##### 









United States Securities and Exchange
Commission

Washington, DC 20549


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 September 30, 2004                            |  | 
|     |  | 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)


|                                         |  |                       
|---------------------------------------- |  | ----------------------
|Delaware                                 |  | 54-1807038            
|(State or Other Jurisdiction of          |  | (I.R.S. Employer      
|Incorporation or Organization)           |  | 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

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act). Yes           No X

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:


Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by
Sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan
confirmed by a
court. Yes           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 November 1, 2004 the registrant had
outstanding 19,905,015 shares of Class A Common Stock, par
value $0.01 per share (the Class A Common
Stock) and 4,537,577 shares of Class B Common Stock,
par value $0.01 per share (the Class B Common
Stock).



---








---



##### 



LCC International, Inc. and
Subsidiaries

Quarterly Report on Form 10-Q

For the quarter ended September 30,
2004


INDEX

|         |  |                                                                                                                                |  |        |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | ------ | -- | 
|         |  |                                                                                                                                |  | Page  
|         |  |                                                                                                                                |  | Number
|         |  |                                                                                                                                |  |       
|PART I:  |  | FINANCIAL INFORMATION                                                                                                          |  |        |    | 
|ITEM 1:  |  | FINANCIAL STATEMENTS                                                                                                           |  |        |    | 
|         |  | Condensed consolidated statements of operations
    for the three months and nine months ended September 30, 2003
    and 2004 |  |        | 2  | 
|         |  | Condensed consolidated balance sheets as of
    December 31, 2003 and September 30, 2004                                       |  |        | 3  | 
|         |  | Condensed consolidated statements of cash flows
    for the nine months ended September 30, 2003 and 2004                      |  |        | 4  | 
|         |  | Notes to condensed consolidated financial
    statements                                                                       |  |        | 5  | 
|ITEM 2:  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                      |  |        | 12 | 
|ITEM 3:  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                                                                 |  |        | 21 | 
|ITEM 4:  |  | CONTROLS AND PROCEDURES                                                                                                        |  |        | 22 | 
|        
|PART II: |  | OTHER INFORMATION                                                                                                              |  |        |    | 
|ITEM 1:  |  | Legal proceedings                                                                                                              |  |        | 23 | 
|ITEM 2:  |  | Unregistered sales of equity securities and use
    of proceeds                                                                |  |        | 23 | 
|ITEM 3:  |  | Defaults upon senior securities                                                                                                |  |        | 23 | 
|ITEM 4:  |  | Submission of matters to a vote of security
    holders                                                                        |  |        | 23 | 
|ITEM 5:  |  | Other information                                                                                                              |  |        | 23 | 
|ITEM 6:  |  | Exhibits                                                                                                                       |  |        | 23 | 





---



##### 



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 |        | Nine Months Ended
|                                                                                    |                                 | September 30,      |        | September 30,    
|                                                                                    |                                 |                    |        |                  
|                                                                                    |                                 | 2003               |        | 2004              |   | 2003 |        | 2004  
|                                                                                    |                                 |                    |        |                   |   |      |        |       
|REVENUES                                                                            |                                 | $                  | 29,350 |                   |   | $    | 56,345 |        |   | $ | 64,677 |        |   | $ | 154,012 |       
|COST OF REVENUES                                                                    |                                 |                    | 23,756 |                   |   |      | 46,015 |        |   |   | 53,215 |        |   |   | 126,751 |       
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|GROSS PROFIT                                                                        |                                 |                    | 5,594  |                   |   |      | 10,330 |        |   |   | 11,462 |        |   |   | 27,261  |       
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|OPERATING (INCOME) EXPENSE:                                                         |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|                                                                                    | Sales and marketing             |                    |        | 1,302             |   |      |        | 2,072  |   |   |        | 4,739  |   |   |         | 5,724  |  
|                                                                                    | General and administrative      |                    |        | 4,118             |   |      |        | 5,929  |   |   |        | 13,587 |   |   |         | 18,762 |  
|                                                                                    | Restructuring charge (recovery) |                    |        | 150               |   |      |        |       |   |   |        | (2     | ) |   |         | (924   | )
|                                                                                    | Depreciation and amortization   |                    |        | 1,338             |   |      |        | 728    |   |   |        | 2,944  |   |   |         | 2,097  |  
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|                                                                                    |                                 |                    | 6,908  |                   |   |      | 8,729  |        |   |   | 21,268 |        |   |   | 25,659  |       
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|OPERATING INCOME (LOSS)                                                             |                                 |                    | (1,314 | )                 |   |      | 1,601  |        |   |   | (9,806 | )      |   |   | 1,602   |       
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|OTHER INCOME (EXPENSE):                                                             |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|                                                                                    | Interest income                 |                    |        | 49                |   |      |        | 23     |   |   |        | 246    |   |   |         | 134    |  
|                                                                                    | Interest expense                |                    |        | (49               | ) |      |        | (60    | ) |   |        | (98    | ) |   |         | (152   | )
|                                                                                    | Other                           |                    |        | (137              | ) |      |        | 83     |   |   |        | 1,232  |   |   |         | 604    |  
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|                                                                                    |                                 |                    | (137   | )                 |   |      | 46     |        |   |   | 1,380  |        |   |   | 586     |       
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|INCOME (LOSS) FROM OPERATIONS BEFORE INCOME
    TAXES                               |                                 |                    | (1,451 | )                 |   |      | 1,647  |        |   |   | (8,426 | )      |   |   | 2,188   |       
|PROVISION (BENEFIT) FOR INCOME TAXES                                                |                                 |                    | (426   | )                 |   |      | 426    |        |   |   | (1,264 | )      |   |   | 1,207   |       
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|NET INCOME (LOSS)                                                                   |                                 | $                  | (1,025 | )                 |   | $    | 1,221  |        |   | $ | (7,162 | )      |   | $ | 981     |       
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|NET INCOME (LOSS) PER SHARE:                                                        |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|                                                                                    | Basic                           |                    | $      | (0.05             | ) |      | $      | 0.05   |   |   | $      | (0.34  | ) |   | $       | 0.04   |  
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|                                                                                    | Diluted                         |                    | $      | (0.05             | ) |      | $      | 0.05   |   |   | $      | (0.34  | ) |   | $       | 0.04   |  
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|WEIGHTED AVERAGE SHARES USED IN CALCULATION OF
    NET INCOME (LOSS)
    PER SHARE: |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|                                                                                    | Basic                           |                    |        | 21,002            |   |      |        | 24,411 |   |   |        | 20,977 |   |   |         | 24,392 |  
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       
|                                                                                    | Diluted                         |                    |        | 21,002            |   |      |        | 24,988 |   |   |        | 20,977 |   |   |         | 25,370 |  
|                                                                                    |                                 |                    |        |                   |   |      |        |        |   |   |        |        |   |   |         |       

See accompanying notes to condensed consolidated
financial statements.

2



---



##### 



LCC International, Inc. and
Subsidiaries

Condensed Consolidated Balance
Sheets

(In thousands, except per share
data)


(Unaudited)


|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |        |        |         | 
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------- | ------------- | ------ | ------ | ------- | ------ | ------ | ------- | 
|                                                                                      |                                                                                                                                             | December 31,               |                                             | September 30,
|                                                                                      |                                                                                                                                             | 2003                       |                                             | 2004         
|                                                                                      |                                                                                                                                             |                            |                                             |              
|ASSETS:                                                                               |                                                                                                                                             |                            |                                             |               |        |        |         |       
|Current assets:                                                                       |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      | Cash and cash equivalents                                                                                                                   |                            | $                                           | 28,943        |        |        | $       | 18,418 |       
|                                                                                      | Restricted cash                                                                                                                             |                            |                                             | 1,568         |        |        |         | 1,194  |       
|                                                                                      | Short-term investments                                                                                                                      |                            |                                             | 520           |        |        |         |       |       
|                                                                                      | Receivables, net of allowance for doubtful
    accounts of $466 and $634 at December 31, 2003 and
    September 30, 2004, respectively:     |                            |                                             |               |        |        |         |        |       
|                                                                                      |                                                                                                                                             |                            | Trade accounts receivable                   |               |        | 27,456 |         |        |        | 42,204  | 
|                                                                                      |                                                                                                                                             |                            | Unbilled receivables                        |               |        | 35,007 |         |        |        | 45,321  | 
|                                                                                      |                                                                                                                                             |                            | Due from related parties and
    affiliates |               |        | 180    |         |        |        | 251     | 
|                                                                                      | Deferred income taxes, net                                                                                                                  |                            |                                             | 3,547         |        |        |         | 3,277  |       
|                                                                                      | Prepaid expenses and other current assets                                                                                                   |                            |                                             | 1,726         |        |        |         | 1,406  |       
|                                                                                      | Prepaid tax receivable and prepaid taxes                                                                                                    |                            |                                             | 662           |        |        |         | 696    |       
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      |                                                                                                                                             |                            | Total current assets                        |               |        | 99,609 |         |        |        | 112,767 | 
|Property and equipment, net                                                           |                                                                                                                                             |                            | 3,818                                       |               |        |        | 4,408   |       
|Investments in affiliates                                                             |                                                                                                                                             |                            | 764                                         |               |        |        | 670     |       
|Deferred income taxes, net                                                            |                                                                                                                                             |                            | 1,407                                       |               |        |        | 683     |       
|Goodwill                                                                              |                                                                                                                                             |                            | 11,115                                      |               |        |        | 11,410  |       
|Other intangibles                                                                     |                                                                                                                                             |                            | 843                                         |               |        |        | 581     |       
|Other assets                                                                          |                                                                                                                                             |                            | 1,035                                       |               |        |        | 1,575   |       
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      |                                                                                                                                             | $                          | 118,591                                     |               |        | $      | 132,094 |       
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|LIABILITIES AND SHAREHOLDERS
    EQUITY:                                             |                                                                                                                                             |                            |                                             |               |        |        |         |       
|Current liabilities:                                                                  |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      | Line of credit                                                                                                                              |                            | $                                           | 1,840         |        |        | $       | 1,291  |       
|                                                                                      | Accounts payable                                                                                                                            |                            |                                             | 11,485        |        |        |         | 18,751 |       
|                                                                                      | Accrued expenses                                                                                                                            |                            |                                             | 21,152        |        |        |         | 28,828 |       
|                                                                                      | Accrued employee compensation and benefits                                                                                                  |                            |                                             | 5,525         |        |        |         | 5,124  |       
|                                                                                      | Deferred revenue                                                                                                                            |                            |                                             | 471           |        |        |         | 558    |       
|                                                                                      | Income taxes payable                                                                                                                        |                            |                                             | 967           |        |        |         | 996    |       
|                                                                                      | Accrued restructuring current                                                                                                               |                            |                                             | 2,903         |        |        |         | 1,705  |       
|                                                                                      | Other current liabilities                                                                                                                   |                            |                                             | 286           |        |        |         | 214    |       
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      |                                                                                                                                             | Total current liabilities  |                                             |               | 44,629 |        |         |        | 57,467 |        
|                                                                                      | Accrued restructuring non-current                                                                                                           |                            |                                             | 3,432         |        |        |         | 2,029  |       
|                                                                                      | Other liabilities                                                                                                                           |                            |                                             | 762           |        |        |         | 752    |       
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      |                                                                                                                                             | Total liabilities          |                                             |               | 48,823 |        |         |        | 60,248 |        
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|Shareholders equity:                                                                 |                                                                                                                                             |                            |                                             |               |        |        |         |       
|Preferred stock:                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      | 10,000 shares authorized; 0 shares issued and
    outstanding                                                                               |                            |                                             |              |        |        |         |       |       
|Class A common stock, $0.01 par value:                                                |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      | 70,000 shares authorized; 19,549 and 19,889
    shares issued and outstanding at December 31, 2003 and
    September 30, 2004, respectively |                            |                                             | 195           |        |        |         | 199    |       
|Class B common stock, $0.01 par value:                                                |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      | 20,000 shares authorized; 4,638 and 4,538 shares
    issued and outstanding at December 31, 2003 and
    September 30, 2004, respectively   |                            |                                             | 46            |        |        |         | 45     |       
|Paid-in capital                                                                       |                                                                                                                                             |                            | 106,262                                     |               |        |        | 107,229 |       
|Accumulated deficit                                                                   |                                                                                                                                             |                            | (36,602                                     | )             |        |        | (35,621 | )     
|Note receivable from shareholder                                                      |                                                                                                                                             |                            | (1,557                                      | )             |        |        | (1,557  | )     
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      | Subtotal                                                                                                                                    |                            |                                             | 68,344        |        |        |         | 70,295 |       
|Accumulated other comprehensive income 
    foreign currency translation adjustments |                                                                                                                                             |                            | 1,424                                       |               |        |        | 1,551   |       
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      |                                                                                                                                             | Total shareholders equity |                                             |               | 69,768 |        |         |        | 71,846 |        
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       
|                                                                                      |                                                                                                                                             | $                          | 118,591                                     |               |        | $      | 132,094 |       
|                                                                                      |                                                                                                                                             |                            |                                             |               |        |        |         |       

