##### Table of Contents






United States Securities and Exchange
Commission

Washington, DC 20549




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Form 10-Q

(Mark One)

|     |  |                                                                                                                                                                     
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[X]  |  | Quarterly report pursuant to Section 13
    or 15(d) of the Securities
    Exchange Act of 1934
    For the quarterly period ended June 30, 2002                    
|     |  | 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: 0-21213


LCC International, Inc.

(Exact name of registrant as specified in its
charter)




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|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|Delaware                                 |  | 54-1807038                          
|(State of Incorporation)                 |  | (IRS 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.)

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 (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.

Yes X          No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest
practicable date.

As of August 9, 2002, the registrant had
outstanding 14,610,644 shares of Class A Common Stock, par value
$0.01 per share (the Class A Common Stock) and
6,318,874 shares of Class B Common Stock, par value $0.01
per share (the Class B Common Stock).



---






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TABLE OF CONTENTS



|                                                     |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION                       
|                                                     | Item 1: Financial Statements                                                                 
|Condensed Consolidated Statements of Operations     
|Condensed Consolidated Balance Sheets               
|Condensed Consolidated Statements of Cash Flows     
|Notes to Condensed Consolidated Financial Statements
|                                                     | Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II: OTHER INFORMATION                          
|                                                     | Item 1: Legal Proceedings                                                                    
|                                                     | Item 2: Changes in Securities                                                                
|                                                     | Item 3: Defaults Upon Senior Securities                                                      
|                                                     | Item 4: Submission of Matters to a Vote of Security Holders                                  
|                                                     | Item 5: Other Information                                                                    
|                                                     | Item 6: Exhibits and Reports on Form 8-K                                                     
|Exhibit Index                                       
|Calculation of Net Income (Loss) Per Share          
|Written statement of CEO and CFO                    



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##### Table of Contents



LCC International, Inc. and
Subsidiaries

Quarterly Report on Form 10-Q

For the quarter ended June 30,
2002


INDEX

|         |  |                                                                                                                                |  |        |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | ------ | -- | 
|         |  |                                                                                                                                |  | Page  
|         |  |                                                                                                                                |  | Number
|         |  |                                                                                                                                |  |       
|PART I:  |  | FINANCIAL INFORMATION                                                                                                          |  |        |    | 
|ITEM 1:  |  | FINANCIAL STATEMENTS                                                                                                           |  |        |    | 
|         |  | Condensed consolidated statements of operations
    for the three and six months ended June 30, 2001 and 2002,
    (unaudited) |  |        | 3  | 
|         |  | Condensed consolidated balance sheets as of
    December 31, 2001 (audited) and June 30, 2002 (unaudited)                      |  |        | 4  | 
|         |  | Condensed consolidated statements of cash flows
    for the six months ended June 30, 2001 and 2002 (unaudited)                |  |        | 5  | 
|         |  | Notes to condensed consolidated financial
    statements                                                                       |  |        | 6  | 
|ITEM 2:  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                      |  |        | 12 | 
|PART II: |  | OTHER INFORMATION                                                                                                              |  |        |    | 
|ITEM 1:  |  | Legal Proceedings                                                                                                              |  |        | 23 | 
|ITEM 2:  |  | Changes in Securities                                                                                                          |  |        | 23 | 
|ITEM 3:  |  | Defaults Upon Senior Securities                                                                                                |  |        | 23 | 
|ITEM 4:  |  | Submission of Matters to a Vote of Security
    Holders                                                                        |  |        | 23 | 
|ITEM 5:  |  | Other Information                                                                                                              |  |        | 24 | 
|ITEM 6:  |  | Exhibits and Reports on Form 8K                                                                                                |  |        | 24 | 

2



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##### Table of Contents






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 Ended
|                                                      |                                                             | June 30,           |        | June 30,        
|                                                      |                                                             |                    |        |                 
|                                                      |                                                             | 2001               |        | 2002             |   | 2001 |         | 2002  
|                                                      |                                                             |                    |        |                  |   |      |         |       
|REVENUES                                              |                                                             | $                  | 29,532 |                  |   | $    | 12,219  |        |   | $ | 72,187 |        |   | $ | 29,617  |       
|COST OF REVENUES                                      |                                                             |                    | 24,654 |                  |   |      | 10,724  |        |   |   | 57,401 |        |   |   | 26,994  |       
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|GROSS PROFIT                                          |                                                             |                    | 4,878  |                  |   |      | 1,495   |        |   |   | 14,786 |        |   |   | 2,623   |       
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|OPERATING (INCOME) EXPENSE:                           |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|                                                      | Sales and marketing                                         |                    |        | 1,612            |   |      |         | 1,951  |   |   |        | 3,618  |   |   |         | 4,246  |  
|                                                      | General and administrative                                  |                    |        | 2,449            |   |      |         | 2,084  |   |   |        | 6,636  |   |   |         | 7,189  |  
|                                                      | Restructuring charge                                        |                    |        |                 |   |      |         | 10,030 |   |   |        |       |   |   |         | 10,030 |  
|                                                      | Gain on sale of tower portfolio and
    administration, net |                    |        | (718             | ) |      |         | (2,000 | ) |   |        | (2,323 | ) |   |         | (2,000 | )
|                                                      | Depreciation and amortization                               |                    |        | 745              |   |      |         | 756    |   |   |        | 1,465  |   |   |         | 1,447  |  
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|                                                      |                                                             |                    | 4,088  |                  |   |      | 12,821  |        |   |   | 9,396  |        |   |   | 20,912  |       
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|OPERATING INCOME (LOSS)                               |                                                             |                    | 790    |                  |   |      | (11,326 | )      |   |   | 5,390  |        |   |   | (18,289 | )     
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|OTHER INCOME (EXPENSE):                               |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|                                                      | Interest income                                             |                    |        | 497              |   |      |         | 208    |   |   |        | 1,086  |   |   |         | 510    |  
|                                                      | Other                                                       |                    |        | (139             | ) |      |         | (5,201 | ) |   |        | (188   | ) |   |         | (5,199 | )
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|                                                      |                                                             |                    | 358    |                  |   |      | (4,993  | )      |   |   | 898    |        |   |   | (4,689  | )     
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|INCOME (LOSS) FROM OPERATIONS BEFORE INCOME
    TAXES |                                                             |                    | 1,148  |                  |   |      | (16,319 | )      |   |   | 6,288  |        |   |   | (22,978 | )     
|PROVISION (BENEFIT) FOR INCOME TAXES                  |                                                             |                    | 459    |                  |   |      | (5,075  | )      |   |   | 2,515  |        |   |   | (6,673  | )     
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|NET INCOME (LOSS)                                     |                                                             | $                  | 689    |                  |   | $    | (11,244 | )      |   | $ | 3,773  |        |   | $ | (16,305 | )     
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|NET INCOME (LOSS) PER SHARE:                          |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|                                                      | Basic                                                       |                    | $      | 0.03             |   |      | $       | (0.54  | ) |   | $      | 0.18   |   |   | $       | (0.79  | )
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|                                                      | Diluted                                                     |                    | $      | 0.03             |   |      | $       | (0.54  | ) |   | $      | 0.18   |   |   | $       | (0.79  | )
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|WEIGHTED AVERAGE SHARES USED IN CALCULATION OF NET    |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|                                                      | INCOME (LOSS) PER SHARE:                                    |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |        |  
|                                                      | Basic                                                       |                    |        | 20,516           |   |      |         | 20,708 |   |   |        | 20,469 |   |   |         | 20,728 |  
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       
|                                                      | Diluted                                                     |                    |        | 20,595           |   |      |         | 20,708 |   |   |        | 20,929 |   |   |         | 20,728 |  
|                                                      |                                                             |                    |        |                  |   |      |         |        |   |   |        |        |   |   |         |       

See accompanying notes to condensed consolidated
financial statements.

3



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##### Table of Contents



LCC International, Inc. and
Subsidiaries






Condensed Consolidated Balance
Sheets


(In thousands)


|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |        |        | 
|----------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------- | ------ | - | ------- | ------ | ------ | 
|                                                                                    |                                                                                                                                        | December 31,               |         | June 30,   
|                                                                                    |                                                                                                                                        | 2001                       |         | 2002       
|                                                                                    |                                                                                                                                        |                            |         |            
|                                                                                    |                                                                                                                                        | (Audited)                  |         | (Unaudited)
|ASSETS:                                                                             |                                                                                                                                        |                            |         |             |        |   |         |       
|Current assets:                                                                     |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    | Cash and cash equivalents                                                                                                              |                            | $       | 52,658      |        |   | $       | 43,062 |       
|                                                                                    | Short-term investments                                                                                                                 |                            |         | 484         |        |   |         | 505    |       
|                                                                                    | Receivables, net of allowance for doubtful
    accounts of $2,048 and $2,601 at December 31, 2001 and
    June 30, 2002, respectively: |                            |         |             |        |   |         |        |       
|                                                                                    |                                                                                                                                        | Accounts receivable        |         |             | 27,367 |   |         |        | 18,828 | 
|                                                                                    |                                                                                                                                        | Unbilled receivables       |         |             | 10,240 |   |         |        | 6,171  | 
|                                                                                    | Deferred income taxes, net                                                                                                             |                            |         | 2,724       |        |   |         | 6,572  |       
|                                                                                    | Prepaid expenses and other current assets                                                                                              |                            |         | 1,607       |        |   |         | 1,191  |       
|                                                                                    | Prepaid income taxes                                                                                                                   |                            |         | 2,632       |        |   |         | 7,468  |       
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | Total current assets       |         |             | 97,712 |   |         |        | 83,797 | 
|Property and equipment, net                                                         |                                                                                                                                        |                            | 5,730   |             |        |   | 4,001   |       
|Investments                                                                         |                                                                                                                                        |                            | 5,162   |             |        |   |        |       
|Deferred income taxes, net                                                          |                                                                                                                                        |                            | 2,038   |             |        |   | 1,441   |       
|Goodwill and other intangibles                                                      |                                                                                                                                        |                            | 637     |             |        |   | 9,023   |       
|Other assets                                                                        |                                                                                                                                        |                            | 952     |             |        |   | 981     |       
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | $                          | 112,231 |             |        | $ | 99,243  |       
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|LIABILITIES AND SHAREHOLDERS
    EQUITY:                                           |                                                                                                                                        |                            |         |             |        |   |         |       
|Current liabilities:                                                                |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    | Accounts payable                                                                                                                       |                            | $       | 3,840       |        |   | $       | 4,264  |       
|                                                                                    | Accrued expenses                                                                                                                       |                            |         | 5,791       |        |   |         | 4,828  |       
|                                                                                    | Accrued employee compensation and benefits                                                                                             |                            |         | 10,323      |        |   |         | 6,069  |       
|                                                                                    | Deferred revenue                                                                                                                       |                            |         | 640         |        |   |         | 264    |       
|                                                                                    | Income taxes payable                                                                                                                   |                            |         | 2,788       |        |   |         | 2,791  |       
|                                                                                    | Other current liabilities                                                                                                              |                            |         | 2,196       |        |   |         | 3,421  |       
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | Total current liabilities  |         |             | 25,578 |   |         |        | 21,637 | 
|Other liabilities                                                                   |                                                                                                                                        |                            | 849     |             |        |   | 4,979   |       
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | Total liabilities          |         |             | 26,427 |   |         |        | 26,616 | 
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|Preferred stock:                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    | 10,000 shares authorized; 0 shares issued and
    outstanding                                                                          |                            |         |            |        |   |         |       |       
|Class A common stock, $0.01 par value:                                              |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    | 70,000 shares authorized; 12,271 and 14,601
    shares issued and outstanding at December 31, 2001 and
    June 30, 2002, respectively |                            |         | 123         |        |   |         | 146    |       
|Class B common stock, $0.01 par value:                                              |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    | 20,000 shares authorized; 8,407 and 6,319 shares
    issued and outstanding at December 31, 2001 and
    June 30, 2002, respectively   |                            |         | 84          |        |   |         | 63     |       
|Paid-in capital                                                                     |                                                                                                                                        |                            | 92,428  |             |        |   | 94,072  |       
|Accumulated deficit                                                                 |                                                                                                                                        |                            | (1,409  | )           |        |   | (17,714 | )     
|Notes receivable from shareholders                                                  |                                                                                                                                        |                            | (2,325  | )           |        |   | (1,625  | )     
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    | Subtotal                                                                                                                               |                            |         | 88,901      |        |   |         | 74,942 |       
|Accumulated other comprehensive loss 
    foreign currency translation adjustments |                                                                                                                                        |                            | (3,097  | )           |        |   | (2,315  | )     
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | Total shareholders equity |         |             | 85,804 |   |         |        | 72,627 | 
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | $                          | 112,231 |             |        | $ | 99,243  |       
|                                                                                    |                                                                                                                                        |                            |         |             |        |   |         |       

