:Cash paid during the period for:Income taxes

$
2,382


$
1,361Interest


515



137    5




---



##### 



LCC
    International, Inc. and Subsidiaries
 Notes to
    Consolidated Financial Statements

(Unaudited) (1)
    Description
    of Operations    end-to-end
  (2)
    Basis of
    Presentation    other-than-temporary.
  Form 10-K
  Accounting for Uncertainty in Income
    Taxes Accounting for Income
    Taxes.
  Fair Value Measurements
 6




---



##### 



(3)
    Sale of
    U.S. Network Deployment Business               7




---



##### 



Three Months EndedSeptember 30, 2005(in thousands)Revenues

$
9,549Gross margin

$
2,896Pretax operating income (loss)

$
2,627     Nine Months EndedSeptember 30, 2006


September 30, 2005(in thousands)Revenues

$
12,761


$
29,429Gross margin (loss)

$
(1,055
)

$
(528
)Pretax operating loss

$
(1,756
)

$
(1,287
)     As ofSeptember 30, 2006Billed and unbilled accounts
    receivable

$
939Accounts payable

$
948Accrued expenses

$
1,364   (4) Share-Based
    Compensation
     8




---



##### 



Service
    Based Awards
    WeightedAverageNumber of


ExerciseShares


PriceBalance at December 31, 2005


2,966Exercised


(154
)Cancelled


(387
)Balance at March 31, 2006


2,425Granted


60Exercised


(75
)Cancelled


(265
)Balance at June 30, 2006


2,145


$
5.43Exercised


(37
)

$
2.33Cancelled


(345
)

$
6.18Balance at September 30, 2006


1,763


$
5.35        9




---



##### 



WeightedWeighted


AverageAverage


RemainingNumber of


Exercise


Contractual


AggregateShares


Price


Term (Years)


Intrinsic ValueOutstanding


1,763


$
5.35



5.72


$
697Exercisable


1,480


$
5.44



5.27


$
670   Three Months


Three Months


Nine Months


Nine MonthsEnded


Ended


Ended


EndedSeptember 30,


September 30,


September 30,


September 30,2006


2005


2006


2005Total intrinsic value of options
    exercised

$
40


$
42


$
220


$
326Total fair value of shares vested
    during the period

$
5


$
44


$
778


$
1,733     Three Months

Nine Months

Nine MonthsEnded

Ended

EndedSeptember 30,

September 30,

September 30,2005

2006

2005Expected dividend yield

0%

0%

0%Risk-free interest rate

4.30%

5.65%

4.25% to 4.50%Expected life

3 - 7 years

3 - 7 years

3 - 7 yearsVolatility

60%

75%

45% to 60%     Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2005


2005Loss from continuing operations as
    reported

$
(1,477
)

$
(9,180
)Deduct total stock-based employee
    compensation expense determined under fair value based method


(286
)


(1,053
)Pro forma net loss from continuing
    operations

$
(1,763
)

$
(10,233
)Income (loss) from discontinued
    operations as reported

$
2,703


$
(1,456
)Deduct total stock-based employee
    compensation expense determined under fair value based method


(9
)


(29
)Pro forma net income (loss) from
    discontinued operations

$
2,694


$
(1,485
)Net income (loss) as reported

$
1,226


$
(10,636
)Deduct total stock-based employee
    compensation expense determined under fair value based method


(295
)


(1,082
)Pro forma net income (loss)

$
931


$
(11,718
) 10




---



##### 



Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2005


2005Net income (loss) per share as
    reported:Continuing: basic and diluted

$
(0.06
)

$
(0.37
)Discontinued: basic and diluted

$
0.11


$
(0.06
)Net loss per share: basic and
    diluted

$
0.05


$
(0.43
)Pro forma:Continuing: basic and diluted

$
(0.07
)

$
(0.42
)Discontinued: basic and diluted

$
0.11


$
(0.06
)Pro forma net loss per share:
    basic and diluted

$
0.04


$
(0.48
)     Market
    Based Awards
    WeightedAverageNumber of


ExerciseShares


PriceBalance at December 31, 2005


1,000Granted


400Balance at March 31, 2006


1,400Granted


575Balance at June and
    September 30, 2006


1,975


$
6.54          11




---



##### 



Restricted
    Stock Awards
      WeightedAverage GrantDate FairShares


ValueNon vested at December 31,
    2005


1,068


$
3.03Granted


45



3.17Forfeited


(78
)


3.54Non vested at March 31, 2006


1,035



3.00Granted


995



3.76Vested


(145
)