See accompanying notes to condensed consolidated
financial statements.

3



---



##### 



LCC International, Inc. and
Subsidiaries

Condensed Consolidated Statements of Cash
Flows

(In thousands)


(Unaudited)


|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |         |        |   |       |         |  
|-------------------------------------------------- | -------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------- | -------------------------------------------- | ---------------------------------------- | - | ------- | ------- | ------ | - | ----- | ------- | -
|                                                   |                                              |                                                                                         
|                                                   |                                              | Nine Months Ended                                                                       
|                                                   |                                              | September 30,                                                                           
|                                                   |                                              |                                                                                         
|                                                   |                                              | 2003                                                                                     |                                  | 2004                                        
|                                                   |                                              |                                                                                          |                                  |                                             
|Cash flows from operating activities:              |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|                                                   |                                              | Net income (loss)                                                                        |                                  | $                                            | (7,162                                   | ) |         | $       | 981    |  
|                                                   |                                              | Adjustments to reconcile net income (loss) to net
    cash used in operating activities: |                                  |                                              |                                          |   |         |         |        |  
|                                                   |                                              |                                                                                          |                                  | Depreciation and amortization                |                                          |   | 2,944   |         |        |   | 2,097 |        
|                                                   |                                              |                                                                                          |                                  | Provision (recovery) for doubtful accounts   |                                          |   | (2,073  | )       |        |   | 136   |        
|                                                   |                                              |                                                                                          |                                  | Loss on equity method investment             |                                          |   | 52      |         |        |   | 466   |        
|                                                   |                                              |                                                                                          |                                  | Restructuring charge (recovery)              |                                          |   | (2      | )       |        |   | (924  | )      
|                                                   |                                              |                                                                                          |                                  | Changes in operating assets and liabilities: |                                          |   |         |         |        |   |       |        
|                                                   |                                              |                                                                                          |                                  |                                              | Trade, unbilled, and other receivables   |   |         | (13,400 | )      |   |       | (25,288 | )
|                                                   |                                              |                                                                                          |                                  |                                              | Accounts payable and accrued expenses    |   |         | 1,564   |        |   |       | 14,541  |  
|                                                   |                                              |                                                                                          |                                  |                                              | Other current assets and liabilities     |   |         | 8,170   |        |   |       | (772    | )
|                                                   |                                              |                                                                                          |                                  |                                              | Other non-current assets and liabilities |   |         | (957    | )      |   |       | (282    | )
|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|Net cash used in operating activities              |                                              |                                                                                          | (10,864                          | )                                            |                                          |   | (9,045  | )      
|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|Cash flows from investing activities:              |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|                                                   |                                              | Proceeds from sales of short-term investments                                            |                                  |                                              | (20                                      | ) |         |         |       |  
|                                                   |                                              | Purchases of property and equipment                                                      |                                  |                                              | (848                                     | ) |         |         | (2,468 | )
|                                                   |                                              | Proceeds from disposals of property and equipment                                        |                                  |                                              | 56                                       |   |         |         | 30     |  
|                                                   |                                              | Business acquisitions and investments                                                    |                                  |                                              | (651                                     | ) |         |         | (360   | )
|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|Net cash used in investing activities              |                                              |                                                                                          | (1,463                           | )                                            |                                          |   | (2,798  | )      
|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|Cash flows from financing activities:              |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|                                                   | Borrowings on line of credit                 |                                                                                          |                                  | 6,517                                        |                                          |   |         | 15,652  |       
|                                                   | Payments on line of credit                   |                                                                                          |                                  | (5,425                                       | )                                        |   |         | (16,197 | )     
|                                                   | Proceeds from issuance of common stock, net  |                                                                                          |                                  | 58                                           |                                          |   |         | 72      |       
|                                                   | Proceeds/purchases of short term investments |                                                                                          |                                  |                                             |                                          |   |         | 520     |       
|                                                   | Proceeds from exercise of options            |                                                                                          |                                  | 170                                          |                                          |   |         | 897     |       
|                                                   | Decrease (increase) in restricted cash       |                                                                                          |                                  | 195                                          |                                          |   |         | 374     |       
|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|Net cash provided by financing activities          |                                              |                                                                                          | 1,515                            |                                              |                                          |   | 1,318   |        
|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|Net decrease in cash and cash equivalents          |                                              |                                                                                          | (10,812                          | )                                            |                                          |   | (10,525 | )      
|Cash and cash equivalents at beginning of period   |                                              |                                                                                          | 37,507                           |                                              |                                          |   | 28,943  |        
|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|Cash and cash equivalents at end of period         |                                              | $                                                                                        | 26,695                           |                                              |                                          | $ | 18,418  |        
|                                                   |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|Supplemental disclosures of cash flow information: |                                              |                                                                                          |                                  |                                              |                                          |   |         |        
|                                                   |                                              |                                                                                          | Cash paid during the period for: |                                              |                                          |   |         |         |        |   |      
|                                                   |                                              |                                                                                          |                                  | Income taxes                                 |                                          | $ | 287     |         |        | $ | 222   |        
|                                                   |                                              |                                                                                          |                                  | Interest                                     |                                          |   | 39      |         |        |   | 40    |        

See accompanying notes to condensed consolidated
financial statements.

4



---



##### 



LCC International, Inc. and
Subsidiaries

Notes to Condensed Consolidated Financial
Statements

(Unaudited)


(1) Description of Operations

LCC International Inc. a Delaware Corporation
(LCCI), was formed in 1983. Unless the context
indicates otherwise, the terms the Company,
we, us, and our refer herein
to LCCI.

We provide integrated end-to-end solutions for
wireless voice and data communication networks with service
offerings to include high level technical consulting, to system
design and deployment, to ongoing operations and maintenance
services. We operate in a highly competitive environment subject
to rapid technological change and emergence of new technologies.
Historically, the key drivers of changes in our 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;
(4) the increasing complexity of wireless systems in
operation; and (5) changes in wireless infrastructure
spending and deployment. Although we believe that our services
are transferable to emerging technologies, rapid changes in
technology and deployment could have an adverse financial impact
on us.

(2) Basis of Presentation

We have prepared the condensed consolidated
financial statements included herein without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission and they reflect all adjustments that are, in the
opinion of management, necessary for a fair presentation of the
results for the interim periods.

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 our Annual Report on Form 10-K for the
year ended December 31, 2003. Operating results for the
interim periods are not necessarily indicative of results for an
entire year.

(3) Equity-Based Compensation

We account for equity-based compensation
arrangements in accordance with the provisions of Accounting
Principles Board (APB) No. 25,
Accounting for Stock Issued to Employees,and
related interpretations including FASB Interpretation
No. 44, and comply with the disclosure provisions of SFAS
No. 123, Accounting for Stock-Based Compensation.All equity-based awards to non-employees are accounted for
at their fair value in accordance with FASB SFAS No. 123.
Under APB No. 25, compensation expense is based upon the
difference, if any, on the date of grant between the fair value
of our stock and the exercise price.

5



---



##### 



Our pro-forma net income (loss) would have
been the following had compensation cost for our stock
based-compensation plans and employee stock purchase plan been
determined on the fair value at the grant dates for awards under
those plans, consistent with FASB SFAS No. 123.

|                            |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |      |      | 
|--------------------------- | --------------------------------------------------------------------------------------------------- | ------------------ | - | ----------------- | ----- | ---- | - | ----- | ---- |  | - | ------ | ----- | - | - | ---- | ---- | 
|                            |                                                                                                     |                    |   |                  
|                            |                                                                                                     | Three Months Ended |   | Nine Months Ended
|                            |                                                                                                     | September 30,      |   | September 30,    
|                            |                                                                                                     |                    |   |                  
|                            |                                                                                                     | 2003               |   | 2004              |       | 2003 |   | 2004 
|                            |                                                                                                     |                    |   |                   |       |      |   |      
|Net income (loss):          |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |     
|                            | Net income (loss) as reported                                                                       |                    | $ | (1,025            | )     |      | $ | 1,221 |      |  | $ | (7,162 | )     |   | $ | 981  |     
|                            | Deduct total stock-based employee compensation
    expense determined under fair value based method |                    |   | (528              | )     |      |   | (545  | )    |  |   | (1,962 | )     |   |   | (986 | )   
|                            |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |     
|                            | Pro forma net income (loss)                                                                         |                    | $ | (1,553            | )     |      | $ | 676   |      |  | $ | (9,124 | )     |   | $ | (5   | )   
|                            |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |     
|Net income (loss) per share |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |     
|                            | As reported:                                                                                        |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |      |     
|                            |                                                                                                     | Basic              |   | $                 | (0.05 | )    |   | $     | 0.05 |  |   | $      | (0.34 | ) |   | $    | 0.04 | 
|                            |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |     
|                            |                                                                                                     | Diluted            |   | $                 | (0.05 | )    |   | $     | 0.05 |  |   | $      | (0.34 | ) |   | $    | 0.04 | 
|                            |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |     
|                            | Pro forma:                                                                                          |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |      |     
|                            |                                                                                                     | Basic              |   | $                 | (0.07 | )    |   | $     | 0.03 |  |   | $      | (0.43 | ) |   | $    | 0.00 | 
|                            |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |     
|                            |                                                                                                     | Diluted            |   | $                 | (0.07 | )    |   | $     | 0.03 |  |   | $      | (0.43 | ) |   | $    | 0.00 | 
|                            |                                                                                                     |                    |   |                   |       |      |   |       |      |  |   |        |       |   |   |     