See accompanying notes to condensed consolidated
financial statements.

4



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##### Table of Contents





LCC International, Inc. and
Subsidiaries






Condensed Consolidated Statements of Cash
Flows


(In thousands)


(Unaudited)


|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |        |         |   |        |        |  
|-------------------------------------------------- | ------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------------------------- | -------------------------------------------- | ---------------------------------------- | - | ------ | ------ | ------- | - | ------ | ------ | -
|                                                   |                                             |                                                                                         
|                                                   |                                             | Six Months Ended                                                                        
|                                                   |                                             | June 30,                                                                                
|                                                   |                                             |                                                                                         
|                                                   |                                             | 2001                                                                                     |                                   | 2002                                        
|                                                   |                                             |                                                                                          |                                   |                                             
|Cash flows from operating activities:              |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|                                                   |                                             | Net income (loss)                                                                        |                                   | $                                            | 3,773                                    |   |        | $      | (16,305 | )
|                                                   |                                             | Adjustments to reconcile net income
    (loss) to net cash used in operating activities: |                                   |                                              |                                          |   |        |        |         |  
|                                                   |                                             |                                                                                          |                                   | Depreciation and amortization                |                                          |   | 1,465  |        |         |   | 1,447  |       
|                                                   |                                             |                                                                                          |                                   | Provision for doubtful accounts              |                                          |   | 1,733  |        |         |   | 632    |       
|                                                   |                                             |                                                                                          |                                   | Impairment of assets                         |                                          |   |       |        |         |   | 5,139  |       
|                                                   |                                             |                                                                                          |                                   | Restructuring charge                         |                                          |   |       |        |         |   | 10,030 |       
|                                                   |                                             |                                                                                          |                                   | Gain on sale of tower portfolio              |                                          |   | (2,323 | )      |         |   | (2,000 | )     
|                                                   |                                             |                                                                                          |                                   | Changes in operating assets and liabilities: |                                          |   |        |        |         |   |        |       
|                                                   |                                             |                                                                                          |                                   |                                              | Trade, unbilled, and other receivables   |   |        | 2,865  |         |   |        | 14,150 |  
|                                                   |                                             |                                                                                          |                                   |                                              | Accounts payable and accrued expenses    |   |        | (6,865 | )       |   |        | (7,747 | )
|                                                   |                                             |                                                                                          |                                   |                                              | Other current assets and liabilities     |   |        | (509   | )       |   |        | (7,076 | )
|                                                   |                                             |                                                                                          |                                   |                                              | Other non-current assets and liabilities |   |        | (1,374 | )       |   |        | (800   | )
|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|Net cash used in operating activities              |                                             |                                                                                          | (1,235                            | )                                            |                                          |   | (2,530 | )     
|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|Cash flows from investing activities:              |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|                                                   |                                             | (Purchases) sales of short term investments                                              |                                   |                                              | 51                                       |   |        |        | (21     | )
|                                                   |                                             | Purchases of property and equipment                                                      |                                   |                                              | (1,604                                   | ) |        |        | (753    | )
|                                                   |                                             | Proceeds from sale of property and equipment                                             |                                   |                                              | (93                                      | ) |        |        | 31      |  
|                                                   |                                             | Investments                                                                              |                                   |                                              | (1,732                                   | ) |        |        |        |  
|                                                   |                                             | Business acquisition                                                                     |                                   |                                              |                                         |   |        |        | (7,146  | )
|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|Net cash used in investing activities              |                                             |                                                                                          | (3,378                            | )                                            |                                          |   | (7,889 | )     
|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|Cash flows from financing activities:              |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|                                                   | Proceeds from issuance of common stock, net |                                                                                          |                                   | 298                                          |                                          |   |        | 14     |        
|                                                   | Proceeds from exercise of options           |                                                                                          |                                   | 263                                          |                                          |   |        | 109    |        
|                                                   | Repayment of loan from shareholder          |                                                                                          |                                   |                                             |                                          |   |        | 700    |        
|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|Net cash provided by financing activities          |                                             |                                                                                          | 561                               |                                              |                                          |   | 823    |       
|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|Net decrease in cash and cash equivalents          |                                             |                                                                                          | (4,052                            | )                                            |                                          |   | (9,596 | )     
|Cash and cash equivalents at beginning of period   |                                             |                                                                                          | 22,271                            |                                              |                                          |   | 52,658 |       
|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|Cash and cash equivalents at end of period         |                                             | $                                                                                        | 18,219                            |                                              |                                          | $ | 43,062 |       
|                                                   |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|Supplemental disclosures of cash flow information: |                                             |                                                                                          |                                   |                                              |                                          |   |        |       
|                                                   |                                             |                                                                                          | Cash paid during the quarter for: |                                              |                                          |   |        |        |         |   |       
|                                                   |                                             |                                                                                          |                                   | Interest                                     |                                          | $ |       |        |         | $ |       |       
|                                                   |                                             |                                                                                          |                                   | Income taxes                                 |                                          | $ | 3,698  |        |         | $ | 1,414  |       

See accompanying notes to condensed consolidated
financial statements.

5



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##### Table of Contents



LCC International, Inc. and
Subsidiaries






Notes to Condensed Consolidated Financial
Statements


(Unaudited)


Note 1:  Description of
Operations

The Company provides integrated end-to-end
solutions for wireless voice and data communication networks
with service offerings that include high level technical
consulting, system design and deployment and ongoing operations
and maintenance services. Telcom Ventures owns the Class B
Common Stock shares outstanding, which have ten-to-one voting
rights over the Class A Common Stock shares and therefore
represent approximately 81% of the voting control.

The Company operates in a highly competitive
environment subject to rapid technological change and emergence
of new technologies. Historically, the key drivers of growth in
the Companys wireless services business have been
(1) the issuance of new or additional licenses to wireless
operators; (2) the introduction of new services or
technologies; (3) increases in the number of subscribers
served by wireless operators; and (4) the increasing
complexity of wireless systems in operation. Although the
Company believes that its services are transferable to emerging
technologies, rapid changes in technology could have an adverse
financial impact on the Company.

Note 2:  Basis of
Presentation

The condensed consolidated financial statements
of the Company included herein have been prepared by the Company
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the results for the interim period.

Certain information and footnote disclosure
normally included in the consolidated financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or
omitted. The interim financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2001
and the quarterly report on Form 10-Q for the period ended
March 31, 2002. Operating results for the interim periods
are not necessarily indicative of results for an entire year.

Certain reclassifications of prior year amounts
have been made to conform to the current year presentation.

Note 3:  Recent Accounting
Pronouncements

On January 1, 2002, the Company adopted FASB
SFAS No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead
be tested for impairment at least annually in accordance with
the provisions of SFAS No. 142. SFAS No. 142 also
requires that intangible assets with estimable useful lives be
amortized over their estimated useful lives to their residual
values, and be reviewed for impairment in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The adoption of SFAS No. 142 did not
have a significant impact on the Companys financial
condition and results of operations.

On January 1, 2002, the Company adopted FASB
SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assetswhich supersedes FASB SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, and APB Opinion
No. 30, Reporting the Results of Operations-Reporting
Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual, and Infrequently Occurring Events and
Transactions. The statement addresses the accounting and
reporting of a disposal of a segment and resolves significant
implementation issues related to SFAS No. 121. The adoption
of SFAS No. 144 did not have a significant impact on the
Companys financial condition and results of operations.

In July 2002, FASB SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities, was issued. The statement provides specific
guidance for the recognition, measurement and reporting of costs
associated with exiting an activity or disposing of a long-lived
asset, including restructuring charges that the Company
currently accounts for under EITF Issue No. 94-3,
Liability Recognition for Certain Employee

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Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a
Restructuring) . The Company plans to
adopt SFAS No. 146 in January 2003 and is evaluating the
impact of the new standard.


