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 1934
 For the quarterly period ended June 30, 2008
 or
 o
    
    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: 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)7900 Westpark Drive, McLean, VA
    
    22102(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (703) 873-2000
 o þ
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2008
INDEX
 PageNumberPART I:
    
    FINANCIAL INFORMATION
    
    
    3ITEM 1:
    
    FINANCIAL STATEMENTS
    
    
    3Condensed consolidated statements
of operations for the three and six months ended June 30, 2008 and 2007 (unaudited)
    
    
    3Condensed consolidated balance
sheets as of June 30, 2008 (unaudited) and December 31, 2007
    
    
    4Condensed consolidated statements
of cash flows for the six months ended June 30, 2008 and 2007 (unaudited)
    
    
    5Notes to condensed consolidated financial statements (unaudited)
    
    
    6ITEM 2:
    
    MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    25ITEM 3:
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    38ITEM 4:
    
    CONTROLS AND PROCEDURES
    
    
    39PART II:
    
    OTHER INFORMATION
    
    
    41ITEM 1:
    
    Legal Proceedings
    
    
    41ITEM 1A:
    
    Risk Factors
    
    
    41ITEM 2:
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41ITEM 3:
    
    Defaults upon Senior Securities
    
    
    41ITEM 4:
    
    Submission of Matters to a Vote of Security Holders
    
    
    41ITEM 5:
    
    Other Information
    
    
    41ITEM 6:
    
    Exhibits
    
    
    42
 2




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##### 



PART I: FINANCIAL INFORMATION
 Item 1: Financial Statements
 LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    

June
30,2008
    
    
    2007
    
    
    2008
    
    
    2007REVENUES
    
    $
    37,238
    
    
    $
    30,176
    
    
    $
    79,602
    
    
    $
    55,257COST OF REVENUES (exclusive of depreciation shown separately below)
    
    
    30,386
    
    
    
    24,891
    
    
    
    62,866
    
    
    
    46,284GROSS PROFIT
    
    
    6,852
    
    
    
    5,285
    
    
    
    16,736
    
    
    
    8,973OPERATING EXPENSE:Sales and marketing
    
    
    4,112
    
    
    
    3,678
    
    
    
    8,031
    
    
    
    6,616General and administrative
    
    
    8,324
    
    
    
    6,222
    
    
    
    15,929
    
    
    
    12,833Bad debt expense
    
    
    1,883
    
    
    
    183
    
    
    
    1,754
    
    
    
    183Restructuring charge
    
    
    3,736
    
    
    
    1,063
    
    
    
    4,162
    
    
    
    1,063Impairment charge
    
    
    31,705
    
    
    
    
    
    
    
    31,705
    
    
    
    Depreciation and amortization
    
    
    1,332
    
    
    
    871
    
    
    
    2,574
    
    
    
    1,49451,092
    
    
    
    12,017
    
    
    
    64,155
    
    
    
    22,189OPERATING LOSS
    
    
    (44,240
    )
    
    
    (6,732
    )
    
    
    (47,419
    )
    
    
    (13,216
    )OTHER INCOME (EXPENSE):Interest income
    
    
    4
    
    
    
    17
    
    
    
    8
    
    
    
    78Interest expense
    
    
    (1,447
    )
    
    
    (545
    )
    
    
    (2,905
    )
    
    
    (994
    )Other
    
    
    (7
    )
    
    
    117
    
    
    
    (1,424
    )
    
    
    (148
    )(1,450
    )
    
    
    (411
    )
    
    
    (4,321
    )
    
    
    (1,064
    )LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (45,690
    )
    
    
    (7,143
    )
    
    
    (51,740
    )
    
    
    (14,280
    )PROVISION FOR INCOME TAXES
    
    
    (1,817
    )
    
    
    341
    
    
    
    (1,678
    )
    
    
    988LOSS FROM CONTINUING OPERATIONS
    
    
    (43,873
    )
    
    
    (7,484
    )
    
    
    (50,062
    )
    
    
    (15,268
    )DISCONTINUED OPERATIONS:Gain from discontinued operations (net of applicable taxes of zero)
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    76Loss on disposal of discontinued operations (net of applicable taxes
of zero)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,550
    )GAIN (LOSS) FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    (1,474
    )NET LOSS
    
    $
    (43,873
    )
    
    $
    (7,456
    )
    
    $
    (50,062
    )
    
    $
    (16,742
    )NET LOSS PER SHARE:Continuing operationsBasic and diluted
    
    $
    (1.62
    )
    