(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). Accumulated
other comprehensive income (loss) consists solely of
foreign currency translation adjustments at September 30,
2003 and 2004. Comprehensive income (loss) for the three
and nine months ended September 30 is as follows (in
thousands).

|                                                                         |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |       | 
|------------------------------------------------------------------------ |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ----- | 
|                                                                         |  |                    |        |                  
|                                                                         |  | Three Months Ended |        | Nine Months Ended
|                                                                         |  | September 30,      |        | September 30,    
|                                                                         |  |                    |        |                  
|                                                                         |  | 2003               |        | 2004              |  | 2003 |        | 2004
|                                                                         |  |                    |        |                   |  |      |        |     
|Net income (loss)                                                        |  | $                  | (1,025 | )                 |  | $    | 1,221  |      |  | $ | (7,162 | ) |  | $ | 981   | 
|                                                                         |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |       | 
|Other comprehensive income (loss), before tax                            |  |                    | 225    |                   |  |      | (593   | )    |  |   | 1,476  |   |  |   | 282   | 
|Income tax provision related to items of
    comprehensive income (loss) |  |                    | 71     |                   |  |      | (1,109 | )    |  |   | 221    |   |  |   | 155   | 
|                                                                         |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |       | 
|Other comprehensive income (loss), net of tax                            |  |                    | 154    |                   |  |      | 516    |      |  |   | 1,255  |   |  |   | 127   | 
|                                                                         |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |       | 
|Comprehensive income (loss)                                              |  | $                  | (871   | )                 |  | $    | 1,737  |      |  | $ | (5,907 | ) |  | $ | 1,108 | 
|                                                                         |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |       | 

(5) Related Party Transactions

RF Investors, a subsidiary of 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 70% voting control.

Prior to our initial public offering, both our
employees and the employees of Telcom Ventures were eligible to
participate in our life, medical, dental and 401(k) plans. In
connection with our initial public offering in 1996, we agreed
pursuant to an Overhead and Administrative Services Agreement to
allow the

6



---



##### 



employees of Telcom Ventures to continue to
participate in our employee benefit plans in exchange for full
reimbursement of our cash costs and expenses. We billed Telcom
Ventures $71,000 during the year ended December 31, 2003
and $58,000 for the first nine months of 2004 for payments made
by us pursuant to this agreement. We received reimbursements
from Telcom Ventures of $65,000 during 2003 and $58,000 for the
first nine months of 2004. At December 31, 2003 and
September 30, 2004, outstanding amounts associated with
payments made by us under this agreement were $6,000 and $6,000,
respectively, and are included as due from related parties and
affiliates within the condensed consolidated balance sheets in
the accompanying financial statements.


During the nine months of 2004, we provided
services to two customers where Telcom Ventures has a minority
investment. Dr. Rajendra Singh, a director of Telcom
Ventures, is a member of our Board of Directors. Revenues earned
from these customers during the quarter were $304,000 and billed
and unbilled receivables of $246,000 outstanding at
September 30, 2004, and included in trade accounts
receivable and unbilled receivables in the accompanying
condensed consolidated balance sheet.

In December 1999, we issued approximately 108,000
shares of Class A Common Stock in exchange for a
$1.6 million note receivable from our President and Chief
Executive Officer. The note is payable on the earlier of
December 22, 2004 or the date he is no longer our President
and Chief Executive Officer. Upon the event of a change in
control of our ownership, the note will be forgiven. Interest
accrues at the federal midterm rate on the date of the note and
is payable quarterly. The note is reflected as a reduction of
shareholders equity in the accompanying statement of
shareholders equity.

In July 2002, we acquired 51 percent of the
outstanding shares of Detron LCC Network Services B.V.
(Detron), a newly formed corporation in the
Netherlands. Our 49% partner, Detron Corporation B.V. through
various corporate affiliates has certain ongoing transactions
with Detron. Under a five-year lease agreement for office space,
Detron recorded approximately $71,000 of rent expense for the
nine months ended September 30, 2003 and approximately
$185,000 for the same period in 2004. During the nine months
ended September 30, 2003, Detron recorded approximately
$125,000 of management and advisory fees and approximately
$119,000 for the same period in 2004. During the nine months
ended September 30, 2003 and 2004 Detron seconded various
idle employees to Detron Telematics, an affiliate of Detron
Corporation B.V. and recorded revenue of approximately $256,000
and $48,000, respectively.

(6) Restructuring Charge

In 2002, we adopted a restructuring plan and
recorded restructuring charges of $13.5 million. 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, we 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 for our employees while performing their services.
The charge for the excess office space was approximately $12.5
million, which included $1.5 million in written-off
leasehold improvements and other assets related to the excess
space. The facility charge equals the existing lease obligation
less the anticipated rental receipts to be received from
existing and potential subleases. This charge required
significant judgments about the length of time that space will
remain vacant, anticipated cost escalators and operating costs
associated with the leases, market rate of the subleased space,
and broker fees or other costs necessary to market the space. As
of September 30, 2004, the restructuring charge calculation
assumes we will receive $11.6 million in sublease income,
of which $10.2 million is committed.

During the first quarter of 2003, we reversed
excess severance payable of approximately $0.2 million.
During the third quarter of 2003, we reoccupied a portion of our
office space in McLean, Virginia and reversed $0.4 million
of the payable and recorded an increase in the restructuring
payable of $0.5 million related to an estimated increase in the
time period expected to sublease space in our London office.
During the second quarter of 2004, we reversed $0.9 million
of the payable due to reoccupied office space in McLean,
Virginia and a decrease in the estimated time period expected to
sublease space in our McLean and London offices.

7



---



##### 



A reconciliation of the restructuring activities
is as follows:

|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |        |  
|--------------------------------------------------------------- | ------------------------------------------------------------ | -------------- | ---- | ---------- | - | ----- | ----- | ------ | - | - | ----- | ------ | -
|                                                                |                                                              | Severance      |      | Facilities |   | Total
|                                                                |                                                              |                |      |            |   |      
|                                                                |                                                              |               
|                                                                |                                                              | (in thousands)
|Restructuring payable as of December 31, 2002                   |                                                              | $              | 152  |            |   | $     | 9,571 |        |   | $ | 9,723 |       
|Reversal of excess severance                                    |                                                              |                | (152 | )          |   |       |      |        |   |   | (152  | )     
|Reversal for reoccupied space                                   |                                                              |                |     |            |   |       | (385  | )      |   |   | (385  | )     
|Additional charge for reduction of expected
    sublease income |                                                              |                |     |            |   |       | 535   |        |   |   | 535   |       
|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |       
|                                                                | Restructuring charge (recovery)                              |                |      | (152       | ) |       |       | 150    |   |   |       | (2     | )
|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |       
|Charges against the provision:                                  |                                                              |                |      |            |   |       |       |        |   |   |       |       
|                                                                | Payments for excess office space, net of sublease
    income |                |      |            |   |       |       | (2,971 | ) |   |       | (2,971 | )
|                                                                | Leasehold improvements and other assets
    written-off      |                |      |            |   |       |       | (564   | ) |   |       | (564   | )
|                                                                | Other                                                        |                |      |            |   |       |       | 149    |   |   |       | 149    |  
|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |       
|Restructuring payable as of December 31, 2003                   |                                                              |                |      |            |   | $     | 6,335 |        |   | $ | 6,335 |       
|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |       
|Reversal for reoccupied space                                   |                                                              |                |      |            |   |       | (228  | )      |   |   | (228  | )     
|Increases in expected sublease income                           |                                                              |                |      |            |   |       | (684  | )      |   |   | (684  | )     
|Reduction of deferred rent for reoccupied space                 |                                                              |                |      |            |   |       | (12   | )      |   |   | (12   | )     
|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |       
|                                                                | Restructuring charge (recovery)                              |                |      |            |   |       |       | (924   | ) |   |       | (924   | )
|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |       
|Charges against the provision:                                  |                                                              |                |      |            |   |       |       |        |   |   |       |       
|                                                                | Payments for excess office space, net of sublease
    income |                |      |            |   |       |       | (1,726 | ) |   |       | (1,726 | )
|                                                                | Other                                                        |                |      |            |   |       |       | 49     |   |   |       | 49     |  
|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |       
|Restructuring payable as of September 30,
    2004              |                                                              |                |      |            |   | $     | 3,734 |        |   | $ | 3,734 |       
|                                                                |                                                              |                |      |            |   |       |       |        |   |   |       |       

At December 31, 2003 and September 30,
2004, the restructuring payable was classified as follows:

|                              |  |              |       |               |  |   |       | 
|----------------------------- |  | ------------ | ----- | ------------- |  | - | ----- | 
|                              |  | December 31, |       | September 30,
|                              |  | 2003         |       | 2004         
|                              |  |              |       |              
|Accrued restructuring current |  | $            | 2,903 |               |  | $ | 1,705 | 
|Accrued restructuring         |  |              | 3,432 |               |  |   | 2,029 | 
|                              |  |              |       |               |  |   |       | 
|Accrued restructuring total   |  | $            | 6,335 |               |  | $ | 3,734 | 
|                              |  |              |       |               |  |   |       | 

(7) Investments

We held 1,666,666 shares of Class B Common
Stock of NextWave Telecom, Inc. (NextWave Telecom)
which is the parent corporation of NextWave Personal
Communications Inc. We acquired the shares of NextWave Telecom
in May 1996 for a purchase price of $5.0 million in
connection with a series of transactions entered into between
NextWave Telecom and us under an agreement dated March 12,
1996 (the March Agreement). We also acquired
warrants to purchase an additional 123,356 shares of
Class B Common Stock of NextWave Telecom at $3.00 per
share. Under the March Agreement, NextWave Telecom agreed to use
us to provide not less than (a) $14.0 million of radio
frequency engineering services and (b) $35.0 million
of system deployment services. These services were to be
provided in increments of twenty-percent (20%) each year during
the five-year period following the execution of the March
Agreement. NextWave Telecom filed for bankruptcy protection on
December 23, 1998. The March Agreement has not been assumed
or rejected by NextWave Telecom in the bankruptcy proceeding. We
did not carry any assets or liabilities on our books relating to
our equity investment in NextWave, any pre-petition debts due
us, or the March Agreement; these balances were written off in
previous years.

The total amount of pre-petition debt owed to us
by NextWave Telecom and certain of its subsidiaries
(collectively, NextWave) was approximately $14.3
million, plus post-petition interest thereon. This amount
included our interest, amounting to approximately
$0.7 million plus post-petition interest thereon, in a
general

8



---



##### 



unsecured claim against NextWave that was
acquired by us in connection with our acquisition of Koll
Telecommunications LLC in 1997 (the Koll Claim).