Note 4:  Other Comprehensive Income
(Loss)

Comprehensive income (loss) is defined as
net income (loss) plus the change in equity of a business
enterprise during a period from transactions and other events
and circumstances from non-owner sources. Other comprehensive
income (loss) refers to revenues, expenses, gains and
losses that under accounting principles generally accepted in
the United States of America are included in comprehensive
income (loss), but excluded from net income (loss). Other
comprehensive income (loss) consists solely of foreign
currency translation adjustments at June 30, 2001 and 2002.
Comprehensive income (loss) for the three and six months ended
June 30, 2001 and 2002 is as follows (in thousands).

|                                                                                   |  |                    |      |                  |  |      |         |      |  |   |       |   |  |   |         |  
|---------------------------------------------------------------------------------- |  | ------------------ | ---- | ---------------- |  | ---- | ------- | ---- |  | - | ----- | - |  | - | ------- | -
|                                                                                   |  |                    |      |                 
|                                                                                   |  | Three Months Ended |      | Six Months Ended
|                                                                                   |  | June 30,           |      | June 30,        
|                                                                                   |  |                    |      |                 
|                                                                                   |  | 2001               |      | 2002             |  | 2001 |         | 2002
|                                                                                   |  |                    |      |                  |  |      |         |     
|Net income (loss)                                                                  |  | $                  | 689  |                  |  | $    | (11,244 | )    |  | $ | 3,773 |   |  | $ | (16,305 | )
|                                                                                   |  |                    |      |                  |  |      |         |      |  |   |       |   |  |   |         |  
|Other comprehensive income (loss), before tax                                      |  |                    | (170 | )                |  |      | 1,204   |      |  |   | (870  | ) |  |   | 1,101   |  
|Income tax provision (benefit) related to
    items of comprehensive income (loss) |  |                    | (68  | )                |  |      | 344     |      |  |   | (348  | ) |  |   | 319     |  
|                                                                                   |  |                    |      |                  |  |      |         |      |  |   |       |   |  |   |         |  
|Other comprehensive income (loss), net of tax                                      |  |                    | (102 | )                |  |      | 860     |      |  |   | (522  | ) |  |   | 782     |  
|                                                                                   |  |                    |      |                  |  |      |         |      |  |   |       |   |  |   |         |  
|Comprehensive income (loss)                                                        |  | $                  | 587  |                  |  | $    | (10,384 | )    |  | $ | 3,251 |   |  | $ | (15,523 | )
|                                                                                   |  |                    |      |                  |  |      |         |      |  |   |       |   |  |   |         |  

Note 5:     Accounts
Receivable

|                                |                                |                   |        |               |  |   |        |     | 
|------------------------------- | ------------------------------ | ----------------- | ------ | ------------- |  | - | ------ | --- | 
|                                |                                | December 31, 2001 |        | June 30, 2002
|                                |                                |                   |        |              
|Trade accounts receivable       |                                | $                 | 28,342 |               |  | $ | 21,240 |    
|Due from related parties:       |                                |                   |        |               |  |   |        |    
|                                | Telcom Ventures                |                   |        | 437           |  |   |        | 140 | 
|                                | Employee and other receivables |                   |        | 636           |  |   |        | 49  | 
|Allowance for doubtful accounts |                                |                   | (2,048 | )             |  |   | (2,601 | )  
|                                |                                |                   |        |               |  |   |        |    
|                                |                                | $                 | 27,367 |               |  | $ | 18,828 |    
|                                |                                |                   |        |               |  |   |        |    

The Companys ten largest customers
constituted 87.6% and 83.3% of the Companys net
receivables balance as of June 30, 2002 and
December 31, 2001, respectively. The Company frequently
performs work for development stage customers, which carry a
higher degree of risk, particularly as to the collection of
accounts receivable. These customers may be particularly
vulnerable to current tightening of available credit and general
economic slowdown. The Company considers three of the
Companys ten largest customers to be development stage
customers. These customers, XM Satellite, Orascomm Telecom in
Algeria, and NorthCoast Communications, had outstanding
receivable balances in the aggregate at December 31, 2001
and June 30, 2002 of $20.8 million and
$11.3 million, respectively.

Note
6:     Restructuring Charge

During the second quarter of 2002, the Company
adopted a restructuring plan and recorded a restructuring charge
of $10.0 million. The restructuring plan was in response to
the low utilization of professional employees caused by the
recent completion of several large fixed price contracts and the
difficulty in obtaining new contracts as a result of the
slowdown in wireless telecommunications infrastructure spending.
The cost of the severance and associated expenses was
approximately $1.0 million and resulted in a work force
reduction of approximately 140 people. In addition, the Company
had excess facility costs relative to the space occupied by the
employees affected by the reduction in force, space previously
occupied by divested operations, and reduced business use of
office space resulting from a continued trend for clients to
provide professional staff office space while performing their
services. The charge for the excess office space was
approximately $9.0 million, which included
$1.5 million in written-off leasehold improvements related
to the excess space. The Company has paid out approximately
$0.6 million in severance and $0.6 million in facility
costs as of June 30, 2002. The Company has also written-off
leasehold improvements aggregating $1.5 million

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as of June 30, 2002. The Company anticipates
$3.2 million of the restructuring charge to be paid out in
the next twelve months and therefore, it is included in other
current liabilities. The balance of the restructuring charge of
$4.1 million is for expected future losses on facilities
and is recorded in other liabilities, as a long-term liability
on the accompanying condensed consolidated balance sheet.


Note
7:     Impairment of Assets

In June 2000, the Company acquired 18.2% of
Mobilocity, Inc. (Mobilocity) which was diluted to
less than 3 percent as Mobilocity continued to raise
additional capital. During the second quarter of 2002, the
Company evaluated its investment in Mobilocity to determine if
an impairment loss had occurred. Mobilocity has implemented a
voluntary liquidation plan, leading the Company to determine the
investment is probably not recoverable and to record a
$0.5 million impairment charge.

The Company has invested a total of
$4.6 million ($2.9 million in August 2000 and
$1.7 million in February 2001) to maintain its 15.0%
interest in Plan + Design Netcare AG
(PDN). The Company used the cost method to account
for this investment. PDN, and its operating subsidiary, have
filed for insolvency protection. During the second quarter of
2002, the Company evaluated this investment and determined that
the investment is probably not recoverable and recorded a
$4.6 million impairment charge.

Note 8:     Business
Combinations

On January 31, 2002, the Company acquired
all of the assets of Smith Woolley Telecom (Smith
Woolley). Smith Woolley is a telecommunications
consultancy company that specializes in the provision of search,
acquisition, design, build, management and maintenance services
to the wireless industry in the United Kingdom. Smith Woolley is
based in Cambridge, England, with several regional offices. The
purchase price of the acquisition was approximately
$8.6 million consisting of $7.1 million in cash and
approximately 215,000 shares of LCC Class A common stock,
par value $0.01 per share. The value of the LCC Class A
common stock was approximately $1.5 million and was based
on the closing price on January 31, 2002 of $7.08 per
share. The acquisition was accounted for using the purchase
method of accounting and therefore, Smith Woolleys results
have been included in the condensed consolidated financial
statements since the date of acquisition.

Allocation of the purchase price to the assets
acquired and liabilities assumed for this acquisition was
finalized during the second quarter of 2002. The net assets and
liabilities acquired and assumed amounted to $0.7 million.
The Company utilized an independent valuation firm to assist in
the allocation of the purchase price between intangible assets
and goodwill. Goodwill recognized in the acquisition amounted to
$5.9 million. Other intangible assets acquired amounted to
$2.0 million. Other intangible assets, including contract
backlog, customer relationships, and the Smith Woolley trade
name, are amortized over two to five years depending on the
estimated remaining useful lives. The Company recognized
$0.2 million in amortization expense for the intangible
assets from the date of purchase through June 30, 2002. The
Company expects amortization expense on the acquired intangible
assets to be $0.3 million for the remainder of 2002 and
$0.6 million for 2003, $0.3 million for 2004 through
2006, and $0.02 million in 2007. Goodwill and other
intangibles will be evaluated annually for possible impairment
under the provisions of SFAS No. 142.

Note 9:     Tower
Portfolio Sale and Administration

During 2000, Microcell Management, Inc.
(Microcell), a subsidiary of the Company, completed
the closing of the sale of its telecommunication tower portfolio
to Pinnacle Towers Inc. (Pinnacle) pursuant to an
Asset Purchase Agreement between Pinnacle and Microcell. As part
of the tower sale transaction, Microcell and Pinnacle entered
into a Master Antenna Site Lease pursuant to which Microcell
agreed to lease, until December 31, 2002, the unoccupied
space on each telecommunication tower sold to Pinnacle. As of
December 31, 2001, the Company had deferred
$2.0 million of the gain and included it in other current
liabilities. Microcell and Pinnacle also entered into a Tower
Services Agreement to provide Pinnacle with audit, maintenance,
and program management services. The Tower Services Agreement,
which expired in August 2001, provided for minimum annual
payments to Microcell of $10.0 million for the contemplated
services.

On January 25, 2002, the Company entered
into a settlement agreement with Pinnacle. Pursuant to the
agreement, the Company received $2.0 million in cash to
satisfy Pinnacles obligations under the Tower Services
Agreement. This gain was recognized in the second quarter of
2002, when all uncertainties related to

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any potential claims against the payment received
were resolved. In addition, the Company paid Pinnacle
$2.0 million to satisfy all remaining obligations under the
Master Antenna Site Lease. This payment reduced the
$2.0 million deferred gain the Company included in other
current liabilities on the December 31, 2001 consolidated
balance sheet.


Note 10:     Related
Party Transactions

During 2001 and the first half of 2002, the
Company provided services to Telcom Ventures and various other
companies majority owned, or controlled by, Telcom Ventures or
its members. Revenues from Telcom Ventures were 0.1% of 2001
revenues and none in the first half of 2002. Receivables from
these related parties were $19,000 at December 31, 2001 and
June 30, 2002 and are included in accounts receivable in
the accompanying consolidated balance sheets. Also included
accounts receivable are employee and travel advances aggregating
approximately $89,000 and $108,000 at December 31, 2001 and
June 30, 2002, respectively.

During 2001 and the first half of 2002, the
Company made certain payments on behalf of Telcom Ventures that
consisted primarily of fringe benefit and payroll
service-related payments. At December 31, 2001 and
June 30, 2002, outstanding amounts associated with these
payments totaled $0.4 million and $0.1 million,
respectively, and were included in accounts receivable within
the accompanying condensed consolidated balance sheets.

In September 1996, the Company lent
$3.5 million to Telcom Ventures to assist in the payment of
taxes due in connection with the assumption by the Company of
$30.0 million of convertible subordinated debt from Telcom
Ventures. The original note was payable over five years with
equal annual principal payments over the term. Interest accrued
at the rate of LIBOR, plus 1.75%. The Company received the final
payment of principal and accrued interest of approximately
$0.8 million during the first quarter of 2002 in
satisfaction of the note.

During 2001 and the first half of 2002, the
Company provided services to XM Satellite. Telcom Ventures has a
minority investment in XM Satellite, and Dr. Rajendra
Singh, a director of Telcom Ventures, is a member of the board
of directors of the Company. Dr. Singh is also a former
member of the XM Satellite board of directors. Revenues earned
for services provided to XM Satellite were $13.7 million
and $0.3 million for the second quarter of 2001 and 2002,
respectively. For the six months ended June 30, 2001 and
2002, revenues earned from XM Satellite were $35.0 million
and $3.3 million, respectively. Receivables due from XM
Satellite were $13.0 million and $7.5 million at
December 31, 2001 and June 30, 2002, respectively.

Note
11:     Contingencies

The Company is party to various non-material
legal proceedings and claims incidental to its business.
Management does not believe that these maters will have a
material adverse affect on the consolidated results of
operations or financial condition of the Company.

Note 12:     Segment
Information

The Companys operating segments include
Services (Design Services and Deployment Services) and Tower
ownership and management. Design Services provides engineering
and design services for cellular phone system operators,
personal communication system (PCS) operators and
other wireless communication system providers. Deployment
Services provides program and construction management services
related to the build-out of wireless communication systems.