    $
    (0.25
    )
    
    $
    (1.86
    )
    
    $
    (0.54
    )Discontinued operationsBasic and diluted
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.06
    )Net loss per shareBasic and diluted
    
    $
    (1.62
    )
    
    $
    (0.25
    )
    
    $
    (1.86
    )
    
    $
    (0.60
    )WEIGHTED AVERAGE SHARES USED IN CALCULATION OF NET LOSS PER SHARE:Basic and diluted
    
    
    27,150
    
    
    
    30,110
    
    
    
    26,882
    
    
    
    27,906
  3




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##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    11,055
    
    
    $
    9,582Restricted cash
    
    
    350
    
    
    
    220Trade receivables, net of allowance for doubtful accounts of $2,657 and $279 at
June 30, 2008 and December 31, 2007, respectively
    
    
    31,174
    
    
    
    43,999Unbilled receivables
    
    
    20,859
    
    
    
    21,983Due from related parties and affiliates
    
    
    7
    
    
    
    7Due from disposal of business
    
    
    
    
    
    
    1,800Employee advances
    
    
    202
    
    
    
    26Prepaid expenses and other current assets
    
    
    5,581
    
    
    
    4,162Prepaid tax receivable and prepaid taxes
    
    
    300
    
    
    
    69Total current assets
    
    
    69,528
    
    
    
    81,848Property and equipment, net
    
    
    4,767
    
    
    
    6,087Deferred income taxes, net
    
    
    5,607
    
    
    
    1,952Goodwill
    
    
    12,733
    
    
    
    44,080Other intangibles, net
    
    
    15,247
    
    
    
    15,875Other assets
    
    
    1,456
    
    
    
    1,608Total assets
    
    $
    109,338
    
    
    $
    151,450LIABILITIES AND SHAREHOLDERS EQUITY:Current liabilities:Lines of credit
    
    $
    28,395
    
    
    $
    2,637Note payable
    
    
    2,300
    
    
    
    5,788Accounts payable
    
    
    18,590
    
    
    
    14,341Accrued expenses
    
    
    13,375
    
    
    
    19,780Accrued employee compensation and benefits
    
    
    9,256
    
    
    
    7,377Deferred revenue
    
    
    740
    
    
    
    1,767Income taxes payable
    
    
    3,221
    
    
    
    1,921Accrued restructuring current
    
    
    2,019
    
    
    
    261Other current liabilities
    
    
    7,243
    
    
    
    6,088Total current liabilities
    
    
    85,139
    
    
    
    59,960Lines of credit
    
    
    79
    
    
    
    22,025Note payable
    
    
    23,965
    
    
    
    23,965Accrued restructuring noncurrent
    
    
    1,805
    
    
    
    78Other liabilities
    
    
    903
    
    
    
    735Total liabilities
    
    
    111,891
    
    
    
    106,763Commitments and contingenciesShareholders equity:Preferred stock; $.01 par value:10,000 shares authorized; 5,738 convertible shares issued and outstanding
    
    
    57
    
    
    
    57Class A common stock; $.01 par value:70,000 shares authorized; 26,754 shares issued and 26,595 shares
outstanding and 26,234 shares issued and 26,074 shares outstanding
at June 30, 2008 and December 31, 2007, respectively
    
    
    266
    
    
    
    262Class B common stock; $.01 par value:20,000 shares authorized; 0 shares issued and outstanding
    
    
    
    
    
    
    Paid-in capital
    
    
    133,569
    
    
    
    133,089Accumulated deficit
    
    
    (146,314
    )
    
    
    (96,252
    )Subtotal
    
    
    (12,422
    )
    
    
    37,156Accumulated other comprehensive income  foreign currency translation adjustments
    
    
    10,751
    
    
    
    8,413Treasury stock (159 shares)
    
    
    (882
    )
    
    
    (882
    )Total shareholders equity
    
    
    (2,553
    )
    
    
    44,687Total liabilities and shareholders equity
    
    $
    109,338
    
    
    $
    151,450
  4




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##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months EndedJune 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (50,062
    )
    
    $
    (16,742
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    2,486
    
    
    
    1,509Provision (recovery) for doubtful accounts
    
    
    2,265
    
    
    
    (7
    )Non-cash share-based compensation
    
    
    602
    
    
    
    1,093Restructuring charge
    
    
    3,448
    
    
    
    931Increase in restricted cash
    
    
    (121
    )
    