In September 2001, we sold all of our 1,666,666
shares of Class B common stock and pre-petition debt claims
(excluding a 92.5% interest in pre-petition interest that may be
payable with respect to the claims, the Pre-Petition
Interest Amount) against NextWave Telecom resulting in a
gain of $21.4 million, which equaled the proceeds from the sale.
The September 2001 sale of current pre-petition debt excluded
(a) the Koll Claim, (b) any claims resulting from the
assumption or rejection of the March Agreement, and (c) the
Pre-Petition Interest Amount. In February 2003, we sold our
interest in the Pre-Petition Interest Amount for
$1.0 million in cash, which was paid in March 2003 and
recorded in other income in the accompanying condensed
consolidated statement of operations. In May 2004, we sold our
interest in the Koll Claim for approximately $0.8 million
in cash, which was paid in May 2004 and recorded in other income
in the accompanying condensed consolidated statement of
operations.

On August 4, 2003 we, through our wholly
owned subsidiary LCC China Services, L.L.C., closed an
investment in a newly created entity based in China, Beijing LCC
Bright Oceans Communication Consulting Co. Ltd. (LCC/
BOCO). We contributed approximately $1.1 million for
a 49.0% share of LCC/ BOCOs registered capital. Bright
Oceans Inter-Telecom Corporation, a Chinese publicly traded
network management and systems integrator (BOCO),
contributed approximately $1.1 million to hold the
remaining 51.0% of LCC/ BOCOs registered capital. We
account for the investment in LCC/ BOCO using the equity method
of accounting. We recorded an equity loss of $0.1 million
to reflect our proportionate share of LCC/ BOCOs losses
through March 31, 2004, and an additional equity loss of
$0.2 million in the second quarter, both of which are
recorded in other expense. BOCO has advised us that it has made
a strategic decision to exit the wireless telecommunications
infrastructure services business and we have agreed to dissolve
the joint venture. We have undertaken to transfer selected
projects and joint venture employees to our wholly-owned Chinese
subsidiary, which continues to pursue projects independently
with customers in China. After distribution of the assets and
cash remaining in the joint venture, we anticipate an additional
loss of $0.2 million, which we recorded in other expense in the
accompanying condensed consolidated statement of operations.

In April 2003, we formed LCC Wireless
Communications Espana S.A. (LCC Espana), as a
subsidiary organized under the laws of Spain. At the time of
formation, 30% of the equity shares of LCC Espana were owned by
an unaffiliated local construction firm, Insyte Instalaciones,
S.A. (Insyte). In late September 2004, we redeemed
Insytes interest in LCC Espana in consideration for
approximately Euro 14,000 in payments to Insyte. As a result,
LCC Espana became a wholly-owned subsidiary of the company.

(8) Line of Credit

In 2003, Detron established a line of credit with
NMB-Heller N.V. (NMB). The line of credit provides
that NMB will provide credit to Detron in the form of advance
payments collateralized by Detrons outstanding
receivables. The agreement provides for NMB to advance up to 75%
of the receivable balance. There is no maximum on the amount of
receivables Detron can assign to NMB. Detron must repay the
advances from NMB within 90 days or upon customer payment
whichever occurs first. Interest on the advance payments will be
calculated at a rate equal to NMBs overdraft base rate
plus 2% subject to a minimum of 5.75% per year. The agreement
has an initial term of two years and can be extended. As of
December 31, 2003, Detron had $1.8 million outstanding
under the credit facility compared to $1.3 million as of
September 30, 2004.

(9) Commitments and
Contingencies

We are party to various non-material legal
proceedings and claims incidental to our business. Management
does not believe that these matters will have a material adverse
effect on our consolidated results of operations or financial
condition.

9



---



##### 



(10) Segment reporting

SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Informationestablished
standards for reporting information about the operating segments
in interim and annual financial reports issued to stockholders.
Operating segments are defined as components of an enterprise
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and
assess performance. Our chief operating decision-making group is
the Operating Committee, which comprises the Chief Executive
Officer, our Senior Vice Presidents and our General Counsel.

Our operating segments are defined geographically
by region, namely the Americas region and the EMEA region. Both
regions provide design and deployment services, operations and
maintenance services and technical consulting services.

Segment detail is summarized as follows (in
thousands):

|                                     |                         |                |        |        |        |               |        |        |        |      |        |        |        |  |        |        |        |  |        |        |        |  |         |        |        | 
|------------------------------------ | ----------------------- | -------------- | ------ | ------ | ------ | ------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ |  | ------ | ------ | ------ |  | ------ | ------ | ------ |  | ------- | ------ | ------ | 
|                                     |                         |                |        |        |        |              
|                                     |                         | Americas       |        | EMEA   |        | Segment Total
|                                     |                         |                |        |        |        |              
|                                     |                         | 2003           |        | 2004   |        | 2003          |        | 2004   |        | 2003 |        | 2004  
|                                     |                         |                |        |        |        |               |        |        |        |      |        |       
|Three Months Ended
    September 30, |                         |                |        |        |        |               |        |        |        |      |        |        |        |  |        |        |        |  |        |        |        |  |         |       
|Revenues:                            |                         |                |        |        |        |               |        |        |        |      |        |        |        |  |        |        |        |  |        |        |        |  |         |       
|                                     | From external customers |                | $      | 13,488 |        |               | $      | 35,284 |        |      | $      | 15,143 |        |  | $      | 19,494 |        |  | $      | 28,631 |        |  | $       | 54,778 |       
|                                     | Inter-segment revenues  |                |        |       |        |               |        |       |        |      |        |       |        |  |        |       |        |  |        |       |        |  |         |       |       
|                                     |                         |                |        |        |        |               |        |        |        |      |        |        |        |  |        |        |        |  |        |        |        |  |         |       
|                                     |                         | Total revenues |        | $      | 13,488 |               |        | $      | 35,284 |      |        | $      | 15,143 |  |        | $      | 19,494 |  |        | $      | 28,631 |  |         | $      | 54,778 | 
|                                     |                         |                |        |        |        |               |        |        |        |      |        |        |        |  |        |        |        |  |        |        |        |  |         |       
|Income (loss) before taxes           |                         |                | (163   | )      |        |               | 4,119  |        |        |      | 685    |        |        |  | 478    |        |        |  | 522    |        |        |  | 4,597   |       
|Total assets                         |                         |                | 18,319 |        |        |               | 51,144 |        |        |      | 42,675 |        |        |  | 58,026 |        |        |  | 60,994 |        |        |  | 109,170 |       

|                                |                         |                |        |        |        |               |       |        |        |      |      |        |        |  |      |        |        |  |        |        |        |  |       |         |         | 
|------------------------------- | ----------------------- | -------------- | ------ | ------ | ------ | ------------- | ----- | ------ | ------ | ---- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | ------ | ------ | ------ |  | ----- | ------- | ------- | 
|                                |                         |                |        |        |        |              
|                                |                         | Americas       |        | EMEA   |        | Segment Total
|                                |                         |                |        |        |        |              
|                                |                         | 2003           |        | 2004   |        | 2003          |       | 2004   |        | 2003 |      | 2004  
|                                |                         |                |        |        |        |               |       |        |        |      |      |       
|Nine Months Ended September 30, |                         |                |        |        |        |               |       |        |        |      |      |        |        |  |      |        |        |  |        |        |        |  |       |        
|Revenues:                       |                         |                |        |        |        |               |       |        |        |      |      |        |        |  |      |        |        |  |        |        |        |  |       |        
|                                | From external customers |                | $      | 27,020 |        |               | $     | 95,022 |        |      | $    | 35,908 |        |  | $    | 54,550 |        |  | $      | 62,928 |        |  | $     | 149,572 |        
|                                | Inter-segment revenues  |                |        |       |        |               |       |       |        |      |      |       |        |  |      |       |        |  |        |       |        |  |       |        |        
|                                |                         |                |        |        |        |               |       |        |        |      |      |        |        |  |      |        |        |  |        |        |        |  |       |        
|                                |                         | Total revenues |        | $      | 27,020 |               |       | $      | 95,022 |      |      | $      | 35,908 |  |      | $      | 54,550 |  |        | $      | 62,928 |  |       | $       | 149,572 | 
|                                |                         |                |        |        |        |               |       |        |        |      |      |        |        |  |      |        |        |  |        |        |        |  |       |        
|Income (loss) before taxes      |                         |                | (2,138 | )      |        |               | 9,955 |        |        |      | (598 | )      |        |  | (253 | )      |        |  | (2,736 | )      |        |  | 9,702 |        

10



---



##### 



A reconciliation of totals reported for the
operating segments to the applicable line items in the
consolidated financial statements is as follows (in thousands):

|                            |                                                 |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |         |        | 
|--------------------------- | ----------------------------------------------- | -------------------------- | ------ | ----------------- |  | ---- | ------ | ------ |  | - | ------ | ------ | ------ | - | ------- | ------- | ------ | 
|                            |                                                 |                            |        |                  
|                            |                                                 | Three Months Ended         |        | Nine Months Ended
|                            |                                                 | September 30,              |        | September 30,    
|                            |                                                 |                            |        |                  
|                            |                                                 | 2003                       |        | 2004              |  | 2003 |        | 2004  
|                            |                                                 |                            |        |                   |  |      |        |       
|Revenues:                   |                                                 |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |        
|                            | Revenues for reportable segments                |                            | $      | 28,631            |  |      | $      | 54,778 |  |   | $      | 62,928 |        |   | $       | 149,572 |       
|                            | Revenues for non-reportable segments            |                            |        | 719               |  |      |        | 1,567  |  |   |        | 1,749  |        |   |         | 4,440   |       
|                            |                                                 |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |        
|Total consolidated revenues |                                                 | $                          | 29,350 |                   |  | $    | 56,345 |        |  | $ | 64,677 |        |        | $ | 154,012 |        
|                            |                                                 |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |        
|Assets:                     |                                                 |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |        
|                            | Assets for reportable segments                  |                            |        |                   |  |      |        |        |  |   | $      | 60,994 |        |   | $       | 109,170 |       
|                            | Assets not attributable to reportable segments: |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |         |       
|                            |                                                 | Cash and cash equivalents  |        |                   |  |      |        |        |  |   |        |        | 23,413 |   |         |         | 13,811 | 
|                            |                                                 | Restricted cash            |        |                   |  |      |        |        |  |   |        |        |       |   |         |         | 222    | 
|                            |                                                 | Short-term investments     |        |                   |  |      |        |        |  |   |        |        | 534    |   |         |         |       | 
|                            |                                                 | Receivables                |        |                   |  |      |        |        |  |   |        |        | 916    |   |         |         | 2,331  | 
|                            |                                                 | Deferred and prepaid taxes |        |                   |  |      |        |        |  |   |        |        | 5,672  |   |         |         | 4,655  | 
|                            |                                                 | Property and equipment     |        |                   |  |      |        |        |  |   |        |        | 1,151  |   |         |         | 868    | 
|                            |                                                 | Investments                |        |                   |  |      |        |        |  |   |        |        | 462    |   |         |         | 643    | 
|                            |                                                 | Prepaid and other          |        |                   |  |      |        |        |  |   |        |        | 179    |   |         |         | 394    | 
|                            |                                                 |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |        
|                            |                                                 |                            |        |                   |  |      |        |        |  |   | 32,327 |        |        |   | 22,924  |        
|                            |                                                 |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |        
|Total consolidated assets   |                                                 |                            |        |                   |  |      |        |        |  | $ | 93,321 |        |        | $ | 132,094 |        
|                            |                                                 |                            |        |                   |  |      |        |        |  |   |        |        |        |   |         |        

|                                                                  |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|----------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                  |  |                    |        |                  
|                                                                  |  | Three Months Ended |        | Nine Months Ended
|                                                                  |  | September 30,      |        | September 30,    
|                                                                  |  |                    |        |                  
|                                                                  |  | 2003               |        | 2004              |  | 2003 |        | 2004
|                                                                  |  |                    |        |                   |  |      |        |     
|Income (loss) before income taxes for
    reportable segments     |  | $                  | 522    |                   |  | $    | 4,597  |      |  | $ | (2,736 | ) |  | $ | 9,702  |  
|Restructuring charge                                              |  |                    | (150   | )                 |  |      |       |      |  |   | 2      |   |  |   | 924    |  
|Income (loss) before income taxes for
    non-reportable segments |  |                    | (1,823 | )                 |  |      | (2,950 | )    |  |   | (5,692 | ) |  |   | (8,438 | )
|                                                                  |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Income (loss) from operations before income
    taxes             |  | $                  | (1,451 | )                 |  | $    | 1,647  |      |  |   | (8,426 | ) |  | $ | 2,188  |  
|                                                                  |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  