9



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Segment detail is summarized as follows (in
thousands):

|                          |                         |                |        |                 |        |               |         |        |        |      |       |      |   |   |       |   |   |   |        |        |        |   |         |        |        | 
|------------------------- | ----------------------- | -------------- | ------ | --------------- | ------ | ------------- | ------- | ------ | ------ | ---- | ----- | ---- | - | - | ----- | - | - | - | ------ | ------ | ------ | - | ------- | ------ | ------ | 
|                          |                         |                |        |                 |        |               |         |        |        |     
|                          |                         |                |        | Tower Ownership |        |              
|                          |                         | Services       |        | and Management  |        | Segment Total
|                          |                         |                |        |                 |        |              
|                          |                         | 2001           |        | 2002            |        | 2001          |         | 2002   |        | 2001 |       | 2002
|                          |                         |                |        |                 |        |               |         |        |        |      |       |     
|Six Months Ended June 30, |                         |                |        |                 |        |               |         |        |        |      |       |      |   |   |       |   |   |   |        |        |        |   |         |       
|Revenues:                 |                         |                |        |                 |        |               |         |        |        |      |       |      |   |   |       |   |   |   |        |        |        |   |         |       
|                          | From external customers |                | $      | 72,187          |        |               | $       | 29,617 |        |      | $     |     |   |   | $     |  |   |   | $      | 72,187 |        |   | $       | 29,617 |       
|                          | Inter-segment revenues  |                |        |                |        |               |         |       |        |      |       |     |   |   |       |  |   |   |        |       |        |   |         |       |       
|                          |                         |                |        |                 |        |               |         |        |        |      |       |      |   |   |       |   |   |   |        |        |        |   |         |       
|                          |                         | Total revenues |        | $               | 72,187 |               |         | $      | 29,617 |      |       | $    |  |   |       | $ |  |   |        | $      | 72,187 |   |         | $      | 29,617 | 
|                          |                         |                |        |                 |        |               |         |        |        |      |       |      |   |   |       |   |   |   |        |        |        |   |         |       
|Net income (loss)         |                         | $              | 5,270  |                 |        | $             | (12,129 | )      |        | $    | 1,395 |      |   | $ | 1,540 |   |   | $ | 6,625  |        |        | $ | (10,589 | )     
|                          |                         |                |        |                 |        |               |         |        |        |      |       |      |   |   |       |   |   |   |        |        |        |   |         |       
|Total assets              |                         | $              | 55,743 |                 |        | $             | 47,707  |        |        | $    | 570   |      |   | $ |      |   |   | $ | 56,313 |        |        | $ | 47,707  |       
|                          |                         |                |        |                 |        |               |         |        |        |      |       |      |   |   |       |   |   |   |        |        |        |   |         |       

|                            |                         |               |       |                 |        |               |        |        |        |      |     |      |   |   |       |   |   |   |       |        |        |   |        |        |        | 
|--------------------------- | ----------------------- | ------------- | ----- | --------------- | ------ | ------------- | ------ | ------ | ------ | ---- | --- | ---- | - | - | ----- | - | - | - | ----- | ------ | ------ | - | ------ | ------ | ------ | 
|                            |                         |               |       |                 |        |               |        |        |        |     
|                            |                         |               |       | Tower Ownership |        |              
|                            |                         | Services      |       | and Management  |        | Segment Total
|                            |                         |               |       |                 |        |              
|                            |                         | 2001          |       | 2002            |        | 2001          |        | 2002   |        | 2001 |     | 2002
|                            |                         |               |       |                 |        |               |        |        |        |      |     |     
|Three Months Ended June 30, |                         |               |       |                 |        |               |        |        |        |      |     |      |   |   |       |   |   |   |       |        |        |   |        |       
|Revenues:                   |                         |               |       |                 |        |               |        |        |        |      |     |      |   |   |       |   |   |   |       |        |        |   |        |       
|                            | From external customers |               | $     | 29,532          |        |               | $      | 12,219 |        |      | $   |     |   |   | $     |  |   |   | $     | 29,532 |        |   | $      | 12,219 |       
|                            | Inter-segment revenue   |               |       |                |        |               |        |       |        |      |     |     |   |   |       |  |   |   |       |       |        |   |        |       |       
|                            |                         |               |       |                 |        |               |        |        |        |      |     |      |   |   |       |   |   |   |       |        |        |   |        |       
|                            |                         | Total revenue |       | $               | 29,532 |               |        | $      | 12,219 |      |     | $    |  |   |       | $ |  |   |       | $      | 29,532 |   |        | $      | 12,219 | 
|                            |                         |               |       |                 |        |               |        |        |        |      |     |      |   |   |       |   |   |   |       |        |        |   |        |       
|Net income (loss)           |                         | $             | 1,629 |                 |        | $             | (8,131 | )      |        | $    | 472 |      |   | $ | 1,540 |   |   | $ | 2,101 |        |        | $ | (6,591 | )     
|                            |                         |               |       |                 |        |               |        |        |        |      |     |      |   |   |       |   |   |   |       |        |        |   |        |       

A reconciliation of net income
(loss) reported for the operating segments to the amount in
the condensed consolidated financial statements is as follows
(in thousands):

|                                   |  |                    |        |                  |  |      |         |      |  |   |        |   |  |   |         |  
|---------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------- | ---- |  | - | ------ | - |  | - | ------- | -
|                                   |  |                    |        |                 
|                                   |  | Three Months Ended |        | Six Months Ended
|                                   |  | June 30,           |        | June 30,        
|                                   |  |                    |        |                 
|                                   |  | 2001               |        | 2002             |  | 2001 |         | 2002
|                                   |  |                    |        |                  |  |      |         |     
|Segment total                      |  | $                  | 2,101  |                  |  | $    | (6,591  | )    |  | $ | 6,665  |   |  | $ | (10,589 | )
|Unallocated corporate expenditures |  |                    | (1,412 | )                |  |      | (4,653  | )    |  |   | (3,167 | ) |  |   | (5,716  | )
|Eliminations                       |  |                    |       |                  |  |      |        |      |  |   | 275    |   |  |   |        |  
|                                   |  |                    |        |                  |  |      |         |      |  |   |        |   |  |   |         |  
|Consolidated net income (loss)     |  | $                  | 689    |                  |  | $    | (11,244 | )    |  | $ | 3,773  |   |  | $ | (16,305 | )
|                                   |  |                    |        |                  |  |      |         |      |  |   |        |   |  |   |         |  

Note 13:     Recovery
of Receivables

On March 28, 2001, the United States
Bankruptcy Court, District of Maryland, Northern Division,
entered an order confirming the Amended Joint Plan of
Reorganization Under Chapter 11 (the Plan) for
DCR PCS, Inc. (DCR) and Pocket Communications, Inc.
(Pocket). The Plan provides that the Companys
claim against DCR will be allowed in the amount of
$5.0 million. The Company received payment of
$5.0 million on April 11, 2001 which has been
recognized as a recovery of a bad debt during the quarter ended
June 30, 2001 and was recorded as a reduction in general
and administrative expense. The Plan also provided that the
Companys general unsecured claim against Pocket would be
allowed. The Company received $1.6 million as final
settlement for the Pocket claim during the second quarter of
2002. The Company recorded the receipt as a recovery of bad debt
and as a reduction in general and administrative expense during
the quarter.

During 1997, the Company recorded a charge for
receivables due from a Malaysian corporation. On March 15,
2001, the Company received payment of $2.1 million, net of
taxes withheld at the source of $0.4 million, as complete
settlement on these balances after the Malaysian Corporation
successfully emerged from bankruptcy. This amount has been
recognized as a recovery of bad debt during the quarter ended
March 31, 2001 and was recorded as a reduction in general
and administrative expense.

Note
14:     Subsequent Events

On July 9, 2002, the Companys
subsidiary, LCC United Kingdom Limited (LCC UK)
acquired 51 percent of the outstanding shares of Detron LCC
Network Services B.V.(Detron), a newly-formed

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corporation organized under the laws of the
Netherlands. Detron specializes in the provision of deployment,
management and maintenance services to the wireless industry in
the Netherlands. LCC UK acquired the shares of Detron from
Westminster Capital BV (Westminster) for EUR
1,454,000 ($1.4 million) in cash paid at closing.
Additional purchase price of up to EUR 468,000 in cash will be
payable if Detron meets performance targets based upon revenues
and earnings before taxes for the period May through December
2002 (the Earnout Payment). The Earnout Payment, if
any, will be made on the earlier of (a) the date on which
Detrons accountants have completed their review of
Detrons financial statements for 2002 or (b) March
31, 2003. The closing portion of the purchase price was funded
from the Companys cash accounts and it is contemplated
that any Earnout Payment will be similarly funded.


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Item 2:     Managements
Discussion and Analysis of Financial Condition and Results of
Operations

LCC International, Inc. and
Subsidiaries

For the Three and Six Months Ended
June 30, 2001 and 2002

This quarterly report on Form 10-Q contains
forward-looking statements within the meaning of
Section 27A of the Securities Exchange Act of 1934. The
Managements Discussion and Analysis of Financial Condition
and Results of Operations includes, without limitation,
forward-looking statements regarding the Companys ability
to pursue and secure new business opportunities, its tower
business, and its working capital. A more complete discussion of
business risks is included in the Companys Annual Report
on Form 10-K for the year ended December 31, 2001.

Overview

The Company provides integrated end-to-end
solutions for wireless voice and data communication networks
with service offerings that include high level technical
consulting, system design and deployment and ongoing operations
and maintenance services. Since its inception in 1983, the
Company has delivered wireless network solutions to more than
300 customers in over 50 countries.

In the last two years, the Company has made
several strategic decisions that have enabled it to focus on its
core competency in providing end-to-end wireless services. In
March 2000, the Company sold its telecommunication tower
business. The Company expanded its international presence with
the acquisitions of Transmast Italia in Italy and Smith Woolley
Telecom in the United Kingdom. In addition, the Company acquired
51 percent of Detron LCC Network Services B.V. in the
Netherlands in July 2002.The Company operates in a highly
competitive environment subject to rapid technological change
and emergence of new technologies. Historically, the key drivers
of growth in the Companys wireless services business have
been (1) the issuance of new or additional licenses to
wireless operators; (2) the introduction of new services or
technologies; (3) increases in the number of subscribers
served by wireless operators; and (4) the increasing
complexity of wireless systems in operation.

The Companys primary sources of revenues
are from engineering design and system deployment services.
Revenues from services are derived from fixed price and time and
materials contracts. The Company recognizes revenues from fixed
price service contracts using the percentage-of-completion
method. With fixed price contracts the Company recognizes
revenue based on the ratio of individual contract costs incurred
to date on a project compared with total estimated costs.
Anticipated contract losses are recognized, as they become known
and estimable. The Company recognizes revenues on time and
materials contracts as the services are performed.