    
    Loss (gain) on disposal of Network Deployment business
    
    
    
    
    
    
    1,550Impairment charge
    
    
    31,820
    
    
    
    Loss on disposal of fixed assets
    
    
    185
    
    
    
    7Changes in operating assets and liabilities:Trade and unbilled receivables
    
    
    13,315
    
    
    
    5,766Accounts payable and accrued expenses
    
    
    (1,293
    )
    
    
    (11,310
    )Other current assets and liabilities
    
    
    1,236
    
    
    
    7,978Other non current assets and liabilities
    
    
    (1,298
    )
    
    
    (4,646
    )Net cash provided by (used in) operating activities
    
    
    2,583
    
    
    
    (13,871
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,329
    )
    
    
    (2,347
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (24,006
    )Net cash used in investing activities
    
    
    (1,329
    )
    
    
    (26,353
    )Cash flows from financing activities:Repurchase of common stock  restricted stock plan
    
    
    (117
    )
    
    
    Proceeds from issuance of common stock, net
    
    
    
    
    
    
    15,837Proceeds from exercise of options
    
    
    
    
    
    
    159Proceeds from line of credit and notes payable
    
    
    4,568
    
    
    
    31,172Payments on lines of credit and notes payable
    
    
    (4,349
    )
    
    
    (8,786
    )Proceeds from note payable
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    102
    
    
    
    38,382Effect of exchange rate changes on cash and equivalents
    
    
    117
    
    
    
    124Net increase (decrease) in cash and cash equivalents
    
    
    1,473
    
    
    
    (1,718
    )Cash and cash equivalents at beginning of period
    
    
    9,582
    
    
    
    6,445Cash and cash equivalents at end of period
    
    $
    11,055
    
    
    $
    4,727Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    864
    
    
    $
    897Income taxes
    
    $
    994
    
    
    $
    1,207Supplemental disclosures of non cash investing and financing activities:Reduction in due from disposal of business and related note payable
    
    
    
    
    
    $
    3,188Note payable issued in connection with business acquisition
    
    
    
    
    
    $
    21,584
  5




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##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE 1. DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION
        6




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##### 



NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Significant accounting policies are as follows:
 Cash Equivalents and Restricted Cash.
 Concentration of Credit Risk
 June 30,
    
    December 31,2008
    
    2007(in thousands)Europe
    
    $
    16,840
    
    
    $
    14,934Middle East/Africa
    
    $
    8,742
    
    
    $
    16,085Asia-Pacific
    
    $
    110
    
    
    $
    110
   Fair Value of Financial Instruments
 Inventory
 7




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##### 



Property and Equipment
  Computer equipment
    
    3 yearsSoftware
    
    3 yearsFurniture and office equipment
    
    3 to 7 yearsLeasehold improvements
    
    Shorter of the term of the lease or estimated useful lifeVehicles
    
    5 years
 Impairment of Long-Lived Assets Accounting for Impairment or Disposal of
Long-Lived Assets,
 Business Combinations.
  Goodwill and Other Intangible Assets Goodwill and
Other Intangible Assets
 Allowance for Doubtful Accounts .
 Revenue Recognition
 8




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##### 



Income Taxes Accounting for
Income Taxes.
   Accounting for Uncertainty in Income Taxes An Interpretation of FASB Statement
No. 109" Income Taxes-Adoption of FIN 48.
 Foreign Currency Translation
 Foreign Currency Translation
  9




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##### 



Share -Based Compensation Share-Based Payment
 Other Comprehensive Income (Loss)
 Earnings (Loss) Per Common Share .
 Factoring of Accounts Receivable. Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, Accounting for Servicing of Financial Assets  An Amendment of FASB
Statement No. 140 (SFAS No. 140). Borrowings
 NOTE 3. NEW ACCOUNTING STANDARDS
 Fair Value Measurements, Accounting for Leases
 10




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##### 



The Fair Value Option for Financial Assets and
Financial Liabilities,
 Business Combinations Non-controlling Interests in Consolidated Financial Statements Consolidated Financial Statements
 Determination of the Useful Life of
Intangible Assets Business Combinations
 Accounting for Transfers of Financial
Assets and Repurchase Financing Transactions
 Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants
 Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities, Earnings per Share.
  NOTE 4. BUSINESS COMBINATIONS
 WFI EMEA
 11




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##### 



Borrowings
    WFI U.S.
 Borrowings. Borrowings.
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2007Revenue
    