11



---



##### 





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

This quarterly report on Form 10-Q contains
forward-looking statements within the meaning of
Section 27A of the Securities Exchange Act of 1934, which
are made under the safe harbor provisions of Section 21E of
the Securities Exchange Act of 1934. These statements involve
known and unknown risks, uncertainties, and other factors that
may cause our actual results, levels of activity, performance,
or achievements to be materially different from any future
results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. In some
cases, these statements can be identified by forward-looking
words such as anticipate, believe,
could, estimate, expect,
intend, may, plan,
potential, should, will, and
would or similar words. The statements that contain
these words should be read carefully because they discuss our
future expectations, contain projections of our future results
of operations or of our financial position, or state other
forward-looking information. These statements include, among
others, our estimates of future revenues and our expectations
that those revenues will fluctuate significantly, our belief
that we have adequate cash, available borrowing capacity and
short-term investments which will satisfy cash requirements for
at least the next twelve months, and our ability to pursue and
secure new business opportunities.

The factors listed under Risk Factors
in our annual report on Form 10-K for the fiscal year ended
December 31, 2003, among others, could cause actual results
to differ materially from those contained in forward-looking
statements made in this report and presented elsewhere by
management from time to time. Such factors, among others, may
have a material adverse effect upon our business, financial
condition, and results of operations. We undertake no obligation
to update publicly or revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise. Accordingly, you are cautioned not to place undue
reliance on forward-looking statements, which speak only as of
the date on which they are made.

Overview

We provide integrated end-to-end solutions for
wireless voice and data communications networks with offerings
ranging from high level technical consulting, to system design
and turnkey deployment, to ongoing management and optimization
services. We have been successful on occasion in using initial
opportunities to provide high level technical consulting
services to secure later-stage system design and deployment
contracts. Long-term engagements to provide design and
deployment services also enable us to secure ongoing management
and operations projects. Providing ongoing operations and
maintenance services also positions us well for additional
opportunities as new technologies continue to be developed and
wireless service providers must either upgrade their existing
networks or deploy new networks utilizing the latest available
technologies.

We provide these services through a regional
organization, which comprises two principal regions and several
smaller divisions. Our primary operating segments are Americas
and EMEA (Europe, Middle East and Africa).

| |  |               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Americas:     |  | Headquartered near Los Angeles,
    California, the Americas region provides the full range of
    service offerings to wireless operators and equipment vendors
    through a network of project offices in North America and South
    America. In the third quarter of 2004, Americas generated
    approximately 63% of our total revenue.                                                                                                                                                                                   
|
| |  | EMEA:         |  | Based in London, the Europe, Middle
    East and Africa region is responsible for operations in the
    U.K., Italy, the Netherlands, Algeria, Germany, Spain, Greece
    and the Middle East. In the third quarter of 2004, EMEA
    generated approximately 35% of our total revenue.                                                                                                                                                                                                                                          
|
| |  | Asia & other: |  | This includes our operations in Asia,
    the Wireless Institute and LCC Wireline. In the third quarter of
    2004, these combined operations generated approximately 2% of
    our total revenues. Our operations in Asia comprise a marketing
    office in Sydney and representative offices in Beijing,
    Singapore and New Delhi, India. We provide training to our
    engineers and customers through our Wireless Institute, which
    covers the latest technologies developed and employed throughout
    the world.

12



---



##### 



Our primary sources of revenues are from
engineering design and system deployment services. Revenues from
services are derived both from fixed price and time and
materials contracts. We recognize revenues from fixed price
service contracts using the percentage-of-completion method.
With fixed price contracts, we recognize revenues based on the
ratio of individual contract costs incurred to date on a project
compared with total estimated costs on completion. Anticipated
contract losses are recognized as they become known and
estimable. We recognize 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 our marketing,
sales and customer support plans.

We generate cash from fixed price contracts by
billings associated with contract milestones, which are
typically agreed with our customers at the time the contracts
are negotiated. For our time and materials contracts, we usually
bill our customers on a monthly basis as services are performed.
On large network deployment contracts, which involve the design
and construction of complex wireless networks, it is
increasingly common for our customers to require fewer contract
milestones than in previous years. This results in extending the
periods during which we are obliged to fund our operating costs
until a milestone can be billed to the customer. This increases
the capital that we require to operate the business, and is
evidenced by increases in unbilled receivables on our balance
sheet. This is an integral part of our business and we are
constantly striving to manage our working capital requirements.
We expect to experience increasing demands for working capital
in the future as we grow our revenues.

Another critical statistic that we monitor is our
contract backlog, which at September 30, 2004, comprised
firm backlog of $82 million and implied backlog of
$5 million. We expect that our contract backlog will vary
from time to time as we deliver contract revenues and win new
awards. However, our current implementation plans call for the
delivery of significant network deployment revenues over the
course of 2004, so it is reasonable to expect that our backlog
will decline in the short term.

Since 1999, we have engaged in a number of
business dispositions, acquisitions and investments, some of
which have either generated significant cash proceeds or created
significant requirements for cash and these transactions
significantly affect the year-to-year comparability of our
financial statements. For example, in 1999 we disposed of our
hardware and software products business for cash proceeds of
about $22 million; in 2000, we sold our tower business for
cash proceeds of about $72 million; and in 2001, we sold
certain of our interests in NextWave Telecom, Inc. (NextWave)
for cash proceeds of about $21 million. Later in that year
and during 2002, we acquired operations in our EMEA region,
which required cash of approximately $10 million. In 2003 we
sold further interests in NextWave for another $1 million
and we initiated our investment in the joint venture in China,
which required total cash commitments of $1.1 million. In
2004, we sold an unsecured claim against NextWave for
$0.8 million and recorded an impairment charge of $0.2
million for our investment in the joint venture in China,
following changes in the local business conditions. We expect to
continue to consider business dispositions, acquisitions and
investments as a way of supporting our longer-term strategies.

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

The major trends that have affected or may affect
our business are as follows:



| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | project related revenues derived from a limited
    set of customers in each market where we do business;                             
|
| |  | our customers have faced difficulties in
    obtaining financing to fund the development, expansion and
    upgrade of their networks;
|
| |  | the acceleration or the delay associated with the
    introduction of new technologies and services by our customers;                 

13



---



##### 





| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the management and the services composition of
    our fixed price contracts;                                                                         
|
| |  | the impact of the percentage of subcontracted
    work (versus self perform work) on our large programs and the
    associated margin degradation; and
|
| |  | increased spending by wireless service providers
    in the areas of network design, deployment and optimization.                                     

Our business is characterized by a limited number
of projects awarded by a limited number of customers. This can
lead to volatility in our results as projects initially ramp up
and then wind down. As projects are completed, we are faced with
the task of replacing project revenues with new projects, either
from the same customer or from new customers. In addition, the
wireless industry is composed of a relatively small number of
wireless service providers and equipment vendors, and this
inevitably leads to issues of customer concentration.
Consequently, our business may be affected in any single market
by the changing priorities of a small group of customers.

During 2000 to 2002, some of our customers faced
difficulty in obtaining the necessary financing to fund the
development, expansion and upgrade of their networks. The state
of the wireless industry and the overall financial market have
an impact on our business, and to the extent there is a slowdown
in the wireless sector or the overall economy in the future,
there could be an adverse effect on the company.

We tend to benefit from projects undertaken by
our customers to introduce new technologies and services in
their networks and we tend to suffer when projects are delayed.
Revenues from 3G networks constituted approximately 21.3% and
12.2% of our total revenues for the nine months ended
September 30, 2003 and 2004, respectively, and it is
expected to be an area of business growth in the future. We have
experienced an increase in the percentage of fixed price
contracts awarded by our customers, and we expect this trend to
continue. A recent trend is for the award of fixed price
contracts to cover the design and deployment of a certain
geographic network area on a full turnkey basis, including
planning, engineering design, site acquisition, construction and
deployment services. In the nine months ended September 30,
2004, approximately 39.4% of our revenues were generated by work
done by subcontractors, for construction related activities,
compared to 15.4% for the same period in the previous year. To
the extent that these large turnkey projects include a
relatively large proportion of construction related activities,
we expect that the composition of our revenues by delivery
method will vary so as to decrease the proportion of services
that we perform ourselves through our own workforce and increase
the services that we deliver through third parties, typically
subcontractors for construction. A consequence of this change in
mix may be to reduce our average gross margins because
subcontracted work generally commands lower margins.

We believe our Americas region may benefit from
increased spending by certain United States wireless service
providers. This increased spending can be attributed to several
trends: (i) the implementation of new technologies such as
third generations (3G) wireless and broadband wireless;
(ii) license swaps as a result of wireless service
providers trying to maximize spectrum utilization and increase
coverage; (iii) network quality enhancement programs to
reduce churn; (iv) network expansion and capacity programs
geared toward enabling new and enhanced services; and
(v) other miscellaneous network upgrades and enhancements
required for market share maintenance and competitive reasons.

We have also observed an increase in spending on
wireless networks in developing countries. The increase in
worldwide terrorism may affect our business in these countries.
For example, the U.S. State Department has issued security
advisories for U.S. Nationals in Saudi Arabia and certain other
countries in the Middle East. While we tend to staff these
projects largely with local or regional personnel, we do
recognize that undertaking work in such areas at this time
carries a higher level of operating and political risk than in
other more developed areas.

Results of Operations

The discussion below provides information which
management believes is relevant to an assessment and
understanding of our consolidated results of operations and
financial condition. The discussion should be read

14



---



##### 



in conjunction with the consolidated financial
statements and accompanying notes thereto included elsewhere
herein.