Cost of revenues includes direct compensation and
benefits, living and travel expenses, payments to third-party
subcontractors and consultants, equipment rentals, expendable
computer software and equipment, and allocated, or directly
attributed, facility and overhead costs identifiable to projects.

General and administrative expenses consist of
compensation, benefits, office and occupancy, and other costs
required for the finance, human resources, information systems,
and executive office functions. Sales and marketing expenses
consist of salaries, benefits, sales commissions, travel and
other related expenses required to implement the Companys
marketing, sales and customer support plans.

Trends That Have Affected or May Affect
Results of Operations and Financial Condition

The Company has continued to see tightened
capital markets, which among other things have contributed to a
slowdown in wireless telecommunications infrastructure spending.
The Companys success depends upon continued growth in the
design and deployment and optimization of wireless networks.
Many wireless carriers are reliant upon the capital markets to
obtain funds to finance building and improving their wireless
networks. Most vulnerable are the customers that are new
licensees and operator/carriers who have limited sources of
funds from operations or have business plans that are dependent
on funding from the capital markets. The slowdown in wireless
telecommunications infrastructure spending caused some of the
Companys customers or potential customers to slow,
postpone or reduce the scope of the deployment of new wireless
networks or expansion of existing networks, which has reduced
the demand for the Companys services. This industry
slowdown is occurring, as the Company needs to replace the
revenue provided by the

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Companys largest client XM Satellite. This
contract was substantially completed in the first quarter of
2002, and significant revenue is not anticipated from this
customer for the remainder of year.


The completion of the XM Satellite contract
coupled with the industry slowdown caused revenue to further
decline in the second quarter of 2002 over the first quarter of
2002. Additionally, the need to replace revenue and the
difficult marketplace has caused gross profit as a percentage of
total revenues to decline. Cost reduction measures currently
being taken by the Company are not sufficient to return the
Company to profitability without additional growth in revenue.
The Company has seen renewed customer activity lately to upgrade
or enhance existing systems. Despite this renewed activity, it
remains uncertain the impact, if any, and the related timing of
any such impact, upon the Companys future revenue growth
opportunities.

The most promising area for revenue growth is in
Europe. This optimism is caused by the need of the European
carriers to meet network-building obligations associated with
their 3G licenses, which represent a significant investment on
their part. With the recent availability of 3G equipment in
Europe, the Company expects that demand for the types of
services provided by the Company will increase. While revenue
from 3G networks only constituted 14.8% of the Companys
revenues for the six months ended June 30, 2002, it is
expected to be an area of business growth in 2002 and in the
future. In anticipation of this growth, the Company has recently
acquired additional deployment capability in Europe. In December
2001, the Company acquired Transmast Italia, a wireless
infrastructure, deployment, civil engineering and project
management firm located in Milan, Italy. In January 2002, the
Company acquired the assets of Smith Woolley Telecom, a
telecommunications consultancy company that specializes in the
provision of search, acquisition, design, build, management and
maintenance services to the wireless industry in the United
Kingdom. In July 2002, the Company acquired 51% of Detron LCC
Network Services B.V., a newly formed company specializing in
the provision, of deployment, management and maintenance
services to the wireless industry in the Netherlands. The
Company also anticipates that its reliance upon fixed price
contracts will continue to grow in connection with these recent
acquisitions. These newly acquired international operations
provide more support for network deployment and construction
management, where use of fixed price contracts is more typical.
These contracts typically contain payment terms that are less
favorable, and consequently require greater working capital than
has historically been required by the Company.

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Results of Operations

The following table and discussion provide
information which management believes is relevant to an
assessment and understanding of the Companys consolidated
results of operations and financial condition. The discussion
should be read in conjunction with the condensed consolidated
financial statements and accompanying notes thereto included
elsewhere herein.

|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |       |       |  
|------------------------------------------------- | -------------------------------------------- | -------------------------------- | ----- | -------------- | ---- | ---- | ------ | ----- | ----- | - | ----- | ---- | ---- |  | ----- | ----- | ----- | -
|                                                  |                                              |                                 
|                                                  |                                              | Percentage of Revenues          
|                                                  |                                              |                                 
|                                                  |                                              |                                  |       |               
|                                                  |                                              | Three Months                     |       | Six Months    
|                                                  |                                              | Ended June 30,                   |       | Ended June 30,
|                                                  |                                              |                                  |       |               
|                                                  |                                              | 2001                             |       | 2002           |      | 2001 |        | 2002 
|                                                  |                                              |                                  |       |                |      |      |        |      
|Revenues                                          |                                              |                                  | 100.0 | %              |      |      | 100.0  | %     |       |   | 100.0 | %    |      |  | 100.0 | %    
|Cost of revenues                                  |                                              |                                  | 83.5  |                |      |      | 87.8   |       |       |   | 79.5  |      |      |  | 91.1  |      
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|Gross profit                                      |                                              |                                  | 16.5  |                |      |      | 12.2   |       |       |   | 20.5  |      |      |  | 8.9   |      
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|Operating (income) expense:                       |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|                                                  | Sales and marketing                          |                                  |       | 5.5            |      |      |        | 16.0  |       |   |       | 5.0  |      |  |       | 14.3  |      
|                                                  | General and administrative                   |                                  |       | 8.3            |      |      |        | 17.0  |       |   |       | 9.2  |      |  |       | 24.3  |      
|                                                  | Restructuring charge                         |                                  |       |               |      |      |        | 82.1  |       |   |       |     |      |  |       | 33.9  |      
|                                                  | Tower portfolio sale and administration, net |                                  |       | (2.4           | )    |      |        | (16.4 | )     |   |       | (3.2 | )    |  |       | (6.8  | )    
|                                                  | Depreciation and amortization                |                                  |       | 2.5            |      |      |        | 6.2   |       |   |       | 2.0  |      |  |       | 4.9   |      
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|                                                  |                                              | Total operating (income) expense |       |                | 13.9 |      |        |       | 104.9 |   |       |      | 13.0 |  |       |       | 70.6  |  
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|Operating income (loss)                           |                                              |                                  | 2.6   |                |      |      | (92.7  | )     |       |   | 7.5   |      |      |  | (61.7 | )    
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|Other income (expense):                           |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|                                                  | Interest income                              |                                  |       | 1.7            |      |      |        | 1.7   |       |   |       | 1.5  |      |  |       | 1.7   |      
|                                                  | Other                                        |                                  |       | (0.5           | )    |      |        | (42.6 | )     |   |       | (0.3 | )    |  |       | (17.6 | )    
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|                                                  |                                              | Total other income (expense)     |       |                | 1.2  |      |        |       | (40.9 | ) |       |      | 1.2  |  |       |       | (15.9 | )
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|Income (loss) from operations before income taxes |                                              |                                  | 3.8   |                |      |      | (133.6 | )     |       |   | 8.7   |      |      |  | (77.6 | )    
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|Provision (benefit) for income taxes              |                                              |                                  | 1.6   |                |      |      | (41.5  | )     |       |   | 3.5   |      |      |  | (22.5 | )    
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      
|Net income (loss)                                 |                                              |                                  | 2.2   | %              |      |      | (92.1  | )%    |       |   | 5.2   | %    |      |  | (55.1 | )%   
|                                                  |                                              |                                  |       |                |      |      |        |       |       |   |       |      |      |  |       |      

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Three Months Ended June 30,
2001

Compared to


Three Months Ended June 30,
2002


Revenues.Revenues
for the three months ended June 30, 2002 were $12.2 million
compared to $29.5 million for the prior year, a decrease of
$17.3 million or 58.6%. The substantial completion of the
Companys deployment contract with XM Satellite Radio, Inc.
(XM Satellite contract) in 2001 was the largest
contributor to the decline. The XM Satellite contract
contributed $13.4 million of the revenue decline. The
balance of the revenue decline is largely attributed to a
slowdown in wireless telecommunications infrastructure spending,
with the largest decline in the United States of
$5.5 million.

Cost of Revenues.Cost of revenues for the three months
ended June 30, 2002 was $10.7 million compared to
$24.7 million for the prior year, a decrease of
$14.0 million. As a percentage of total revenues, cost of
revenues was 87.8% and 83.5% for the three months ended
June 30, 2002 and 2001, respectively. Cost of revenues was
higher in each year for selected costs. For 2002 cost of
revenues as a percentage of total revenues increased because of
lower utilization of professional staff by 5.8%
($0.7 million). In 2001, as a percentage of total revenues,
cost of revenues increased because of a change in estimated
contract costs to complete a large, fixed price contract in the
Middle East by 7.5% ($2.2 million), and an additional
provision for expatriate employee reimbursed taxes by 4.4%
($1.3 million). After adjusting for all these items, cost
of revenues as a percentage of revenues, was 82.0% and 71.6% for
the three months ended June 30, 2002 and 2001,
respectively. Cost of revenues increased in 2002 as a percentage
of revenues because of reductions in gross profit, discussed
below.

Gross Profit.Gross
profit for the three months ended June 30, 2002 was $1.5
million compared to $4.9 million for the prior year, a
decrease of $3.4 million. The reduced level of sales in 2002
resulted in reduced gross profit. Gross profit as a percentage
of revenue, or gross profit margin, has declined. The gross
profit margin was 12.2% and 16.5% for the three months ended
June 30, 2002 and 2001, respectively. Excluding the
additional items of cost, discussed in cost of revenues, gross
profit margins would have been 18.0% and 28.4% for the three
months ended June 30, 2002 and 2001, respectively. The
gross profit margin decline in 2002 was largely driven by price
reductions in response to increased competition caused by a
slowdown in wireless telecommunications infrastructure spending.
The decline in revenue also contributed to the gross profit
margin decline, since some costs of sales, such as shared
management and infrastructure costs remains relatively fixed.

Sales and Marketing.Sales and marketing expenses were $2.0 million for the
three months ended June 30, 2002 compared to
$1.6 million for the prior year, an increase of
$0.4 million. The increase in sales and marketing is
largely related to increased business development activity in
the Asia Pacific region. As a percentage of total revenues,
sales and marketing was 16.0% and 5.5% for 2002 and 2001,
respectively. The slowdown in wireless telecommunications
infrastructure spending has increased competition. To respond to
competitive pressures, the Company has maintained a higher level
of sales and marketing expenditures despite the decline in
revenues.

General and Administrative.General and administrative expenses
were $2.1 million for the three months ended June 30, 2002
compared to $2.4 million for the prior year. General and
administrative expenditures in the second quarter of both 2001
and 2002 received an unusual benefit relative to recoveries of
receivables from bankrupt clients. The benefit recognized from
bankruptcy recoveries was $1.6 million and
$5.0 million for the three months ended June 30, 2002 and
2001, respectively. The benefit from bad debt recoveries
received in 2001 was partially offset by an increase in the
provision for doubtful accounts of $1.5 million, largely
driven by new bankruptcies. Excluding the receivable recoveries
and provision for bad debts, general and administrative
expenditures decreased $2.3 million or 37.8% for the three
months ended June 30, 2002 compared to the same quarter in the
prior year. This cost reduction reflects cost saving initiatives
and reduced administrative support requirements.