    $
    37,263
    
    
    $
    75,273Operating loss
    
    $
    (7,510
    )
    
    $
    (13,995
    )Net loss
    
    $
    (9,057
    )
    
    $
    (19,190
    )Loss per share (basic and diluted)
    
    $
    (0.30
    )
    
    $
    (0.69
    )
 12




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##### 



NOTE 5. DISCONTINUED OPERATIONS
    Sale of U.S. Network Deployment Business
   Borrowings
  13




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##### 



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007(in thousands)Revenue
    
    
    
    
    
    $
    30
    
    
    
    
    
    
    $
    91Gross margin
    
    
    
    
    
    $
    30
    
    
    
    
    
    
    $
    91Income from discontinued operations (net
of applicable taxes of zero)
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    77Loss on disposal of discontinued
operations (net of applicable taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,550
    )Total income (loss) from discontinued operations
    
    
    
    
    
    $
    28
    
    
    
    
    
    
    $
    (1,473
    )
  NOTE 6. ACCOUNTS RECEIVABLE
    NOTE 7. PROPERTY AND EQUIPMENT
  June 30,
    
    
    December 31,2008
    
    
    2007(in thousands)Computer equipment
    
    $
    3,523
    
    
    $
    4,847Software
    
    
    9,309
    
    
    
    9,448Furniture and office equipment
    
    
    14,421
    
    
    
    16,238Leasehold improvements
    
    
    1,962
    
    
    
    1,860Vehicles
    
    
    133
    
    
    
    214Property and equipment
    
    
    29,348
    
    
    
    32,607Less accumulated depreciation and amortization
    
    
    (24,581
    )
    
    
    (26,520
    )Property and equipment, net
    
    $
    4,767
    
    
    $
    6,087
  14




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##### 



NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  June 30,
    
    
    December 31,2008
    
    
    2007(in thousands)Goodwill
    
    $
    12,733
    
    
    $
    44,080Other intangible assets:Customer relationships
    
    $
    17,546
    
    
    $
    17,531Trade names
    
    
    247
    
    
    
    230Patents
    
    
    48
    
    
    
    43Other
    
    
    265
    
    
    
    265Other Intangibles
    
    
    18,106
    
    
    
    18,069Less: Accumulated amortization
    
    
    (2,859
    )
    
    
    (2,194
    )Other intangibles, Net
    
    $
    15,247
    
    
    $
    15,875
 Business Combinations
    NOTE 9. BORROWINGS
 Discontinued Operations
   15




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##### 



Business Combinations
   16




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##### 



17




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##### 



2008
    
    $
    6,0702009
    
    
    24,7042010
    
    
    23,9652011
    
    
    2012
    
    
    $
    54,739
 NOTE 10. RESTRUCTURING CHARGE
      18




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##### 



Facilities andOther Non-HeadcountSeverance
    
    
    Related Items
    
    
    Total(in thousands)Accrued restructuring as of
January 1, 2007
    
    $
    3
    
    
    $
    1,033
    
    
    $
    1,036Restructuring charge
    
    
    991
    
    
    
    609
    
    
    
    1,600Reversal of excess severance
    
    
    
    
    
    
    (493
    )
    
    
    (493
    )Restructuring charge on
acquisition
    
    
    545
    
    
    
    
    
    
    
    545Charges against the provision:Payments for excess office
space, net of sublease
income
    
    
    
    
    
    
    (824
    )
    
    
    (824
    )Payments for severance
    
    
    (1,548
    )
    
    
    
    
    
    
    (1,548
    )Other
    
    
    12
    
    
    
    11
    
    
    
    23Accrued restructuring
as of December 31, 2007
    
    
    3
    
    
    
    336
    
    
    
    339Restructuring charge
    
    
    2,274
    
    
    
    1,888
    
    
    
    4,162Charges against the
restructuring liability:Payments for excess office
space, net of sublease
income
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Payments for severance
    
    
    (656
    )
    
    
    
    
    
    
    (656
    )Accrued restructuring
as of June 30, 2008
    
    $
    1,621
    
    
    $
    2,203
    
    
    $
    3,824
  June 30,
    
    
    December 31,2008
    
    
    2007(in thousands)Accrued restructuring current
    
    $
    2,019
    
    
    $
    261Accrued restructuring non-current
    
    
    1,805
    
    
    