3.62Forfeited


(15
)


3.62Non vested at June 30, 2006


1,870



3.35Vested


(2
)


2.30Forfeited


(270
)


3.70Non vested at September 30,
    2006


1,598


$
3.30     (5)
    Other
    Comprehensive Income (Loss)    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Net income (loss)

$
(1,570
)

$
1,226


$
(3,652
)

$
(10,636
)Other comprehensive income (loss),
    before tax


275



(239
)


1,555



(2,285
)Income tax provision related to
    items of comprehensive income (loss)














Other comprehensive income (loss),
    net of tax


275



(239
)


1,555



(2,285
)Comprehensive income (loss)

$
(1,295
)

$
987


$
(2,097
)

$
(12,921
)  12




---



##### 



(6) Related
    Party Transactions
  ten-to-one
        (7)
    Restructuring
    Charge    Form 10-K
   13




---



##### 



Severance


Facilities


Total(In thousands)Restructuring payable as of
    December 31, 2005

$
22


$
1,542


$
1,564Restructuring charge






108



108Charges against the provision:Payments for excess office space,
    net of sublease income






(307
)


(307
)Severance and associated costs paid


(20
)






(20
)Other






11



11Restructuring payable as of
    June 30, 2006

$
2


$
1,354


$
1,356Charges against the provision:Payments for excess office space,
    net of sublease income






(180
)


(180
)Other






8



8Restructuring payable as of
    September 30, 2006

$
2


$
1,182


$
1,184     September 30,


December 31,2006


2005Accrued restructuring current

$
1,101


$
1,072Accrued restructuring non-current


83



492Accrued restructuring total

$
1,184


$
1,564   (8) Line
    of Credit
         14




---



##### 



(9) Sale
    of Brazilian Subsidiary
                Three Months EndedSeptember 30,


September 30,2006


2005(In thousands)Revenue

$
502


$
938Gross margin (loss)

$
(375
)

$
179Pretax operating income (loss)

$
(671
)

$
76   15




---



##### 



Nine Months EndedSeptember 30,


September 30,2006


2005(In thousands)Revenue

$
1,659


$
2,428Gross margin (loss)

$
(288
)

$
528Pretax operating loss

$
(951
)

$
(169
)     As ofSeptember 30,2006Cash and cash equivalents

$
111Trade and other receivables


435Other current assets


40Assets held for sale

$
586Accounts payable


50Accrued employee compensation and
    benefits


159Other accrued expenses


112Liabilities held for sale

$
321   (10) Segment
    Reporting
  Disclosures about Segments of an
    Enterprise and Related Information
        OperatingAmericas


EMEA


Segment Total2006


2005


2006


2005


2006


2005Three Months Ended
    September 30,Revenues:From external customers

$
7,117


$
9,180


$
24,816


$
29,761


$
31,933


$
38,941Inter-segment revenues






















Total revenues

$
7,117


$
9,180


$
24,816


$
29,761


$
31,933


$
38,941Income (loss) before taxes


(172
)


(659
)


4,622



2,714



4,450



2,055Total assets


19,427



33,724



78,615



63,983



98,042



97,707  16




---



##### 



OperatingAmericas


EMEA


Segment Total2006


2005


2006


2005


2006


2005Nine Months Ended
    September 30,Revenues:From external customers

$
24,524


$
27,317


$
77,149


$
77,123


$
101,673


$
104,440Inter-segment revenues






















Total revenues

$
24,524


$
27,317


$
77,149


$
77,123


$
101,673


$
104,440Income (loss) before taxes


117



(3,540
)


9,878



4,904



9,995



1,364     Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Revenues:Revenues for reportable segments

$
31,933


$
38,941


$
101,673


$
104,440Revenues for non-reportable
    segments






89







1,324Total consolidated revenues

$
31,933


$
39,030


$
101,673


$
105,764Income (loss) before taxes:For reportable segments

$
4,450


$
2,055


$
9,995


$
1,364For non-reportable segments,
    including Corporate expenses


(2,808
)


(2,483
)


(8,420
)


(7,818
)Total income (loss) before taxes

$
1,642


$
(428
)

$
1,575


$
(6,454
)Assets:Assets for reportable segments









$
98,042


$
97,707Assets not attributable to
    reportable segments:Cash and cash equivalents