Restructuring Charge.A restructuring charge of
$10.0 million was recorded for the three months ended
June 30, 2002 pursuant to a restructuring plan adopted by
the Company. The plan was formulated to respond to the low
utilization of professional employees caused by the recent
completion of several large fixed price contracts and the
difficulty in obtaining new contracts as a result of a slowdown
in wireless telecommunications infrastructure spending. The cost
of the severance and associated expenses were approximately

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$1.0 million and resulted in a work force
reduction of approximately 140 people. Additionally, the Company
had excess facility costs relative to the space occupied by the
employees affected by the reduction in force and reduced
business use of office space resulting from a continued trend
for clients to provide professional staff office space while
performing their services. The charge for the excess office
space was approximately $9.0 million.


Gain on Sale of Tower Portfolio and
Administration, Net.During February
2000, the Company entered into an agreement for the sale of
telecommunications towers that it owned. As part of the sale
agreement, the Company agreed to lease unoccupied space on the
towers, effectively guaranteeing a minimum rent level of a fixed
amount on the towers sold. The gain from the tower portfolio
sale deferred an amount corresponding to this rent commitment,
until the space was leased to another tenant or otherwise
satisfied. The Company recognized $2.0 million and $0.7
million of this previously deferred gain, for the three months
ended June 30, 2002 and 2001, respectively.

Depreciation and
Amortization.Depreciation and
amortization expense was $0.8 million for both the three months
ended June 30, 2002 and 2001. Depreciation expense declined
$0.3 million for the three months ended June 30, 2002
compared to the same quarter in the prior year. The decline in
depreciation expense was offset by amortization expense relative
to capitalized intangibles incurred in connection with the
purchase of Smith Woolley Telecom in January 2002.

Interest Income.Interest income was $0.2 million for the three months ended
June 30, 2002 compared to $0.5 million for the prior
year. Interest income in 2002 declined over 2001 reflecting a
decline in yields available for short-term investments.

Other Income (Expense).Other expense for the three months
ended June 30, 2002 contained an impairment charge of
$5.1 million. This charge relates to the entire investment
the Company made in 2000 relative to investments in two separate
companies, Plan + Design Netcare AG ($4.6 million) and
Mobilocity, Inc. ($0.5 million). Both firms have entered
into statutory or voluntary liquidation plans during the second
quarter of 2002. In both cases, no proceeds are anticipated to
be returned to shareholders.

Provision (Benefit) for Income Taxes.The provision for income taxes was
recorded for the three months ended June 30, 2002 using an
effective income tax rate of 31.1% compared to 40.0% for the
comparable period in 2001. Since 2002 has a pre-tax loss, the
lower the effective tax rate, the lower the tax benefit, where
the opposite is true in 2001, when the Company had pre-tax
income. Both the 2001 and 2002 effective tax rates are
unfavorable when compared to the statutory federal tax rate of
35.0%. This reduced tax benefit occurs because the Company is
recording no tax benefit on anticipated losses outside the
United States. These foreign operating losses will be a carry
forward item for income tax purposes, and the tax asset will be
recognized when it can be demonstrated these tax losses can be
utilized. The effective tax rate of 31.1% for the three months
ended June 30, 2002 reflects a change in the annual
anticipated effective tax rate to 29.0%.

Net Income (Loss).The net loss was $11.2 million for the three months ended
June 30, 2002 compared to net income of $0.7 million
in the prior year. The restructuring charge of
$10.0 million coupled with the impairment charge of
$5.1 million included in other expense, contributed to
$10.7 million of the loss on an after-tax basis in the
second quarter of 2002. The operating loss and the business
requirement for a restructuring charge are a result of the
reduced revenue and gross profit in 2002 compared to 2001.

Six Months Ended June 30, 2001

Compared to


Six Months Ended June 30, 2002


Revenues.Revenues
for the six months ended June 30, 2002 were
$29.6 million compared to $72.2 million for the prior
year, a decrease of $42.6 million or 59.0%. The substantial
completion of the XM Satellite contract in 2001 was the largest
contributor to the decline. The XM Satellite contract
contributed $31.7 million of the revenue decline. The
balance of the revenue decline is largely attributed to a
slowdown in wireless telecommunications infrastructure spending,
with the largest decline in the United States of
$10.9 million.

Cost of Revenues.Cost of revenues for the six months
ended June 30, 2002 was $27.0 million compared to
$57.4 million for the prior year, a decrease of $30.4
million. As a percentage of total revenues, cost of

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revenues was 91.1% and 79.5% for the six months
ended June 30, 2002 and 2001, respectively. Cost of
revenues was higher in each year for selected costs. The
increase in cost of revenues in 2002, as a percentage of total
revenues, was caused by lower utilization of professional staff
of approximately 8.5% ($2.5 million), and a fixed price
contract cost growth of 1.7% ($0.5 million) caused by a
reduction in a fixed price contract value. The staff utilization
decline was caused by the completion of several large fixed
price contracts and difficulty in obtaining new contracts as a
result of the slowdown in wireless telecommunications
infrastructure spending. In 2001, as a percentage of total
revenues, cost of revenues increased because of a change in
estimated contract costs to complete a large, fixed price
contract in the Middle East by 3.1% ($2.2 million), an
additional provision for expatriate employee reimbursed taxes of
1.8% ($1.3 million), and lower utilization of professional
staff of 0.8% ($0.6 million). After adjusting for these
selected costs, cost of revenues as a percentage of total
revenues was 80.9% and 73.8% for the six months ended
June 30, 2002 and 2001, respectively. Cost of revenues
increased in 2002 as a percentage of revenues because of
reductions in gross profit, discussed below.


Gross Profit.Gross
profit for the six months ended June 30, 2002 was $2.6
million compared to $14.8 million for the prior year, a
decrease of $12.2 million. The reduced level of sales in 2002
resulted in reduced gross profit. Gross profit as a percentage
of revenue, or gross profit margin, has declined. The gross
profit margin was 8.9% and 20.5% for the six months ended
June 30, 2002 and 2001, respectively. Excluding the
additional items of cost, discussed in cost of revenues, gross
profit margins would have been 19.1% and 26.2% for the six
months ended June 30, 2002 and 2001, respectively. The
gross profit margin decline in 2002 compared to 2001 was largely
driven by price reductions to respond to increased competition
caused by a slowdown in wireless telecommunications
infrastructure spending. The decline in revenue also contributed
to the gross profit margin decline, since some costs of sales,
such as shared management and infrastructure costs remains
relatively fixed.

Sales and Marketing.Sales and marketing expenses were $4.2 million for the six
months ended June 30, 2002 compared to $3.6 million
for the prior year, an increase of $0.6 million. The
increase in sales and marketing is largely related to increased
business development activity in the Asia Pacific region. As a
percentage of total revenues, sales and marketing was 14.3% and
5.0% for 2002 and 2001, respectively. The slowdown in wireless
telecommunications infrastructure spending has increased
competition. To respond to competitive pressures, the Company
has maintained a higher level of sales and marketing
expenditures despite the decline in revenues.

General and Administrative.General and administrative expenses
were $7.2 million for the six months ended June 30, 2002
compared to $6.6 million for the prior year. General and
administrative expenditures for the first half of both 2001 and
2002 received an unusual benefit relative to recoveries of
receivables from bankrupt clients. The benefit recognized from
bankruptcy recoveries was $1.6 million and
$7.5 million for the six months ended June 30, 2002
and 2001, respectively. The benefit from bad debt recoveries in
2001 was partially offset by an increase in the provision for
doubtful accounts of $1.6 million largely driven by new
bankruptcies. The provision of doubtful accounts was
$0.6 million for the six months ended June 30, 2002.
Excluding the receivable recoveries and provision for bad debt
general and administrative expenditures decreased
$4.3 million or 34.4% for the six months ended
June 30, 2002 compared to the prior year. This cost
reduction reflects cost saving initiatives and reduced
administrative support requirements.

Restructuring Charge.A restructuring charge of
$10.0 million was recorded for the six months ended
June 30, 2002 pursuant to a restructuring plan adopted by
the Company. The plan was formulated to respond to the low
utilization of professional employees caused by successful
completion of several large fixed price contracts and difficulty
in obtaining new contracts as a result of a slowdown in wireless
telecommunications infrastructure spending. The cost of the
severance and associated costs was approximately
$1.0 million and resulted in a work force reduction of
approximately 140 people. Additionally, the Company had excess
facility costs relative to the space occupied by the employees
affected by the reduction in force and reduced business use of
office space resulting from a continued trend for clients to
provide professional staff office space while performing their
services. The charge for the excess office space was
approximately $9.0 million.

Gain on Sale of Tower Portfolio and
Administration, Net.During February
2000, the Company entered into an agreement for the sale of
telecommunications towers that it owned. As part of the sale
agreement, the Company agreed to lease unoccupied space on the
towers, effectively guaranteeing a minimum rent level of a

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fixed amount on the towers sold. The gain from
the tower portfolio sale deferred an amount corresponding to
this rent commitment, until the space was leased to another
tenant or otherwise satisfied. The Company recognized $2.0
million and $2.3 million of this previously deferred gain,
for the six months ended June 30, 2002 and 2001,
respectively.


Depreciation and
Amortization.Depreciation and
amortization expense was $1.5 million for both the six months
ended June 30, 2002 and 2001. Depreciation expense declined
$0.3 million for the six months ended June 30, 2002
compared to the same period in the prior year. The decline in
depreciation expense was offset by amortization expense relative
to capitalized intangibles incurred in connection with the
purchase of Smith Woolley Telecom in January 2002.

Interest Income.Interest income was $0.5 million for the six months ended
June 30, 2002 compared to $1.1 million for the prior
year. Interest income in 2002 declined over 2001 reflecting a
decline in yields available for short-term investments.

Other Income (Expense).Other expense for the six months ended
June 30, 2002 contained an impairment charge of
$5.1 million. This charge relates to the entire investment
the Company made in 2000 relative to investments in two separate
companies, Plan + Design Netcare AG ($4.6 million) and
Mobilocity, Inc. ($0.5 million). Both firms have entered
into statutory or voluntary liquidation plans during the second
quarter of 2002. In both cases, no proceeds are anticipated to
be returned to shareholders.

Provision (Benefit) for Income Taxes.The provision for income taxes was
recorded for the six months ended June 30, 2002 using an
effective income tax rate of 29.0% compared to 40.0% for the
comparable period in 2001. Since 2002 has a pre-tax loss, the
lower the effective tax rate the lower the tax benefit where the
opposite is true in 2001, when the Company had pre-tax income.
Both the 2001 and 2002 effective tax rates are unfavorable when
compared to the statutory federal tax rate of 35%. This reduced
tax benefit occurs because the Company is recording no tax
benefit on anticipated losses outside the United States. These
foreign operating losses will be a carry forward item for income
tax purposes, and the tax asset will be recognized when it can
be demonstrated these tax losses can be utilized.