    78Accrued restructuring total
    
    $
    3,824
    
    
    $
    339
 NOTE 11. INCOME TAXES  ADOPTION OF FIN 48
   19




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##### 



NOTE 12. OTHER CURRENT LIABILITIES
  June 30,
    
    
    December 31,2008
    
    
    2007(in thousands)Due to WFI
    
    $
    1,864
    
    
    $
    1,837Interest payable
    
    
    3,154
    
    
    
    1,685Deferred rent
    
    
    872
    
    
    
    862Due to customers
    
    
    781
    
    
    
    1,213Other
    
    
    572
    
    
    
    491Other current liabilities
    
    $
    7,243
    
    
    $
    6,088
 NOTE 13. SHARE-BASED COMPENSATION
  Americas
    
    
    EMEA
    
    
    Non Reportable Segments
    
    
    Total2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Three Months ended June 30,Cost of revenues
    
    $
    19
    
    
    $
    19
    
    
    $
    24
    
    
    $
    48
    
    
    $
    
    
    
    $
    
    
    
    $
    43
    
    
    $
    67Sales and marketing
    
    
    5
    
    
    
    6
    
    
    
    24
    
    
    
    21
    
    
    
    11
    
    
    
    9
    
    
    
    40
    
    
    
    36General and administrative
    
    
    12
    
    
    
    10
    
    
    
    60
    
    
    
    70
    
    
    
    79
    
    
    
    176
    
    
    
    151
    
    
    
    256$
    36
    
    
    $
    35
    
    
    $
    108
    
    
    $
    139
    
    
    $
    90
    
    
    $
    185
    
    
    $
    234
    
    
    $
    359
 Americas
    
    
    EMEA
    
    
    Non Reportable Segments
    
    
    Total2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Six Months ended June 30,Cost of revenues
    
    $
    39
    
    
    $
    28
    
    
    $
    48
    
    
    $
    73
    
    
    $
    
    
    
    $
    
    
    
    $
    87
    
    
    $
    101Sales and marketing
    
    
    12
    
    
    
    22
    
    
    
    49
    
    
    
    44
    
    
    
    22
    
    
    
    67
    
    
    
    83
    
    
    
    133General and administrative
    
    
    24
    
    
    
    21
    
    
    
    120
    
    
    
    139
    
    
    
    280
    
    
    
    699
    
    
    
    424
    
    
    
    859$
    75
    
    
    $
    71
    
    
    $
    217
    
    
    $
    256
    
    
    $
    302
    
    
    $
    766
    
    
    $
    594
    
    
    $
    1,093
 20




---



##### 



NOTE 14. OTHER COMPREHENSIVE INCOME (LOSS)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Net income (loss)
    
    $
    (43,873
    )
    
    $
    ( 7,456
    )
    
    $
    (50,062
    )
    
    $
    (16,742
    )Other comprehensive income (loss), net of tax:Change in foreign currency translation gains
    
    
    (284
    )
    
    
    257
    
    
    
    2,338
    
    
    
    693Other comprehensive income (loss)
    
    $
    (44,157
    )
    
    $
    ( 7,199
    )
    
    $
    (47,724
    )
    
    $
    (16,049
    )
 NOTE 15. RELATED PARTY TRANSACTIONS
   NOTE 16. FAIR VALUE OF DEBT
   21




---



##### 



NOTE 17. COMMITMENTS AND CONTINGENCIES
   NOTE 18. SEGMENT REPORTING
 Disclosures about Segments of an Enterprise and Related Information
   OperatingAmericas
    
    
    EMEA
    
    
    Segment Total2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Three Months ended June 30,Revenues:From external customers
    
    $
    9,776
    
    
    $
    8,637
    
    
    $
    26,788
    
    
    $
    21,080
    
    
    $
    36,564
    
    
    $
    29,717Inter-segment revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    9,776
    
    
    $
    8,637
    
    
    $
    26,788
    
    
    $
    21,080
    
    
    $
    36,564
    
    
    $
    29,717Loss before taxes
    
    $
    (16,648
    )
    
    $
    (1,349
    )
    
    $
    (22,845
    )
    
    $
    (2,607
    )
    
    $
    (39,493
    )
    
    $
    (3,956
    )Total assets
    
    $
    40,238
    
    
    $
    56,768
    
    
    $
    62,082
    
    
    $
    80,400
    
    
    $
    102,320
    
    
    $
    137,168
 OperatingAmericas
    
    
    EMEA
    
    
    Segment Total2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Six Months ended June 30,Revenues:From external customers
    