Revenues, Cost of Revenues and Gross
Margins

|                  |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |      |  
|----------------- | -------------- | -------------------------------- | ------ | ------------------------------- |  | ------------------ | ---- | ------------------ | - | ---------- | ------ | ------ |  | ---------- | ---- | ---- | - | - | ------ | ------ |  |  | ---- | ---- | - | - | ------- | ------ |  |  | ---- | ---- | -
|                  |                |                                  |        |                                
|                  |                | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                  |                |                                  |        |                                
|                  |                |                                  |        |                                 |  |                    |      |                   
|                  |                | 2003                             |        | 2004                            |  | 2003               |      | 2004              
|                  |                |                                  |        |                                 |  |                    |      |                   
|                  |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |     
|                  |                | (in                              |        |                                 |  | (in                |      |                    |   | (in        |        |        |  | (in        |      |     
|                  |                | thousands)                       |        |                                 |  | thousands)         |      |                    |   | thousands) |        |        |  | thousands) |      |     
|Revenues:         |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     
|                  | Americas       |                                  | $      | 13,488                          |  |                    |      |                    |   |            | $      | 35,285 |  |            |      |      |   |   | $      | 27,020 |  |  |      |      |   |   | $       | 95,023 |  |  |      |      |  
|                  | EMEA           |                                  |        | 15,143                          |  |                    |      |                    |   |            |        | 19,494 |  |            |      |      |   |   |        | 35,908 |  |  |      |      |   |   |         | 54,550 |  |  |      |      |  
|                  | Asia and other |                                  |        | 719                             |  |                    |      |                    |   |            |        | 1,566  |  |            |      |      |   |   |        | 1,749  |  |  |      |      |   |   |         | 4,439  |  |  |      |      |  
|                  |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     
|                  |                | $                                | 29,350 |                                 |  |                    |      |                    |   | $          | 56,345 |        |  |            |      |      |   | $ | 64,677 |        |  |  |      |      |   | $ | 154,012 |        |  |  |      |     
|                  |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     
|                  |                | (% of
    revenue)               |        | (% of
    revenue)              |  | (% of
    revenue) |      | (% of
    revenue)
|Cost of revenues: |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     
|                  | Americas       |                                  | $      | 11,457                          |  |                    |      | 84.9               | % |            | $      | 29,653 |  |            |      | 84.0 | % |   | $      | 23,252 |  |  |      | 86.1 | % |   | $       | 80,548 |  |  |      | 84.8 | %
|                  | EMEA           |                                  |        | 11,922                          |  |                    |      | 78.7               |   |            |        | 15,108 |  |            |      | 77.5 |   |   |        | 28,783 |  |  |      | 80.2 |   |   |         | 42,942 |  |  |      | 78.7 |  
|                  | Asia and other |                                  |        | 377                             |  |                    |      | 52.4               |   |            |        | 1,254  |  |            |      | 80.1 |   |   |        | 1,180  |  |  |      | 67.5 |   |   |         | 3,261  |  |  |      | 73.5 |  
|                  |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     
|                  |                | $                                | 23,756 |                                 |  |                    | 80.9 | %                  |   | $          | 46,015 |        |  |            | 81.7 | %    |   | $ | 53,215 |        |  |  | 82.3 | %    |   | $ | 126,751 |        |  |  | 82.3 | %   
|                  |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     
|Gross margins:    |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     
|                  | Americas       |                                  | $      | 2,031                           |  |                    |      | 15.1               | % |            | $      | 5,632  |  |            |      | 16.0 | % |   | $      | 3,768  |  |  |      | 13.9 | % |   | $       | 14,475 |  |  |      | 15.2 | %
|                  | EMEA           |                                  |        | 3,221                           |  |                    |      | 21.3               |   |            |        | 4,386  |  |            |      | 22.5 |   |   |        | 7,125  |  |  |      | 19.8 |   |   |         | 11,608 |  |  |      | 21.3 |  
|                  | Asia and other |                                  |        | 342                             |  |                    |      | 47.6               |   |            |        | 312    |  |            |      | 19.9 |   |   |        | 569    |  |  |      | 32.5 |   |   |         | 1,178  |  |  |      | 26.5 |  
|                  |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     
|                  |                | $                                | 5,594  |                                 |  |                    | 19.1 | %                  |   | $          | 10,330 |        |  |            | 18.3 | %    |   | $ | 11,462 |        |  |  | 17.7 | %    |   | $ | 27,261  |        |  |  | 17.7 | %   
|                  |                |                                  |        |                                 |  |                    |      |                    |   |            |        |        |  |            |      |      |   |   |        |        |  |  |      |      |   |   |         |        |  |  |      |     

Americas

In the third quarter of 2003, network deployment
represented $5.5 million of revenue, comprising the early
stages of the US Cellular contract award received in the
previous quarter, and the completion of several smaller projects
for certain other customers. RF/wireless design business
continued to grow and represented $7.7 million of revenue.
Cost of revenue and gross margins for network deployment were
adversely affected by contract losses on certain small projects
resulting in gross margins of less than 7%, while gross margins
for RF/wireless design business exceeded 20%. Overall, the
blended gross margin for the network deployment and RF/wireless
design business combined in the Americas was 15.1%.

For the first nine months of 2003, network
deployment represented $9.6 million of revenue, reflecting
the lack of revenues in contract backlog from any significant
contract awards. RF/wireless design business continued to grow
during the period and represented about $16.6 million of
revenue. Cost of revenues and gross margins for network
deployment were depressed by contract losses and gross margins
were almost 0% for the first nine months of the year.
RF/wireless design business recorded cost of revenues and gross
margins more in line with our expectations, and gross margins
for the first nine months were 21.7%. The combined effect of the
network deployment and RF/wireless design business was to record
gross margins of 13.9% for the nine months.

In the third quarter of 2004, we continued to
implement the US Cellular and Sprint network deployment
projects, with a major emphasis on subcontracted construction
activities. Network deployment represented about
$25.8 million of revenue, an increase of more than
$20 million over the same period in 2003. RF/wireless
design business continued to grow steadily and represented about
$8.3 million of revenue, an

15



---



##### 



increase of only $0.6 million over the same
period in 2003. Cost of revenues and gross margins for network
deployment for the third quarter of 2004 were affected by the
large percentage of subcontracted construction activity in the
quarter, resulting in gross margins of 12.2%. RF/wireless design
business recorded cost of revenues and gross margins in line
with our expectations, resulting in gross margins of 27.0% for
the quarter. The combined effect of the network deployment and
RF/wireless design business was to record gross margins of 16.0%
for the quarter.


For the first nine months of 2004, network
deployment and RF/wireless design represented about
$64.8 million and $27.8 million of revenues,
respectively. Cost of revenues and gross margins for the nine
months reflected the mix of the business and the significant
volume of subcontracted work, so that gross margins for the nine
months for network deployment and RF/wireless design amounted to
11.9% and 22.7%, respectively, a combined gross margin for the
region of 15.2%.

EMEA

In the third quarter of 2003, our operations in
EMEA largely reflected the businesses that we had acquired in
late 2001 and 2002 together with the projects that we had won in
Algeria. These businesses in the developed countries of Italy,
United Kingdom and the Netherlands accounted for about 60% of
the total revenue for the quarter, while our projects in Algeria
accounted for about 40%. During the quarter, the differentiation
in profitability between the core businesses in the developed
countries and the business in the lesser developed countries
such as Algeria became apparent. Gross margins of the businesses
in developed countries were 15.0% while gross margins for the
lesser developed countries exceeded 30%, resulting in an overall
gross margin for the region of 21.3%.

For the first nine months of 2003, the businesses
in developed countries generated about 75% of revenues for the
period and about 55% of gross profit, while the lesser developed
countries generated about 25% of revenue and 45% of gross profit.

In the third quarter of 2004, revenues grew to
$19.5 million, an increase of $4.4 million over the
same period in 2003. Growth in the businesses in developed
countries accounted for about $1.3 million of this increase
and about $3.1 million was attributable to the growth in
lesser developed countries, such as Saudi Arabia. During the
third quarter of 2003, the gross margins of the businesses in
developed countries were adversely affected by higher than
expected costs of revenue for certain deployment projects,
resulting in gross margins falling to about 12% of revenues.
Gross margins for the businesses in lesser developed countries,
which are primarily time and materials contracts, improved to
34.0%. Overall, gross margins for the region were 22.5%

For the first nine months of 2004, revenues grew
to $54.6 million, an increase of $18.6 million over
the same period in 2003. Growth in the businesses in developed
countries accounted for $7.0 million of this increase,
while the businesses in lesser developed countries accounted for
$11.6 million, $8.5 million of which was attributable to
Saudi Arabia alone. Developed countries generated about 62% of
the revenue for period and 42% of the gross profit, while the
lesser developed countries generated 38% of the revenue and 58%
of the gross profit. Gross margin improved from 19.8% for the
first nine months of 2003 to 21.3% for the same period in 2004
largely because of the reduced profitability in the developed
countries being offset by the increasing share of the more
profitable businesses in the lesser developed countries.

Asia and other

Asia and other generated revenues of
$0.7 million in the third quarter of 2003 and about
$1.5 million in the third quarter of 2004, an increase of
$0.8 million. In 2003, these revenues were generated by our
operations in Asia and our Wireless Institute. In the second
half of 2003, we started a new initiative, LCC Wireline, and
this accounted for all of the increase in revenues of
$0.8 million. Gross margins in the wireline business are
broadly consistent with our RF/wireless design business, and
while the gross profits for the first nine months of 2004 have
increased in absolute terms compared to the same period in 2003
largely due to the results of the Wireline business, the gross
margin of Asia and other has decreased overall from 32.5% for
the first nine months of 2003 to 26.5% for the same period in
2004.

16



---



##### 



Operating Expenses

|                    |                                 |                                  |       |                   |       |      |       |       |       |   |        |        |        |   |        |        |        | 
|------------------- | ------------------------------- | -------------------------------- | ----- | ----------------- | ----- | ---- | ----- | ----- | ----- | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                    |                                 |                                  |       |                  
|                    |                                 | Three Months Ended               |       | Nine Months Ended
|                    |                                 | September 30,                    |       | September 30,    
|                    |                                 |                                  |       |                  
|                    |                                 | 2003                             |       | 2004              |       | 2003 |       | 2004 
|                    |                                 |                                  |       |                   |       |      |       |      
|                    |                                 |                                  |       |                  
|                    |                                 | (in thousands)                   |       | (in thousands)   
|Operating expenses: |                                 |                                  |       |                   |       |      |       |       |       |   |        |        |        |   |        |       
|                    | Net bad debt expense (recovery) |                                  | $     | (816              | )     |      | $     | 36    |       |   | $      | (2,072 | )      |   | $      | 136    |       
|                    | General and administrative      |                                  |       | 4,934             |       |      |       | 5,893 |       |   |        | 15,659 |        |   |        | 18,626 |       
|                    |                                 |                                  |       |                   |       |      |       |       |       |   |        |        |        |   |        |       
|                    |                                 | Total general and administrative |       |                   | 4,118 |      |       |       | 5,929 |   |        |        | 13,587 |   |        |        | 18,762 | 
|                    |                                 |                                  |       |                   |       |      |       |       |       |   |        |        |        |   |        |       
|                    | Sales and marketing             |                                  |       | 1,302             |       |      |       | 2,072 |       |   |        | 4,739  |        |   |        | 5,724  |       
|                    | Restructuring charge (recovery) |                                  |       | 150               |       |      |       |      |       |   |        | (2     | )      |   |        | (924   | )     
|                    | Depreciation and amortization   |                                  |       | 1,338             |       |      |       | 728   |       |   |        | 2,944  |        |   |        | 2,097  |       
|                    |                                 |                                  |       |                   |       |      |       |       |       |   |        |        |        |   |        |       
|                    |                                 | $                                | 6,908 |                   |       | $    | 8,729 |       |       | $ | 21,268 |        |        | $ | 25,659 |       
|                    |                                 |                                  |       |                   |       |      |       |       |       |   |        |        |        |   |        |       

In 2003 bad debt recoveries were mostly
attributable to the recovery of amounts previously provided in
2002 for a fixed price contract in Algeria.