Net Income (Loss).The net loss was $16.3 million for the six months ended
June 30, 2002 compared to net income of $3.8 million
in the prior year. Excluding the unusual items discussed above:
tower gains, restructuring charge, impairment charge (included
in other expense), and receivable recoveries (included in
general and administrative) the loss was $8.1 million and
$2.1 million, for the six months ended June 30, 2002
and 2001, respectively. The decline in revenue and associated
gross profit and the inability to reduce costs at the same rate
as revenues declined in 2002, are the largest contributing
factors to the increased loss in 2002.

Liquidity and Capital Resources

Cash combined with short-term investments as
June 30, 2002 provides total liquid assets of
$43.6 million compared to $53.1 million at
December 31, 2001, a decrease of $9.5 million. The
decrease in liquidity largely relates to $7.1 million used
to purchase Smith Woolley Telecom in January 2002 and cash used
in operations of $2.5 million.

Cash used in operating activities was
$2.5 million for the six months ended June 30, 2002,
compared to $1.2 million in the prior year. The pre-tax
loss of $23.0 million for the six months ended
June 30, 2002 contains $13.9 million of expenses that
did not require a current outlay of cash and $6.6 million
of cash collected from receivables in excess of payables.
Expenditures that did not include cash during the six months
ended June 30, 2002 include an impaired asset charge
($5.1 million), written-off leasehold improvements included
in the restructuring charge ($1.5 million), and a portion
of the restructuring charge in which payment was deferred
($7.3 million). Cash used in operating activities in 2001
was largely the result of expenses paid that were accrued at
December 31, 2000.

Cash used by investing activities totaled
$7.9 million for the six months ended June 30, 2002.
The largest use of cash by investing activities was
$7.1 million to acquire Smith Woolley in January 2002 and
purchases of property and equipment of $0.8 million. Cash
used in investing activity in 2001 totaled $3.4 million.
The investing activity in 2001 was largely related to an
additional investment of $1.7 million in a German wireless
deployment firm and purchases of property and equipment for
$1.6 million.

Working capital was $62.2 million at
June 30, 2002 compared to $72.1 million at
December 31, 2001, a decrease of $9.9 million. The
decrease in working capital was largely related to the purchase
of Smith Woolley

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for cash of $7.1 million and net cash used
in operating activities of $2.5 million. The Companys
primary requirement for working capital is to fund receivables
relative to services performed. With the substantial completion
of the XM Satellite contract, the Company expects to generate an
operating loss in the current year, which will also require
working capital. Additionally, the Company has seen a slowdown
in receivable payments and increasingly seen less favorable
payment terms available in the current marketplace, further
increasing working capital requirements. The Company has no
material cash commitments other than obligations under its
operating leases, which are primarily office space. Future
capital requirements will depend upon many factors, including
the timing of payments under contracts and increases in
personnel in advance of new contracts.


The Company had no debt and did not maintain a
line of credit as of June 30, 2002, since it had cash and
short-term investments that it considered sufficient to meet
liquidity requirements. Additionally, the Company believes that
a large outstanding receivable balance with XM Satellite of
$7.5 million as of June 30, 2002, related to work
performed prior to the current quarter will generate additional
liquidity during the current year. The Company has not engaged
in any off-balance sheet financing as of June 30, 2002. The
Company believes it will generate sufficient cash from
operations to meet its long-term liquidity needs.

Quantitative and Qualitative Disclosures about
Market Risk

The Company is exposed to the impact of foreign
currency fluctuations. The Companys exposure to exchange
rates relates primarily to its foreign subsidiaries.
Subsidiaries with material foreign currency exposure are in
England, Italy, Brazil, and Egypt. Additionally, the
Companys subsidiary in England maintains branches in
Europe and Africa in which the Company receives payment in
Euros. Exchange rates can have an impact on the U.S. dollar
value of the subsidiaries reported earnings and the intercompany
transactions with the subsidiaries.

Approximately 48.8% of the Companys
revenues were generated outside the United States for the six
months ended June 30, 2002; the majority of which were in
Europe. In connection with the Companys recent
acquisitions and the increased availability of 3G equipment in
Europe, the Company anticipates continued growth of its
international operations, particularly in Europe, the Middle
East and Africa, in 2002 and beyond. As a result, fluctuations
in the value of foreign currencies against the U.S. dollar may
have a significant impact on the reported results of the
Company. Revenues and expenses denominated in foreign currencies
are translated monthly into United States dollars at the
weighted average exchange rate. Consequently, as the value of
the dollar strengthens relative to other currencies in the
Companys major markets the resulting translated revenues,
expenses and operating profits are lower.

Fluctuations in currency exchange rates also can
have an impact on the U.S. dollar amount of shareholders
equity of the Company. The assets and liabilities of the
Companys non-U.S. subsidiaries were translated into United
States dollars at the exchange rate in effect at June 30,
2002. The resulting translation adjustments are recorded in
shareholders equity as accumulated other comprehensive
loss. The dollar was weaker relative to many of the foreign
currencies at June 30, 2002 compared to December 31,
2001. Consequently, the accumulated other comprehensive loss
component of shareholders equity decreased
$0.8 million during the six months ended June 30,
2002. As of June 30, 2002, the total amount of long-term
intercompany receivable/payables in non-U.S. subsidiaries
subject to this equity adjustment, using the exchange rate as of
the same date, was approximately $6.6 million.

The Company is exposed to the impact of foreign
currency fluctuations due to the operations of and short-term
intercompany transactions with its consolidated foreign
subsidiaries. While these intercompany balances are eliminated
in consolidation, exchange rate changes do affect consolidated
earnings. Foreign subsidiaries with amounts owed to U.S.
operations at June 30, 2002 (denominated in U.S. dollars)
include Brazil in the amount of $0.7 million. The potential
foreign currency translation losses from a hypothetical 10%
adverse change relative to this intercompany balance would not
be material. In addition, a hypothetical 10% adverse change
would result in a $0.07 million decline relative to
operating losses generated outside the United States. This was
estimated using a 10% deterioration factor to the average
monthly exchange rates applied to net income or loss for each of
the subsidiaries in the respective period. Foreign exchange
gains and losses recognized on any transactions are included in
the Consolidated Statements of Operations.

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Although currency fluctuations can impact the
Companys reported results and shareholders equity,
such fluctuations generally do not affect the Companys
cash flow or result in actual economic gains or losses. The
Company currently does not hedge any of these risks in its
foreign subsidiaries because: (i) the Companys
Brazilian and Egyptian subsidiaries derive revenues and incur
expenses within a single country and consequently, do not incur
currency risks in connection with the conduct of their normal
operations, (ii) the British pound sterling, U.S. dollar,
and Euro are relatively stable against each other,
(iii) other foreign operations are minimal, and
(iv) the Company does not believe that hedging transactions
are justified by the current exposure and cost at this time.

Critical Accounting Policies

The Companys critical accounting policies
are as follows:



| |   |                                                                       
| | - | ----------------------------------------------------------------------
| |  | Revenue recognition;                                                  
|
| |  | Allowance for doubtful accounts and accrual of
    expatriate taxes;  
|
| |  | Accounting for income taxes;                                          
|
| |  | Impairment of long-lived assets and investments
    in affiliates; and
|
| |  | Restructuring charge                                                  

Revenue
recognition policy

The Companys principal source of revenues
consists of design and system deployment services. The Company
provides design services on a contract basis, usually in a
customized plan for each client and generally charges for
engineering services on a time and materials or fixed price
basis. The Company generally offers its deployment services on a
fixed price, time-certain basis. The Company recognizes revenue
on fixed price contracts using the percentage-of-completion
method. With the percentage-of-completion method, expenses on
each project are recognized as incurred, and revenues are
recognized based on the ratio of the current costs incurred for
the project to the then estimated total costs of the project.
Accordingly, revenue recognized in a given period depends on,
among other things, the costs incurred on each individual
project and its then current estimate of the total remaining
costs to complete individual projects. Considerable judgment on
the part of the Companys management may be required in
determining estimates to complete a project including the scope
of the work to be completed, and reliance on the customer or
other vendors to fulfill some task(s). If in any period the
Company significantly increases its estimate of the total costs
to complete a project, it may recognize very little or no
additional revenue with respect to that project. For example, in
2001, the Companys gross profits were decreased by
$3.3 million because of increased costs to complete a
project performed in the Middle East. If total contract cost
estimates increase, gross profit for any single project may be
significantly reduced or eliminated. If the total contract cost
estimates indicate that there is a loss, the loss is recognized
in the period the determination is made.

Allowance for
doubtful accounts and accrual of expatriate taxes

The preparation of financial statements requires
the Companys management to make estimates and assumptions
that affect the reported amount of assets, liabilities,
contingent assets and liabilities and the reported amounts of
revenues and expenses during the reported period. Specifically,
the Companys management must make estimates on the
uncollectability of its accounts receivables. Management
specifically analyzes accounts receivable balances, customer
concentrations, customer credit-worthiness, current economic
trends and changes in its customer payment terms when evaluating
the adequacy of the valuation allowance for doubtful accounts.
The Company derived 66.4% of its total revenues during the
quarter ended June 30, 2002, from its ten largest
customers, indicating significant customer concentration risk
with the Companys receivables. These ten largest customers
constituted 87.6% of the Companys net receivable balance
as of June 30, 2002, respectively. In addition, fixed price
contracts with unfavorable milestone payments can cause unbilled
receivables to grow prior to achieving the applicable milestone
that permits billing. Lastly, the Company frequently performs
services for development stage customers, which carry a higher
degree of risk, particularly as to the collection of accounts
receivable. These customers may be particularly vulnerable to
current tightening of available credit and general economic
slowdown. The Company considers three of the Companys ten
largest customers to be development stage customers. The
customers, XM Satellite, Orascomm Telecom in Algeria, and
NorthCoast Communications, had outstanding receivable

20



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balances in the aggregate at December 31,
2001 and June 30, 2002 of $20.8 million and
$11.3 million, respectively.


The Company estimates liabilities associated with
taxes relative to employees sent to assignments in foreign
countries. These expatriate employees are reimbursed for
additional personal income tax burden that was derived as a
result of the assignment. Calculation of these obligations takes
considerable knowledge of payroll, social, and other taxes in
multiple countries, and the employees personal tax
situation. In addition, it requires interpretation of tax laws,
an assessment of potential audit risk from tax authorities, and
often the resolution of the tax liabilities may not occur for
several years. For example, in 2001, the Companys gross
profits were decreased by $1.3 million because of an
additional provision for expatriate employees reimbursed taxes.
The Company had $3.5 million and $2.9 million accrued
for expatriate tax obligations as of December 31, 2001 and
June 30, 2002, respectively.