2,366



5,700Restricted cash










37



37Receivables










288



617Deferred and prepaid taxes










1,385



1,831Property and equipment










620



528Investments














623Prepaid and other










479



2885,175



9,624Total consolidated assets









$
103,217


$
107,331   (11) Receivables
    (12) Reclassifications
   17




---



##### 



(13) Income
    Tax Expense
    (14) Subsequent
    Events
  Due From
    Disposal of Business
    Sale of
    Brazilian Subsidiary
   18




---



##### 



Item 2:
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations  Form 10-Q
  Form 10-K
  Overview
  end-to-end end-to-end
    Americas:
    
    Until June 30, 2006, the Americas region provided the full
    range of service offerings to wireless operators and equipment
    vendors through a network of project offices in North America
    and South America. As of June 30, 2006 we no longer provide
    network deployment services in the U.S. As of
    September 30, 2006 we have reported the operations of our
    Brazil subsidiary in discontinued operations, reflecting our
    decision to sell that business. For the nine months ended
    September 30, 2006, Americas generated 24.1% of our total
    revenue. See also Sale of U.S. Network Deployment Business
    and Sale of Brazilian Subsidiary in Notes 3 and 9,
    respectively, to the Consolidated Financial Statements.EMEA:
    
    Based in London, the Europe, Middle East and Africa region is
    responsible for operations in the U.K., Italy, Netherlands,
    Algeria, Germany, Spain, Greece, Pakistan, Saudi Arabia and the
    Middle East. EMEA provides the full range of service offerings
    throughout its region and has recently established a marketing
    office in Dubai. For the nine months ended September 30,
    2006, EMEA generated 75.9% of our total revenue.Nonreportable segments:
    
    In 2005 this was primarily comprised of our operations in Asia
    which we ceased in 2005. 19




---



##### 



percentage-of-completion
            Trends
    That Have Affected or May Affect Results of Operations and
    Financial Condition
    
    project related revenues derived from a limited set of customers
    in each market where we do business;
    the acceleration or the delay associated with the introduction
    of new technologies and services by our customers;
    the management and the services composition of our fixed price
    contracts;
    the impact of the percentage of subcontracted work (versus self
    performed work) on our large programs and the associated margin
    degradation; and
    increases or decreases of spending by wireless service providers
    in the areas of network design, deployment and optimization.   20




---



##### 



Results
    of Continuing Operations
    Revenues,
    Cost of Revenues and Gross Margins
  Three Months Ended September 30,


Nine Months Ended September 30,2006


2005


2006


2005(in thousands)


(% of revenue)


(in thousands)


(% of revenue)


(in thousands)


(% of revenue)


(in thousands)


(% of revenue)Revenues:Americas

$
7,117






$
9,180






$
24,524






$
27,317EMEA


24,816







29,761







77,149







77,123Non-reportable segments










89















1,324$
31,933






$
39,030






$
101,673






$
105,764Cost of revenues:Americas

$
5,653



79.4
%

$
7,912



86.2
%

$
19,338



78.9
%

$
23,895



87.5
%EMEA


17,104



68.9



22,548



75.8



55,544



72.0



58,207



75.5Non-reportable segments


(86
)


0.0



(75
)


(84.3
)


(86
)


0.0



731



55.2$
22,671



71.0
%

$
30,385



77.9
%

$
74,796



73.6
%

$
82,833



78.3
%Gross margins:Americas

$
1,464



20.6
%

$
1,268



13.8
%

$
5,186



21.1
%

$
3,422



12.5
%EMEA


7,712



31.1



7,213



24.2



21,605



28.0



18,916



24.5Non-reportable segments


86



0.0



164



184.3



86



0.0



593



44.8$
9,262



29.0
%

$
8,645



22.1
%

$
26,877



26.4
%

$
22,931



21.7
%  21




---



##### 



Americas
      EMEA
      Non-reportable
    segments
   22




---



##### 



Operating
    Expense
  Three Months Ended


Nine-Months EndedSeptember 30,


September 30,2006


2005


2006


2005(in thousands)


(in thousands)Sales and marketingAmericas

$
553


$
471


$
1,752


$
1,652EMEA


702



1,371



3,120



4,164Nonreportable segments


380



88



453



3271,635



1,930



5,325



6,143General and administrativeAmericas


940



1,318



2,879



4,404EMEA


2,593



2,663



7,764



8,297Nonreportable segments


2,549



2,260



7,902



7,0356,082



6,241



18,545



19,736Restructuring chargeAmericas














564EMEA










31



Nonreportable segments










77



118







108



682Depreciation and amortizationAmericas


143



138



439



341EMEA


441



503



1,353



1,495Nonreportable segments


89



73



241



255673



714



2,033



2,091TotalAmericas


1,636



1,927



5,070



6,961EMEA


3,736



4,537



12,268



13,956Nonreportable segments


3,018



2,421



8,673



7,735$
8,390


$
8,885


$
26,011


$
28,652        23




---



##### 



Other
    Income and Expense
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(in thousands)