The increase in general and administrative
expenses in the third quarter of 2004 compared to the same
period in 2003 is largely attributable to support costs for our
contract in Saudi Arabia, which we started in the first quarter
of this year and an increase in our estimated costs for
compliance with the requirements of the Sarbanes-Oxley Act of
2002. The increase in sales and marketing costs in the third
quarter of 2004 compared to the same period in 2003 is largely
attributable to the sales commissions for our contract in Saudi
Arabia.

The reduction in costs due to restructuring,
results from our latest estimates of the restructuring reserve,
which we established in 2002. The reserve represents the future
costs of excess office space, offset by our estimates of future
income from sublease agreements. We have continued to sublet
excess space, either at rates better than anticipated or earlier
than anticipated, and this changes our estimates of future
sublease income.

The decrease in depreciation and amortization
expense in the periods ending at September 30, 2004
compared to the same periods in 2003 is primarily attributable
to writing off the $0.5 million unamortized balance of
intangible cost for a trade name acquired in the acquisition of
Smith Woolley Telecom, which we have ceased to use.

Other Income and Expense

|                        |                  |                          |     |                 |     |      |    |      |    |   |       |     |       |   |     |      |      |  
|----------------------- | ---------------- | ------------------------ | --- | --------------- | --- | ---- | -- | ---- | -- | - | ----- | --- | ----- | - | --- | ---- | ---- | -
|                        |                  |                          |     |                
|                        |                  | Three Months             |     | Nine Months    
|                        |                  | Ended                    |     | Ended September
|                        |                  | September 30,            |     | 30,            
|                        |                  |                          |     |                
|                        |                  | 2003                     |     | 2004            |     | 2003 |    | 2004
|                        |                  |                          |     |                 |     |      |    |     
|                        |                  |                          |     |                
|                        |                  | (in thousands)           |     | (in thousands) 
|Other income (expense): |                  |                          |     |                 |     |      |    |      |    |   |       |     |       |   |     |     
|                        | Interest income  |                          | $   | 49              |     |      | $  | 23   |    |   | $     | 246 |       |   | $   | 134  |     
|                        | Interest expense |                          |     | (49             | )   |      |    | (60  | )  |   |       | (98 | )     |   |     | (152 | )   
|                        | Other:           |                          |     |                 |     |      |    |      |    |   |       |     |       |   |     |      |     
|                        |                  | Gain on investments      |     |                 |    |      |    |      |   |   |       |     | 1,000 |   |     |      | 766  |  
|                        |                  | Impairment of investment |     |                 |    |      |    |      |   |   |       |     |      |   |     |      | (181 | )
|                        |                  | Other                    |     |                 | 137 |      |    |      | 83 |   |       |     | 232   |   |     |      | 19   |  
|                        |                  |                          |     |                 |     |      |    |      |    |   |       |     |       |   |     |     
|                        |                  |                          | 137 |                 |     |      | 83 |      |    |   | 1,232 |     |       |   | 604 |     
|                        |                  |                          |     |                 |     |      |    |      |    |   |       |     |       |   |     |     
|                        |                  | $                        | 137 |                 |     | $    | 46 |      |    | $ | 1,380 |     |       | $ | 586 |     
|                        |                  |                          |     |                 |     |      |    |      |    |   |       |     |       |   |     |     

17



---



##### 



Gain on investments of $1.0 million and
$0.8 million in 2003 and 2004 represents the cash received
from the sale of NextWave Pre-Petition interest and the cash
received on the sale of our general unsecured claim against
NextWave which we acquired as part of our acquisition of Koll
Telecommunications LLC in 1997, the Koll claim (see
note 7 to the condensed consolidated financial statements).

Impairment of investment of $0.2 million
relates to our investment in the joint venture in China, LCC/
BOCO (see note 7 to the consolidated financial statements).

Other income and expense are mostly attributable
to foreign currency gains and our share of equity losses in the
LCC/ BOCO joint venture.

Tax Benefit or (Expense)

The expense for income taxes of $0.4 million
in the third quarter of 2004 was based on an estimated effective
income tax rate of 25.9% for the quarter. This compares to a tax
benefit of $0.4 million, based upon an estimated effective
tax rate of 29.4% for the third quarter of 2003. The tax expense
of $1.2 million and the tax benefit of $1.3 million for the
nine months ended 2004 and 2003, respectively, were computed at
an estimated effective income tax rate of 55.2% and 15.0%,
respectively. The tax expense in 2004 is driven by statutory
taxes in jurisdictions in which we are currently profitable and
are anticipating the payment of income taxes. The estimated
effective income tax rate is significantly higher than the
statutory tax rates for the nine months ended September 30,
2004 due to losses generated in foreign jurisdictions for which
we have not taken income tax benefits.

Net Income (Loss)

In the third quarter of 2003, revenues of
$29.4 million generated an operating loss of
$1.3 million and resulted in a loss before tax of
$1.4 million. We recorded a tax benefit of
$0.4 million and reported a net loss of $1.0 million.
For the first nine months of 2003, revenues of
$64.7 million generated an operating loss of
$9.8 million, which was reduced by other income of $1.4
million (primarily due to cash received of $1.0 million for
the sale of our pre-petition interest in NextWave), and resulted
in a loss before tax of $8.4 million. We recorded tax
benefit at an estimated rate of 15.0% for the year and reported
a net loss of $7.2 million.

In the third quarter of 2004, revenues of
$56.3 million generated operating income of
$1.6 million resulting in income before tax of
$1.6 million. We recorded a tax expense of
$0.4 million based on an estimated tax rate of 25.9% for
the quarter, and reported net income of $1.2 million. For
the first nine months of 2004, revenues of $154.0 million
generated an operating income of $1.6 million, which after
recording other income and expense for the Koll claim and our
losses on LCC/ BOCO, resulted in income before tax of
$2.2 million. We recorded tax expense of $1.2 million
and reported net income of $1.0 million.

Liquidity and Capital Resources

The following discussion relates to our sources
and uses of cash and cash requirements during the nine months
ended September 30, 2003 and 2004.



| |                         
| | ------------------------
| | Sources and Uses of Cash

|                                                        |                                           |                   |         |         |   |   |        |         |  
|------------------------------------------------------- | ----------------------------------------- | ----------------- | ------- | ------- | - | - | ------ | ------- | -
|                                                        |                                           |                  
|                                                        |                                           | Nine Months Ended
|                                                        |                                           | September 30,    
|                                                        |                                           |                  
|                                                        |                                           | 2003              |         | 2004   
|                                                        |                                           |                   |         |        
|                                                        |                                           |                  
|                                                        |                                           | (in thousands)   
|Net cash used in operating activities                   |                                           | $                 | (10,864 | )       |   | $ | (9,045 | )      
|Net cash used in investing activities                   |                                           |                   | (1,463  | )       |   |   | (2,798 | )      
|Net cash provided by (used in) financing
    activities |                                           |                   | 1,515   |         |   |   | 1,318  |        
|                                                        |                                           |                   |         |         |   |   |        |        
|                                                        | Net decrease in cash and cash equivalents |                   | $       | (20,812 | ) |   | $      | (10,525 | )
|                                                        |                                           |                   |         |         |   |   |        |        

18



---



##### 



In the first nine months of 2003, activities
continued at a comparatively low level; we reported revenues of
$64.7 million and a net loss of $7.2 million. Cash
used in operating activities was $10.9 million and cash
used in investing activities was $1.5 million; cash
generated from financing activities of $1.5 million was mostly
attributable to borrowings made under the line of credit
established in the second quarter of 2003 for LCC Detron, in the
Netherlands. Overall, cash decreased by $10.8 million
during the period.

In the first nine months of 2004, activities were
significantly increased compared to 2003; revenues of
$154.0 million resulted in net income of $1.0 million. Cash
used in operating activities in the period was
$9.0 million, largely attributable to an increase in
receivables of $25.3 million, partly offset by an increase
in accounts payable and accrued expenses of $14.5 million. Cash
used in investing activities was $2.8 million, a
significant part of which was attributable to the purchase of
test and measurement equipment for new contracts won in the EMEA
region, while cash generated by financing activities was
$1.3 million. Overall, cash decreased by $10.5 million
during the period.



| |                  
| | -----------------
| | Cash Requirements

|                          |                                       |                   |        |                    |  |   |        |        | 
|------------------------- | ------------------------------------- | ----------------- | ------ | ------------------ |  | - | ------ | ------ | 
|                          |                                       | December 31, 2003 |        | September 30, 2004
|                          |                                       |                   |        |                   
|                          |                                       |                  
|                          |                                       | (thousands)      
|Cash and cash equivalents |                                       | $                 | 28,943 |                    |  | $ | 18,418 |       
|Restricted cash           |                                       |                   | 1,568  |                    |  |   | 1,194  |       
|Short-term investments    |                                       |                   | 520    |                    |  |   |       |       
|                          |                                       |                   |        |                    |  |   |        |       
|                          | Total cash and short-term investments |                   | $      | 31,031             |  |   | $      | 19,612 | 
|                          |                                       |                   |        |                    |  |   |        |       
|Line of credit            |                                       | $                 | 1,840  |                    |  | $ | 1,291  |       
|                          |                                       |                   |        |                    |  |   |        |       
|Working capital           |                                       | $                 | 54,980 |                    |  | $ | 55,300 |       
|                          |                                       |                   |        |                    |  |   |        |       

During the first nine months of 2004 the
principal requirements for cash was to finance the increase in
receivables of $25.3 million. A significant part of this
increase in receivables was funded through our vendors, and
accounts payable and accrued expenses increased by
$14.5 million in the period. We have granted extended
payment terms to one customer in Algeria, and this contract
accounted for about 6% of the receivables at the end of the
third quarter. However, we expect to collect about 60% of the
total amount due from this customer by the end of this year and
the remaining 40% in the first half of next year. We have also
experienced growth in our unbilled receivables as we performed
work on major deployment programs ahead of contractual billing
milestones.

In the third quarter of this year, we experienced
a reduction in our cash requirements and an increase in cash and
cash equivalents as we collected certain extended receivables
and completed certain billing milestones associated with our
large deployment programs. We currently expect our total cash
balances to decrease marginally by the end of this year. We
believe that for at least the next twelve months we have
adequate cash to fund our operations. However, this expectation
is subject to risk if we have any delays on our large deployment
contracts.