    $
    21,899
    
    
    $
    12,811
    
    
    $
    56,599
    
    
    $
    41,547
    
    
    $
    78,498
    
    
    $
    54,358Inter-segment revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    21,899
    
    
    $
    12,811
    
    
    $
    56,599
    
    
    $
    41,547
    
    
    $
    78,498
    
    
    $
    54,358Loss before taxes
    
    $
    (16,614
    )
    
    $
    (3,218
    )
    
    $
    (24,111
    )
    
    $
    (3,873
    )
    
    $
    (40,725
    )
    
    $
    (7,091
    )
 22




---



##### 



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Revenues:Revenues for reportable segments
    
    $
    36,564
    
    
    $
    29,717
    
    
    $
    78,498
    
    
    $
    54,358Revenues for non-reportable segments
    
    
    674
    
    
    
    459
    
    
    
    1,104
    
    
    
    899Total consolidated revenues
    
    $
    37,238
    
    
    $
    30,176
    
    
    $
    79,602
    
    
    $
    55,257Income (loss) before income taxes:For reportable segments
    
    $
    (39,491
    )
    
    $
    (3,956
    )
    
    $
    (40,723
    )
    
    $
    (7,091
    )For non-reportable segments
    
    
    (6,199
    )
    
    
    (3,187
    )
    
    
    (11,017
    )
    
    
    (7,189
    )Total income (loss) before taxes
    
    $
    (45,690
    )
    
    $
    (7,143
    )
    
    $
    (51,740
    )
    
    $
    (14,280
    )Assets:Assets for reportable segments
    
    
    
    
    
    
    
    
    
    $
    102,320
    
    
    $
    137,168Assets not attributable to reportable segments:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    1,035Restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Deferred and prepaid tax assets
    
    
    
    
    
    
    
    
    
    
    5,477
    
    
    
    1,183Property and equipment
    
    
    
    
    
    
    
    
    
    
    389
    
    
    
    605Receivables
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    110Prepaids and other
    
    
    
    
    
    
    
    
    
    
    979
    
    
    
    693Total consolidated assets
    
    
    
    
    
    
    
    
    
    $
    109,338
    
    
    $
    140,803
 NOTE 19. MANAGEMENTS PLANS, LIQUIDITY AND BUSINESS RISKS
  Classification of Obligations
When a Violation Is Waived by the Creditor
  NOTE 20. SUBSEQUENT EVENTS
  23




---



##### 



24




---



##### 



ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   OVERVIEW
   Americas:
 EMEA:
 Nonreportable segments:
    25




---



##### 



Goodwill and Other Intangible Assets
     RECENT DEVELOPMENTS
  26




---



##### 



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;
 27




---



##### 




    
    the management and the services composition of our fixed price contracts;
    
    spending levels by wireless service providers in the areas of network design, deployment and
optimization;
    
    migration of networks to accommodate enhanced data offerings;
    
    consolidation in the carrier and OEM community;
    
    increased percentage of revenues derived from our international operations; and
    
    recent auctions of spectrum by governments in the U.S. and certain countries in Europe.
       28




---



##### 



RESULTS OF OPERATIONS
  Revenues, Cost of Revenues and Gross Margins
 Three Months Ended June 30,
    
    
    Three Months Ended June 30,
    
    
    Six Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (% of revenue)
    
    
    (in thousands)
    
    
    (% of revenue)
    
    
    (in thousands)
    
    
    (% of revenue)
    
    
    (in thousands)
    
    
    (% of revenue)Revenues:Americas
    
    $
    9,776
    
    
    
    
    
    
    $
    8,637
    
    
    
    
    
    
    $
    21,899
    
    
    
    
    
    
    $
    12,811EMEA
    
    
    26,788
    
    
    
    
    
    
    
    21,080
    
    
    
    
    
    
    
    56,599
    
    
    
    
    
    
    
    41,547Non-reportable
segments
    
    
    674
    
    
    
    
    
    
    
    459
    
    
    
    
    
    
    
    1,104
    
    
    
    
    
    
    
    89937,238
    
    
    
    
    
    
    
    30,176
    
    
    
    
    
    
    
    79,602
    
    
    
    
    
    
    
    55,257Cost of revenues:Americas
    
    
    7,862
    
    
    
    80.4
    %
    
    
    7,617
    
    
    
    88.2
    %
    
    
    16,485
    
    
    
    75.3
    %
    
    
    12,132
    
    
    
    94.7
    %EMEA
    
    
    21,816
    
    
    