(in thousands)Interest income:Americas

$



$



$
1


$
EMEA


5



3



30



14Nonreportable segments


2



12



15



597



15



46



73Interest expense:Americas














1EMEA


(26
)


89



(26
)


(16
)Nonreportable segments


(145
)


(122
)


(550
)


(141
)(171
)


(33
)


(576
)


(158
)Other:Americas














EMEA


667



(54
)


537



(54
)Nonreportable segments


267



(116
)


702



(594
)934



(170
)


1,239



(648
)Total other income (expense):Americas










1



(1
)EMEA


646



38



541



(56
)Nonreportable segments


124



(226
)


167



(676
)$
770


$
(188
)

$
709


$
(733
)        24




---



##### 



Income
    (Loss) Before Taxes
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(in thousands)


(in thousands)Segment Income (Loss) Before TaxesAmericas

$
(172
)

$
(659
)

$
117


$
(3,540
)EMEA


4,622



2,714



9,878



4,904Nonreportable segments


(2,808
)


(2,483
)


(8,420
)


(7,818
)$
1,642


$
(428
)

$
1,575


$
(6,454
)   Tax
    Expense
    Net
    Loss
      Liquidity
    and Capital Resources
    Sources
    and Uses of Cash
  Nine Months EndedSeptember 30, 2006


September 30, 2005(in thousands)Net cash used in operating
    activities

$
(11,270
)

$
(15,949
)Net cash provided (used) in
    investing activities


11



(2,313
)Net cash provided by financing
    activities


2,980



4,263Effect of exchange rates on cash
    and cash equivalents


314



(517
)Net decrease in cash and cash
    equivalents

$
(7,965
)

$
(14,516
)  25




---



##### 



Cash
    Requirements
  September 30, 2006


December 31, 2005(in thousands)Cash and cash equivalents

$
6,231


$
14,196Restricted cash


870



1,141Total cash and short-term
    investments

$
7,101


$
15,337Line of credit and note payable

$
5,148


$
2,975Working capital

$
37,489


$
37,770    26




---



##### 



27




---



##### 



Critical
    Accounting Policies
    
    revenue recognition;
    allowance for doubtful accounts;
    accounting for income taxes;
    restructuring charge; and
    share-based compensation  Revenue
    recognition
  percentage-of-completion percentage-of-completion
  Allowance
    for doubtful accounts
   28




---



##### 



Accounting
    for income taxes
      Restructuring
    charge
    Share-based
    compensation
      Related
    party transactions
   Item 3:
    Quantitative and Qualitative Disclosures about Market
    Risk   29




---



##### 



non-U.S. subsidiaries
      Item 4.
    Controls
    and Procedures  (a)
    Disclosure Controls and Procedures    Form 10-K. Form 10-K
   30




---



##### 



(b)
    Changes in Control Over Financial Reporting  Rules 13a-15(f) 15d-15(f).
  
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of the company;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use, or disposition of
    the companys assets that could have a material effect on
    the financial statements.    Form 10-K, percentage-of-completion
  
    Each project manager must complete and sign a checklist and
    questionnaire monthly on which the project manager attests that
    he or she has reviewed the calculation and concurs with it.
    The VP Finance for the Americas or designated representative and
    the project managers must review the calculation with the chief
    financial officer.
    It is a requirement any person serving as VP Finance or
    designated representative must have a strong accounting
    background.   31




---



##### 



PART II:
    OTHER INFORMATION Item 1:
    Legal Proceedings     Item 1A:
    Risk Factors  Form 10-K
 Item 2:
    Unregistered Sales of Equity Securities and Use of
    Proceeds   Item 3:
    Defaults Upon Senior Securities   Item 4:
    Submission of Matters to a Vote of Security Holders   Item 5:
    Other Information   Item 6:
    Exhibits  (a)
    Exhibits  11




Calculation of Net Loss Per Share31
.1



Certification of Chief Executive
    Officer pursuant to Exchange Act
    Rules 13a-14(a)/15d-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 200231
.2



Certification of Chief Financial
    Officer pursuant to Exchange Act
    Rules 13a-14(a)/15d-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 200232
.1



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



Certification of Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  32




---



##### 



Signature
    Louis
    Salamone Jr.
   
   33