As of September 30, 2004, we had no material
cash commitments and had not engaged in any off-balance sheet
financing.

Critical Accounting Policies

Our critical accounting policies are as follows:



| |   |                                 
| | - | --------------------------------
| |  | revenue recognition;            
|
| |  | allowance for doubtful accounts;
|
| |  | accounting for income taxes; and
|
| |  | restructuring charge.           

19



---



##### 





| |                    
| | -------------------
| | Revenue recognition

Our principal sources of revenues consist of
design and system deployment services. We provide design
services on a contract basis, usually in a customized plan for
each client, and generally charge for engineering services on a
time and materials or fixed price basis. We generally offer
deployment services on a fixed price, time-certain basis. The
portion of our revenues from fixed-price contracts was 79.0% and
74.0% for the nine months ended September 30, 2003 and 2004,
respectively. We recognize revenues 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, revenues
recognized in a given period depend on, among other things, the
costs incurred on each individual project and our then current
estimate of the total remaining costs to complete individual
projects. Considerable judgment on the part of our 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 we significantly increase the estimate of the total costs
to complete a project, we may recognize very little or no
additional revenues with respect to that project. 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. At
December 31, 2003 and September 30, 2004,
respectively, we had $35.0 million and $45.3 million
of unbilled receivables.



| |                                
| | -------------------------------
| | Allowance for doubtful accounts

The preparation of our consolidated financial
statements requires our 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, our management must make estimates of the
probability of collection of accounts receivable. Management
specifically analyzes accounts receivable balances, customer
concentrations, customer credit-worthiness, current economic
trends and changes in customer payment terms when evaluating the
adequacy of the valuation allowance for doubtful accounts. For
the year ended December 31, 2003 and the quarter ended
September 30, 2004, we derived 72.9% and 85.6%,
respectively, of total revenues from our ten largest customers,
indicating significant customer concentration risk with our
receivables. These ten largest customers constituted 81.2% and
73.2% of our net receivable balance as of December 31, 2003
and September 30, 2004, respectively. Lastly, we frequently
perform 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 the current tightening of available credit and
general economic slowdown.



| |                            
| | ---------------------------
| | Accounting for income taxes

As part of the process of preparing our
consolidated financial statements an estimate for income taxes
is required for each of the jurisdictions in which we operate.
This process requires estimating the actual current tax exposure
together with assessing temporary differences resulting from
differing treatment of items, such as deferred revenues, for tax
accounting purposes. These differences result in deferred tax
assets and liabilities, which are included in the consolidated
balance sheet. We must then assess the likelihood that the
deferred tax assets will be recovered from future taxable income
and to the extent we believe that recovery is not likely, we
must establish a valuation allowance. The valuation allowance is
based on our estimates of taxable income by jurisdiction in
which we operate and the period over which the deferred tax
assets will be recoverable. In the event the actual results
differ from these estimates, we may need to increase or decrease
the valuation allowance, which could materially have an impact
on the financial position and results of operations.

Considerable management judgment may be required
in determining our provision for income taxes, the deferred tax
assets and liabilities and any valuation allowance recorded
against the net deferred tax assets. We have recorded a
valuation allowance of $8.3 million and $10.0 million
as of December 31, 2003 and September 30, 2004,
respectively, due to uncertainties related to our ability to
utilize some of the deferred tax assets before they expire.
These deferred tax assets primarily consist of foreign net
operating losses carried forward, foreign tax credits and
non-cash compensation accruals relating to stock options issued
under a

20



---



##### 



phantom membership plan in effect prior to our
initial public offering. The net deferred tax assets as of
December 31, 2003 and September 30, 2004, were
$5.0 million and $4.0 million, respectively.




| |                     
| | --------------------
| | Restructuring charge

In 2002 we recorded restructuring charges of
$13.5 million. Included in these restructuring charges was
a charge for excess facilities aggregating $12.5 million. This
facility charge primarily relates to leased office space, which
we no longer occupy. The facility charge equals 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 the space will remain vacant,
anticipated cost escalators and operating costs associated with
the leases, the market rate at which the space will be
subleased, and broker fees or other costs necessary to market
the space. These judgments were based upon independent market
analysis and assessment from experienced real estate brokers.
The restructuring charge calculation assumes as of
September 30, 2004 that we will receive $11.6 million
in sublease income, of which $10.2 million is committed.

Item 3:     Quantitative
and Qualitative Disclosures about Market Risk

We are exposed to the impact of foreign currency
fluctuations. The exposure to exchange rates relates primarily
to our foreign subsidiaries. Subsidiaries with material foreign
currency exposure are in Great Britain, the Netherlands and
Italy. For our foreign subsidiaries, exchange rates can have an
impact on the United States dollar value of their reported
earnings and the intercompany transactions with the subsidiaries.

Approximately 37.1% of the Companys
revenues were generated outside the United States for the nine
months ended September 30, 2004, the majority of which were
in Europe. In connection with the increased availability of 3G
equipment in Europe, we anticipate continued growth of our
international operations, particularly in Europe, the Middle
East and Africa, in 2004 and beyond. As a result, fluctuations
in the value of foreign currencies against the United States
dollar may have a significant impact on our reported results.
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 or weakens relative to other currencies in our major
markets the resulting translated revenues, expenses and
operating profits become lower or higher, respectively.

Fluctuations in currency exchange rates also can
have an impact on the United States dollar amount of our
shareholders equity. The assets and liabilities of the
non-U.S. subsidiaries are translated into United States dollars
at the exchange rate in effect on the date of the balance sheet
for the respective reporting period. The resulting translation
adjustments are recorded in shareholders equity as
accumulated other comprehensive loss. Consequently, the
accumulated other comprehensive income component of
shareholders equity increased $ 0.1 million during
the nine months ended September 30, 2004. As of
September 30, 2004, 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 $11.7 million.

We are exposed to the impact of foreign currency
fluctuations due to our London and U.S. offices funding foreign
subsidiaries. While these intercompany balances are eliminated
in consolidation, exchange rate changes do affect consolidated
earnings. Foreign subsidiaries with amounts owed to or from the
London and U.S. operations at September 30, 2004
(denominated in Euros) include Italy in the amount of
$1.8 million and the Netherlands in the amount of $0.7
million. These balances generated a foreign exchange gain of
$0.1 million included in our consolidated results at
September 30, 2004. A hypothetical appreciation of the Euro
and British Pound of 10% would result in a $0.1 million net
increase to our operating losses generated outside the United
States. This was estimated using a 10% appreciation factor to
the average monthly exchange rates applied to net income or loss
for each of our subsidiaries in the respective period. Foreign
exchange gains and losses recognized on any transactions are
included in the condensed consolidated statements of operations.

We currently do not hedge any of these risks in
our foreign subsidiaries because: (i) our subsidiaries
generally earn revenues and incur expenses within a single
country and, consequently, do not incur currency

21



---



##### 



risks in connection with the conduct of their
normal operations; (ii) other foreign operations are
minimal; and (iii) we do not believe that hedging
transactions are justified by the current exposure and cost at
this time.


Item 4:     Controls
and Procedures

(a) Evaluation of disclosure controls and
procedures

We carried out an evaluation, under the
supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) as of
September 30, 2004. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded
that as of September 30, 2004, our disclosure controls and
procedures were effective in timely notification to them of
information we are required to disclose in our periodic SEC
filings and in ensuring that this information is recorded,
processed, summarized and reported within the time periods
specified in the SECs rules and regulations.

(b) Changes in internal control

During the period covered by this report, there
were no significant changes in our internal control over
financial reporting that have materially affected, or were
reasonably likely to materially affect, our disclosure control
over financial reporting.

As a result of the Sarbanes Oxley Act of 2002, we
are subject to new rules requiring our management to report, in
our 2004 Annual Report, on the effectiveness of our internal
controls over financial reporting, and further requiring our
independent auditor to attest to this report. Since mid 2003, as
standards continued to evolve, we have been actively preparing
for this requirement by evaluating, documenting and testing our
internal controls over financial reporting throughout our
domestic and international operations. Due to final standards
recently published by the Public Company Accounting and
Oversight Board (PCAOB), we have additional work to complete
beyond our original plans to comply by the end of 2004. Given
the geographic scope of our current operations, including
historical operations in the United Kingdom, Italy and the
Netherlands as well as newer operations in countries such as
Algeria and Saudi Arabia that have only recently become material
for our financial reporting, we are uncertain whether the
Company and our independent auditor will successfully complete
all the tasks that must be completed by year end to fully comply
with PCAOBs published standards. Although our procedures
to date have not uncovered any significant deficiencies or
material weaknesses in our system of internal controls over
financial reporting, there can be no assurance that the Company
and its independent auditor will be able to complete the
required tasks in all significant Company locations by year end.

22



---



##### 



PART II:     OTHER
INFORMATION

Item 1:     Legal
Proceedings

We are party to various non-material legal
proceedings and claims incidental to our business. We do not
believe that these matters will have a material adverse impact
on our consolidated results of operations or financial condition.



|        |                                                                
|------- | ---------------------------------------------------------------
|Item 2: | Unregistered Sales of Equity Securities and
    Use of Proceeds

Not Applicable



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

Not Applicable



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

Not Applicable



|        |                  
|------- | -----------------
|Item 5: | Other Information

Not Applicable



|        |         
|------- | --------
|Item 6: | Exhibits

| |    |     |  |   |  |                                                                                                                                                                                                                                                                                 
| | -- | --- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .1  |  |  |  | Restated Certificate of Incorporation of the LCC
    International, Inc. (incorporated by reference to
    exhibit 3.1 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed with the SEC on September 20,
    1996).
| | 3  | .2  |  |  |  | Amended and Restated Bylaws of the Company
    (incorporated by reference to Exhibit 3.2 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed with the
    SEC on September 20, 1996).                              
| | 4  | .1  |  |  |  | Form of Class A and Class B Common
    Stock certificates (incorporated by reference to
    Exhibit 4.1 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed with the SEC on September 20,
    1996).               
| | 10 | .35 |  |  |  | Form of Terms and Conditions and Option Grant
    Letter under the LLC International, Inc. Amended and
    Restated Equity Incentive Plan.                                                                                                                                      
| | 11 |     |  |  |  | Calculation of Net Income Per Share                                                                                                                                                                                                                                             
| | 31 | .1  |  |  |  | Certification of Chief Executive Officer pursuant
    to Exchange Act Rules 13a-14(a)/ 15d-14(a), as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                     
| | 31 | .2  |  |  |  | Certification of Chief Financial Officer pursuant
    to Exchange Act Rules 13a-14(a)/ 15d-14(a), as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                     
| | 32 | .1  |  |  |  | Certification of Chief Executive Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                      
| | 32 | .2  |  |  |  | Certification of Chief Financial Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                      

23



---



##### 



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/ GRAHAM B. PERKINS                   
| |                                         
| | Graham B. Perkins                       
| | Senior Vice President, Chief Financial  
| | Officer and Treasurer                   
| | (Principal Financial Officer and        
| | Principal Accounting Officer)           

Date: November 12, 2004


24