    81.4
    %
    
    
    16,718
    
    
    
    79.3
    %
    
    
    45,174
    
    
    
    79.8
    %
    
    
    33,162
    
    
    
    79.8
    %Non-reportable
segments
    
    
    708
    
    
    
    105.0
    %
    
    
    556
    
    
    
    121.1
    %
    
    
    1,207
    
    
    
    109.3
    %
    
    
    990
    
    
    
    110.1
    %30,386
    
    
    
    81.6
    %
    
    
    24,891
    
    
    
    82.5
    %
    
    
    62,866
    
    
    
    79.0
    %
    
    
    46,284
    
    
    
    83.8
    %Gross margins:Americas
    
    
    1,914
    
    
    
    19.6
    %
    
    
    1,020
    
    
    
    11.8
    %
    
    
    5,414
    
    
    
    24.7
    %
    
    
    679
    
    
    
    5.3
    %EMEA
    
    
    4,972
    
    
    
    18.6
    %
    
    
    4,362
    
    
    
    20.7
    %
    
    
    11,425
    
    
    
    20.2
    %
    
    
    8,385
    
    
    
    20.2
    %Non-reportable
segments
    
    
    (34
    )
    
    
    (5.0
    %)
    
    
    (97
    )
    
    
    (21.1
    %)
    
    
    (103
    )
    
    
    (9.3
    %)
    
    
    (91
    )
    
    
    (10.1
    %)$
    6,852
    
    
    
    18.4
    %
    
    $
    5,285
    
    
    
    17.5
    %
    
    $
    16,736
    
    
    
    21.0
    %
    
    $
    8,973
    
    
    
    16.2
    %
 Americas
   EMEA
   29




---



##### 



Operating Expense
 Three Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30, 2007(in thousands)Sales and marketing:Americas
    
    $
    945
    
    
    $
    883
    
    
    $
    1,651
    
    
    $
    1,516EMEA
    
    
    2,707
    
    
    
    2,106
    
    
    
    5,149
    
    
    
    3,537Non-reportable segments
    
    
    460
    
    
    
    689
    
    
    
    1,231
    
    
    
    1,5634,112
    
    
    
    3,678
    
    
    
    8,031
    
    
    
    6,616General and administrative:Americas
    
    
    1,352
    
    
    
    1,195
    
    
    
    2,524
    
    
    
    2,052EMEA
    
    
    2,771
    
    
    
    2,562
    
    
    
    5,429
    
    
    
    5,427Non-reportable segments
    
    
    4,201
    
    
    
    2,465
    
    
    
    7,976
    
    
    
    5,3548,324
    
    
    
    6,222
    
    
    
    15,929
    
    
    
    12,833Bad debt expenseAmericas
    
    
    
    
    
    
    
    
    
    
    (129
    )
    
    
    EMEA
    
    
    1,883
    
    
    
    183
    
    
    
    1,883
    
    
    
    183Non-reportable segments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,883
    
    
    
    183
    
    
    
    1,754
    
    
    
    183Restructuring charge (recovery):Americas
    
    
    115
    
    
    
    
    
    
    
    489
    
    
    
    EMEA
    
    
    2,968
    
    
    
    1,556
    
    
    
    3,020
    
    
    
    1,556Non-reportable segments
    
    
    653
    
    
    
    (493
    )
    
    
    653
    
    
    
    (493
    )3,736
    
    
    
    1,063
    
    
    
    4,162
    
    
    
    1,063Impairment chargeAmericas
    
    
    14,896
    
    
    
    
    
    
    
    14,896
    
    
    
    EMEA
    
    
    16,700
    
    
    
    
    
    
    
    16,700
    
    
    
    Non-reportable segments
    
    
    109
    
    
    
    
    
    
    
    109
    
    
    
    31,705
    
    
    
    
    
    
    
    31,705
    
    
    
    Depreciation and amortization:Americas
    
    
    533
    
    
    
    118
    
    
    
    1,110
    
    
    
    194EMEA
    
    
    737
    
    
    
    688
    
    
    
    1,339
    
    
    
    1,164Non-reportable segments
    
    
    62
    
    
    
    65
    
    
    
    125
    
    
    
    1361,332
    
    
    
    871
    
    
    
    2,574
    
    
    
    1,494Total:Americas
    
    
    17,841
    
    
    
    2,196
    
    
    
    20,541
    
    
    
    3,762EMEA
    
    
    27,766
    
    
    
    7,095
    
    
    
    33,520
    
    
    