Accounting for
income taxes

As part of the process of preparing the
Companys consolidated financial statements an estimate for
income taxes is required for each of the jurisdictions in which
the Company operates. This process requires estimating the
Companys actual current tax exposure together with
assessing temporary differences resulting from differing
treatment of items, such as deferred revenue, for tax accounting
purposes. These differences result in deferred tax assets and
liabilities, which are included in the consolidated balance
sheet. The Company must then assess the likelihood that its
deferred tax assets will be recovered from future taxable income
and to the extent the Company believes that recovery is not
likely, it must establish a valuation allowance. To the extent
the Company establishes a valuation allowance or increases this
allowance in a period, it must include an expense within the tax
provision in the statement of operations.

Significant management judgment is required in
determining the Companys provision for income taxes, its
deferred tax assets and liabilities and any valuation allowance
recorded against its net deferred tax assets. The Company has
excluded from the 2002 tax provision $0.7 million for the
six months ended June 30, 2002, due to uncertainties
related to its ability to utilize some of its deferred tax
assets, primarily consisting of foreign net operating losses
carried forward and foreign tax credits, before they expire. The
valuation allowance is based on the Companys estimates of
taxable income by jurisdiction in which it operates and the
period over which its deferred tax assets will be recoverable.
In the event the actual results differ from these estimates the
Company may need to increase or decrease its valuation allowance
which could materially impact its financial position and results
of operations. The net deferred tax assets, as of June 30,
2002 was $8.0 million.

Impairment of
investments in affiliates

The Company maintained investments in affiliates
of $5.1 million as of December 31, 2001. These
investments were made in 2000 relative to two separate
companies, Plan + Design Netcare AG ($4.6 million) and
Mobilocity, Inc. ($0.5 million). Both investments were
accounted for at cost. Mobilocity has implemented a voluntary
liquidation plan. Plan + Design Netcare AG and its operating
subsidiary have filed for insolvency protection. Based upon the
voluntary liquidation plans and insolvency filings, the Company
has determined these investments are probably not recoverable
and recorded an impairment charge of $5.1 million.

Restructuring
charge

The Company recorded a restructuring charge
during the second quarter of 2002. Included in this
restructuring charge of $10.0 million was a charge for
excess facilities aggregating $9.0 million. This facility
charge significantly relates to leased office space, which the
Company believes it will no longer occupy. The facility charge
takes the existing lease obligation less anticipated rental
receipts to be received from existing and potential subleases.
This requires significant judgments about the length of time
space will remain vacant, anticipated cost escalators and
operating costs associated with the leases, market rate the
space will be subleased at, and broker fees or other costs
necessary to market the space. These real estate judgments were
based upon independent market analysis and assessment from
experienced real estate brokers. The restructuring charge
calculation assumes $9.8 million will be derived in
sublease income, for which the Company does not currently have a
subtenant.

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Related Party Transactions

The Company provided services to Telcom Ventures
and various other companies that are majority owned, or
controlled by, Telcom Ventures or its members. The
Companys relationship with Telcom Ventures may result in
potential conflicts of interest Revenues from Telcom Ventures
were 0.1% of 2001 revenues and none in 2002.

During 2001 and 2002, the Company provided
services to XM Satellite. Telcom Ventures has a minority
investment in XM Satellite, and Dr. Rajendra Singh, a
director of Telcom Ventures, is a member of the board of
directors of the Company. Dr. Singh also is a former member
of the XM Satellite board of directors. Revenues earned for
services provided to XM Satellite were $13.7 million and
$0.3 million for the second quarter of 2001 and 2002,
respectively. Revenues earned during the first six months of
2001 and 2002 for services provided to XM Satellite were
$35.0 million and $3.3 million, respectively.
Receivables from XM Satellite were $13.0 million and
$7.5 million at December 31, 2001 and June 30, 2002,
respectively.

Recent Accounting Pronouncements

In July 2002, FASB SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities, was issued. The statement provides specific
guidance for the recognition, measurement and reporting of costs
associated with exiting an activity or disposing of a long-lived
asset, including restructuring charges that the Company
currently accounts for under EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring). The Company plans to adopt
SFAS No. 146 in January 2003 and is evaluating the impact
of the new standard.

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##### Table of Contents






PART II: OTHER INFORMATION




Item 1:     Legal
Proceedings

The Company is party to various non-material
legal proceedings and claims incidental to its business.
Management does not believe that these maters will have a
material adverse affect on the consolidated results of
operations or financial condition of the Company.




Item 2:     Changes
in Securities

Not Applicable




Item 3:     Defaults
Upon Senior Securities

Not Applicable




Item 4:     Submission
of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders was held on
May 23, 2002. All of the proposals for Shareholder
consideration at the Annual Meeting were approved. The following
is a tabulation of the voting on each proposal presented at the
Annual Meeting.

Proposal
1  Election of Directors

|                        |  |         |      |              |  |             |              |              |  |  |     |   |  |  |     |  
|----------------------- |  | ------- | ---- | ------------ |  | ----------- | ------------ | ------------ |  |  | --- | - |  |  | --- | -
|                        |  | Term    |      |              |  | Votes       |              | Broker      
|Elected Director        |  | Expires |      | Votes For(1) |  | Withheld(1) |              | Non-Votes(1)
|                        |  |         |      |              |  |             |              |             
|C. Thomas Faulders, III |  |         | 2003 |              |  |             | 12,126,808(A | )            |  |  | 0(A | ) |  |  | 0(A | )
|                        |  |         |      |              |  |             | 63,188,740(B | )            |  |  | 0(B | ) |  |  | 0(B | )
|Mark D. Ein             |  |         | 2003 |              |  |             | 12,126,808(A | )            |  |  | 0(A | ) |  |  | 0(A | )
|                        |  |         |      |              |  |             | 63,188,740(B | )            |  |  | 0(B | ) |  |  | 0(B | )
|Steven J. Gilbert       |  |         | 2003 |              |  |             | 12,126,808(A | )            |  |  | 0(A | ) |  |  | 0(A | )
|                        |  |         |      |              |  |             | 63,188,740(B | )            |  |  | 0(B | ) |  |  | 0(B | )
|Susan Mayer             |  |         | 2003 |              |  |             | 12,126,808(A | )            |  |  | 0(A | ) |  |  | 0(A | )
|                        |  |         |      |              |  |             | 63,188,740(B | )            |  |  | 0(B | ) |  |  | 0(B | )
|Susan Ness              |  |         | 2003 |              |  |             | 12,126,808(A | )            |  |  | 0(A | ) |  |  | 0(A | )
|                        |  |         |      |              |  |             | 63,188,740(B | )            |  |  | 0(B | ) |  |  | 0(B | )
|Rajendra Singh          |  |         | 2003 |              |  |             | 12,126,808(A | )            |  |  | 0(A | ) |  |  | 0(A | )
|                        |  |         |      |              |  |             | 63,188,740(B | )            |  |  | 0(B | ) |  |  | 0(B | )
|Neera Singh             |  |         | 2003 |              |  |             | 12,126,808(A | )            |  |  | 0(A | ) |  |  | 0(A | )
|                        |  |         |      |              |  |             | 63,188,740(B | )            |  |  | 0(B | ) |  |  | 0(B | )

Proposal
2 Ratification of the
appointment of KPMG LLP as the independent auditors of the
Company for the fiscal year ended December 31, 2002.

|              |  |            |          |               |  |              |          |   |  |  |     |  
|------------- |  | ---------- | -------- | ------------- |  | ------------ | -------- | - |  |  | --- | -
|Votes         |  | Votes      |          | Votes         |  | Broker      
|For(1)        |  | Against(1) |          | Abstaining(1) |  | Non-Votes(1)
|              |  |            |          |               |  |             
|12,125,383(A) |  |            | 17,200(A | )             |  |              | 23,855(A | ) |  |  | 0(A | )
|63,188,740(B) |  |            | 0(B      | )             |  |              | 0(B      | ) |  |  | 0(B | )

Proposal
3 Adoption of an amendment
to the Employee Stock Purchase Plan increasing the maximum
number of Class A Common Stock that may be issued to
860,000 shares.

|              |  |            |           |               |  |              |          |   |  |  |     |  
|------------- |  | ---------- | --------- | ------------- |  | ------------ | -------- | - |  |  | --- | -
|Votes         |  | Votes      |           | Votes         |  | Broker      
|For(1)        |  | Against(1) |           | Abstaining(1) |  | Non-Votes(1)
|              |  |            |           |               |  |             
|12,008,360(A) |  |            | 109,381(A | )             |  |              | 48,697(A | ) |  |  | 0(A | )
|63,188,740(B) |  |            | 0(B       | )             |  |              | 0(B      | ) |  |  | 0(B | )




Note (1): The shareholders are entitled to vote
as a single class, with each share of the Companys
Class A Common Stock having one vote and each share of the
Companys Class B Common Stock having ten votes.

23



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Item 5:     Other
Information

Not Applicable




Item 6:     Exhibits
and Reports on Form 8-K

(a) Exhibits



|     |                                                                                                                                                                                                    
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10  | LCC International, Inc. Employee Stock Purchase
    Plan, as amended (incorporated by reference to Exhibit 4.1
    to the Companys Registration Statement on Form S-8
    filed on August 8, 2002)

11  Calculation of Net Income (Loss)
Per Share



|     |                                                                                                                                           
|---- | ------------------------------------------------------------------------------------------------------------------------------------------
|99  | Written Statement of Chief Executive Officer and
    Chief Financial Officer Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

On August 6, 2002, the Company filed a
Current Report on Form 8-K, which reported that on
August 5, 2002 the Company issued a press release
announcing its financial and operating results for the second
quarter of 2002.

On July 9, 2002, the Company filed a Current
Report on Form 8-K, which reported that the Companys
subsidiary, LCC United Kingdom Limited acquired 51 percent of
the outstanding shares of Detron LCC Network Services B.V. in
the Netherlands for an initial payment of 1,454,000 Euro in cash.

24



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##### Table of Contents



Signature

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



| |                                         
| | ----------------------------------------
| | LCC International, Inc. and Subsidiaries
|
| | /s/ DAVID N. WALKER                     
| |                                         
| | David N. Walker                         
| | Senior Vice President, Treasurer        
| | and Chief Financial Officer             
| | (Principal Accounting Officer and       
| | Chief Financial Officer)                

Date: August 14, 2002




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##### Table of Contents



LCC International, Inc. and
Subsidiaries






Exhibit Index


|               |  |                                                                                                                                                                                                    
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit Description                                                                                                                                                                                
|               |  |                                                                                                                                                                                                    
|10             |  | LCC International, Inc. Employee Stock Purchase
    Plan, as amended (incorporated by reference to Exhibit 4.1
    to the Companys Registration Statement on Form S-8
    filed on August 8, 2002)
|11             |  | Calculation of Net Income (Loss) Per Share                                                                                                                                                         
|99             |  | Written statement of Chief Executive Officer and
    Chief Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002