    11,867Non-reportable segments
    
    
    5,485
    
    
    
    2,726
    
    
    
    10,094
    
    
    
    6,560Total
    
    $
    51,092
    
    
    $
    12,017
    
    
    $
    64,155
    
    
    $
    22,189
     30




---



##### 



See Note 8, Goodwill and Other
Intangible Assets.
  Other Income and Expense
 Three Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30, 2007(in thousands)Interest income:Americas
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    EMEA
    
    
    4
    
    
    
    12
    
    
    
    8
    
    
    
    24Non-reportable segments
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    544
    
    
    
    17
    
    
    
    8
    
    
    
    78Interest expense:Americas
    
    
    (713
    )
    
    
    (170
    )
    
    
    (1,485
    )
    
    
    (170
    )EMEA
    
    
    (92
    )
    
    
    (37
    )
    
    
    (143
    )
    
    
    (42
    )Non-reportable segments
    
    
    (642
    )
    
    
    (338
    )
    
    
    (1,277
    )
    
    
    (782
    )(1,447
    )
    
    
    (545
    )
    
    
    (2,905
    )
    
    
    (994
    )Other income (expense):Americas
    
    
    (8
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    35EMEA
    
    
    37
    
    
    
    150
    
    
    
    (1,881
    )
    
    
    (373
    )Non-reportable segments
    
    
    (36
    )
    
    
    (31
    )
    
    
    459
    
    
    
    190(7
    )
    
    
    117
    
    
    
    (1,424
    )
    
    
    (148
    )Total:Americas
    
    
    (721
    )
    
    
    (172
    )
    
    
    (1,487
    )
    
    
    (135
    )EMEA
    
    
    (51
    )
    
    
    125
    
    
    
    (2,016
    )
    
    
    (391
    )Non-reportable segments
    
    
    (678
    )
    
    
    (364
    )
    
    
    (818
    )
    
    
    (538
    )Total
    
    $
    (1,450
    )
    
    $
    (411
    )
    
    $
    (4,321
    )
    
    $
    (1,064
    )
   Tax Expense
  Liquidity and Capital Resources
  31




---



##### 



Sources and Uses of Cash
 Six Months EndedJune 30, 2008
    
    
    June 30, 2007(in thousands)Net cash provided by (used in) operating activities
    
    $
    2,583
    
    
    $
    (13,871
    )Net cash used in investing activities
    
    
    (1,329
    )
    
    
    (26,353
    )Net cash provided by financing activities
    
    
    102
    
    
    
    38,382Effect of exchange rates on cash and equivalents
    
    
    117
    
    
    
    124Net increase (decrease) in cash and cash equivalents
    
    $
    1,473
    
    
    $
    (1,718
    )
       32




---



##### 



33




---



##### 



Cash Requirements
 June 30, 2008
    
    
    December 31, 2007(in thousands)Cash and cash equivalents (excluding restricted cash)
    
    $
    11,055
    
    
    $
    9,582Borrowing facilities & notes payable
    
    $
    54,739
    
    
    $
    54,415Working capital deficit
    
    $
    (15,611
    )
    
    $
    21,888
     34




---



##### 



CRITICAL ACCOUNTING POLICIES
  
    
    revenue recognition;
    
    allowance for doubtful accounts;
    
    accounting for income taxes;
    
    restructuring charge; and
    
    goodwill and purchased and other intangibles.
 Revenue recognition
  35




---



##### 



Allowance for doubtful accounts
  Accounting for income taxes
    Restructuring charge
   36




---



##### 



Goodwill and Intangibles
       37




---



##### 



Related Party Transactions
    ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     38




---



##### 



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  (b) Internal Control over Financial Reporting
 Managements Report on Internal Control over Financial Reporting
  
    
    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.
  Internal Control-Integrated Framework
    39




---



##### 



(c) Changes in Internal Control over Financial Reporting
  (d) Remediation Efforts
    40




---



##### 



PART II: OTHER INFORMATION
 Item 1: Legal Proceedings
  Item 1A: Risk Factors
    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
  41




---



##### 



Item 6: Exhibits
 31.1
    
     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 2002.31.2
    
     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
2002.32.1
    
     Certification of Chief Executive Officer pursuant to18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
     Certification of Chief Financial Officer pursuant to18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 42




---



##### 



SIGNATURE
  /s/ Louis Salamone, Jr.Louis Salamone, Jr.Executive Vice President, Chief Financial Officer and Treasurer  43